CHAPTER 47:02
COOPERATIVE SOCIETIES

ARRANGEMENT OF SECTIONS

   SECTION

PART I
PRELIMINARY

   1.   Short title

   2.   Interpretation

PART II
REGISTRATION

   3.   Registrar and assistant registrars

   4.   Societies which may be registered

   5.   Conditions of registration

   6.   Application for registration

   7.   Registration of society

   8.   Indication of registration

   9.   Cancellation of registration

   10.   Amendment of by-laws of a registered society

   11.   Appeal to the Minister

   12.   Name of society to be different from others

   13.   Evidence of registration

PART III
RIGHTS AND LIABILITIES OF MEMBERS

   14.   Qualification for membership

   15.   Restriction on shareholding

   16.   Restriction on membership

   17.   Member not to exercise rights until due payment made

   18.   Restriction of membership in more than one society

   19.   Votes of members

   20.   Restriction on transfer of shares or interest

PART IV
DUTIES OF REGISTERED SOCIETIES

   21.   Address of society

   22.   Copy of the Act, regulations, by-laws, etc., to be open for inspection

   23.   Audit and annual returns and accounts

   24.   Qualifications of auditors

   25.   Estimates and expenditure

   26.   Voluntary amalgamation of societies

   27.   Transfer of assets and liabilities to another society

   28.   Voluntary division of a society

PART V
DUTIES AND PRIVILEGES OF SOCIETIES

   29.   Societies to be bodies corporate

   30.   By-laws to bind members

   31.   Contract with members

   32.   Imposition of fines upon members

   33.   Charge on produce and certain other materials and articles

   34.   Charge and set-off in respect of shares or interest of members

   35.   Share or interest not liable to attachment

   36.   Liability of past member

   37.   Liability of estate of deceased member

   38.   Transfer of interest or death of member

   39.   Registers and books of societies and copies thereof shall be received in evidence in certain circumstances

   40.   Restriction on the production of societies books

   41.   Power to remit or refund revenue

PART VI
PROPERTY AND FUNDS OF REGISTERED SOCIETIES

   42.   Restrictions on loan

   43.   Restrictions on borrowing

   44.   Restrictions on other transactions with non-members

   45.   Investments of funds

   46.   Dividend or bonus

   47.   Reserve and provident fund

   48.   Distribution of net balance

PART VII
NATIONAL COOPERATIVE EDUCATION FUND

   49.   Establishment of the Fund

   50.   Fund Committee

   51.   Account and Audit

   52.   Financial Year

   53.   Disbursement from the Fund

   54.   Holdings of the Fund

PART VIII
CHARGES BY SOCIETIES

   55.   Power to charge property

   56.   Registration of charges

   57.   Duty of society to register charges created by society

   58.   Duty of society to register charges existing on property acquired

   59.   Register of charges

   60.   Endorsement of certificate of registration on debentures

   61.   Entry of satisfaction

   62.   Rectification of register of charges

   63.   Registration of appointment of receiver

   64.   Copy of instrument creating charge to be kept by society

   65.   Society’s register of charges

   66.   Right to inspect copies of instruments creating charges and society’s register of charges

PART IX
SUPERVISION AND INSPECTION OF AFFAIRS

   67.   Production of cash and books of society

   68.   Ad hoc committee of inquiry

   69.   Inspection of books of indebted society

   70.   Cost of inquiry

   71.   Recovery of an award under section 70

PART X
DISSOLUTION OF A REGISTERED SOCIETY

   72.   Cancellation of registration after inquiry or inspection

   73.   Cancellation for other reasons

   74.   Winding-up

   75.   Application of certain provisions of Companies Act

   76.   Effect of cancellation

   77.   Copy of order to be filed by Registrar

   78.   Appointment of liquidator

   79.   Powers of liquidator

   80.   Powers of Registrar in liquidation

   81.   Appeal against an order of a liquidator or the Registrar

   82.   Closure of liquidation

   83.   Commission of offence

   84.   Convicted officers not to be officers of a society

   85.   Offences

PART XI
SURCHARGE AND ATTACHMENT

   86.   Powers of Registrar to surcharge officers, etc.

   87.   Appeal to Minister

   88.   Attachment of property

PART XII
SETTLEMENT OF DISPUTES

   89.   Settlement of dispute

   90.   Protection of arbitrator

   91.   Appeal to court from decision of the Minister

PART XIII
REGULATIONS

   92.   Regulations

PART XIV
MISCELLANEOUS PROVISIONS

