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Resolution of Disputes

Resolution of Disputes :

(a) Disputes (Section 581ZO): Where any dispute relating to the formation, management or business of a producer company arises—

(i) amongst members, former members or persons claiming to be members or nominees of deceased members; or

(ii) between a member, former member or a person claiming to be a member, or nominee of deceased member and the producer company, its Board of directors, office-bearers, or liquidator, past or present; or

(iii) between the producer company or its Board, and any director, office-bearer or any former director, or the nominee, heir or legal representative of any deceased director of the producer company,

such dispute shall be settled by conciliation or by arbitration as provided under the Arbitration and Conciliation Act, 1996 (26 of 1996) as if the parties to the dispute have consented in writing for determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall apply accordingly.

Explanation—For the purposes of this section, a dispute shall include—

(a) a claim for any debt or other amount due;

(b) a claim by surety against the principal debtor, where the producer company has recovered from the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt or amount due be admitted or not;

(c) a claim by producer company against a member for failure to supply produce as required of him;

(d) a claim by a member against the producer company for not taking goods supplied by him.

If any question arises whether the dispute relates to formation, management or business of the producer company, the question shall be referred to the arbitrator, whose decision thereon shall be final.

(b) Striking off name of producer company (Section 581ZP): If a producer company fails to commence business within one year of its registration or ceases to transact business with the members or if the Registrar is satisfied, after making such inquiry as he thinks fit, that the producer company is not carrying any of its objects specified in Section 581B, he shall make an order striking off the name of the producer company, which shall thereupon cease to exist forthwith.

No such order cancelling the registration as aforesaid shall be passed until a notice to show cause has been given by the Registrar to the producer company with a copy to all its directors on the proposed action and reasonable opportunity to represent its case has been given.

Where the Registrar has reasonable cause to believe that a producer company is not maintaining any of the mutual assistance principles specified, he shall strike its name off the register in accordance with the provisions contained in Section 560 of this Act.

Any member of a producer company, who is aggrieved by an order made under this section, may appeal to the Company Law Board within sixty days of the order. After disposing the appeal, if any, the order to striking off the name shall take effect.

(c) Re-conversion of producer company to inter-state co-operative society (Section 581ZS): The method is as follows:

(1) Any producer company, being an erstwhile inter-State co-operative society, formed and registered under this Part, may make an application—

(a) after passing a resolution in the general meeting by not less than two-third of its members present and voting; or

(b) on request by its creditors representing three-fourth value of its total creditors, to the High Court for its re-conversion to the inter-State co-operative society.

(2) The High Court shall, on the application made under sub-section (1), direct holding meeting of its members or such creditors, as the case may be, to be conducted in such manner as it may direct.

(3) If a majority in number representing three-fourths in value of the creditors, or members, as the case may be, present and voting in person at the meeting conducted in pursuance of the directions of the High Court under sub-section (2), agree for re-conversion, if sanctioned by the High Court, be binding on all the members and all the creditors, as the case may be, and also on the company which is being converted:

Provided that no order sanctioning re-conversion shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor‟s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.

(4) An order made by the Court under sub-section (3) shall have no effect until a certified copy of the order has been filed with the Registrar.

(5) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(6) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees, for each copy in respect of which default is made.

(7) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.

(8) Every producer company which has been sanctioned re-conversion by the High Court, shall make an application, under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) or any other law for the time being in force for its registration as multi -State cooperative society or co-operative society, as the case may be, within six months of sanction by the High Court and file a report thereof to the High Court and the Registrar of companies and to the Registrar of the co-operative societies under which it has been registered as a multi-State Co-operative society or co-operative society, as the case may be.

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