Objects and Reasons for the 97th Constitutional Amendment Act : the Cooperative Societies Act

97th Constitutional Amendment 2011 : Cooperative Societies Act

The 97th Constitutional Amendment, which dealt with issues related to effective management of co-operative societies in the country, was passed by Parliament in December 2011 and had come into effect from February 15, 2012. The Part IXB contained Articles 243ZH to Article 243ZT, which empowered Parliament (for multi-state cooperative societies) and state legislatures for other cooperative societies to make laws.

The Constitution (97th Amendment) Act, 2011 relates to the cooperative societies working in India. It aims to overcome all the problems faced by these societies and bring about an efficient way to manage them. It aims at encouraging economic activities of cooperatives which in turn will help rural India progress.

Objects and Reasons for the 97th Constitutional Amendment Act

The Union government, in its  Statement of Objects and Reasons for the amendment,  referred to the “weaknesses” in  safeguarding the interests of  members of co-operatives and the  fulfilment of  the objectives of these institutions. It referred to delayed  elections, nomination of office bearers for long durations, reduced accountability in management and  inadequate professionalism in  many societies. The co-operative movement certainly needs reform and revitalisation. Beset by political interference, many cooperative societies do not hold elections regularly, while some are superseded frequently. It mentioned the need to initiate fundamental reforms to  revitalise these institutions and  ensure “their autonomy, democratic functioning and  professional management”. 

Recognising that ‘co-operative  societies’ came under Entry 32 of  the State List in the Seventh  Schedule, the Amendment proposed  to create a framework for the functioning of co-operative societies. State laws on co-operatives should conform to thi framework.

It introduced Part IXB in the Constitution so that the concept of co-operative societies gains constitutional recognition. It was on the lines of Part IX, which deals with  panchayats, and Part IXA, which deals with urbanlocal bodies. The  idea was to empower Parliament to frame laws for co-operative  societies that function across States (Multi State Co-operative Societies) and State legislatures to make laws for all other co-operative societies falling under their jurisdiction.

The Amendment set out basic rules such as a maximum of 21 directors in a society, a fixed term of five years for elected members, a six month cap on the time limit for which a society’s board of directors can be kept under supersession or  suspension, and reservation of one seat for the Scheduled Castes or the Scheduled Tribes, and two seats for women on the board of every co-operative society, that is, every society that has members from these sections.

What are all the provisions made by the 97th Constitutional Amendment Act, 2011?

The Constitution (Ninety-seventh Amendment) Act, 2011 provided constitutional status and protection to co-operative societies.

In this context, it made the following three changes in the constitution:

1. It added the words “or co-operative societies” to Article 19(1)(c) of the Constitution to expand the fundamental right to form associations or unions to cover co-operative societies too.

2. It included a new Directive Principle of State Policy through Article 43B, which says: “The State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies.”

3. It added a new Part IXB in the constitution which is entitled as, “The Co-operative Societies” (Article 243ZH to 243ZT).

Who challenged the 97th Constitutional Amendment Act 2011?

The Constitution (Ninety-seventh Amendment) Act, 2011 was passed by both the houses of Parliament in December 2011. The President of India gave his assent to that amendment on 12th January 2012 and the said notification was published in the gazette of India of 13th January 2012 and the amendment came into force on 15th February 2012.

A few months later, Mr. Rajendra N. Shah, an activist associated with NGO Consumer Protection Analytic Committee [CPAC], in September 2012, filed a Public Interest Litigation before the Gujarat High Court seeking quashing of the Constitution (97th Amendment) Act, 2011, as ultra vires the Constitution of India.

On 22nd April 2013, the High Court bench of the then Chief Justice Bhaskar Bhattacharya and Justice JB Pardiwala allowed his writ petition by declaring that the Constitution (97th amendment) Act, 2011, inserting Part IXB containing Articles 243ZH to 243ZT is ultra vires to the Constitution of India, for not taking recourse to Article 368(2) of the Constitution. 

What was the Constitutional infirmity in the 97th Constitutional Amendment?

On 22nd April 2013, the Gujarat High Court struck down Part IXB in its entirety on two grounds, on a legal challenge to the validity of the 97th Constitutional Amendment.

First, the Amendment required not only a special majority in Parliament, which was obtained, but also had to be ratified by 50% of the States  legislatures, as mandated by Article 368(2) of the Constitution.This was because the Amendment impinged on a subject over which only the State legislatures had law making powers. In the absence of such ratification, the Part IXB was declared unconstitutional.

Second, it ruled that the Part violated the basic structure of the Constitution in that it was in breach of federal principles.

What is the verdict of Supreme Court?

The Centre justified they were injecting ‘professionalism’ and autonomy into the functioning of the societies. Lack of accountability by the members has led to poor services and low productivity. Even elections are not held on time. Co-operatives need to run on “well-established democratic principles”, the government argued in the apex court.

The Centre’s defence was that the amendment did not alter the entry in the State List on ‘co-operative societies’. In fact, it specified that  the State legislatures would enact the relevant laws based on a common framework. There was no need for ratification by the State legislatures, as no subject was shifted from the State List to the Central or Concurrent List. 

