The Supreme Court on July 20 in a 2:1 majority verdict upheld the validity of the 97th constitutional amendment that deals with issues related to effective management of cooperative societies.

• But, the apex court struck down a part inserted by it which relates to the Constitution and working of cooperative societies.
• The striking down part of the 97th Constitution Amendment, was dealt with cooperative societies under the domain of the States.
• It has brought the focus on the extent to which the Centre can seek to lay down policy for the functioning of cooperative societies.

What is the 97th Constitution Amendment?

The 97th constitutional amendment dealt with issues related to effective management of co-operative societies in the country.

• It was passed by Parliament in December 2011 and had come into effect from February 15, 2012.
• The change in the Constitution has amended Article 19(1)(c) to give protection to the cooperatives and inserted Article 43 B and Part IX B, relating to them.

Objects and Reasons for the amendment:

According to the Statement of Objects and Reasons for the amendment, Union government referred to:

• The “weaknesses” in safeguarding the interests of members of cooperatives and the fulfilment of the objectives of these institutions.
• The delayed elections, nomination of office-bearers for long durations, reduced accountability in management and inadequate professionalism in many societies.
• The need to initiate fundamental reforms to revitalise these institutions and ensure “their autonomy, democratic functioning and professional management”.

Recognising that ‘cooperative societies’:

Recognising that ‘cooperative societies’ comes under Entry 32 of the State List in the Seventh Schedule.

• the Amendment proposed to create a framework for the functioning of cooperative societies.
• State laws on cooperatives should conform to this framework.
• It introduced Part IXB in the Constitution so that the concept of cooperative societies gains constitutional recognition.
• It was on the lines of Part IX, which deals with panchayats, and Part IXA, which deals with urban local bodies.

Key feature of the Amendment:

The idea was to empower Parliament to frame laws for cooperative societies that function across States (multi-State cooperative societies) and State legislatures to make laws for all other cooperative 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 cooperative society, that is, every society that has members from these sections.

What was the legal infirmity in the Amendment?

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

• First, the Amendment required not only a two-thirds majority in Parliament, which was obtained, but also had to be ratified by 50% of the State legislatures.
• 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 was declared unconstitutional.
• It also ruled that the Part violated the basic structure of the Constitution in that it was in breach of federal principles.

The Centre’s defence was:

• The Amendment did not alter the entry in the State List on ‘cooperative societies’.
• It specified that the State legislatures would enact the relevant laws based on a common framework.
• There was no need for ratification by the Assemblies, as no subject was shifted from the State List to the Central or Concurrent List.

What was the Supreme Court’s view?

However, the Supreme Court rejected Centre’s defence argument.

The Amendment had the effect of limiting and circumscribing the scope and extent to which States could frame laws on cooperative societies.

• This impacted on their legislative power and would therefore amount to a change that would require ratification by the Assemblies.
• The majority of Justices declared the Part inoperative only in respect of cooperative societies that came under the States.
• It would be valid as far as multi-State cooperative societies were concerned as Parliament had the power to regulate their functioning.

The dissenting view of Supreme Court:

Justice K.M. Joseph, in his dissenting view, ruled that Part IXB could not be severed into two sections, one covering State cooperatives and the other for multi-State cooperatives.

• It set out a framework for the State cooperatives and only added a clause that in respect of multi-State cooperatives, Parliament will enact the relevant law.
• As the latter provision had no independent life if the portion concerning the State cooperatives was struck down, the ‘doctrine of severability’ cannot be applied, and the entire Part had to be declared unconstitutional.

How does the ruling affect Cooperation Ministry?

The Ministry of Cooperation was formed recently, apparently with a view to giving a fillip to the cooperative movement and reforming the functioning of cooperative societies.

• Until now, the subject was dealt with by the Agriculture Ministry.
• It administered the Multi-State Cooperative Societies Act, 2002.
• The new Ministry will continue this work.
• For now, it will not be in a position to compel States to bring their cooperative laws in conformity with the Centre’s vision.

Regarding the fate of the constitutional framework for all cooperative societies in the country, the Centre has the option of re-enacting the Amendment with a two-thirds majority in Parliament and obtaining ratification by 50% of the State legislatures.

Source: The Hindu