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Chapter 9: Co-operative Organisation

A group of small milk producers in a village each sells a few litres a day. Individually, none of them can afford a chilling unit, a transport van or a testing laboratory, and each is left to accept whatever price a passing trader offers. Together, however, they can pool their milk, share the cost of these facilities and reach a city market directly. The organisation they form to do this is a co-operative society. A co-operative is a voluntary association of persons of moderate means who join together to protect and promote their common economic interests. Its guiding idea is self-help through mutual help, and its purpose is service to members rather than the maximisation of profit. This makes it different in character from the forms of organisation studied so far, where the supply of capital decides both control and reward. This chapter explains what a co-operative organisation means, how it is formed and governed, how it differs from a joint stock company, what advantages and limitations it carries, and how multi-state co-operative societies operate across state boundaries.

Figure

Fig. 9.0-1 — Members Pooling Milk At A Village Collection Centre Photograph of villagers queuing with milk cans at a rural dairy collection point while a worker records the quantities.

9.1 Meaning Of A Co-operative Organisation

The word ‘co-operative’ is built from ‘co’, meaning together, and ‘operative’, meaning to work. A co-operative organisation is therefore a group of persons who choose to work together for a purpose none of them can achieve alone.

The need for such a form arises from weakness of scale. A single small farmer, weaver, shopkeeper or salaried employee has too little capital to buy in bulk, too little produce to bargain with a large buyer, and too little standing to obtain credit on fair terms. Acting alone, each is exposed to the trader, the middleman and the money lender. By pooling their small resources, the same persons gain the buying power, the selling power and the creditworthiness that they lacked individually.

A co-operative society is a voluntary association of persons of moderate means who unite to protect and promote their common economic and social interests. It rests on collective effort, mutual self-help, equality and democratic control, and its working principle is often stated as ‘each for all and all for each’.

9.1.1 Concept And Definitions

The objects of a co-operative are economic in character. Persons who are individually weak organise themselves so that the surplus that would otherwise go to a trader or lender is retained by the members themselves. The motive behind production and distribution is therefore service to members rather than profit for outside investors.

NoteDefinition

Co-operative Society A co-operative society is a voluntary association of persons of limited means who join together to achieve a common economic end through a democratically controlled organisation, contributing capital equitably and sharing its risks and benefits fairly.

Two features of this description are worth noting carefully, because later sections depend on them. First, membership is voluntary at both ends — a person joins by choice and may leave after due notice. Second, control is democratic and does not follow the size of a member’s shareholding, which distinguishes a co-operative from every form of organisation where capital carries control.

Registration Of A Society

A co-operative society acquires its legal standing only on registration. Societies operating within a single state are registered under the Co-operative Societies Act, 1912 or under the co-operative societies Act of the state concerned, since co-operation is a state subject. Registration converts the association into a body corporate with an existence separate from its members.

9.1.2 Areas In Which Co-operatives Work

The co-operative form can be applied to almost any economic activity, because wherever persons of small means face a common disadvantage, they can combine against it. This is why the scope of the form is as wide as the economic life of a community.

Credit Societies In Rural India Primary agricultural credit societies lend to their own members at rates fixed by the society itself, and lend chiefly for productive purposes such as seed and fertiliser. Because the lender and the borrowers are the same body of people, the society has a direct interest in ensuring that the loan is used well and repaid.

The activities most commonly organised on co-operative lines are the following.

  1. Credit societies — members pool their savings and lend to one another, freeing themselves from money lenders who charge exploitative rates.
  2. Consumer stores — members buy household goods in bulk directly from producers, so the middleman’s margin is saved and quality is easier to control.
  3. Producers’ and marketing societies — small producers pool output to obtain a fair price and reach markets that no member could reach alone.
  4. Housing societies — members combine their savings to acquire land and construct dwellings at a cost far below what each would pay separately.
  5. Farming societies — cultivators pool land, implements or irrigation facilities so that costly inputs are used to their full capacity.

Find out whether a consumer store, credit society or housing society in your locality is registered as a co-operative, and note what its members hold in common.

9.2 Features Of A Co-operative Organisation

Every form of business organisation has to settle three questions: who may join it, who controls it, and who receives what it earns. The answers a co-operative gives to these questions are what set it apart, and the features listed below all follow from them.

A co-operative answers the first question by keeping entry open, because the more members it draws in, the greater the pooled strength on which it depends. It answers the second by democratic management, so that a member who has contributed more capital does not thereby gain more control. It answers the third by the service motive, under which earnings return to members in proportion to the business they do with the society rather than in proportion to the capital they hold.

