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TMI BlogInsertion of new Chapter XXIAX X X X Extracts X X X X X X X X Extracts X X X X ..... through an institution of which it is a constituent; (d) limited return means the maximum dividend as may be specified by the articles; (e) Member means a person or Producer Institution (whether incorporated or not) admitted as a Member of a Producer Company and who retains the qualifications necessary for continuance as such; (f) mutual assistance principles means the principles set out in sub-section (2) of section 378G; (g) officer includes any director or Chief Executive or Secretary or any person in accordance with whose directions or instructions part or whole of the business of the Producer Company is carried on; (h) patronage means the use of services offered by the Producer Company to its Members by participation in its business activities; (i) patronage bonus means payments made by a Producer Company out of its surplus income to the Members in proportion to their respective patronage; (j) primary produce means - (i) produce of farmers, arising from agriculture (including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products), or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, research and development and all other activities for the promotion of the interests of its Members; (f) generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce; (g) insurance of producers or their primary produce; (h) promoting techniques of mutuality and mutual assistance; (i) welfare measures or facilities for the benefit of Members as may be decided by the Board; (j) any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner; (k) financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) which include extending of credit facilities or any other financial services to its Members. . (2) Every Producer Company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section. Formation of Producer Company and its registration 378C. (1) Any ten or more individuals, each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined on the basis of the shareholding by such Producer Institutions. (c) In a case where the membership consists of individuals and Producer Institutions, the voting rights shall be computed on the basis of a single vote for every Member. (2) The articles of any Producer Company may provide for the conditions, subject to which a Member may continue to retain his membership, and the manner in which voting rights shall be exercised by the Members. (3) Notwithstanding anything contained in sub-section (1) or sub-section (2), any Producer Company may, if so authorised by its articles, restrict the voting rights to active Members, in any special or general meeting. (4) No person, who has any business interest which is in conflict with business of the Producer Company, shall become a Member of that Company. (5) A Member, who acquires any business interest which is in conflict with the business of the Producer Company, shall cease to be a Member of that Company and be removed as a Member in accordance with the articles. Benefits to Members. 378E. (1) Subject to the provisions made in articles, every Member shall initially receive only such value for the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany; (b) its articles duly signed by the subscribers to the memorandum. (2) The articles shall contain the following mutual assistance principles, namely:- (a) the membership shall be voluntary and available, to all eligible persons who, can participate or avail of the facilities or services of the Producer Company, and are willing to accept the duties of membership; (b) each Member shall, save as otherwise provided in this Chapter, have only a single vote irrespective of the shareholding; (c) the Producer Company shall be administered by a Board consisting of persons elected or appointed as directors in the manner consistent with the provisions of this Chapter and the Board shall be accountable to the Members; (d) particulars on limited return on share capital; (e) the surplus arising out of the operations of the Producer Company shall be distributed in an equitable manner by- (i) providing for the development of the business of the Producer Company; (ii) providing for common facilities; and (iii) distributing amongst the Members, as may be admissible in proportion to their respective participation in the business; (f ) provision for the education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estriction on the use of such funds and the extent of debt that may be contracted and the conditions thereof; (k) the credit, loans or advances which may be granted to a Member and the conditions for the grant of the same; (l) the right of any Member to obtain information relating to general business of the company; (m) the basis and manner of distribution and disposal of funds available after meeting liabilities in the event of dissolution or liquidation of the Producer Company; (n) the authorisation for division, amalgamation, merger, creation of subsidiaries and the entering into joint ventures and other matters connected therewith; (o) laying of the memorandum and articles of the Producer Company before a special general meeting to be held within ninety days of its registration; (p) any other provision, which the Members may, by special resolution recommend to be included in the articles. Amendment of memorandum. 