Sections 42 and 48 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 42 requires every multi-State co-operative society to devise a way of associating the representatives of its employees in management decisions. Section 48 lets the Central Government or a State Government nominate persons to the board when it has put money into the society. Neither section was amended in 2023; they are stated here as per the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023.
Under section 42 the society must set out, in its bye-laws or in administrative instructions, how employee representatives are associated in the management decision making process, and at what level or bodies. Under section 48, a Government that has subscribed to the share capital may nominate one, two or three board members depending on whether it holds under twenty six per cent, twenty-six per cent or more but under fifty-one per cent, or fifty-one per cent or more of the issued equity share capital, never more than one third of the board. Nominees hold office during the pleasure of the nominating Government.
Section 42: association of employees in management
Section 42 is a short duty. As printed: "Every multi-state cooperative society shall devise such procedure, as may be specified in the bye-laws or in the administrative instructions of such society, for the association of the representatives of employees of such multi-state cooperative societies at such level or bodies as may be specified in the bye-laws or the instructions issued in this regard, in the management decision making process."
Read closely, the section does four things:
- it puts the duty on the society itself, not on the Central Registrar or on employees;
- it lets the society choose the instrument: the bye-laws, or "administrative instructions";
- it leaves the level or body of participation to that same instrument, so the Act does not say that employees must sit on the board;
- it speaks of "representatives of employees", but does not say how they are chosen.
Employee representation on the board is a separate matter. Section 43(1)(d) disqualifies a person who holds an office or place of profit under the society, with a proviso that excepts a person elected by the employees to represent them on the board. That is covered in our note on disqualifications for being a member of the board. Section 42 and that proviso fit together, but the Act does not say that the representatives under section 42 are the same persons.
Because the section is silent on the form of the instruction, a society should record it in a document that can be shown to the Central Registrar. The Act itself prescribes no form and no penalty for not devising one in this section. Penalties are in section 104, which is outside this note. A society unsure how to word the bye-law can take advice from our legal consultation team.
Section 48: Government nominees on the board
When the right arises
Section 48(1) applies "where the Central Government or a State Government has subscribed to the share capital of a multi-state cooperative society". The Government, "or any person authorised by" it, has the right to nominate on the board the number of persons set out in the section.
How many nominees
| Government's share of total issued equity share capital | Members of the board it may nominate |
|---|---|
| Less than twenty six per cent | One |
| Twenty-six per cent or more but less than fifty-one per cent | Two |
| Fifty-one per cent or more of the total issued share capital | Three |
The text of clause (c) says "total issued share capital", while clauses (a) and (b) say "total issued equity share capital". We reproduce the wording as printed and do not reconcile it. The first proviso caps the number: "the number of such nominated persons shall not exceed one third of the total number of members of the board".
Where the Government has stood behind the society
The second proviso adds a separate route. Where the Central Government or a State Government has given a guarantee for repayment of principal and payment of interest on debentures issued by the society, or has given a guarantee for repayment of principal and payment of interest on loans and advances to the society, or "has given any assistance by way of grants or otherwise", the Government "shall have the right to nominate person on the board of such a society in the manner as may be prescribed". Two points stand out:
- the number is not tied to a percentage in this proviso; the manner is left to rules;
- the proviso is attached to clause (c), but its wording ("where the Central Government or a State Government has ... ") reads as an independent route. We do not resolve that placement.
Rules on the manner of nomination are not in the sources. Amendment rules were notified on 4 August 2023 (G.S.R. 591(E)); the consolidated Rules should be checked.
Tenure of the nominee
Section 48(2) says: "A person nominated under this section shall hold office during the pleasure of the Government by which he has been so nominated," and the sentence ends with a comma, not a full stop, in the printed copy. We flag this as a printing slip and add nothing to it.
How nominees sit with the size of the board
Section 41, as amended in 2023, fixes the board at not more than twenty-one directors and adds reserved seats and co-opted directors. The one-third cap in section 48 is expressed against "the total number of members of the board". How the nominated seats are counted against the elected seats and the reserved seats is not addressed in these sections. See our note on the board of directors, its size and reserved seats.
A practical example
Kisan Vikas Multi-State Co-operative Society has issued equity share capital, and a State Government holds thirty per cent of it. Under section 48(1)(b) the State Government may nominate two members of the board. If the board has twelve members, one third is four, so two nominees are within the cap. Later the State Government gives a guarantee for repayment on the society's debentures. The second proviso allows it to nominate on the board in the manner prescribed, but the Act does not say that this adds to, or replaces, the two seats.
What the 2023 Amendment Act changed
| Provision | Before and after |
|---|---|
| Section 42 | Not amended; same text |
| Section 48 | Not amended; same text |
The related change is indirect: the board in section 41 and the disqualification rules in section 43 were amended in 2023, and nominated members sit on a board built under those rules.
Need help with board composition or bye-laws?
If your society has Government share capital and you are not sure how many nominees the board should carry, or you need to word the bye-law that gives effect to section 42, our legal consultation service can work through the text with you before you amend anything. A bye-law change goes through the procedure for amendment of bye-laws, so plan it early.
Key takeaways
- Section 42 makes the society devise a procedure for associating employee representatives, in its bye-laws or administrative instructions.
- Section 48 ties the Government's right to nominate to its share in the issued equity share capital: one, two or three nominees.
- The nominees never exceed one third of the total number of board members.
- A guarantee or assistance by the Government opens a separate nomination right, in the manner prescribed.
- A nominee holds office during the pleasure of the nominating Government.
Read next
- Disqualifications for being a member of the board
- Bar on holding office and removal of elected members
- Board of directors: size, reserved seats and interested directors
- Multi-State Co-operative Societies Act, 2002: complete guide
Disclaimer: Based on the Ministry of Cooperation copy of the Multi-State Co-operative Societies Act, 2002 read with the Multi-State Co-operative Societies (Amendment) Act, 2023 (in force from 3 August 2023), as consulted on 2 October 2026. The Multi-State Co-operative Societies Rules, 2002 as amended, later notifications and later amendments are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.