The Essential Characteristics
  1. Voluntary association — no one is compelled to join a co-operative or to remain in it, and a member may withdraw after giving due notice. Membership is open and unrestricted to persons sharing the common interest, with no bar of caste, creed, religion or gender, since the society gains from wider participation.
  2. Democratic management — the members elect a managing committee from among themselves to conduct and control the business. Because the committee is elected by and answerable to the members, management stays accountable to the very people it serves.
  3. Equality of voting rights — the society follows the rule of one member, one vote, irrespective of the number of shares held, and decisions are taken by majority. This prevents a few well-off members from dominating a body formed to protect the weak.
  4. Service motive — the object of the society is to serve its members, not to maximise profit. The surplus it earns is therefore treated as a means to member welfare rather than as a return to investors.
  5. Limited liability — where the society uses the word ‘Limited’ after its name, the liability of a member is restricted to the amount of the shares subscribed. Personal property cannot be attached to meet the society’s debts, which makes membership safe for persons of small means.
  6. Legal existence — on registration the society becomes a body corporate with a separate legal entity and perpetual succession. Death, insolvency or withdrawal of a member does not disturb the existence of the society.
  7. Regulation and control — a co-operative is governed by the co-operative societies Act under which it is registered, and its accounts are subject to compulsory audit and inspection. This protects members who may lack the means to scrutinise the management themselves.
  8. Disposal of surplus — the whole of the surplus is not distributed. A prescribed portion is transferred to a reserve fund, a limited return is paid on share capital, and the remainder is distributed according to the volume of business each member has transacted with the society, not according to shareholding.
  9. Cash trading — co-operative stores and societies generally sell for cash. Cash trading avoids bad debts and the expense of collecting dues, and keeps enough working capital in hand for a body that cannot easily raise more.
  10. Restricted transfer of shares — shares are not freely transferable to outsiders. A member who wishes to leave surrenders the shares to the society itself, so that membership stays with those who actually use its services.
  11. State assistance — co-operatives can obtain grants, loans and concessions from the State Government, which supports them because they promote self-reliance among small producers and consumers.

Cash Trading In A Consumer Store A consumer co-operative store buys household goods in bulk and sells them to members for cash at prices close to cost. Selling for cash keeps the store’s limited funds circulating and spares it the cost of chasing credit dues, which a small society with thin capital can ill afford.

Two of these features are frequently misapplied in answers, and the situation below shows how they work together in practice.

Case 9.1 — Two Members, One Decision Sunehra Milk Producers’ Co-operative Society Ltd. has 240 members. Mr. Deshmukh holds forty shares and supplies little milk; Mrs. Bhatt holds two shares and supplies milk almost daily. At the annual meeting Mr. Deshmukh insists that his vote should count for more, and later objects that Mrs. Bhatt has received a larger share of the surplus than he has. Q. Name the two features of a co-operative society that answer Mr. Deshmukh’s objections, and state the reason behind each.

Look at the name board of any society in your area that ends with ‘Ltd.’ and state what the word tells you about the liability of its members.

9.3 Co-operative Society And Joint Stock Company Compared

Both a co-operative society and a joint stock company are registered bodies corporate with a separate legal entity, perpetual succession and, in most cases, limited liability for their members. Because they look alike in these respects, students often treat them as variants of one form. They are not.

The difference lies in what each organisation is built around. A company is an association of capital: it is formed to earn profit for those who supply the capital, and so the shareholder who supplies more capital carries more votes and receives a larger dividend. A co-operative is an association of persons: it is formed to serve those who use its services, and so control and reward follow membership and patronage rather than shareholding. Almost every point of difference in Table 9.1 can be traced back to this single distinction.

Table 9.1 — Co-operative Society And Joint Stock Company | Basis | Co-operative Society | Joint Stock Company | |—|—|—| | Registration | Under the co-operative societies Act of the state, or the Co-operative Societies Act, 1912 | Under the Companies Act, 2013 | | Main objective | Service to members | Earning profit for shareholders | | Minimum members | Ten adult persons | Two for a private company, seven for a public company | | Maximum members | No upper limit | Two hundred for a private company, unlimited for a public company | | Voting right | One member, one vote | One share, one vote | | Transfer of shares | Not freely transferable; surrendered to the society | Freely transferable in a public company | | Distribution of surplus | Mainly on the volume of business transacted by the member | As dividend, on the number of shares held | | Management | Elected committee of members, largely honorary | Board of directors assisted by paid professional managers | | Area of coverage | Usually drawn from a limited local area | Members drawn from across the country and abroad | | State support | Enjoys concessions and exemptions granted by the government | No special privileges as a rule |

Why The Difference Matters In Practice

The consequences of the table are practical rather than technical. A company can raise very large sums because an investor who puts in more money gets more control and a larger return; a co-operative cannot, because it deliberately refuses to offer either. Conversely, a co-operative can serve a group that no company would find worth serving, because it is content to return the benefit to its members as fair prices and fair terms rather than as profit.