   93.   Remuneration of officers

   94.   Prohibition of the use of the word “Cooperative”

   95.   Offences and penalties

   96.   Penalty for soliciting violation of contracts

   97.   Application of other laws

   98.   Certain laws not to apply

   99.   Repeal and savings

36 of 1998
G.N. 10/2000

An Act to consolidate the law relating to the constitution and regulation of cooperative societies and for other matters incidental thereto or connected therewith

[1ST APRIL 2000]

PART I
PRELIMINARY

1.   Short title

   This Act may be cited as the Cooperative Societies Act.

2.   Interpretation

   In this Act, unless the context otherwise requires—

   “apex society” means a registered society under this Act, the membership of which is restricted to cooperative unions and includes a society established to serve the cooperative movement by providing facilities for banking, insurance and the supply of goods or services;

   “bonus” means a share of the surplus of a registered society divided among its members in proportion to the volume of business done with the society by them from which the surplus of the society was derived;

   “by-laws” means the registered by-laws made by a society in the exercise of any power conferred by this Act, and includes a registered amendment of such by-laws;

   “committee” means the governing body of a registered society to which the management of its affairs is entrusted and includes a Board of Directors;

   “Commissioner” means the Commissioner for Cooperative Development and includes the Deputy Commissioner for Cooperative Development and Assistant Commissioner for Cooperative Development when acting for the Commissioner;

   “cooperative” means an autonomous association of persons united voluntarily to meet their common economic and social needs in accordance with cooperative principles through a jointly owned and democratically controlled enterprise;

   “cooperative principles” means—

   (i)   membership of a society is voluntary and open;

   (ii)   the management of the society is carried out democratically whereby each member has one vote and there is no voting by proxy;

   (iii)   the distribution of surplus is done justly in proportion to the amount of the business contribution of each member;

   (iv)   there is payment of limited return on capital;

   (v)   there is self-reliance;

   (vi)   race, creed, ethnic origins, language or political beliefs are no bar to voluntary membership and membership is open to all who can use the services of the society;

   “cooperative union” means a registered society under this Act, the membership of which is restricted to primary societies;

   “date of dissolution” means the date on which the Registrar’s order cancelling the registration of a society takes effect;

   “dividend” means share of surplus of a registered society divided among its members in proportion to the share capital held by them;

   “member” includes a person or a registered society joining in the application for the registration of a society and a person or registered society admitted to membership after registration in accordance with the by-laws;

   “officer” includes a Chairman, Secretary, Treasurer, member of committee, employees, or other person empowered under any regulations made under the provisions of this Act or by-laws of a registered society to give directions in regard to the business of a registered society.

   “primary society” means a registered society under this Act, the membership of which consists of individual persons and includes any body of persons and other bodies approved by the Registrar under section 16; of this Act.

   “registered society” means a cooperative society registered under this Act;

   “Registrar” means the Registrar of cooperative societies appointed under section 3 and includes any person when exercising such powers of the Registrar as may have been conferred upon him under that section;

   “secondary society” means a registered society under this Act, the membership of which is restricted to primary societies;

   “society with limited liability” means a society the liability of whose members is limited by its by-laws to—

   (a)   the amount if any unpaid on the shares respectively held by them; or

   (b)   such amount as the members may each undertake to contribute to the assets of the society in the event of its being wound up;

   “society with unlimited liability” means a society not having limited on the liability of its members;

   “winding-up” means all proceedings subsequent to the cancellation of the registration of a society.

