Section 378Z — Voting rights

Save as otherwise provided in sub-sections (1) and (3) of section 378D, every
Member shall have one vote and in the case of equality of votes, the Chairman or the person presiding shall
have a casting vote except in the case of election of the Chairman.
PART IV
GENERAL MEETINGS
37ZA. Annual general meetings.—(1) Every Producer Company shall in each year, hold, in addition
to any other meetings, a general meeting, as its annual general meeting and shall specify the meeting as
such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual
general meeting of a Producer Company and that of the next:
Provided that the Registrar may, for any special reason, permit extension of the time for holding any
annual general meeting (not being the first annual general meeting) by a period not exceeding three months.
(2) A Producer Company shall hold its first annual general meeting within a period of ninety days from
the date of its incorporation.
(3) The Members shall adopt the articles of th e Producer Company and appoint directors of its Board
in the annual general meeting.
(4) The notice calling the annual general meeting shall be accompanied by the following documents,
namely:—
(a) the agenda of the annual general meeting;
(b) the minutes of the previous annual general meeting or the extraordinary general meeting;
(c) the names of candidates for election, if any, to the office of director including a statement of
qualifications in respect of each candidate;
(d) the audited balance -sheet and profit and loss accounts of the Producer Company and its
subsidiary, if any, together with a report of the Board of Directors of such Company with respect to—

(i) the state of affairs of the Producer Company;
(ii) the amount proposed to be carried to reserve;
(iii) the amount to be paid as limited return on share capital;
(iv) the amount proposed to be disbursed as patronage bonus;
(v) the material changes and commitments, if any, affecting the financial position of the
Producer Company 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 on e-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
within the city, town or village in which the registered office of the Company is situate.
(7) A general meeting of th e Producer Company shall be called by giving not less than fourteen days
prior notice in writing.
(8) The notice of the general meeting indicating the date, time and place of the meeting shall be sent to
every Member and auditor of the Producer Company.
(9) Unless the articles of the Producer Company provide for a larger number, one-fourth of the total
number of members of the Producer Company shall be the quorum for its annual general meeting.
(10) The proceedings of every annual general meeting alongwith the report of the Board of Directors,
the audited balance-sheet and the profit and loss account shall be filed with the Registrar within sixty days
of the date on which the annual general meeting is held, with an annual return alongwith the filing fees as
applicable under the Act.
(11) In the case where a Producer Company is formed by Producer Institutions, such Institutions shall
be represented in the general body through the Chairman or the Chief Executive thereof who shall be
competent to act on its behalf:
Provided that a Producer Institution shall not be represented if such Institution is in default or failure
referred to in clauses (d) to (f) of sub-section (1) of section 378Q.
PART V
SHARE CAPITAL AND MEMBERS RIGHTS
378ZB. Share capital.—(1) The share capital of a Producer Company shall consist of equity shares
only.
(2) The shares held by a Member in a Producer Company, shall as far as may be, be in proportion to
the patronage of that company.
378ZC. Special user rights.— (1) The producers, who are active Members may, if so provided in the
articles, have special rights and the Producer Company may issue appropriate instruments to them in respect
of such special rights.

(2) The instruments of the Producer Company issued under sub -section ( 1) shall, afte r obtaining
approval of the Board in that behalf, be transferable to any other active Member of that Producer Company.
Explanation.—For the purposes of this section, the expression “special right” means any right relating
to supply of additional produce by the active Member or any other right relating to his produce which may
be conferred upon him by the Board.

378ZD.Transferability of shares and attendant rights .—(1) Save as otherwise 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 sha ll, 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 a Member as specified in articles,
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:
Provided that the Board shall not direct such surrender of shares unless the Member has been served
with a written notice and given an opportunity of being heard.
PART VI
FINANCE, ACCOUNTS AND AUDIT
378ZE. Books of account.— (1) Every Producer Company shall keep at its registered office proper
books of account with respect to—
(a) all sums of money received and expended by the Producer Company and the matters in
respect of which the receipts and expenditure take place;
(b) all sales and purchase of goods by the Producer Company;
(c) the instruments of liability executed by or on behalf of the Producer Company;
(d) the assets and liabilities of the Producer Company;
(e) in case of a Producer Company engaged in production, processing and manufacturing, the
particulars relating to utilisation of materials or labour or other items of costs.
(2) The balance-sheet and profit and loss accounts of the Producer Company shall be prepared, as far
as may be, in accordance with the provisions contained in section 129.