Two Ways Of Selling Milk A dairy company buys milk from farmers as suppliers and pays them a price, keeping the profit on the sale for its shareholders. A dairy co-operative is owned by the same farmers, so the price it can pay them is limited only by what the market returns and what the society must retain. Ownership and patronage sit with one group.

9.4 Advantages Of A Co-operative Organisation

The gains from a co-operative arise from four sources: the pooling of small resources, democratic control, the service motive, and the support the state extends to the form. Since these sources are of different kinds, the advantages are conveniently grouped under the four heads shown in FC 9.1.

Flowchart

FC 9.1 — Advantages Of A Co-operative Organisation Advantages → Economic, Social, Moral, Political

9.4.1 Economic Advantages

The economic gains come from scale. Small sums of money, small quantities of produce and small purchases become significant once they are pooled, and the margin that would otherwise have been taken by a trader, a lender or a middleman stays with the members.

  1. Financial assistance to persons of small means — credit societies lend to agriculturists and low-income members at reasonable rates, which is often the only institutional credit available to them.
  2. Protection from exploitation — because members can borrow from their own society, they are no longer dependent on money lenders and indigenous bankers who charge exploitative rates.
  3. Control over the use of funds — co-operatives generally lend for productive purposes only, so borrowed money is applied to seed, stock or equipment rather than wasted.
  4. Encouragement to savings — societies accept members’ savings and pay interest on them, which builds the habit of saving in areas where banking reaches thinly.
  5. Elimination of middlemen — by buying and selling directly, members obtain goods of better quality at cheaper rates and producers receive a larger share of the final price.
  6. Support to agriculture and small production — pooled purchase of inputs and pooled marketing of output allow small producers to raise both the quantity and the quality of what they produce.
  7. Tax and grant concessions — co-operatives receive grants, subsidised loans and tax concessions from the government, which improves the return available to members.

Housing On Co-operative Lines A group of salaried employees forms a housing co-operative, acquires a single plot and constructs flats for its members. Because the society builds for its own members rather than for sale, the promoter’s profit is absent from the cost, and each member obtains a dwelling for less than a comparable flat bought in the open market.

9.4.2 Social Advantages

The social gains follow from the way a co-operative is controlled. Since every member has one vote and every member is both an owner and a user, the form spreads economic power instead of concentrating it.

  1. Decentralisation of economic power — trade and industry conducted co-operatively remain in many hands rather than being concentrated in a few.
  2. Upliftment of weaker sections — by giving credit, employment and fair prices to persons of limited means, the society strengthens the groups least able to help themselves.
  3. Spirit of co-operation and democracy — working an organisation on one member, one vote teaches members to discuss, elect and abide by a majority decision.
  4. Recognition of individual effort — a member who transacts more business with the society receives a larger share of the surplus, so effort is rewarded even where capital is small.

9.4.3 Moral Advantages

A co-operative depends on the honesty and reliability of its members, since each is dealing with a body that the others own. This dependence encourages habits that the society then has an interest in maintaining.

  1. Emphasis on self-help and mutual help — members learn to solve a common problem by their own combined effort rather than by seeking outside charity.
  2. Encouragement of thrift and industry — saving, hard work and self-dependence are the qualities on which the society’s funds and its repayments rest.
  3. Discouragement of wasteful habits — societies commonly discourage extravagance among members, because money wasted by one borrower is money lost to the whole membership.

9.4.4 Political Advantages

The form also carries advantages of a broader kind, arising from the values it puts into practice.

  1. Equitable distribution of wealth — returns are linked to participation rather than to capital, so income is spread more evenly among members.
  2. Importance to individual freedom — membership is voluntary and control is democratic, so the individual keeps the freedom to join, to vote and to leave.

Identify one activity in your locality that is presently carried on by a middleman, and state which of the economic advantages above a co-operative could deliver in its place.