PART II
REGISTRATION

3.   Registrar and assistant registrar

   (1) There shall be a Registrar for cooperative societies who shall also be the Commissioner for Cooperative Development for the purposes of this Act.

   (2) The Registrar shall be a public officer responsible for providing and administering services required by societies under this Act.

   (3) There shall be assistant registrars who shall be assistant commissioners, who shall assist the Registrar in the administration of cooperative societies and the implementation of the provisions of this Act.

4.   Societies which may be registered

   Subject to the provisions of this Act, a society may be registered under this Act with or without limited liability:

   Provided that a cooperative union or any apex society shall be registered with limited liability.

5.   Conditions of registration

   (1) No society shall be registered under this Act unless—

   (a)   in the case of a primary society, it consists of at least ten persons all of whom are qualified for membership of the society under section 14; or

   (b)   in the case of a secondary society, it consists of at least two registered primary societies among its registered members;

   (c)   in the case of a tertiary society, it consists of at least two registered secondary societies among its registered members;

   (d)   in the case of an apex society, it consists of two or more secondary societies.

   (2) All cooperative societies registered under this Act shall conform to the cooperative principles.

   (3) When for the purposes of this section any question arises as to residence or occupation of land constituting the qualification of any person, that question shall be decided by the Registrar.

6.   Application for registration

   (1) For the purpose of registration an application to register registration shall be made to the Registrar.

   (2) The application shall be signed—

   (a)   in the case of a primary society, by at least ten persons qualified for membership of the society under section 14; and

   (b)   in the case of a secondary, tertiary or apex society, by a person duly authorized in that behalf by each registered society, as the case may be, who is a member of that society.

   (3) The application shall be accompanied by three copies of the proposed by-laws of the society and the persons by whom or on whose behalf such an application is made shall furnish such information in regard to the society as may be prescribed under regulations made under this Act.

   (4) An application for the registration of a society shall be accompanied by such registration fees as may be prescribed by regulations made under this Act.

7.   Registration of Society

   (1) If the Registrar is satisfied that a society has complied with the provisions of this Act and regulations made thereunder and that its proposed by-laws are not contrary to the provisions of this Act, he shall register the society and its by-laws.

   (2) The Registrar shall register a society within thirty days from the date the application is submitted failing which the society shall be deemed to have been registered.

8.   Indication of registration

   (1) A society which is registered under section 7 shall state in legible letters in all its receipts, letter-heads, notices, advertisements or other official publications that it is registered and shall indicate the same on a signboard in a conspicuous position outside any premises or office in which it carries on its business.

   (2) If a society registered under section 7 contravenes or fails to comply with the provisions of this section that society and any officer or person who purports to act on its behalf commits an offence and shall be liable after conviction to a fine not exceeding K3,000 and in the case of a continuing offence to a further fine not exceeding K500 for each day on which the offence is continued after conviction thereof.

9.   Cancellation of registration

   (1) At any time during the period of registration of a society under section 7, the Registrar may, after giving notice in writing to the person responsible for the running of the society, cancel the registration of such society stating reasons for such cancellation and the society shall, from the date of service of the notice, cease to be a registered society.

   (2) The cancellation referred to in subsection (1) shall be Published in the Gazette.

10.   Amendment of by-laws of a registered society

   (1) Any registered society may, subject to the provisions of this Act, amend its by-laws, including the by-law which declares the name of the society.

   (2) No amendment of the by-laws of a registered society shall be valid until the amendment has been registered under this Act or regulations made under this Act.

   (3) If the Registrar is satisfied that an amendment of the by-laws is not contrary to the provisions of this Act, he shall register the amendment.

   (4) An amendment which changes the name of a registered society shall not affect any right or obligation of the society or any of its members or past members, and any legal proceedings pending may be continued by or against the society.

   (5) When the Registrar registers an amendment of the by-laws of a registered society, he shall issue to the society a copy of the amendment certified by him which shall be conclusive evidence of the fact that the amendment has been fully registered.

   (6) If it appears to the Registrar that an amendment of the by-laws of a society is necessary or desirable in the interest of such society, he may call upon the society, subject to any regulations made under this Act, to make the amendment within such time as he may specify.

