37. Investment of funds.– A society may invest or deposit its funds–
(a) in the Government Saving Bank; or
(b) in any of the securities specified in section 20 of the 79[* * *] Trusts Act, 188280; or
(c) in the shares or on the security of any other society, provided that no such investment shall be made in the shares of any society other than one with limited liability; or
(d) with any bank or person carrying on the business of banking approved for this purpose by the Registrar; or
(e) in any other mode permitted by the rules.
81[38. Restriction on dividend.– (1) No society, other than housing, banking or producers’ society, shall pay a dividend to its members at a rate exceeding ten percent of its net profits.
(2) A housing, banking or producers’ society shall pay a dividend to its members at a rate not exceeding twenty percent of its net profits.]
39. Reserve Fund.– (1) Every society which does or can derive a profit from its transactions shall maintain a reserve fund.
(2) In the case of a resource or producers’ society at least 1/4th of the net profits of the society each year shall be carried to the reserve fund and in the case of any other society at least 1/10th of the 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 be invested, subject to the provisions of section 37, as 82[the Provincial Government] may by general or special order direct, or may, with the previous sanction of 83[the Provincial Government] be used in part for some public purpose likely to promote the objects of this Act or for some purposes of provincial or local interest.
40. Restriction on distribution of profits.– Subject to the provisions of section 38 the balance of the profits of a society after making the prescribed provisions for the reserve fund may, together with any available profits of past years be distributed among its members, and in the case of consumers’ and producers’ societies, also among persons who are not members, to the extent and under the conditions prescribed by the rules or by the by-laws of such societies, provided that :-
(a) in the case of a resource society on a basis of unlimited liability in which the members do not hold shares, no distribution of profits shall be made without the general or special order of 84[the Provincial Government] in this behalf; and
(b) in the case of a resource society on a basis of unlimited liability in which the members hold shares, no such distribution of profits shall be made until 10 years from the date of registration of the society have elapsed.
41. Provident fund.– Any society may establish a provident fund for its members out of contributions from such members in accordance with by-laws made by the society in this behalf and may contribute to such provident fund from its net profits, after the prescribed payments have been made to the reserve fund, provided that such provident fund shall not be used in the business of the society but shall be invested under the provisions of section 37; and provided further, that no part of such provident fund shall be considered as an asset of the society.
42. Contribution to charitable purpose.– With the approval of the 85[Registrar] and after the payments prescribed by sub-section (2) of section 39 have been made to the reserve fund, any society may–
(a) set aside a sum not exceeding 20 per cent of its net profits, and
(b) utilize from time to time the whole of such sum in contributing to any public or co-operative purpose, or to a charitable purpose as defined in section 2 of the Charitable Endowments Act, 189086.
INSPECTION OF AFFAIRS]
43. Inquiry by Registrar.– (1) The Registrar may of his own motion by himself or by a person duly authorised by him in writing in this behalf hold an inquiry into the constitution, working and financial condition of a society.
(2) The Registrar shall hold such an inquiry as is contemplated in sub-section (1) of this section–
(a) on the requisition of a society, duly authorised by rules made in this behalf to make such requisition, in respect of one of its members, such member being itself a society,
(b) on the application of a majority of the Committee of the society,
(c) on the application of 1/3rd of the members of the society.
(3) All officers and members of the society whose affairs are investigated shall furnish such information in their possession in regard to the affairs of the society as the Registrar or the person authorized by the Registrar may require.
(4) The result of any inquiry under this section shall be communicated to the society whose affairs have been investigated.
44. Inspection of books of indebted society.– (1) The Registrar may, on the application of a creditor of a society inspect or direct some person authorized by him by order in writing in this behalf to inspect the books of the society:
(a) the applicant satisfies the Registrar that the debt is a sum then due, and that he has demanded payment thereof and has not received satisfaction within a reasonable time; and
(b) the applicant deposits with the Registrar such sum as security for the costs of the proposed inspection as the Registrar may require.
(2) The Registrar shall communicate the result of any such inspection to the creditor.