378ZF.Internal audit.— Every Producer Company shall have internal audit of its accounts carried
out, at such interval and in such manner as may be specified in articles, by a chartered accountant as defined
in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949).
378ZG. Duties of auditor under this Chapter .—Without prejudice to the provisions contained in
section 143, the auditor shall report on the following additional matters relating to the Producer Company,
namely:—
(a) the amount of debts due alongwith particulars of bad debts, if any;
(b) the verification of cash balance and securities;
(c) the details of assets and liabilities;
(d) all transactions which appear to be contrary to the provisions of this Chapter;
(e) the loans given by the Producer Company to the directors;
(f) the donations or subscriptions given by the Producer Company;
(g) any other matter as may be considered necessary by the auditor.
378ZH. Donation or subscription by Producer Company.—A Producer Company may, by special
resolution, make donation or subscription 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.
378Z-I. General and other reserves.—(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 proportion to their patronage in the business of that Company in that year.
378ZJ. Issue of bonus Shares .— Any Producer Company may, upon recommendation of the Board
and passing of resolution in the general meeting, issue bonus shares by capitalisation of amounts from
general reserves referred to in section 378Z-I in proportion to the shares held by the Members on the date
of the issue of such shares.
PART VII
LOANS TO MEMBERS AND INVESTMENTS
378ZK. Loan, etc., to Members.— The Board may, subject to the provisions made in articles, provide
financial assistance to the Members of the Producer Company by way of—
(a) credit facility, to any Member, in connection with the business of the Producer Company, for a
period not exceeding six months;
(b) loans and advances, aga inst security specified in articles to any Member, repayable within a
period exceeding three months but not exceeding seven years from the date of disbursement of such
loan or advances:

Provided that any loan or advance to any director or his relative shall be granted only after the approval
by the Members in general meeting.
378ZL. Investment in other companies, formation of subsidiaries etc .— (1) The general reserves
of any Producer Company shall be invested to secure the highest returns available from approved securities,
fixed deposits, units, bonds issued by the Government or co -operative or scheduled bank or in such other
mode as may be prescribed.
(2) Any Producer Company may, for promotion of its objectives acquire the shares of another Producer
Company.
(3) Any Producer Company may subscribe to the share capital of, or enter into any agreement or other
arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner
with any body corporate, for the purpose of promoting the objects of the Producer Company by special
resolution in this behalf.
(4) Any Producer Company, either by itself or together with its subsidiaries, may invest, by way of
subscription, purchase or otherwise, shares in any other company, other t han a Producer Company,
specified under sub -section ( 2), or subscription of capital under sub -section ( 3), for an amount not
exceeding thirty per cent. of the aggregate of its paid-up capital and free reserves:
Provided that a Producer Company may, by spec ial resolution passed in its general meeting 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 regi ster 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
378ZM. Penalty for contravent ion.—(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 punishable with fine which may extend to ten thousand rupees for every day during
which such name has been used by him.
(2) If a director or an officer of a Producer Company, who wilfully fails to furnish any information
relating to the affairs of the Producer Company required by a Member or a person duly authorised in this
behalf, he shall be liable to imprisonment for a term which may extend to six months and with fine
equivalent to five per cent. of the turnover of that Company during the preceding financial year.
(3) If a director or officer of a Producer Company—
(a) fails to hand over the custody of books of account and other documents or property in his
custody to the Producer Company of which he is a director or officer; or
(b) fails to convene annual general meeting or other general meetings,
he shall be punishable with fine which may extend to one lakh rupees, and in the case of a continuing default
or failure, with an additional fine which may extend to ten thousand rupees for every day during which such
default or failure continues.