378H. (1) A Producer Company shall not alter the conditions contained in its memorandum except in the cases, by the mode and to the extent for which express provision is made in this Act. (2) A Producer Company may, by special resolution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (c) a statement indicating that the inter-State co-operative society is engaged in any one or more of the objects specified in section 378B; (d) a declaration by two or more directors of the inter-State co-operative society certifying that particulars given in clauses (a) to (c) are correct. (3) When an inter-State co-operative society is registered as a Producer Company, the words Producer Company Limited shall form part of its name with any word or expression to show its identity preceding it. (4) On compliance with the requirements of sub-sections (1) to (3), the Registrar shall, within a period of thirty days of the receipt of application, certify under his hand that the inter-State co-operative society applying for registration is registered and thereby incorporated as a Producer Company under this Chapter. (5) A co-operative society formed by producers, by federation or union of co-operative societies of producers or co-operatives of producers, registered under any law for the time being in force which has extended its objects outside the State, either directly or through a union or federation of co-operatives of which it is a constituent, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto, or engaged to be done by, with or for, the Producer Company. (4) All sums of money due to the inter-State co-operative society immediately before the date of transformation, shall be deemed to be due to the Producer Company. (5) Every organisation, which was being managed immediately before the date of transformation by the inter-State co-operative society shall be managed by the Producer Company for such period, to such extent and in such manner as the circumstances may require. (6) Every organisation which was getting financial, managerial or technical assistance from the inter-State co-operative society, immediately before the date of transformation, may continue to be given financial, managerial or technical assistance, as the case may be, by the Producer Company, for such period, to such extent and in such manner as that company may deem fit. (7) The amount representing the capital of the erstwhile inter-State co-operative society shall form part of the capital of the Producer Company. (8) Any reference to the inter-State co-operative society in any law other than this Act or in any contract or other instrument, shall be deemed to be reference to the Produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to leave, leave travel concession, welfare scheme, medical benefit scheme, insurance, provident fund, other funds, retirement, voluntary retirement, gratuity and other benefits as he would have held under the erstwhile inter-State co-operative society if its undertaking had not vested in the Producer Company and shall continue to do so as an officer or, as the case may be, other employee of the Producer Company. (3) Where an officer or other employee of the inter-State co-operative society opts under sub-section (2) not to be in employment or service of the Producer Company, such officer or other employee shall be deemed to have resigned. (4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or in any other law for the time being in force, the transfer of the services of any officer or other employee of the inter-State co-operative society to the Producer Company shall not entitle such officer or other employee to any compensation under this Act or under any other law for the time being in force and no such claim shall be entertained by any court, tribunal or other authority. (5) The officers and other employees who have retired before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) of section 378N] hold office as such on the date of registration of such company, the provisions of this sub-section shall have effect as if for the words ninety days , the words three hundred and sixty-five days had been substituted. (3) Every person shall hold office of a director for a period not less than one year but not exceeding five years as may be specified in the articles. (4) Every director, who retires in accordance with the articles, shall be eligible for re-appointment as a director. (5) Save as otherwise provided in sub-section (2), the directors of the Board shall be elected or appointed by the Members in the annual general meeting. (6) The Board may co-opt one or more expert directors or an additional director not exceeding one-fifth of the total number of directors or appoint any other person as additional director for such period as the Board may deem fit: Provided that the expert directors shall not have the right to vote in the election of the Chairman but shall be eligible to be elected as Chairman, if so provided by its articles: Provided further that the maximum period, for which the expert director or the additional director holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief Executive and such other officers of the Producer Company, as may be specified in the articles; (f) exercise superintendence, direction and control over Chief Executive and other officers appointed by it; (g) cause proper books of account to be maintained; prepare annual accounts to be placed before the annual general meeting with the report of the auditor and the replies on qualifications, if any, made by the auditors; (h) acquisition or disposal of property of the Producer Company in its ordinary course of business; (i) investment of the funds of the Producer Company in the ordinary course of its business; (j) sanction any loan or advance, in connection with the business activities of the Producer Company to any Member, not being a director or his relative; (k) take such other measures or do such other acts as may be required in the discharge of its functions or exercise of its powers. (3) All the powers specified in sub-sections (1) and (2) shall be exercised by the Board, by means of resolution passed at its meeting on behalf of the Producer Company. Explanation. -For the removal of doubts, it is hereby declared that a director or a group of directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any shall be a member of such committee. (3) Every such committee shall function under the general superintendence, direction and control of the Board, for such duration, and in such manner as the Board may direct. (4) The fee and allowances to be paid to the members of the committee shall be such as may be determined by the Board. (5) The minutes of each meeting of the committee shall be placed before the Board at its next meeting. Meetings of Board and quorum. 