Corporate and Economic Laws · Company Formation and Conversion

Re-conversion of Producer Company to Inter-State Co-operative Society

Updated 11 October 2026 · Fact-checked

Section 378ZS lets a Producer Company that was once an inter-State co-operative society apply to the Tribunal to go back to that form. It needs a two-thirds resolution of members present and voting, or a request by creditors holding three-fourths of total creditors by value. The Tribunal directs a meeting and sanctions the re-conversion.

Understand Re-conversion of Producer Company to Co-operative Society

A Producer Company is a company of primary producers. Some of them began life as inter-State co-operative societies and converted under Section 378J. Section 378ZS gives them a way back.

Not every Producer Company can use it. The section applies only to a Producer Company that is an erstwhile inter-State co-operative society, formed and registered under this Chapter. A Producer Company that was incorporated afresh does not qualify on the text of the section.

The route runs through the Tribunal, not the Registrar. Either the members (by resolution) or the creditors (by request) trigger the application. The Tribunal then orders a meeting, and if the required majority agrees and the Tribunal sanctions, the re-conversion binds all members, all creditors and the company.

The Tribunal must be satisfied that full disclosure was made. The order has no effect until a certified copy is filed with the Registrar. After sanction, the company must apply for registration under the Multi-State Co-operative Societies Act, 2002 or another applicable law within six months.

Compare this with Section 378J, which is the forward route (society to Producer Company) and works through the Registrar on a special resolution of not less than two-thirds of total members.

Key rules to remember

Who can apply (s. 378ZS(1)): Erstwhile inter-State co-operative society, now a Producer Company → application to Tribunal; Only such a Producer Company is covered by the section.
Member route: Resolution in general meeting by not less than 2/3 of Members present and voting; Based on members present and voting, not total members.
Creditor route: Request by creditors representing 3/4 value of total creditors; Measured by value of total creditors.
Tribunal meeting (s. 378ZS(2)-(3)): Majority in number representing 3/4 in value of creditors or Members present and voting in person, then Tribunal sanction; Once sanctioned, binds all Members, all creditors and the company.
Disclosure proviso: No sanction unless all material facts disclosed by affidavit or otherwise; Includes latest financial position, latest auditor's report and pending Chapter XIV investigations.
Effect of order (s. 378ZS(4)-(6)): No effect until certified copy filed with Registrar; default fine up to ₹100 per copy; The order must also be annexed to every copy of the memorandum issued afterwards. Company and every officer in default are liable.
Stay of proceedings (s. 378ZS(7)): Tribunal may stay suits or proceedings against the company until application is disposed of; On such terms as the Tribunal thinks fit.
After sanction (s. 378ZS(8)): Apply for registration within 6 months of Tribunal sanction; Under the Multi-State Co-operative Societies Act, 2002 or other law. File a report with the Tribunal, the Registrar of Companies and the Registrar of Co-operative Societies concerned.

How to solve Re-conversion of Producer Company to Co-operative Society questions

Use the same sequence for any question on re-conversion. It keeps the answer in the order of the section.

1Check eligibility: is the company a Producer Company that was an erstwhile inter-State co-operative society? If not, say the section does not apply.
2Identify the trigger: a members' resolution or a creditors' request. Note who is applying.
3Test the majority: two-thirds of Members present and voting for the resolution, or creditors holding three-fourths of total creditors by value for the request.
4State that the application goes to the Tribunal, which directs a meeting of Members or creditors in the manner it directs.
5Apply the meeting test: majority in number representing three-fourths in value of those present and voting in person, followed by Tribunal sanction.
6Check disclosure: the applicant must disclose all material facts, such as financial position, auditor's report and pending Chapter XIV investigations.
7State the effect: binding on all; no effect until the certified order is filed with the Registrar; fine up to ₹100 per copy for default.
8Close with post-sanction duty: apply for registration within six months and file a report.

Quickest way: Who, where, how many, what next

When to use it: For MCQs and short case questions where you must spot the right figure or authority in seconds.

Who: erstwhile inter-State co-operative society only.
Where: Tribunal, not Registrar.
How many: 2/3 of members present and voting; 3/4 value of creditors; meeting needs a majority in number representing 3/4 in value.
What next: file certified copy with Registrar, then register as a co-operative within 6 months.
Contrast with s. 378J: Registrar, 2/3 of total members, 30 days for Registrar to certify.