PART IX
AMALGAMATION, MERGER OR DIVISION
378ZN. Amalgamation merger or division, etc. to form new Producer Companies .—(1) A
Producer Company may, by a resolution passed at its general meeting,—
(a) decide to transfer its assets and liabilities, in whole or in part, to any other Producer Company,
which agrees to such transfer by a resolution passed at its general meeting, for any of the objects
specified in section 378B;
(b) divide itself into two or more new Producer Companies.
(2) Any two or more Producer Companies may, by a resolution passed at any general or special
meetings of its Members, decide to—
(a) amalgamate and form a new Producer Company; or
(b) merge one Producer Company (hereafter in this Chapter referred to as "merging company")
with another Producer Company (hereafter in this Chapter referred to as "merged company").
(3) Every resolution of a Producer Company under this section shall be passed at its general meeting
by a majority of total Members, with right of vote not less than two-thirds of its Members present and voting
and such resolution shall contain all particulars of the transfer of assets and liabilities, or division,
amalgamation, or merger, as the case may be.
(4) Before passing a resolution under this section, the Producer Company shall give notice 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) the purchase of shares or interest of any Members of the Producer Company by other Members
or by the Producer Company;
(c) the consequent reduction of its share capital, in case of purchase of shares of one Producer
Company by another Producer Company;
(d) termination, setting aside or modification of any agreement, howsoever arrived between the
company on the one hand and the directors, secretaries and manager on the other hand, apart from such
terms and conditions as may, in the opinion of the majority of shareholders, be just and equitable in the
circumstances of the case;

(e) termination, setting aside or modification of any agreement between the Producer Company and
any person not referred to in clause (d):
Provided that no such agreement shall be terminated, set aside or modified except after giving due
notice to the party concerned:
Provided further that no such agre ement shall be modified except after obtaining the consent of the
party concerned;
(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to
property, made or done by or against the Producer Company within three months before the date of
passing of the resolution, which would if made or done against any individual, be deemed in his
insolvency to be a fraudulent preference;
(g) the transfer to the merged company of the whole or any part of the undertaking, property or
liability of the Producer Company;
(h) the allotment or appropriation by the merged company of any shares, debentures, policies, or
other like interests in the merged company;
(i) the continuation by or against the merged company of any legal proceedings pending by or
against any Producer Company;
(j) the dissolution, without winding up, of any Producer Company;
(k) the provision to be made for the Members or creditors who make dissent;
(l) the taxes, if any, to be paid by the Producer Company;
(m) such incidental, consequential and supplemental matters as are necessary to secure that the
division, amalgamation or merger shall be fully and effectively carried out.
(9) When a resolution passed by a Producer Company under this section takes effect, the res olution
shall be a sufficient conveyance to vest the assets and liabilities in the transferee.
(10) The Producer Company shall make arrangements for meeting in full or otherwise satisfying 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 pro visions 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 Produce r Companies in accordance
with the provisions of clause ( b) of sub -section ( 1) and the new Producer Companies are registered in
accordance with the provisions of this Chapter, the registration of the erstwhile Producer Company shall
stand cancelled forthwith and that Company shall be deemed to have been dissolved and cease to exist as a
corporate body.
(14) The amalgamation, merger or division of companies under the foregoing sub-sections shall not in
any manner whatsoever affect the pre -existing rights or obligations and any legal proceedings that might

