Gujarat Co-operative Societies Act, 1961

Co-operative Bank” means a society registered under The Gujarat Co-operative Societies Act, 1961 and doing business of banking, as defined in clause (b) of sub-section (1) of Section 5 of the Banking Companies Act, 1949 (X of 1949)

Central Bank” means a co-operative bank, the object of which include creation of funds to be loaned to other societies.

Definition as per Reserve Bank of India Act, 1934

scheduled bank” means a bank included in the Second Schedule;

Definitions of Co-operative Societies in Others Acts

Refer above article for definition of terms used in this article

Section 67: Reserve Fund of the Gujarat Co-operative Societies Act, 1961

  1. Every society which does or can, derive a profit from its transactions, shall maintain a reserve fund.
  2. At least one-fourth net profits of the society each year, shall be carried to the reserve fund; and such reserve fund may be used in the business of the society or may, subject to the provisions of section 71, be invested, as the State Government may by general or special order direct, or may, with the previous sanction of the State Government, be used in part for some public purpose likely to promote the objects of this Act, or for some such purpose of the State, or of local Interest :
  3. Provided that if the Registrar is satisfied that financial condition of the society is such that it is unable to carry to its reserve fund an amount up to the aforesaid limit of one-fourth of its net profits, he may by order in writing for such period as he may specify in the order, fix for the society a limit lower that the aforesaid limit but not lower than one-tenth of its net profits.


Clause 39: Duties and Responsibilities of the Managing Committee

(13) To raise the fund for the work of the society and, to approve the terms for the same or to enter into required agreements and to invest the surplus fund in pursuance of Section 71 of The Gujarat Co-operative Societies Act, 1961.

Section 71 of The Gujarat Co-operative Societies Act, 1961

Section 71 controls investment by Cooperative Societies and it provides that a society may invest or deposit its funds in several types of institutions. Relevant provisions are quoted below.

A society may invest, or deposits its fund,—

  • (a) in a Central Bank, or the State Co-operative Bank.
  • (b) in the State Bank of India.
  • (c) in the Postal Savings bank.
  • (d) in any of the securities specified in Section 20 of the Indian Trusts Act, 1882.
  • (e) in shares or security, or debentures, issued by any other society with limited liability.
  • (f) in a Scheduled Co-operative Bank as defined in clause (2) of Section 2 of the Reserve Bank of India Act, 1934 and having its registered office within the State or in any nationalised bank
  • (ff) in any land or building-
    1. where the money in a building fund established by a society is sufficient for the purpose, or
    2. where the money in such a fund is insufficient for the purpose or where a society has not established such fund, with the previous sanction of the Registrar:
    3. Provided that the Registrar shall endeavor to decide the question as to previous sanction be given or not, within ninety days of the receipt of an application for such sanction,
  • (g) in any corporation owned or controlled by the Government of Gujarat and other Scheduled Banks not covered under clause (f), with the prior approval of the State Government subject to such terms and conditions as may be prescribed in this behalf.

Provided that in the case of the State Co-operative Bank, the Central Co-operative Banks and the Primary Agricultural Credit Co-operative Societies, the Reserve Bank of India may issue further guidelines restricting or enlarging the scope of investment in any institutions approved for the purpose under this section.

(2) Notwithstanding anything in sub-section (1) the Registrar may, with the approval of this State Co-operative Central Council, order a society or a class or societies to invest any funds in a particular manner, or may impose conditions regarding the made of investment of such funds.

Rule 29: Investment of Funds of The Gujarat Co-operative Societies Rules, 1965

With the previous sanction of the Registrar any society can invest its funds or a portion thereof

  • in loan raised by a local authority in the State under the authority of the Local Authorities Loan Act, 1914 (IX of 1914)
  • in the purchase or leasing of land or building, and in the construction of building, provided that the purchase of such land or the construction of such building is likely to be advantageous to the society in the conduct of its business.