9.5 Limitations Of A Co-operative Organisation

Most of the weaknesses of a co-operative are the reverse side of its strengths. The same refusal to link control and reward to capital that keeps the society democratic also makes it unattractive to anyone with money to invest. The same reliance on elected members that keeps management accountable also puts the business in the hands of persons who may have no training in running one. A limitation is therefore best learnt together with the feature that produces it.

Weaknesses Of Capital And Incentive
  1. Lack of capital — the society draws its funds from members of limited means, the face value of its shares is small, and it cannot approach the stock market. Capital is consequently the standing constraint on what a co-operative can attempt.
  2. Limited return on capital — since the object is service, only a limited return is paid on share capital. A person with surplus funds has little reason to invest in a society, and even members are discouraged from contributing more than they must.
  3. Lack of direct incentive — ownership and management rest on democracy rather than on personal stake, so effort and reward are not directly linked. Honorary office bearers who gain nothing extra from working harder often do not work harder.
  4. Weak saving base — the progress of a society depends on what its members can save, and where the habit of saving is weak the society never accumulates enough to serve them well.
Weaknesses Of Management
  1. Inefficient management — the managing committee is elected from among the members, who generally lack managerial training and experience. The society also cannot pay the salaries that would attract professional managers, so decisions are taken without specialised skill.
  2. Mutual disputes and groupism — success depends on the loyalty of members drawn from different sections of society. Differences of opinion, rigid attitudes and attempts by some members to dominate the committee frequently lead to factions that paralyse the working.
  3. Corruption and favouritism — where members are poorly educated and accounts are indifferently maintained, office bearers may favour their own group in granting loans, allotting stock or awarding contracts.
  4. High administrative expenses — societies often carry establishment costs out of proportion to their turnover, and every rupee so spent reduces the benefit returning to members.

Democratic Management And Professional Management Democratic management asks who chooses the managers — here, the members, by election. Professional management asks what qualifies them — training and experience. A co-operative secures the first and commonly sacrifices the second.

Weaknesses Of Flexibility And Control
  1. Lack of elasticity — societies work within rules that restrict methods of sale such as credit sale, price cutting or home delivery. A private competitor free to use these methods can take away business the society cannot fight for.
  1. Government interference — audit, inspection and detailed rules are compulsory for a registered society. Protection of this kind is necessary, but carried too far it slows day-to-day working and reduces the autonomy of the elected committee.
  2. Limited scope — the combination of small capital, local membership and untrained management makes the form unsuitable for large-scale enterprise requiring heavy investment and rapid decisions.

Case 9.2 — The Committee That Would Not Yield Suraj Handloom Weavers’ Co-operative Society Ltd. has been losing orders to a private firm that offers buyers thirty days’ credit and home delivery. Its elected committee, whose members are skilled weavers but have never managed a business, rejects the proposal to appoint a salaried marketing manager on the ground that the salary cannot be afforded. Q. Identify two limitations of the co-operative form visible in this situation and explain how each is affecting the society.

Because of these limitations, several co-operative movements have fallen short of what they set out to achieve. The form remains a living force for persons of limited means, but it works well only where members are informed, accounts are honestly kept, and management is given room to act.

9.6 Multi-State Co-operative Societies

Co-operation is a state subject, and an ordinary society is registered with, and supervised by, the Registrar of the state in which it works. This arrangement suits a society whose members and business lie within one state. It becomes an obstacle the moment the activity itself crosses a state boundary — when fertiliser has to be supplied to farmers in a dozen states, or produce procured in one state and sold in another. A society of that kind would otherwise have to satisfy several state Acts at once.

A multi-state co-operative society answers this problem. It operates in more than one state of India and draws its members from at least two different states, and it is registered and regulated under a single central law instead of several state laws.

NoteDefinition

Multi-State Co-operative Society A multi-state co-operative society is a co-operative organisation whose operations extend to more than one state of India and whose members are drawn from at least two different states, registered under the Multi-State Co-operative Societies Act, 2002.

Registration And Supervision

Such societies are registered and regulated under the Multi-State Co-operative Societies Act, 2002, which is administered by the Central Government. The Act was enacted to provide uniform regulation for societies whose working extends beyond the boundaries of a single state. Supervision rests with the Central Registrar of Cooperative Societies, Government of India, rather than with a state Registrar.