378V. (1) A meeting of the Board shall be held not less than once in every three months and at least four such meetings shall be held in every year. (2) Notice of every meeting of the Board of Directors shall be given in writing to every director for the time being in India, and at his usual address in India to every other director. (3) The Chief Executive shall give notice as aforesaid not less than seven days prior to the date of the meeting of the Board and if he fails to do so, he shall be liable to a penalty of five thousand rupees: Provided that a meeting of the Board may be called at shorter notice and the reasons thereof shall be recorded in writing by the Board. (4) The quorum for a mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (6) The Chief Executive shall manage the affairs of the Producer Company under the general superintendence, direction and control of the Board and be accountable for the performance of the Producer Company. Secretary of Producer Company. 378X. (1) Every Producer Company having an average annual turnover exceeding five crore rupees or such other amount as may be prescribed in each of three consecutive financial years shall have a whole-time secretary. (2) No individual shall be appointed as whole-time secretary unless he possesses membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980). (3) If a Producer Company fails to comply with the provisions of sub-section (1), the Company and every officer of the Company who is in default, shall be liable to a penalty of one hundred rupees for every day during which the default continues subject to a maximum of rupees one lakh: Provided that in any proceedings against a person in respect of a default under this sub-section, no penalty shall be imposed if it is shown that all reasonable efforts to comply with the provisions of sub-section (1) were taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its subsidiary, which have occurred in between the date of the annual accounts of the Producer Company to which the balance-sheet relates and the date of the report of the Board; (vi) any other matter of importance relating to energy conservation, environmental protection, expenditure or earnings in foreign exchanges; (vii) any other matter which is required to be, or may be, specified by the Board; (e) the text of the draft resolution for appointment of auditors; (f) the text of any draft resolution proposing amendment to the memorandum or articles to be considered at the general meeting, alongwith the recommendations of the Board. (5) The Board of Directors shall, on the requisition made in writing, duly signed and setting out the matters for the consideration, made by one-third of the Members entitled to vote in any general meeting, proceed to call an extraordinary general meeting in accordance with the relevant provisions contained in Chapter VII. (6) Every annual general meeting shall be called, for a time during business hours, on a day that is not a public holiday and shall be held at the registered office of the Producer Company or at some other place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise provided in sub-sections (2) to (4), the shares of a Member of a Producer Company shall not be transferable. (2) A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares alongwith any special rights, to an active Member at par value. (3) Every Member shall, within three months of his becoming a Member in the Producer Company, nominate, in the manner specified in articles, a person to whom his shares in the Producer Company shall vest in the event of his death. (4) The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his nominee: Provided that in a case where such nominee is not a producer, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board. (5) Where the Board of a Producer Company is satisfied that- (a) any Member has ceased to be a primary producer; or (b) any Member has failed to retain his qualifications to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bscription to any institution or individual for the purposes of- (a) promoting the social and economic welfare of Producer Members or producers or general public; or (b) promoting the mutual assistance principles: Provided that the aggregate amount of all such donations and subscriptions in any financial year shall not exceed three per cent. of the net profit of the Producer Company in the financial year immediately preceding the financial year in which the donation or subscription was made: Provided further that no Producer Company shall make directly or indirectly to any political party or for any political purpose to any person any contribution or subscription or make available any facilities including personnel or material. General and other reserves. 