However, the Supreme Court rejected the argument. The amendment had the effect of limiting and circumscribing the scope and extent to which States could frame laws on co-operative societies. This impacted on their legislative power and would therefore amount to a change that would require ratification by the State legislatures.

All three judges on the Bench that heard the Union government’s appeals agreed with the Gujarat High Court that the ratification by the State legislatures was required for Part IXB, and in the absence of such ratification, the Part had to be struck down. However, the majority, comprising Justices Rohinton F. Nariman and B. R. Gavai, declared the Part inoperative only in respect of co-operative societies that came under the States. It would be valid as far as Multi State Co-operative Societies were concerned as Parliament had the power to regulate their functioning. 

Justice K. M. Joseph, in his dissenting view, ruled that Part IXB could not be severed into two sections, one covering State co-operatives and the other for Multi State Co-operatives. It set out a framework for the State co-operatives and only added a clause that in respect of Multi State Co-operatives, the Parliament will enact the relevant law. As the latter provision had no independent life if the portion concerning the  State co-operatives was struck down, the ‘doctrine of severability’ cannot be applied, and the entire Part IXB had to be declared unconstitutional.

Thus the Supreme Court bench by a 2:1 majority held that, “When it comes to Multi State Co-operative Societies (MSCS) with objects not confined to one State, the legislative power would be that of the Union of India which is contained in Entry 44 of the Union List. It is declared that Part IXB of the Constitution of India is operative only insofar as it concerns Multi-State Co-operative Societies both within the various States and in the Union Territories of India”.

What are the views of the bench of Supreme Court against the objection raised by the Centre that no state government had challenged the amendment?

The bench of the Supreme Court dismissed the objection raised by the Centre that no state government had challenged the amendment.

The bench said, “The argument that no state has come forward to challenge the 97th Constitutional Amendment does not take the matter any further."

"When a citizen of India challenges a constitutional amendment as being procedurally infirm, it is the duty of the court to examine such challenge on merits as the Constitution of India is a national charter of governance affecting persons, citizens and institutions alike,” the Supreme Court observed.

The bench also reiterated the “important constitutional principle that can be said to form part of the basic structure of the Constitution, namely, the fact that the Constitution is not unitary but quasi-federal in character.”

 

What now remains valid in the 97th Constitutional Amendment?

Both Article 19(1)(c) and Article 43B remain undisturbed. In line with the Supreme Court’s judgment, Part IXB dealing with co-operative societies will survive, but only with reference to Multi State Co-operative Societies.

What will be the fate of constitutional framework for all co-operative societies in the country?

Regarding the fate of the constitutional framework for all co-operative societies in the country, the Centre has the option of re-enacting the amendment with special majority in Parliament and obtaining ratification by 50% of the State legislatures.

How does the verdict affect the newly created, the Ministry of Co-operation?

The Ministry of Co-operation was formed recently, apparently with a view to giving a fillip to the co-operative movement and reforming the functioning of co-operative societies. Until now, the subject was dealt with by the Agriculture Ministry. It administered the Multi State Co-operative Societies Act, 2002. The new Ministry will continue to work the same functions. For now, it will not be in a position to compel States to bring their co-operative laws in conformity with the vision of the Union government.

The “Ministry of Co-operation” will continue to have the power to look into the work of “multi state” co-operative societies though the Supreme Court has struck down the constitutional provisions that prescribed the contours of the rules that state governments could create in their own states.

This judgment may mean that the concern expressed by some about the adverse implications of the formation of a new Ministry of Co-operation on federal principles could be true. However, there is no denying that the scope for democratising the functioning of co-operative societies and enhancing their autonomy remains unchanged.

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Frequently Asked Questions (FAQs) :

1. What is 97th Constitutional Amendment?

Ans : The 97th constitutional amendment, which dealt with issues related to effective management of co-operative societies in the country, was passed by Parliament in December 2011 and had come into effect from February 15, 2012. The Part IXB contained Articles 243ZH to Article 243ZT, which empowered Parliament (for multi-state cooperative societies) and state legislatures for other cooperative societies to make laws.

2. What are the reasons for the 97th Constitutional Amendment Act of 2011?

Ans : The Constitution (97th Amendment) Act, 2011 relates to the cooperative societies working in India. It aims to overcome all the problems faced by these societies and bring about an efficient way to manage them. It aims at encouraging economic activities of cooperatives which in turn will help rural India progress.

3. Which right has been granted to the people by the 97th amendment of the Indian Constitution?

Ans : Right of a member to get information. -(1) The Legislature of a State may, by law, provide for access to every member of a co-operative society to the books, information and accounts of the co-operative society kept in regular transaction of its business with such member.

4. Which article of the constitution gave constitutional status and protection to co-operative societies?

Ans : 97th Constitutional Amendment Act

5. Who has the right to make provisions for the incorporation, regulation and winding-up of co-operative societies?

Ans : State Legislature

6. Which article of the Directive Principle of State Policy promotes the formation of Cooperative Societies?

Ans : Article 43-B

7. Which article of the constitution made right to form co-operative societies a fundamental right?

Ans : Article 19

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