   (7) If the society fails to comply with the Registrar’s directive, the Registrar may cancel the registration of the Society under section 73 (c).

   (8) With effect from the date of registration of an amendment under this Act, the by-laws shall be binding on the society and its members.

11.   Appeal to the Minister

   From every refusal of the Registrar to register a society or its by-laws or any amendment of its by-laws, an appeal shall lie to the Minister.

12.   Name of society to be different from others

   (1) No society shall be registered under a name identical to any other existing society, or under any name likely to mislead members of the public as to its identity.

   (2) The word “cooperative” shall form part of the name of every society registered under this Act, and the word “Limited” shall be the last word in the name of every society with limited liability registered under this Act.

13.   Evidence of registration

   (1) A certificate of registration signed by the Registrar shall be conclusive evidence that the society mentioned therein is duly registered unless it is proved that the registration of the society has been cancelled.

   (2) If the Registrar is satisfied that a society’s original certificate of registration has been lost or destroyed, he may issue a duplicate certificate.

PART III
RIGHTS AND LIABILITIES OF MEMBERS

14.   Qualifications for membership

   In order to be qualified for membership of a society, a person, other than a registered society shall—

   (a)   have attained the age of eighteen years; and

   (b)   be a resident within or in occupation of land within the society’s area of operation as prescribed by the relevant by-laws;

   (c)   qualify under a common bond as specified by-lays.

15.   Restriction on shareholding

   No member shall hold more than one-fifth of the paid-up share capital of any cooperative society.

16.   Restriction on membership

   No company incorporated under the Companies Act, and no unincorporated body of persons, shall be entitled to become a member of a registered society except with the written permission of the Registrar.

17.   Member not to exercise rights until due payment made

   No member of a registered society shall exercise any of the rights rights of a member unless and until he has made such payment to the society in respect of membership or has acquired such interest in the society as may be prescribed by any regulations made under this Act or by the by-laws of the society.

18.   Restriction of membership in more than one society

   (1) No person shall be a member of more than one registered society with unlimited liability.

   (2) Save with the written consent of the Registrar, no person be a member of more than one registered society having the same or similar objects:

   Provided that a person who is a member of a registered society and carries on business on land or at premises outside the area of operation of that registered society, may be a member of a registered society in whose area of operations that land or those premises are situated notwithstanding that its objects are the same as or similar to those of the list mentioned society.

19.   Vote of members

   Each member of a registered society shall have one vote only as a member in the affairs of the registered society:

   Provided that a registered society, a cooperative union or an apex society which is a member of any registered society shall have as many votes as may be prescribed by the by-laws of such other society, and may, subject to such by-laws, appoint any number of its committee members, not exceeding the number of such votes, to exercise its voting power.

20.   Restriction on shares or interest

   (1) The transfer of the share or interest of a transfer of member in the capital of a registered society shall be subject to the conditions as to maximum holding for which provision is made in section 15.

   (2) In the case of a society registered with unlimited liability, a member shall not transfer or charge any share held by him, or his interest in the capital of the society or any part thereof, unless—

   (a)   he has held such share or interest for not less than one year; and

   (b)   the transfer of charge is made to the society or to a member of the society.

PART IV
DUTIES OF REGISTERED SOCIETIES

21.   Address of societies

   (1) Every registered society shall have a registered address to which notices and communications may be sent and shall send to the Registrar notice of every change thereof within one month of such change.

   (2) Every registered society shall display its name and address on a signboard in a conspicuous position outside its place of business.

22.   Copy of the Act, regulations, by-laws, etc., to be open for inspection

   Every registered society shall keep a copy of this Act and of the Regulations made thereunder and of its by-laws and a list of members open to inspection by any member, fee of charge, and any other person at a fee to be determined by the Society, at all reasonable times during business hours at the office of the society.