Table 9.2 — State Co-operative Society And Multi-State Co-operative Society | Basis | State Co-operative Society | Multi-State Co-operative Society | |—|—|—| | Area of operation | Confined to one state | Extends to more than one state | | Membership base | Members drawn from within the state | Members drawn from at least two states | | Governing law | Co-operative societies Act of the state concerned | Multi-State Co-operative Societies Act, 2002 | | Registering and controlling authority | Registrar of Co-operative Societies of the state | Central Registrar of Cooperative Societies, Government of India | | Administering government | State Government | Central Government |

Features

A multi-state society keeps the essential character of the co-operative form; only its reach and its regulator change.

  1. Voluntary membership — persons join and leave of their own accord, as in any co-operative.
  2. Democratic management — control rests with an elected body working on the principle of one member, one vote.
  3. Registration under central law — the society is registered under the central Act and not under a state Act.
  4. Service-oriented objective — the purpose remains service to members, particularly producers spread across states.
  5. Limited liability — a member’s liability is limited to the shares subscribed.
  6. Separate legal entity — the registered society is a body corporate distinct from its members.
  7. Continuity of existence — the society enjoys perpetual succession and is unaffected by changes in membership.

Fertiliser And Produce On Co-operative Lines IFFCO, the Indian Farmers Fertiliser Cooperative Limited, supplies fertiliser to farmers across many states, and KRIBHCO produces and distributes fertiliser on similar lines. NAFED, the National Agricultural Cooperative Marketing Federation of India, procures, stores and markets agricultural produce across the country, helping to steady the prices farmers receive.

Amul, run by the Gujarat Cooperative Milk Marketing Federation, is registered at the state level, yet it markets across India and abroad on principles that the multi-state societies follow. It illustrates the point of the whole chapter: producers who are individually small can, by acting together, reach markets that no member could reach alone.

Multi-state co-operative societies matter chiefly in agriculture, dairying, fertilisers, marketing and rural credit. By working across state boundaries they give members the advantages of national scale while leaving ownership and control with the producers themselves.

9.7 Summary

  1. A co-operative society is a voluntary association of persons of moderate means who unite to protect and promote their common economic and social interests, working on the principle of self-help through mutual help.
  2. The form arises from weakness of scale: persons who are individually too small to buy in bulk, to bargain with large buyers or to obtain credit on fair terms gain that strength by pooling their small resources.
  3. A society acquires legal standing only on registration, under the co-operative societies Act of the state concerned or the Co-operative Societies Act, 1912, and thereafter exists as a body corporate separate from its members.
  4. The co-operative form can be applied to almost any activity, and is commonly used for credit societies, consumer stores, producers’ and marketing societies, housing societies and farming societies.
  5. The essential features of a co-operative society are voluntary and open membership, democratic management, equality of voting rights, the service motive, limited liability, separate legal existence, regulation by statute, distribution of surplus by volume of business, cash trading, restricted transfer of shares and state assistance.
  6. Control and reward in a co-operative follow membership and patronage, not shareholding, which is what distinguishes it from a joint stock company:
  1. A company is an association of capital, formed to earn profit for those who supply the capital.
  2. A co-operative is an association of persons, formed to serve those who use its services.
  3. From this follow the differences in voting right, distribution of surplus, transferability of shares, management and membership limits.
  1. The advantages of the form fall under four heads:
  1. Economic — credit to persons of small means, protection from money lenders, elimination of middlemen, encouragement to savings, and government grants and concessions.
  2. Social — decentralisation of economic power, upliftment of weaker sections and the spread of democratic habits.
  3. Moral — emphasis on self-help, thrift, hard work and self-dependence.
  4. Political — equitable distribution of wealth and respect for individual freedom.
  1. The limitations are largely the reverse side of these strengths: shortage of capital and a limited return on it, lack of direct incentive, inefficient and untrained management, mutual disputes and groupism, corruption where accounts are weak, high administrative expenses, lack of elasticity in business methods, government interference and limited scope for large-scale enterprise.
  2. A multi-state co-operative society operates in more than one state and draws members from at least two states. It is registered under the Multi-State Co-operative Societies Act, 2002, administered by the Central Government and supervised by the Central Registrar of Cooperative Societies.
  3. Co-operative societies are therefore classified by their area of operation, as shown in FC 9.2, while retaining the same essential character at both levels.