Common mistakes in Re-conversion of Producer Company to Co-operative Society

Saying any Producer Company can re-convert.
The heading sounds general.
Fix: Remember the words 'erstwhile inter-State co-operative society'. Check the history of the company in the facts.
Writing that the Registrar approves the re-conversion.
Mixing it up with s. 378J, where the Registrar registers the company.
Fix: In s. 378ZS the Tribunal sanctions. The Registrar only receives the certified copy of the order.
Using two-thirds of total members instead of members present and voting.
s. 378J uses two-thirds of total members in its special resolution.
Fix: For 378ZS(1)(a) write 'not less than two-thirds of its Members present and voting'.
Mixing up the three-fourths for creditors, as a head count versus value.
There are two different tests: the creditors' request and the meeting.
Fix: The request is by creditors representing three-fourths value of total creditors. The meeting needs a majority in number representing three-fourths in value of those present and voting.
Treating the Tribunal order as effective from the date it is passed.
Students assume orders operate immediately.
Fix: State that the order has no effect until a certified copy is filed with the Registrar.
Forgetting the six-month registration duty and the report.
Students stop at the Tribunal order.
Fix: Add that the company must apply for registration within six months of sanction and file a report with the Tribunal and the Registrars.

Worked examples

Example 1

Kisan Agro Producer Company Limited was formed by conversion of an inter-State co-operative society under Chapter XXIA. At a general meeting, 150 Members were present and voted. 96 voted for re-conversion to an inter-State co-operative society. Is the resolution sufficient to apply to the Tribunal under Section 378ZS(1)(a)?

Show the solution

Eligibility: the company is an erstwhile inter-State co-operative society, so s. 378ZS can apply.
Required majority: not less than two-thirds of Members present and voting.
Two-thirds of 150 = 100.
Votes in favour = 96, which is less than 100. As a fraction, 96 ÷ 150 = 64%, below 66.67%.
The resolution fails the test.

Answer: No. 96 of 150 is less than two-thirds (100 needed), so the members' route is not available on this resolution.

Example 2

Malwa Dairy Producer Company Limited, an erstwhile inter-State co-operative society, has total creditors of ₹8,00,000. Creditors holding ₹6,40,000 request re-conversion. Explain the procedure that follows if the Tribunal accepts the application, and when the order takes effect.

Show the solution

Test the request: three-fourths of ₹8,00,000 = ₹6,00,000. Creditors representing ₹6,40,000 exceed this, so the request is valid under s. 378ZS(1)(b).
Application is made to the Tribunal.
The Tribunal directs a meeting of the creditors in the manner it directs.
If a majority in number representing three-fourths in value of creditors present and voting in person agree, and the Tribunal sanctions, the re-conversion binds all members, all creditors and the company.
Before sanction, the Tribunal must be satisfied that all material facts have been disclosed, including financial position, latest auditor's report and any pending Chapter XIV investigation.
The order takes effect only when a certified copy is filed with the Registrar. Default attracts a fine up to ₹100 per copy on the company and every officer in default.
Within six months of sanction, the company must apply for registration under the Multi-State Co-operative Societies Act, 2002 or other applicable law and file a report.

Answer: The request is valid (₹6,40,000 is above ₹6,00,000). The Tribunal orders a meeting, sanctions on the required majority and disclosure, and the order operates only after the certified copy is filed with the Registrar. Registration as a co-operative must be applied for within six months.

Exam tips

Expect MCQs on the figures: two-thirds of members present and voting, three-fourths value of creditors, six months and ₹100.
In case studies, check whether the company was originally an inter-State co-operative society before applying the section.
Contrast 378ZS with 378J. Examiners like the pairing of Tribunal versus Registrar and total members versus members present and voting.
Write the proviso on disclosure in descriptive answers. It is often the missed mark.
Always end with the effect: order inoperative until filed with the Registrar.

Practice questions from Company Formation and Conversion

Re-conversion of Producer Company to Co-operative Society in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Re-conversion of Producer Company to Co-operative Society: frequently asked questions

Can every Producer Company re-convert under Section 378ZS?

No. The section covers a Producer Company that is an erstwhile inter-State co-operative society, formed and registered under the Chapter. Other Producer Companies are outside its text.

Who approves re-conversion under Section 378ZS?

The Tribunal. It directs a meeting of members or creditors and sanctions the re-conversion if the required majority agrees. The Registrar only receives the certified copy of the order.

What is the penalty for not filing the Tribunal's order with the Registrar?

The company and every officer in default are punishable with a fine that may extend to ₹100 for each copy in respect of which default is made. The order also has no effect until the certified copy is filed.

What must the company do after the Tribunal sanctions re-conversion?

It must apply for registration as a multi-State co-operative society or co-operative society under the Multi-State Co-operative Societies Act, 2002 or other applicable law within six months. It must also file a report with the Tribunal, the Registrar of Companies and the Registrar of Co-operative Societies concerned.