378Z-I. (1) Every Producer Company shall maintain a general reserve in every financial year, in addition to any reserve maintained by it as may be specified in articles. (2) In a case where the Producer Company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be shared amongst the Members in propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and with prior approval of the Central Government, invest in excess of the limits specified in this section. (5) All investments by a Producer Company may be made if such investments are consistent with the objects of the Producer Company. (6) The Board of a Producer Company may, with the previous approval of Members by a special resolution, dispose of any of its investments referred to in sub-sections (3) and (4). (7) Every Producer Company shall maintain a register containing particulars of all the investments, showing the names of the companies in which shares have been acquired, number and value of shares; the date of acquisition; and the manner and price at which any of the shares have been subsequently disposed of. (8) The register referred to in sub-section (7) shall be kept at the registered office of the Producer Company and the same shall be open to inspection by any Member who may take extracts therefrom. PART VIII PENALTIES Penalty for contravention. 378ZM. (1) If any person, other than a Producer Company registered under this Chapter, carries on business under any name which contains the words Producer Company Limited , he shall be punishabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce thereof in writing together with a copy of the proposed resolution to all the Members and creditors who may give their consent. (5) Notwithstanding anything contained in articles or in any contract to the contrary, any Member, or any creditor not consenting to the resolution shall, during the period of one month of the date of service of the notice on him, have the option,- (a) in the case of any such Member, to transfer his shares with the approval of the Board to any active Member thereby ceasing to continue as a Member of that Company; or (b) in the case of a creditor, to withdraw his deposit or loan or advance, as the case may be. (6) Any Member or creditor, who does not exercise his option within the period specified in sub-section (5), shall be deemed to have consented to the resolution. (7) A resolution passed by a Producer Company under this section shall not take effect until the expiry of one month or until the assent thereto of all the Members and creditors has been obtained, whichever is earlier. (8) The resolution referred to in this section shall provide for- (a) the regulation of conduct of the affairs of the Producer Company in future; (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all claims of the Members and the creditors who exercise the option, within the period specified in sub-section (4), not to continue as the Member or creditor, as the case may be. (11) Where the whole of the assets and liabilities of a Producer Company are transferred to another Producer Company in accordance with the provisions of sub-section (9), or where there is merger under sub-section (2), the registration of the first mentioned Company or the merging company, as the case may be, shall stand cancelled and that Company shall be deemed to have been dissolved and shall cease to exist forthwith as a corporate body. (12) Where two or more Producer Companies are amalgamated into a new Producer Company in accordance with the provisions of sub-section (2) and the Producer Company so formed is duly registered by the Registrar, the registration of each of the amalgamating companies shall stand cancelled forthwith on such registration and each of the Companies shall thereupon cease to exist as a corporate body. (13) Where a Producer Company divides itself into two or more Producer Companies in accordance with the provisions of clause (b) of sub-section (1) and the new Producer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of this section, a dispute shall include- (a) a claim for any debt or other amount due; (b) a claim by surety against the principal debtor, where the Producer Company has recovered from the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt or amount due be admitted or not; (c) a claim by Producer Company against a Member for failure to supply produce as required of him; (d) a claim by a Member against the Producer Company for not taking goods supplied by him. (2) If any question arises whether the dispute relates to formation, management or business of the Producer Company, the question shall be referred to the arbitrator, whose decision thereon shall be final. PART XI MISCELLANEOUS PROVISIONS Strike off name of Producer Company. 378ZP. (1) Where a Producer Company fails to commence business within one year of its registration or ceases to transact business with the Members or if the Registrar is satisfied, after making such inquiry as he thinks fit, that the Producer Company is no longer carrying on any of its objects specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal for its re-conversion to the inter-State co-operative society. (2) The Tribunal shall, on the application made under sub-section (1), direct holding meeting of its Members or such creditors, as the case may be, to be conducted in such manner as it may direct. (3) If a majority in number representing three-fourths in value of the creditors, or Members, as the case may be, present and voting in person at the meeting conducted in pursuance of the directions of the Tribunal under sub-section (2), agree for re-conversion, if sanctioned by the Tribunal, be binding on all the Members and all the creditors, as the case may be, and also on the company which is being converted: Provided that no order sanctioning re-conversion shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest report of the auditor on the accounts of the company, the pendency of any investigation proceedings in relation to the company und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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