Flowchart

FC 9.2 — Co-operative Societies By Area Of Operation Co-operative Society → State-level Society, Multi-State Society; State-level Society → State Registrar; Multi-State Society → Central Registrar

9.8 Key Terms

  1. Co-operative Society A voluntary association of persons of limited means who join together to achieve a common economic end through a democratically controlled organisation, contributing capital equitably and sharing its risks and benefits fairly.
  2. Democratic Management Management of a society by a committee elected by the members themselves, working on the rule of one member, one vote, so that control does not follow the size of a member’s shareholding.
  3. Joint Stock Company An association of capital registered under the Companies Act, 2013, formed to earn profit for its shareholders, in which voting power and dividend follow the number of shares held.
  4. Multi-State Co-operative Society A co-operative society whose operations extend to more than one state of India and whose members are drawn from at least two states, registered under the Multi-State Co-operative Societies Act, 2002.
  5. Service Motive The guiding object of a co-operative society, under which it works to serve the interests of its own members rather than to maximise profit for suppliers of capital.

9.9 Points To Ponder

  1. A co-operative deliberately refuses to give more control to the member who invests more. This keeps the society democratic but also keeps it short of capital. Is the trade-off worth making, or should societies be allowed to offer larger investors a greater say?
  2. Elected office bearers work largely without extra reward, while a salaried professional manager would work for pay but not out of membership. Which of the two is a small society better served by, and on what does the answer depend?
  3. Compulsory audit and inspection protect members who cannot scrutinise the accounts themselves, yet the same rules slow the society’s working. Where would you draw the line between protection and interference?
  4. Surplus in a co-operative is shared according to the business a member transacts with the society, not according to the capital contributed. Consider whether this basis is fairer than a company’s dividend, and to whom.
  5. Cash trading protects a society’s working capital but costs it customers who want credit. Would you advise a consumer store facing a private competitor to relax the rule, and what would it risk by doing so?
  6. Some co-operatives grow large enough to market nationally and abroad. At what point, if any, does the local, member-based character that defines the form become difficult to maintain?

9.10 Objective Questions

  1. In a co-operative society, the surplus available for distribution among members is shared on the basis of: [1]
  1. the number of shares held by each member
  2. the volume of business each member has transacted with the society
  3. the length of time each member has belonged to the society
  4. the office each member holds in the managing committee
  1. Assertion (A): A co-operative society finds it difficult to attract large investors. [1] Reason (R): Control in a co-operative does not increase with the amount of capital a member contributes, and only a limited return is paid on share capital.
  1. Both (A) and (R) are true, and (R) is the correct explanation of (A).
  2. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
    1. is true, but (R) is false.
    1. is false, but (R) is true.
  1. A multi-state co-operative society is supervised by the ____________, Government of India. [1]
  2. State whether the following statement is true or false: The shares of a co-operative society may be freely transferred to any outsider who is willing to buy them. [1]
  3. Match the item in Column A with the correct description in Column B. [1]
  1. Equality of voting rights
  2. Cash trading
  3. Restricted transfer of shares
  4. Legal existence
  1. Shares are surrendered to the society and not sold to outsiders
  2. The society continues irrespective of a change in its membership
  3. One member, one vote, irrespective of shareholding
  4. Avoids bad debts and the cost of recovering dues
  1. (i)–(C), (ii)–(D), (iii)–(A), (iv)–(B)
  2. (i)–(D), (ii)–(C), (iii)–(B), (iv)–(A)
  3. (i)–(C), (ii)–(A), (iii)–(D), (iv)–(B)
  4. (i)–(B), (ii)–(D), (iii)–(A), (iv)–(C)

9.11 Check Your Concepts

  1. Define a co-operative society and state its guiding principle. [2]
  2. Explain, with the reason behind each, any three features of a co-operative organisation. [3]
  3. Distinguish between a state-level co-operative society and a multi-state co-operative society on any three bases. [3]
  4. Why does a co-operative society generally suffer from a shortage of capital? Explain how two of its own features contribute to this difficulty. [4]
  5. ‘A joint stock company is an association of capital, while a co-operative society is an association of persons.’ Explain this statement and show how the difference is reflected in voting rights, distribution of surplus and management in the two forms. [6]

9.12 Case-Based Questions

  1. Sixty vegetable growers of a district have been selling their produce to a trader who visits the village each morning and fixes the price himself. They decide to form a registered society of their own to grade, pack and sell the produce directly in the city market, and to lend small sums to members for seed and fertiliser. Mr. Rathore, who has contributed the largest amount of share capital, demands that he be given a decisive vote at meetings and a larger share of the surplus than the others.
  1. Name the form of business organisation the growers have chosen and state two economic advantages it offers them in this situation. [2]
  2. State whether Mr. Rathore’s demands can be accepted, and explain the two features of this form of organisation on which your answer rests. [2]