have been continued or commenced by or against any erstwhile company before the amalgamation, merger
or division, may be continued or commenced by, or against, the concerned resulting company, or merged
company, as the case may be.
(15) The Registrar shall strike off the names of every Producer Company deemed to have been
dissolved under sub-sections (11) to (14).
(16) Any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation
or merger may, within thirty days of the passing of the resolution, prefer an appeal to the Tribunal.
(17) The Tribunal shall, after giving a reasonable opportunity to the person concerned, pass such orders
thereon as it may deem fit.
(18) Where an app eal has been filed under sub -section ( 16), the transfer of assets, division,
amalgamation or merger of the Producer Company shall be subject to the decision of the Tribunal.
PART X
RESOLUTION OF DISPUTES
378Z-O. Disputes.—(1) Where any dispute relating to the formation, management or business of a
Producer Company arises—
(a) amongst Members, former Members or persons claiming to be Members or nominees of
deceased Members; or
(b) between a Member, former Member or a person claiming to be a Member, or nominee of
deceased Member and the Producer Company, its Board of Directors, office-bearers, or liquidator, past
or present; or
(c) between the Producer Company or its Board, and any director, office-bearer or any former
director, or the nominee, heir or legal representative of any deceased director of the Producer Company,
such dispute shall be settled by conciliation or by arbitration as provided under the Arbitration and
Conciliation Act, 1996 (26 of 1996) as if the parties to the dispute have consented in wri ting for
determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall
apply accordingly.
Explanation.—For 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 whe ther 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
378ZP. Strike off name of Producer Company.— (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 in section 378B, he shall make an order striking off the name of the
Producer Company, which shall thereupon cease to exist forthwith:
Provided that no such order cancelling the registration as aforesaid shall be passed until a notice to
show cause has been given by the Registrar to the Producer Company with a copy to all its directors on the
proposed action and reasonable opportunity to represent its case has been given.
(2) Where the Registrar has reasonable cause to believe that a Producer Company is not maintaining
any of the mutual assistance principles specified, he shall strike its name off the register in accordance with
the provisions contained in section 248.
(3) Any Member of a Producer Company, who is agg rieved by an order made under sub-section (1),
may appeal to the Tribunal within sixty days of the order.
(4) Where an appeal is filed under sub-section (3), the order of striking off the name shall not take effect
until the appeal is disposed of.
378ZQ. Provisions of this C hapter to override other laws .— The provisions of this Chapter shall
have effect notwithstanding anything inconsistent therewith contained in this Act or any other law for the
time being in force or any instrument having effect by virtue of any such law; but the provisions of any
such Act or law or instrument in so far as the same are not varied by, or are inconsistent with, the provisions
of this Chapter shall apply to the Producer Company.
378ZR. Application of provisions relating to pr ivate companies.— All the limitations, restrictions
and provisions of this Act, other than those specified in this Chapter, applicable to a private company, shall,
as far as may be, apply to a Producer Company, as if it is a private limited company under this Act in so far
as they are not in conflict with the provisions of this Chapter.
PART XII
RE-CONVERSION OF PRODUCER COMPANY TO INTER-STATE CO-OPERATIVE SOCIETY
378ZS. Re -conversion of Producer Company to inter -State co -operative society .—(1) Any
Producer Company, being an erstwhile inter -State co-operative society, formed and registered under this
Chapter, may make an application—
(a) after passing a resolution in the general meeting by not less than twothirds of its Members
present and voting; or
(b) on request by its creditors representing three-fourths value of its total creditors, to the 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 o f 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 under Chapter XIV,
and the like.

(4) An order made by the Tribunal under sub -section (3) shall have no effect until a certified copy of
the order has been filed with the Registrar.
(5) A copy of every such order shall be annexed to every copy of the memorandum of the company
issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having
a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the
company.
(6) If default is made in complying with sub-section (4), the company, and every officer of the company
who is in default, shall be punishable with fine which may extend to one hundred rupees, for each copy in
respect of which default is made.
(7) The Tribunal may, at any time after an application has been made to it under this section, stay the
commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal
thinks fit, until the application is finally disposed of.
(8) Every Producer Company, which has been sanctioned re-conversion by the Tribunal, shall make an
application under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) or any other law for the
time being in force for its registration as multi -State co-operative society or co -operative society, as the
case may be, within six months of sanction by the Tribunal and file a report thereof to the Tribunal and the
Registrar of Companies and to the Registrar of the Co-operative Societies under which it has been registered
as a multi-State co-operative society or co-operative society, as the case may be.
378ZT. Power to modify Act in its application to Producer Companies .—(1) The Central
Government may, by notification, direct that any of the provisions of this Act (other than those contained
in this Chapter) specified in the said notification—
(a) shall not apply to the Producer Companies or any class or category thereof; or
(b) shall apply to the Producer Companies or any class or category thereof with such exception or
adaptation as may be specified in the notification.
(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before
each House of Parliament, while it is in session, for a total period of thirty days which may be comprised
in one session or in two or more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of
the notification or both Houses agree in making any modification in the notification, the notification shall
not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by
both the Houses.
378ZU. Power to make rules.—The Central Government may make rules for carrying out the purposes
of this Chapter.]