Sections 55 and 56 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 55 gives a multi-State co-operative society a charge on a member's share, contribution, interest in the capital and deposits, and on dividend, bonus and profits, for any debt the member owes. Section 56 shields a member's share or contribution from attachment or sale in a court decree, and shields the society's reserve fund, bad debt reserves and employees' provident fund. Neither section was amended in 2023. They are stated as per the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023.
The society has a charge on a member's (or past or deceased member's) share, contribution or interest in the capital and on deposits, and on any dividend, bonus or profits payable, for any debt due to the society; it may also set off sums credited or payable to the member against that debt (s.55). A member's share or contribution is not liable to attachment or sale under a court decree for his debts, and an official assignee or receiver has no claim on it, but this is subject to section 55 (s.56(1)). The society's reserve fund, bad debt reserves and employees' provident fund, if invested in accordance with the Act and bye-laws, are not liable to attachment for the society's debts (s.56(2)).
Section 55: charge and set-off
What the charge covers
Section 55 says the society "shall have a charge on the share or contribution or interest in the capital and on the deposits of a member or past or deceased member and on any dividend, bonus or profits payable to a member or past member or the estate of a deceased member in respect of any debt due from such member or past member or the estate of such deceased member to the society".
Take the pieces in turn:
| Element | What the text says |
|---|---|
| Whose property | A member, a past member, or the estate of a deceased member |
| Which property | Share, contribution, interest in the capital, deposits, and any dividend, bonus or profits payable |
| For what | "any debt due" from that person or estate to the society |
| Effect | A charge in favour of the society; no court order or agreement is mentioned in the section |
The section does not limit the debt to a loan. "Any debt due" is wide, and the section does not say whether it includes a debt that has not yet fallen due; we read only what is printed.
Set-off
The society "may set-off any sum credited or payable to a member or past member or the estate of deceased member in or towards payment of any such debt." The word "may" makes set-off a choice for the society. The set-off reaches sums "credited or payable", which is not limited to the heads in the first part of the sentence.
In practice a society should keep a running record of the debt, the date of any notice to the member and the sums set off. If you want those practices checked against the section and your bye-laws, our legal consultation team can help.
Section 56: shares and funds not liable to attachment
Sub-section (1): the member's share
"Subject to the provisions of section 55, the share or contribution or interest of a member or past or deceased member in the capital of a multi-state cooperative society shall not be liable to attachment or sale under any decree or order of any court in respect of any debt or liability incurred by such member, and an official assignee or a receiver under any law relating to insolvency shall not be entitled to, or have any claim on, such share or contribution or interest."
Three points follow:
- the protection runs against third-party creditors who hold a decree or order of a court; the society's own charge under section 55 is excepted by the opening words;
- the protection extends to a past or deceased member's share, contribution or interest;
- an official assignee or receiver under a law relating to insolvency cannot claim the share. The Act names no insolvency law, and we name none.
Note the protection covers the member's "share or contribution or interest in the capital". Deposits and dividends are named in section 55 but not in section 56(1), so the text of sub-section (1) does not extend the bar on attachment to them.
Sub-section (2): the society's own funds
"The reserve fund, or the bad debt reserves, or the provident fund of the employees, of a multi-state cooperative society invested by such society in accordance with the provision of this Act and the bye-laws shall not be liable to attachment under any decree or order of a court in respect of any debt or liability incurred by the society."
The protection depends on a condition: the fund must be "invested by such society in accordance with the provision of this Act and the bye-laws". A fund invested otherwise is outside the shield on the text. Investment of funds is the subject of section 64; see our note on investment of funds. The employees' provident fund is separately dealt with in section 69, covered in our note on transactions with non-members and the contributory provident fund.
Putting the two together
Section 55 gives the society a claim against its own member's capital; section 56 stops outside creditors from reaching that capital. The result is that a member's share works first as security for what he owes the society, and is then protected from his other creditors. The two sections are to be read together because section 56(1) is expressly "subject to the provisions of section 55".
The Act does not say in these sections how the society converts its charge into payment, or how a charge on a deceased member's estate interacts with nomination or succession. Transfer on death is in section 36 and the liability of past members in section 37; see our note on transfer of interest on death and past member liability.
A practical example
Mr. Khan holds shares in Shakti Multi-State Co-operative Society and took a loan from it which he has not repaid. The society's dividend for the year is payable to him. Under section 55 the society has a charge on his share and on the dividend for the loan and may set the dividend off against the debt. A bank, which has a decree against Mr. Khan on an unrelated debt, tries to attach his share in the society. Under section 56(1) the share is not liable to attachment or sale under the decree. If Mr. Khan is adjudged insolvent, the official assignee or receiver has no claim on the share.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| s.55 | As printed above | Unchanged |
| s.56 | As printed above | Unchanged |
The 2023 Amendment Act (Act 11 of 2023) came into force on 3 August 2023 by notification S.O. 3493(E). The principal Act came into force by notification, date not in the source. Section 56 is headed "Share of contribution or interest not liable to attachment" in the body (the contents list says "Share or contribution"). We use the body heading as printed.
Need help with member dues and share records?
A society that relies on its charge and set-off should keep notices, ledgers and board decisions in order, and a member facing a claim should know what the text protects. Our legal consultation team can review a specific set of facts against sections 55 and 56.
Key takeaways
- The society has a charge on a member's share, contribution, interest in capital and deposits, and on dividend, bonus and profits payable, for any debt due.
- The society may set off sums credited or payable to the member against that debt.
- A member's share or contribution is not liable to attachment or sale under a court decree, subject to section 55.
- The reserve fund, bad debt reserves and employees' provident fund, invested as the Act and bye-laws require, are not liable to attachment for the society's debts.
Read next
- Register of members, evidence and exemption from registration (sections 57 to 59)
- Deduction from salary and Government aid (sections 60 and 61)
- Funds not to be divided by way of profit (section 62)
- 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.