88[44-A. Inspection of books and properties.– The Registrar, or any of his authorized representative, shall have access and right to inspect the books, accounts, cash, documents, properties and securities of a society and every employee, past or present, of the society shall produce the same and furnish such information with regard to the transactions and working of the society as the person making such inspection may require.]
89[44-B. Power of Registrar to exercise powers under section 50-A in the course of an inquiry or inspection.– Where, in the course of any inquiry under section 43 or an inspection under section 44 or section 44-A it appears to the Registrar that there exists any such ground as is specified in section 50-A, he may, of his own motion or on the application of the person authorised by him under section 43 or section 44 or section 44-A, exercise the powers specified in section 50-A].
90[44-C. Power to remove officers.– (1) An officer of a society, by whatever name called may be removed by the Registrar, if, on an enquiry, he is satisfied that the said officer–
(i) acts in a manner prejudicial to the interest of the society or its members; or
(ii) has incurred any of the disqualifications or has ceased to possess any of the qualifications for being an officer provided by the Act, rules or bye-laws; or
(iii) has committed an act in respect of which the Registrar is empowered to take action under section 50-A.
(2) An order under sub-section (1) shall not be passed without giving to the concerned officer a reasonable opportunity of being heard.
(3) On being removed, the officer shall not perform any functions as such in relation to the society.
(4) An officer aggrieved by an order under sub-section (1) may, within a period of seven days from the date of the order of his removal, prefer an appeal to such Appellate Authority as may be constituted by the Government and the decision of the said Authority shall be final:
Provided that the provisions of this section shall not apply to the Punjab Provincial Cooperative Bank Ltd.
91[(5) The Registrar may suspend, for a period not exceeding three months, a member of the managing committee of a society, against whom an inquiry is pending under this Act or there are reasons to believe that any such member has committed any irregularity, illegality, breach of trust or act prejudicial to the interests of the society.]
44-D. Power of Registrar to give directions.– (1) Where the Registrar is satisfied that in the public interest or to prevent the affairs of any society from being conducted in a manner detrimental to the interest of its members or depositors or the society or to secure the proper management of any society generally, it is necessary, to issue directions to the societies generally or to any society in particular, it may issue necessary directions, and the societies or as the case may be the society shall be bound to comply with such directions.
(2) The Registrar may on a representation made to him or on his own motion modify or cancel any direction issued under sub-section (1) and in so modifying or cancelling any direction impose such conditions as he may think fit subject to which the modification or cancellation shall have effect.
44-E. Special measures.– (1) If it appears to the Registrar that in the interest of the members of a society or its depositors it is necessary that the moneys received and other assets of the society, whether held in the name of that society or any other person, are protected and preserved, the Registrar or any other person authorised by him, may without prejudice to any other action or proceedings which may be taken against the society under any law for the time being in force:
(i) enter and search any premises and seize books of account or other documents or records;
(ii) take in his custody all moneys, cash, securities, title deeds, properties, whether movable or immovable, belonging to such society including those being held on behalf of or in the name of any officer, employee or agent of the society, beneficiary or transferee of such society or other person or their dependents.
(iii) direct any bank, financial institution or person to freeze all moneys deposited with it or him on behalf of the society or of any officer, employee, agent, beneficiary or transferee of such society;
(iv) take all necessary steps and measures for identifying assets and property of the society and for realization, protection and preservation thereof;
(v) restrain any society or officer, employee, agent, beneficiary or transferee of such society or any person deriving or claiming title through any of them from alienating, transferring, selling, assigning, disposing of or parting with possession of any property, movable or immovable, or deriving any benefit, rent or income therefrom;
(vi) make such order for realization, protection and preservation of deposits of money and other assets and property of the society as he may deem fit.
(2) The order passed under sub-section (1) may at any time be withdrawn and shall not remain in force for more than one year.]
