I'|;UV1S1<)\ OF B01U?OWIX<; I AULITIES. 277 



(it) In the Act of 190 1 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 critieised 

 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 proposed 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 see clause -1 of 

 the Bill. 



(tit) 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 Society has, in practice, been for some time in 

 existence in several provinces, and Societies of this 

 character, though not of the orthodox type, are 

 recognized 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 see clause :I8 

 of the Bill. 



(//) A cardinal principle which is observed in the organization 

 of Co-operative Societies in Europe is the grouping of 



9 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 1901, 

 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 r/ ( /,' clauses 5 (1), 6 and 10 

 (5) of the Bill. 



