Section 29 of the Co-operative Societies Act, 1912 - Restrictions on Loans
Section 29 of the Co-operative Societies Act, 1912 regulates to whom a registered society may lend and places additional controls on certain loans secured by movable or immovable property. The provision forms part of the Act's rules governing the property and funds of registered societies.
What Section 29 provides
29. Restrictions on loans.
(1) A registered society shall not make a loan to any person other than a member:
Provided that, with the general or special sanction of the Registrar, a registered society may make loans to another registered society.
(2) Save with the sanction of the Registrar, a society with unlimited liability shall not lend money on the security of moveable property.
(3) The State Government may, by general or special order, prohibit or restrict the lending of money on mortgage of immoveable property by any registered society or class of registered societies.
Statutory text checked against the official India Code text of the Co-operative Societies Act, 1912.
Meaning and scope of Section 29
The basic rule in sub-section (1) is that a registered society may lend only to its members. The proviso creates a specific exception: a registered society may lend to another registered society when the Registrar gives general or special sanction.
Sub-section (2) imposes an additional safeguard on a society having unlimited liability. Such a society cannot, without the Registrar's sanction, lend money against the security of movable property.
Sub-section (3) gives the State Government power, by a general or special order, to prohibit or restrict loans secured by a mortgage of immovable property. The power may be exercised for a particular registered society or for a class of registered societies.
Key expressions used in the provision
| Expression | Meaning for the Act |
|---|---|
| Registered society | Under Section 2(e), a society registered or deemed to be registered under the Act. |
| Member | Under Section 2(c), this includes a person joining in the application for registration and a person subsequently admitted to membership in accordance with the by-laws and applicable rules. |
| Registrar | Under Section 2(f), a person appointed to perform the duties of a Registrar of Co-operative Societies under the Act. |
| Movable and immovable property | Section 29 distinguishes lending secured by movable property from lending on mortgage of immovable property and applies different statutory controls to them. |
Practical effect of Section 29
Before granting a loan, a society governed by this provision should determine whether the borrower is a member, whether the proposed borrower is another registered society requiring the Registrar's sanction, and whether the proposed security triggers sub-section (2) or any State Government order made under sub-section (3). Applicable State amendments, rules, by-laws and orders should also be checked because co-operative society law may differ by State and the 1912 Act has been replaced or modified in several jurisdictions.
Related provisions
Section 29 should be read with Section 30 - Restrictions on borrowing. The succeeding provisions regulate transactions with non-members and investment of society funds.
Official legal source
India Code - The Co-operative Societies Act, 1912 (official PDF)