Statement of Objects and Reasons.-When the Bill, which subsequently became the Act of 1904, was published, the following remarks were made in the Statement of Objects and Reasons:-"Legislation is called for not only in order to lay down the fundamental conditions, which must be observed; but, also with a view to giving such societies a corporate existence, without resort to the elaborate provisions of the Companies Act; but it is thought that legislation should be confined within the narrowest possible limits. The Bill has, therefore, been drawn so as to deal with those points which the Government consider to be essential and its provisions have been expressed in simple and general terms, a wide rule-making power being reserved to Local Governments, so that what is felt to be of the nature of an experiment may be tried in each Province or part of a Province on such lines as seem to offer most promise of success," and these principles were followed in the Act as passed.

The adequacy of the existing Act was examined at a conference of Registrars of Co-operative Credit Societies in 1909, and it was held that the Act remained in many ways unduly restricted, and that it also required certain alterations in detail which had been suggested by experts since 1904. The conference of Registrars drew up proposals for the amendment of the Act, and after consulting Local Government on these proposals the Government of India, have prepared the Bill now published. The chief changes, contemplated by the Government of India, are four in number.

(i) The Act of 1904, applies to societies for the purpose of co-operative credit only and not to co-operative societies of other kinds, such as those established for production or distribution. It has in practice been found that the establishment of credit societies has led to the founding of other classes of co-operative societies also, and it is advisable that the privileges, extended by the Act to co-operative credit societies, should be extended to these other societies. It is proposed, therefore, that the Act, as now revised, should be made applicable to all classes of co-operative societies.

(ii) In the Act of 1904, societies were classified according as they were "Urban" or "Rural" and the principle was laid down that, as a general rule, rural societies should be with unlimited liability. This basis for distinction was adopted, mainly because it represented a classification which had already been recommended and put in force in the initiation of co-operative credit societies in certain parts of India, but it was at the time criticised as unsuitable by experts, and it has in practice been found artificial and inconvenient. The real distinction is between societies with limited and those with unlimited liability and it is proper in the new Bill to maintain this distinction only while retaining the principle that agricultural credit societies must as a general rule be with unlimited liability.

(iii) The Act of 1904 did not contemplate that societies with unlimited liability should distribute profits. It is still felt that such societies do not represent the best form of co-operation for agricultural communities, but this form of societies has, in practice been for some time in existence in several Provinces, and societies of this character, though not of the orthodox type, are recognised to be capable of useful work. Although therefore, it is not intended to give them undue encouragement, it is proposed to legalize their existence and to permit an unlimited society, with the sanction of the Local Government to distribute profits.

(iv) A cardinal principle which is observed in the organisation of co-operative societies in Europe is the grouping of such societies into Unions and their financing by means of Central Banks. This stage of co-operation had not been fully realised or provided for in the Act of 1904, but such grouping of societies has already been found feasible in most Provinces, and it is now considered desirable to legalize the formation of co-operative credit societies of which the members shall be other co-operative credit societies.

In addition to carrying out the main alterations above described the present Bill contains the several changes of details and it has been found advisable to recast the Bill in order to improve the drafting and to incorporate the changes now contemplated .

Whereas it is expedient further to facilitate the formation of Co-operative Societies for the promotion of thrift and self-help among agriculturists, artisans and persons of limited means, and for that purpose to amend the law relating to Co-operative Societies.