Section 63B 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 63B, inserted by the 2023 Amendment Act, lets the Central Registrar declare a multi-State co-operative society sick, lets the Central Government prepare a rehabilitation and reconstruction scheme for the general body to approve, and lets the Central Government reorganise the board on the general body's recommendation. It defines a "sick co-operative society" by losses. This article states the section as per the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023.
If the Central Registrar is of the opinion that a multi-State co-operative society has become sick, he may declare it a sick co-operative society by an order. The Central Government, or a person or agency authorised by it, may prepare a scheme and hand it to the society for approval of the general body. On the general body's recommendation the Central Government may reorganise the board. For a sick multi-State co-operative bank, any scheme needs the prior approval of the Reserve Bank.
Where the section comes from
The 2023 Amendment Act (Act 11 of 2023) came into force on 3 August 2023 by notification S.O. 3493(E). Its section 24 inserted sections 63A, 63B and 63C after section 63. The principal copy contained no provision on sick societies. The sources stop at 4 August 2023 and say nothing about any society actually declared sick under this section. The Fund for revival of sick societies is described in our note on the Rehabilitation, Reconstruction and Development Fund.
For a society or its lender facing signs of distress, a review of the position against the definition in this section is a sensible first step; our legal due diligence team can help.
Section 63B(1): declaration by the Central Registrar
"If, at any time, the Central Registrar, is of the opinion that a multi-State co-operative society has become sick, he may, by an order, declare such society as sick co-operative society."
Three features are worth noting. The test is the Central Registrar's opinion, not a fixed formula in this sub-section, although the Explanation defines "sick co-operative society". The power is exercised "at any time". And it is by "an order", so the declaration is a written decision. The sub-section does not say whether the society must be heard before the declaration, and it does not say how long the order lasts.
Section 63B(2): the scheme
"Where a multi-State co-operative society is declared as a sick co-operative society under sub-section (1), the Central Government or any person or agency authorised by it, may prepare a scheme for rehabilitation and reconstruction of the society and hand it over to the society for approval of the general body."
The scheme is prepared by the Central Government or its authorised person or agency and then handed to the society; the general body approves. The sub-section does not say what the scheme contains or what happens if the general body does not approve.
Section 63B(3): reorganising the board
"The Central Government may, on the recommendation of the general body and to give effect to the scheme for rehabilitation and reconstruction referred to in sub-section (2), re-organise the board of such society with such persons, having experience in the field of co-operation, management, finance, accountancy and any other area relating to such societies as may be recommended by the general body."
| Step | Who | What |
|---|---|---|
| 1 | Central Registrar | Forms an opinion and declares the society sick by order |
| 2 | Central Government or authorised person or agency | Prepares a scheme and hands it to the society |
| 3 | General body | Approves the scheme and recommends persons |
| 4 | Central Government | Re-organises the board with persons recommended by the general body |
The persons named for the reorganised board must have experience in "co-operation, management, finance, accountancy and any other area relating to such societies". Note that the recommendation comes from the general body, not from the Central Government.
Proviso: multi-State co-operative banks
"Provided that in respect of a sick multi-State co-operative bank, any scheme for rehabilitation or reconstruction shall be done with the prior approval of the Reserve Bank." The Act prints only this about the Reserve Bank in section 63B. Check the current law for how the Reserve Bank's approval operates and what other provisions apply to a co-operative bank.
The Explanation: what "sick co-operative society" means
"For the purposes of this section, the expression 'sick co-operative society' means a multi-State co-operative society being a society registered under the provisions of this Act which has at the end of any financial year accumulated losses equal to or exceeding total of its paid-up capital, and surpluses and has also suffered cash losses in such financial year and the financial year immediately preceding such financial year."
The Act uses a specific term in the bracketed place for reserves that are not earmarked, and does not define it. We describe it as reserves other than earmarked reserves, and flag that the Act does not define the expression.
The test has two limbs, both of which must be met:
- at the end of any financial year, accumulated losses equal to or exceeding the total of paid-up capital, those reserves and surpluses; and
- cash losses in that financial year and in the financial year immediately preceding it.
The Explanation applies to a society "registered under the provisions of this Act". A society that has accumulated losses but made a cash profit in either of the two years is outside the definition as printed. There is a possible gap between the Explanation (a definition by figures) and sub-section (1) (the Central Registrar's opinion): the Act does not say whether the Central Registrar may declare a society sick where the Explanation is not met. We quote both and do not reconcile them.
A practical example
Jai Bharat Multi-State Co-operative Society has paid-up capital of Rs 5 crore, reserves other than earmarked reserves of Rs 1 crore and no surpluses. At the end of the financial year its accumulated losses are Rs 6.5 crore. It also suffered cash losses in that year and in the year before. The accumulated losses exceed the total of Rs 6 crore, and both years show cash losses, so the Explanation is met. The Central Registrar may declare it sick. The Central Government then has a scheme prepared and handed to the society; the general body approves it and recommends persons with the right experience, and the Central Government re-organises the board.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| s.63B | No such provision | Inserted: declaration, scheme, board reorganisation, Reserve Bank approval for banks, and the definition of a sick co-operative society |
Need help assessing a distressed society?
A lender, a member or a board that wants to understand where a society stands against the definition in section 63B, and what it can expect from a scheme, can start with the accounts. Our legal due diligence service can help you review the numbers and the governing documents.
Key takeaways
- The Central Registrar may declare a multi-State co-operative society sick by an order if he is of that opinion.
- The Central Government or its authorised person or agency may prepare a scheme and hand it to the society for the general body's approval.
- The Central Government may re-organise the board with persons recommended by the general body.
- For a sick multi-State co-operative bank, the scheme needs the prior approval of the Reserve Bank.
- The Explanation defines "sick" by accumulated losses against paid-up capital, reserves other than earmarked reserves and surpluses, plus cash losses in two years.
Read next
- Rehabilitation, Reconstruction and Development Fund (sections 63A and 63C)
- Investment of funds (section 64)
- Winding up of multi-State co-operative societies (section 86)
- 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.