23.   Audit and annual returns and accounts

   (1) It shall be the duty of every registered society to cause its accounts to be audited at least once in every year by an auditor from a list of registered auditors appointed by the annual general meeting and the cost of such audit shall be borne by the society:

   Provided that—

   (a)   no auditor chosen by a registered society to audit its books shall perform that function for more than three consecutive annual audits;

   (b)   where the registered society is unable to appoint its own auditors, the Registrar may appoint such auditors or carry out the audit at a fee.

   (2) Audits, shall be conducted in accordance with generally accepted professional auditing standards and shall include audit of management efficiency.

   (3) The auditor shall at all times have access to all books, accounts, papers and securities of a registered society, and every officer of the society shall furnish such information in regard to the transactions and working of the society as the auditor may require.

   (4) Every auditor appointed under subsection (1) shall submit a detailed audit report on the financial statements to the committee and a true copy of such financial statements to the Registrar within three months after its financial year and shall include the auditor’s opinion on whether or not the business administration of the society has been conducted—

   (a)   efficiently;

   (b)   in accordance with cooperative principles and the auditing and accounting provisions of this Act; and

   (c)   in accordance with its objectives, by-laws and any other decisions made by the annual general meeting.

   (5) The audited financial statements referred to in subsection (4) shall be open for inspection by any member of the public upon payment of such fee as may be fixed by the Registrar.

   (6) Where a registered society fails to cause its accounts to be audited in accordance with subsections (1), (2) and (4), the committee of that society shall be deemed to have relinquished its office; and the Registrar shall convene a special general meeting to elect a new committee unless the Registrar is satisfied that the failure was due to circumstances beyond the committee’s control.

24.   Qualifications of auditors

   (1) No person shall be appointed or approved as an auditor for the audit of the accounts of a registered society unless that person, or in the case of a firm, is a member of a recognized accounting body.

   (2) The Minister may, in consultation with the Registrar and by notice published in the Gazette, amend the qualifications of auditors specified in this section.

25.   Estimates and expenditure

   (1) Every committee of a registered society shall cause estimates of the society’s income and expenditure of both revenue and capital to be prepared for the coming twelve months at least three months before the end of its financial year. A copy of such estimates shall be sent to the Registrar.

   (2) If a society contravenes or fails to comply with any provision of this section, every member of that Committee and any officer or person who purports to act on its behalf commits an offence and shall, upon conviction, be liable to a fine not exceeding K3,000 and in the case of a continuing offence to a further fine not exceeding K500 for each day on which the offence is continued.

26.   Voluntary amalgamation of societies

   (1) Any or more registered societies (hereinafter referred to as the “amalgamating societies”) may, by special resolution with the approval of the Registrar, (in this section referred to as the “preliminary resolution”), resolve to amalgamate as a single society (hereinafter referred to as the “amalgamated society”).

   (2) A copy of the preliminary resolution shall be sent to all the members and creditors of each of the societies, and to all other persons whose interest in any of the societies will be affected by the amalgamation.

   (3) Any member of any of the societies concerned may, notwithstanding any by-law to the contrary, by notice in writing given to his society at least one month before the date specified as the date of amalgamation, intimate his intention not to become a member of the amalgamated society.

   (4) Any creditor of any of the societies concerned may, notwithstanding any agreement to the contrary, by notice in writing given to such society at least one month before the date specified as the date of amalgamation, intimate his intention to demand the payment of any money due to him.

   (5) Any other person whose interest will be affected by the amalgamation may, by notice in writing given to the society concerned not less than one month before the date specified as the date of amalgamation, object to the amalgamation unless his claim is satisfied.

   (6) Not less than three months after the date of the meeting at which the preliminary resolution is passed, a further special general meeting of each of the societies shall be held to consider the preliminary resolution and any notices received under this section.

   (7) At the special general meeting held under subsection (6) of this section, provision shall be made by a further resolution of the society (in this section referred to as the “secondary resolution”) for—

   (a)   the repayment of the share capital of any member who has given notice under subsection (3);

   (b)   the satisfaction of any claims by creditors who have given notice under subsection (4); and

   (c)   the satisfaction of the claims of such other persons who have given notice under subsection (5) of this section as the Registrar determines, or the securing of their claims in such manner as the Registrar directs:

   Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

   (8) Each society may, by further resolution passed by a two-thirds majority of the members present and voting, confirm the preliminary resolution.