Section 20 of the Indian Trusts Act, 1882

Clause (d) of Section 71, allow Cooperative Societies in any of the securities specified in Section 20 of the Indian Trusts Act, 1882. Section 20 was amended with The Indian Trusts (Amendment) Act, 2016. Revised Section 20 as given below:

20. Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee shall, subject to any direction contained in the instrument of trust, invest the money in any of the securities or class of securities expressly authorised by the instrument of trust or as specified by the Central Government, by notification in the Official Gazette

Explanation.—For the purposes of this section, the expression “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

Securities as per Securities Contracts (Regulation) Act, 1956

securities” include—

  1. shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
    • (ia) derivative;
    • (ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;]
    • (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;]
    • [(id) units or any other such instrument issued to the investors under any mutual fund scheme;]
  2. Government securities;
    • (iia) such other instruments as may be declared by the Central Government to be securities; and
  3. rights or interest in securities;

Approval of Registrar

If proposed instrument is not in Sec 71, then an approval has to be requested from District Registrar with below documents and time period for revert back on such application is 7 days.

  1. Detailed application.
  2. Last year’s Annual Accounts.
  3. Resolution copy of AGM and Resolution copy of the Committee for the proposed Investment.
  4. Details of the proposed Investment and amount to be invested.
  5. A description of the financial condition of the organization to be invested in.
  6. Reasons for not using the surplus funds in the intended activity of the society.
  7. Details showing the benefit / interest rate etc. to the society from the surplus funds proposed for investment.

Offence Under Sec 147, The Gujarat Cooperative Societies Act, 1961

(1). It shall be an offence under this Act, if –

(d) a committee of a society or an officer or member thereof fails to invest funds of such society in the manner required by Section 71.

(2) Where an offence under this Act has been committed by a committee of a society, every person who at the time the offence was committed, was a member of such committee, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment as provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

Sec 148: Punishments for offences under Section 147

(1) Every employer or officer, member, agent or servant of a society, or any other person, who commits an offence under Section 147 shall, on conviction, be punished

(d) if it is an offence under clause (d) of that section, with fine which may extend to five thousand rupees;

Investment Policy

With amendment of Sec 20 of The Indian Trust Act 1882, Cooperative Societies have almost all options open for investment. Sec 20 mentions “subject to any direction contained in the instrument of trust”. Unlike, in case of Cooperative society, it is Byelaws which does not have any direction for investment or any other referring to Section 71.

Thus, it is advisable that Managing committee should frame an Investment Policy based on their / member’s risk appetite and put it for members approval in AGM / SGM. All future investments should be done based on approved Investment Policy.

Unanswered Question:

Can Cooperative Society place Fixed Deposit in Private Sector Banks

As discussed above Section 71 allows Co-operative society to invest in Central Bank, the State Co-operative Bank, State Bank of India, Postal Savings Bank, Scheduled Co-operative Bank (Schedule 2) and in any Nationalised Bank. Further clause (g) states, if investment is to be done in any corporation owned or controlled by the Government of Gujarat and other Scheduled Banks not covered under clause (f), on prior approval of the State Government subject to such terms and conditions as may be prescribed in this behalf.

Hence, Investment (Fixed Deposit) can be placed with Private Sector Banks only post approval from Registrar Office.

Schedule Cooperative Banks having Registered Office in Gujarat

  1. Ahmedabad Mercantile Co-Op Bank Ltd
  2. Gujarat State Co-operative Bank
  3. Kalupur Commercial Co-operative Bank Ltd
  4. Mehsana Urban Co-Op Bank Ltd
  5. Nutan Nagarik Sahakari Bank Ltd
  6. Rajkot Nagrik Sahakari Bank Ltd
  7. SBPP Co-operative Bank Ltd., Killa Pardi
  8. Surat Peoples Coop Bank Ltd


Cooperative Society can invest their surplus in

  1. Bank Fixed Deposit (Schedule Cooperative Bank and any Nationalized Bank)
  2. Stocks
  3. Mutual funds
  4. Government Securities


  1. The Gujarat Co operative Societies Act, 1961
  2. The Indian Trusts (Amendment) Act, 2016
  3. Securities Contracts (Regulation) Act, 1956
  4. Parmanand Jamnadas Patel & 6 vs. State of Gujarat (Gujarat High Court)
  5. Marketyard Commercial Coop Bank vs State of Gujarat (Gujarat High Court)
  6. Banking Regulation Act, 1949
  7. Reserve Bank of India Act, 1934
  8. Schedule 2 of Reserve Bank of India Act, 1934
  9. Local Authority Loan Act

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s