Recently, the Supreme Court (SC) upheld the Gujarat High Court’s 2013 ruling by striking down certain provisions of the Constitution (97th Amendment) Act, 2011. This decision is noteworthy as it gives federalism a boost and addresses the exclusive authority States have over cooperative societies, a massive contributor to the economy.
Understanding Cooperatives
As per the International Labour Organisation (ILO), a cooperative is a voluntarily united autonomous association of persons. With a common goal of meeting their economic, social, and cultural needs, these associations become jointly owned enterprises that are democratically controlled. Among cooperatives, there are several types such as Consumer Cooperative Society, Producer Cooperative Society, Credit Cooperative Society, Housing Cooperative Society and Marketing Cooperative Society. In recognition of their importance, the United Nations General Assembly declared 2012 as the International Year of Cooperatives.
India, being an agricultural country, initiated the world’s largest cooperative movement. To further this cause, the Central Government recently established a separate ‘Ministry of Co-operation’.
Issue with The 97th Amendment
Part IXB of the 97th Amendment, introduced into the Constitution, outlines the conditions for running cooperative societies. The problematic elements of this amendment, passed without ratification from State legislatures, set precise guidelines such as the number of directors a society should have, their tenure length, and even the expertise required to become a member of the society.
Other Major Provisions of the 97th Amendment
The 97th Amendment included significant changes like adding the word “cooperatives” in Article 19(1)(c) under Part III of the Constitution, giving citizens the fundamental right to form cooperatives. Additionally, a new Article 43B was added to the Directive Principles of State Policy (Part IV), promoting the formation of cooperative societies.
The Central Government justified these changes as a way to inject ‘professionalism’ into the functioning of the societies while addressing issues of poor services, low productivity, and delayed elections due to lack of accountability.
The Supreme Court’s Ruling
The SC highlighted how the Constitution provides a quasi-federal structure where States have exclusive legislative power within their sphere. They noted that Part IXB “significantly and substantially impacted” the exclusive legislative power of State legislatures over the cooperative sector as per Entry 32 of the State List. It also emphasized that the 97th Amendment needed ratification by at least half of the state legislatures since it dealt with an entry (cooperative societies) that was a State’s exclusive subject.
Because such ratification was not completed, the 97th Amendment was liable to be struck down.
Upholding Provisions Related to Multi-State Cooperative Societies
Despite the issues, the SC maintained the validity of provisions related to Multi-State Cooperative Societies (MSCS) due to non-ratification not affecting them. This is because when objects are not confined to one State, the Union of India can legislate as per Entry 44 List I (Union List).
Defining Legislative Powers
Legislative powers are divided into three Lists: Union List (List I), the State List (List II), and the Concurrent List (List III) under the 7th Schedule to the Constitution.
The Union List consists of subjects of national importance, for example, Defense, Foreign Affairs, Banking, Currency, Union Taxes, etc. The State List comprises subjects of local or State interest like Public Order and Police, Health, Agriculture, etc. The Concurrent List includes areas where both the Union Parliament and the State Legislature can legislate concurrently. This list serves as a ‘twilight zone’, allowing States to initiate matters of less importance, while the Parliament can handle significant issues.