45. Costs of inquiry.– Where an inquiry is held under section 43 or an inspection is made under section 44 the Registrar may apportion the costs, or such part of the costs, as he may think right, between the society, the members or creditors demanding the inquiry or inspection, the officers or former officers, and the members or past members of the society. 92[Costs may also be awarded by the Registrar to the financing bank in the case of inspection under section 44-A of the books of any society other than an Agricultural Credit Society the liability of which is unlimited]:
(a) no order of apportionment 93[or award] of the costs shall be made under this section unless the society or persons liable to pay the costs thereunder has or have been heard or has or have had a reasonable opportunity of being heard;
(b) the Registrar shall state in writing under his own hand the grounds on which the costs are apportioned 94[or awarded].
95[Explanation–For the purposes of this section an Agricultural Credit Society means a resource society of which the primary object is the creation of funds to be lent to its members and of which a majority of the members are agriculturists and of which no member is a registered society and the liability of which is unlimited.]
96[46. Recovery of costs.– Any sum awarded by way of costs under section 45, may be recovered, on the application of the Registrar, by a Magistrate having jurisdiction in the place where the person from whom the money is claimable actually and voluntarily resides, or carries on business, or by an officer authorized in this behalf by the Government, by distress and sale of any movable property belonging to such person, within the limits of the jurisdiction of such Magistrate or any such officer.]
LIQUIDATION AND ARBITRATION]
47. Winding up.– If the Registrar, after an inquiry has been held under section 43 or after an inspection has been made under section 44 98[or section 44-A] or on receipt of an application made by 99[two-third] of the members of a society present at a special general meeting, called for the purpose or of his own motion, in the case of a society that has not commenced working, or has ceased working 100[* * *], is of opinion that the society ought to be wound up he may issue an order directing it to be wound up, and the when necessary, may appoint a liquidator for the purpose and fix his remuneration.
101[48. Society may be wound up if membership is reduced.– (1) The Registrar may, by order in writing, direct a society to be wound up, if at any time it is proved to his satisfaction that the membership of the society has been reduced to less than the requisite minimum number of members and the society, despite a reasonable opportunity, has failed to raise the number of members to be in accordance with the provisions of this Act.
(2) All existing societies shall, within two years of the commencement of this Act, raise their membership to be in accordance with the provisions of this Act, failing which the Registrar may wind up such a society after affording it an opportunity of being heard.]
102[48-A. Winding up of housing society.– If a housing society fails to complete development and allotment of plots in accordance with its development schedule, the Registrar may order the winding up of the society after affording it an opportunity of hearing.]
49. Effect of cancellation of registration.– When the affairs of a society for which a liquidator has been appointed under section 47 have been wound up, or, where no liquidator has been appointed, after two months from the date of an order under section 47, or after confirmation of such order in appeal, the Registrar shall make an order cancelling the registration of the society, and the society shall be deemed to be dissolved from the date of such order.
50. Power of a liquidator.– A liquidator appointed under section 47 shall have power with the sanction of the Registrar to do all or any of the following things:-
(a) pay any class or classes of creditors in full;
(b) make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging themselves to have any claim, present or future, whereby the society may be rendered liable;
(c) to compromise all calls or liabilities to calls and debts, and liabilities capable of resulting in debts, and all claims, present or future, certain or contingent, subsisting or supposed to subsist between the society and a contributory or alleged contributory or other debtor or person apprehending liability to the society and all questions in any way relating to or affecting the assets or the winding up of the society on such terms as may be agreed and take any security for the discharge of any such call, liability, debt, or claim and give a complete discharge in respect thereof;
(d) from time to time to determine the contribution to be made or remaining to be made by the members or past members or by the estates or nominees, heirs or legal representatives of deceased members or by any officer to the assets of the society, such contribution including debts due from such members or persons;
(e) to institute and defend suits and other legal proceedings on behalf of the society in the name of his office;
(f) to issue requisitions under section 59 upon the Collector for the recovery as arrears of land revenue of any sum ordered by him to be recovered as dues from members, or as a contribution to the assets of the society or to the cost of liquidation;
(g) to get disputes referred to arbitration;
(h) to investigate all claims against the society and subject to the provisions of this Act as to decide questions of priority arising out of such claims, and to pay rateably according to the amount of such debts, the surplus if any being applied in payment of interest 103[or return] from the date of liquidation at a rate to be fixed by the Registrar and not exceeding the contract rate;
(i) to determine by what persons and in what proportion the cost of the liquidation shall be borne;
(j) to give such directions in regard to the collection and distribution of the assets of the society as may appear to him to be necessary for winding up the affairs of the society;
(k) to fix the time or times within which creditors shall prove their debts and claims or be included for the benefit of any distribution made before those debts or claims are proved;
(l) to carry on the business of the society so far as may be necessary for the beneficial winding up of the same:
Provided that no liquidator shall determine the contribution, debt or dues to be recovered from a past member or the representative of a deceased member unless opportunity has been given to such past member or to such representative to answer the claim:
104[Provided further that all debts due to 105[Government] shall have priority over all debts which are not secured by a mortgage, charge or lien on the property of the society or any part thereof but nothing herein contained shall affect the provisions of sections 137 and 138 of the 106[Sind] Land Revenue Code, 1879107 108[, or any other law relating to land revenue in force in the area].
