Unit 4: Arbitration and Liquidation

Arbitration in Cooperative Societies

Arbitration is a method of settling disputes within the cooperative system without going to civil courts.

When is Arbitration used?

If any dispute arises:

Between society and members
Between society and past members
Between two societies
Between society and officers/employees (in some states)

The Registrar can:

Decide the dispute, OR
Refer the matter to an Arbitrator

Role of the Arbitrator

Hear both parties
Accept documents & evidence
Give an Arbitration Award
The award is final, unless appealed

Supersession of the Board

Supersession means removing/suspending the elected board of a cooperative society.

Why can a Board be superseded?

Mismanagement
Corruption or misuse of funds
Not conducting elections on time
Failure to follow the Cooperative Act
Loss caused to the society
Non-functioning or deadlock in the board

Who supersedes the Board?

Registrar of Cooperative Societies, or
State Government (depending on the Act)

What happens after supersession?

A Administrator or Special Officer is appointed
He runs the society temporarily
Fresh elections must be held within the specified time (usually 6 months)

Winding Up of Registered Societies

Winding up = closing the cooperative society permanently.

Reasons for Winding Up

Society is not working
Long-term losses
Membership reduced below minimum requirement
Activities against cooperative principles
On request of members
On the order of Registrar

Who orders winding up?

Registrar of Cooperative Societies

What happens after winding up?

A Liquidator is appointed

Liquidator takes control of:

Property
Records
Bank accounts
Liabilities

Execution of Orders

Execution means enforcing or implementing orders given by:

Registrar
Arbitrator
Cooperative Tribunal
Liquidator

Execution may include

Recovery of money from members or officials
Attachment (seizure) of property
Sale of assets
Recovery as arrears of land revenue

Execution ensures that final orders are actually carried out.

Cooperative Tribunals

A Cooperative Tribunal is a special court that hears appeals related to cooperative matters.

Functions

Hear appeals against decisions of Registrar or Arbitrator
Give final judgments on disputes
Ensure fair and lawful decisions

Tribunal has powers similar to a civil court, such as:

Summoning persons
Taking evidence
Ordering production of records

Appeals

An appeal means challenging a decision in a higher authority.

Appeals can be made against:

Registrar’s orders
Arbitration awards
Liquidator’s decisions
Election decisions

Where to appeal?

To the Cooperative Tribunal
In some matters, to the State Government (depending on the Act)

Time limit

Usually 60–90 days from the date of the order.

Revision

Revision is the power of the Registrar or Government to review decisions made by subordinates.

Used when:

Subordinate officer made a mistake
Order was illegal
Procedure was not followed
Decision caused injustice

Revision is not a full rehearing — it only checks legality and correctness.

Review

Review means reconsidering one’s own order.

A review can be requested if:

New evidence is found
There is an apparent error in the order
A party was not heard properly

Only the authority that issued the order can review it.

Procedure for Liquidation

Liquidation is the step-by-step process of closing a cooperative society.

Steps in Liquidation

1. Registrar issues order for winding up.
2. Liquidator is appointed.

3. Liquidator takes over:

Assets
Records
Accounts

4. Prepares a list of:

Creditors
Debtors
Assets and liabilities

5. Sells assets of the society.
6. Collects outstanding dues from members.

Pays:

Government dues
Creditors
Members’ share capital (if anything remains)

7. Submits a Final Report to Registrar.
8. Registrar orders dissolution of the society.

Quick Revision Table

Topic	Meaning	Key Authority
Arbitration	Dispute settlement	Registrar/Arbitrator
Supersession	Board removed	Registrar/Govt
Winding Up	Closing the society	Registrar & Liquidator
Execution	Enforcing orders	Registrar/Authorities
Tribunal	Appellate body	Cooperative Tribunal
Appeals	Challenging order	Tribunal
Revision	Checking correctness	Registrar/Govt
Review	Reconsidering own order	Issuing authority
Liquidation	Final closure	Liquidator

Circumstances of Winding Up of a Cooperative Society

A cooperative society can be wound up (closed permanently) under certain conditions. These are called circumstances for winding up.

A. When Members Request Winding Up

Majority of members pass a special resolution to close the society.
Society is not functioning or has no business activity.

B. Non-Functioning or Financial Failure

Society has continuous losses.
It is unable to pay debts.
Membership falls below the minimum required by law.

C. Mismanagement or Illegal Activities

Society working against Cooperative Act & Rules.
Fraud, corruption, or serious mismanagement.

D. On the Direction of the Registrar

Registrar may order winding up when:

Audit/Inquiry/Inspection reveals serious defects.
Society becomes inactive or dead for long.
Society fails to hold elections/meetings for long.

E. On the Request of Financing Banks

If the society:

Fails to repay loans.
Shows signs of insolvency.

Appointment of Liquidator

When the Registrar orders the winding up of a society, he appoints a Liquidator.

Who appoints Liquidator?

Registrar of Cooperative Societies
(Sometimes State Govt may approve or support the appointment)

Role of Liquidator

The liquidator takes full control of the society after winding-up order.

When does Liquidator start work?

Immediately after appointment
All powers of the board and officers end
Liquidator replaces the management

Powers of the Liquidator

Liquidator has wide powers to settle all affairs of the society.

Key Powers

Take possession of all books, records, funds, assets.
Sell movable and immovable property of the society.
Recover dues from members or any person.
Call for contributions from members if needed to clear debts.
Settle claims of creditors after verification.
Institute and defend legal proceedings.
Terminate staff and settle salaries as per rules.
Prepare a final liquidation statement.
Distribute remaining funds to members.
Report progress of liquidation to Registrar regularly.

Important Point: During liquidation, all powers of the Board stop, and only the liquidator manages the society.

Disposal of Records of Wound-up Society

Once all liquidation work is finished:

Steps for Disposal of Records

1. Liquidator prepares a record list (registers, files, vouchers, documents).

2. Records are handed over to:

Registrar, OR
Any authority authorized by Registrar

3. Some records may be preserved for a fixed number of years (as per rules).
4. Unimportant or old records may be destroyed after permission.

This ensures transparency and avoids misuse of old documents.

Cancellation of Registration of a Society

After liquidation is fully complete:

Registrar Cancels the Registration

This is the final step in winding up.

When Registration is Cancelled?

Liquidator submits his Final Report showing:

All assets sold
All dues recovered
All liabilities paid
No activity remains
Registrar examines and confirms correctness.

Effect of Cancellation

Society legally ceases to exist.
Name of society is removed from the register.
No member can claim rights after cancellation.
Society cannot enter into any new contract.

Short Exam-Friendly Summary

Topic	Meaning
Circumstances for Winding Up	Reasons for closing society (losses, mismanagement, member request, etc.)
Appointment of Liquidator	Registrar appoints liquidator after winding-up order
Powers of Liquidator	Full control: sell assets, recover dues, settle claims, sue/defend
Disposal of Records	Records handed to Registrar & preserved/destroyed as per rules
Cancellation of Registration	Final step; society legally ends after liquidation