   (9) If, within such time as the Registrar considers reasonable, the Registrar is satisfied that the provisions of the secondary resolutions of each of the societies, and the provisions of this section, have been complied with, he may register the amalgamated society and the by-laws of such thereupon—

   (a)   the registration of all the amalgamating societies shall be cancelled, and the amalgamating societies shall be dissolved;

   (b)   the registration of the amalgamated society shall be a sufficient conveyance to vest the assets and liabilities of the amalgamating societies in the amalgamated society;

   (c)   the remaining members of the amalgamating societies shall become members of the amalgamated society and subject to its by-laws in accordance with section 30; and

   (d)   any creditors of the amalgamating societies or any other persons who have claims against the amalgamating societies, and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims or causes of action against the amalgamated society.

27.   Transfer of assets and liabilities to another society

   (1) Any registered society may by a resolution transfer its assets and liabilities to any other society which agrees to accept them.

   (2) The transfer of liabilities referred to in subsection (1) shall not be made to any society without giving notice in writing of ninety days to the creditors of both or more societies concerned in the transfer of the liabilities.

   (3) If a creditor objects to an amalgamation decided upon under section 26 or a transfer of liabilities under this section and gives notice in writing of one month before the date fixed for the amalgamation or transfer of liabilities to the society concerned, the amalgamation or transfer shall not take place until liabilities of the creditor have been satisfied or until an agreement for payment of the liabilities has been made by the society and the creditor.

   (4) Any creditor who is not satisfied with the liabilities paid to him or who does not accept to enter into an agreement with the society concerned as provided under subsection (3) may appeal to the Registrar within ninety days from the date of his disagreement with the society.

28.   Voluntary division of a society

   (1) Any registered society may, with the prior written approval of the Registrar, divide itself into two or more societies in accordance with the procedure laid down by regulations made under this Act.

   (2) A division of a society referred to under subsection (1) shall not take place unless—

   (a)   a general meeting of the members of the society has been called;

   (b)   each member of the society has had a written notice of at least fifteen days of the meeting; and

   (c)   a resolution has been passed by a two-thirds majority of the members present at the meeting in support of the division.

   (3) A resolution passed under subsection (2) (hereinafter referred to as a “preliminary resolution”) shall contain proposals for the distribution of the assets and liabilities of the divided society among the societies in which it is proposed to be divided and shall prescribe the area of operation of, and specify the members who may constitute each of, the new societies.

   (4) a copy of the preliminary resolution shall be sent to all the members of the society and its creditors and any other person whose interests may be affected by the division shall be informed in writing by the society.

   (5) Any member of the divided society may notify the society in writing, within three months from the receipt of the preliminary resolution, of his intention not to belong to any of the new societies and any creditor may demand from the society within the said period a repayment of the amount due to him.

   (6) Any other person whose interests are affected by the division of the society may submit his claim in writing to the society.

   (7) After the period of three months from the sending of the resolution under subsection (4) to the members and creditors of the society, a special general meeting of the society shall be called to consider the preliminary resolution.

   (8) A special meeting of the society shall not be held under subsection (7) unless each member of the society has had a notice of fifteen days in writing informing him of the meeting.

   (9) If, at the meeting called under subsection (7), a preliminary resolution is confirmed by a two-thirds majority of the members present, either without any change or with such changes, which, in the opinion of the Registrar, are not material, the Registrar may register the new societies and their by-laws and on such registration, the registration of the old society shall be deemed to have been cancelled and the society shall be deemed to be dissolved from the date of the cancellation.

