Section 123 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 123 lets the Central Government supersede or suspend the board of a specified multi-State co-operative society and appoint administrators for a period not exceeding six months. The 2023 Amendment Act widened the grounds, removed the power to extend the period, replaced the proviso and substituted the Explanation that defines a "specified" society.
This article follows the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023, which amended s.123 by its section 46. The 2023 Act came into force on 3 August 2023 (notification S.O. 3493(E)).
If, in the opinion of the Central Government, the board of a specified multi-State co-operative society is persistently in default or negligent, has committed an act including fraud, misappropriation and the like prejudicial to the society or its members, has failed to comply with directions under section 122, is in a stalemate, or the Co-operative Election Authority has failed to conduct elections, it may, after giving the board an opportunity to state its objections, supersede or suspend the board and appoint administrators for a period not exceeding six months. A supersession for failure of elections is allowed only if the board had not given requisition to hold election in time or not extended necessary assistance.
Section 123(1): grounds and order, as amended
The sub-section applies "If in the opinion of the Central Government, the board of any specified multi-State co-operative society" is one of the following:
| Ground | Words of the section |
|---|---|
| Default or negligence | "persistently making default or is negligent in the performance of the duties imposed on it by this Act or the rules or the bye-laws" |
| Prejudicial act | "has committed any act including fraud, misappropriation and the like which is prejudicial to the interests of the society or its members" |
| Directions not followed | "has omitted or failed to comply with any directions given to it under section 122 in public interest" |
| Stalemate | "that there is a stalemate in the constitution or functions of the board" |
| Elections | "the Co-operative Election Authority has failed to conduct elections in accordance with the provisions of this Act" |
The first ground is unchanged. The second added the words "including fraud, misappropriation and the like". The last two are new in substance: the principal copy's corresponding passage (printed "there is a statement in the constitution or functions of the board", a slip for "stalemate") has been replaced, and the election ground is new.
In such a case, "the Central Government may, after giving the board an opportunity to state its objections, if any, and considering the objections, if received, by order in writing, supersede or suspend the board and appoint one or more administrators, who need not be members of the society, to manage the affairs of the society for such period not exceeding six months, as may be specified in the order".
Example. The Central Government forms the opinion that the board of the invented Sone Multi-State Cotton Society, in which the Government has a shareholding, has committed misappropriation prejudicial to its members. It gives the board an opportunity to state its objections, considers them, and by written order supersedes the board, appointing an administrator for a period of up to six months. A board or society in that position can seek legal dispute resolution support to prepare its objections.
The proviso as substituted
"Provided that while taking a decision for supersession or suspension on grounds of failure to conduct election, such action shall only be taken if the Board had not given requisition to hold election to the Co-operative Election Authority within the time limit or not extended necessary assistance as per the provisions of section 45."
The proviso refers to "the provisions of section 45" for the board's duty to requisition elections and to assist. In the Act as amended, the duty to inform the Authority six months before the term ends is printed in s.45J(8), and the duty to give information, documents and assistance appears in s.43(2)(a) and s.45J(9). This is a cross-reference oddity, quoted as printed and not reconciled. The practical effect of the proviso is that a board which requisitioned the election in time and gave the Authority the help it needed cannot be superseded on the election ground.
What the amendment removed
The principal text allowed the order to be for a period "not exceeding six months" which the Government could extend "from time to time", up to an aggregate of one year, with a proviso that for a co-operative bank the aggregate would be two years. The amending clause replaces the whole portion from "or has committed any act" to "the aggregate period does not exceed one year" and replaces the proviso. As amended, the text prints a period "not exceeding six months, as may be specified in the order" and no power to extend and no two-year rule for banks. The amending clause and the principal text reconcile; the old words appear here only to explain the change.
Section 123(2) to (6): not amended
- Remuneration. The Central Government may fix such remuneration for the administrators as it thinks fit, paid out of the funds of the specified society.
- Powers. The administrator, subject to the control of the Central Government and its instructions, has power to exercise all or any of the functions of the board or any officer of the society and take all such actions as may be required in the interests of the society.
- New board. Save as provided in sub-section (5), the administrator shall, before the expiry of his term of office, arrange for the constitution of a new board in accordance with the bye-laws.
- Earlier hand-over. At any time, the Central Government may, by order in writing giving reasons, direct the administrator to arrange for a new board; the administrator then hands over management and ceases to function.
- Financial institutions. Where the society is indebted to any financial institution, the Central Government shall consult the institution before acting under sub-section (1).
The Explanation: who is a specified society
As substituted: "For the purposes of section 122 and this section, the expression 'specified multi-State co-operative society' means any multi-State co-operative society where there is Government shareholding or loan or financial assistance or any guarantee by the Government." See our article on Central Government directions to specified societies.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| Grounds in s.123(1) | Default or negligence; prejudicial act; non-compliance with s.122 directions; "statement" (stalemate) in the board | Adds "including fraud, misappropriation and the like", "stalemate", and failure of the Authority to conduct elections |
| Order | "remove the board" | "supersede or suspend the board" |
| Period | Six months, extendable to one year (two years for a co-operative bank) | "not exceeding six months, as may be specified in the order" |
| Proviso | Co-operative bank: "two years" for "one year" | New proviso on supersession for failure to conduct elections |
| Explanation | Not less than fifty-one per cent. of paid-up share capital or total shares held by the Central Government | Government shareholding or loan or financial assistance or any guarantee by the Government |
Need help with a supersession notice or order?
The board gets an opportunity to state its objections before the order, and the proviso on elections turns on what the board did and when. Our team can help you assemble the record and the response under legal dispute resolution.
Key takeaways
- Supersession or suspension applies to a specified multi-State co-operative society, as defined in the Explanation.
- Grounds now include fraud, misappropriation, stalemate and failure of the Authority to conduct elections.
- The board has an opportunity to state objections, and the order is in writing.
- Administrators serve for a period not exceeding six months as specified in the order.
- For failure of elections, action is only if the board had not requisitioned elections in time or not given necessary assistance.
Read next
- Multi-State Co-operative Societies Act, 2002: complete guide
- Sections 121 and 122: Acts not to apply and Central Government directions
- Section 124: power to make rules
- Section 86: winding up of multi-State co-operative societies
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.