50-A. Power of Registrar to assess damage against delinquent promoters, etc.– (1) Where in the course of the winding up of a society it appears that any person who has taken part in the organization or management of the society or any past or present chairman, secretary, member of the managing committee or officer of the society has misapplied or retained or become liable or accountable for any money or property of the society or has been guilty of misfeasance or breach of trust in relation to the society 109[or, where the society is acting under sub-section (4) of section 34 as agent of the financing bank, has made any payment contrary to the instructions of the financing bank] the Registrar may, on the application of the liquidator or of any creditor or contributory, examine into the conduct of such person and make an order requiring him to repay or restore the money or property or any part thereof respectively with interest 110[or return] at such rate as the Registrar thinks just or to contribute such sum to the assets of the society 111[or of the financing bank] by way of compensation in regard to the misapplication, retainer, misfeasance or breach of trust as the Registrar thinks just.
(2) This section shall apply notwithstanding that the act is one for which the offender may be criminally responsible.
51. Bar of suit in winding up and dissolution matters.– Save in so far as is expressly provided in this Act no civil court shall take cognizance of any matter 112[arising out of any proceedings under Chapter VIII-A or] connected with the winding up or dissolution of a society under this Act and when a winding up order has been made no suit or other legal proceeding shall lie or be proceeded with against the society except by leave of the Registrar and subject to such terms as he may impose.
52. Disposal of surplus assets.– After all the liabilities including the paid-up share capital of a cancelled society have been met, the surplus assets shall not be divided amongst its members but they shall be devoted to any object or objects described in the by-laws of the society and when no object is so described to any object of public utility determined by the general meeting of the society and approved by the Registrar or they may in consultation with them either be assigned by the Registrar in whole or in part to any or all of the following:-
(a) an object of public utility of local or communal interest,
(b) a charitable purpose as defined in section 2 of the Charitable Endowments Act, 1890113.
(c) the 114[115[* * *] Provincial Co-operative Institute], or may be placed on deposit with 116[the Provincial Co-operative Bank] until such time as a new society with similar conditions is registered when with the consent of the registrar such surplus may be credited to the reserve fund of such new society.
53. Surplus assets of housing society.– Where the society directed to be wound up is a housing society, its assets, both movable and immovable, shall for the purposes of winding up or dissolution of the society jointly vest, subject to all rights and equities, in three persons of whom one shall be nominated by the Registrar, one shall be nominated by the said society in a general meeting specifically called for the purpose and one shall be nominated by the 117[118[* * *] Provincial Co-operative Institute]. Such persons shall, for the purpose of winding up or dissolution of the society be Joint Liquidators and shall have all the powers of a liquidator under this Act. They may, with the sanction of the Registrar, continue the working of the society, or may, subject to his sanction and in consultation with the members of the society in a general meeting, reconstruct the society or may sell off the premises of the society to the best advantage of all interests concerned, and when all the liabilities of the society are met, may dispose of the surplus assets of the society, if any, as provided in section 52.