   (10) At the special general meeting of the society held under subsection (7), provision shall be made by another resolution for—

   (a)   the repayment of the share capital of all the members who have given notice under subsection (5);

   (b)   the satisfaction of the claims of all the creditors who have given notice under subsection (5);

   (c)   the satisfaction of the claims of any other person who has given notice under subsection (6):

   Provided that no member, creditor or any other person shall be entitled to any repayment or satisfaction until the preliminary resolution is confirmed under subsection (9).

   (11) The registration of new societies under subsection (9) shall be sufficient to vest the assets and liabilities of the divided society in the new societies in accordance with the provisions of the preliminary resolution.

PART V
DUTIES AND PRIVILEGES OF SOCIETIES

29.   Societies to be bodies corporate

   A society on registration shall become a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to hold moveable and immoveable property of every description, to enter into contracts, to institute and defend suits and other legal proceedings and to do all things necessary for the purpose of its constitution.

30.   Registered by-laws to bind members

   (1) The by-laws of a registered society shall, when registered, bind the society and the members thereof to the same extent as if they were signed by each member, and contain obligations on the part of each member, his heirs, executors, administrators and assignees, to observe all the provisions of the by-laws.

   (2) No member of a registered society shall contest any suit, claim, action or proceedings between such member and the society or any other member of the society on the ground that any by-laws of the society constitutes a contract in restraint of trade.

31.   Contract with members

   (1) A registered society, having as one of its objects the disposal of any agricultural produce, may contract with its members either in its by-laws or by a separate document, that they shall dispose of all their produce, or of such amounts or descriptions as may be stated therein, to or through the society, and may in contract provide for payment of a specific sum per unit of weight or other measure as liquidated damages for infringement of the contract, and such sum shall be a debt due to the society.

   (2) Any such contract as is mentioned in subsection (1) shall create in favour of the society a first charge upon all produce mentioned therein, whether existing or future.

   (3) The covenants obligations imposed by any contract as is mentioned in subsection (1) shall run with any assets and shall be binding on all assignees and transferees and any transfer or conveyance of property subject to such contract shall be deemed to operate also as alike transfer or assignment of the contract.

   (4) No contract entered into under the provisions of this section shall be contested in any court on the ground that it constitutes a contract in restraint of trade.

32.   Imposition of fines upon members

   (1) The by-laws of a registered society may subject to the provisions of any regulations made under this Act, provide for the imposition of fines on its members for any infringement of its by-laws but no such fine shall be imposed upon any member until written notice of intention to impose the fine and the reason therefor has been served on him and he has had an opportunity of showing cause against the imposition of the fine, and if he so desires, of being heard with or without witnesses.

   (2) Any such fine may be recovered by legal proceedings in a court of law.

   (3) The whole or any part of such fine may be set-off against any moneys due to such member in respect of produce delivered by him to the society.

   (4) A member shall not be deemed to have infringed the by-laws of a registered society by reason of his having failed to deliver produce to the society if such failure was due to the fact that before becoming a member of the society such member had contracted to deliver such produce to some other person.

   (5) It shall be the duty of every person applying for membership of a registered society to disclose to the society particulars of all such contracts as are mentioned in subsection (4).

33.   Charge on produce and certain other materials and articles

   Subject to the prior claims of the Government on property of its debtors and of landlords in respect of rent, or any money recoverable as rent, or to any prior charge duly registered under this Act or under any other law for the time being in force, a registered society shall have a first charge—

   (a)   upon produce of a member or past member, at any time within two years from the date when seed or fertilizer as advanced, or services were supplied, or money was lent to such member or past members in respect of the unpaid portion of such advance, supplies services on loan;

   (b)   in respect of the supply of agricultural or industrial implements or machinery, or raw material for manufacturing or building or for the loan of money for the purchase of any of such implements to be supplied or purchased in whole or in part from any such loan or any articles manufactured from raw materials supplied or purchased.

34.   Charge and set-off in respect of shares or interest of member

   A registered society shall have a first charge upon the shares or interest in the capital and on the deposits of a member or past member and upon any dividend, bonus or accumulated funds payable to a member or past member in respect of any debt due from such member or past member to the society, and may set-off any sum credited or payable to such member or past member in or towards payment of any such debt.

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