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Co-operative societies: Supreme Court quashes part of 97th amendment

Krishnadas Rajagopal New Delhi | Updated on July 20, 2021

Move a major boost to federalism

In a major boost to federalism, the Supreme Court, on Tuesday, struck down parts of a Constitutional Amendment which shrunk the exclusive authority of States over its co-operative societies, a sector that is considered a massive contributor to the national economy.

Part IXB, introduced into the Constitution through the 97th amendment of 2012, dictated the terms for running co-operative societies. The provisions in the amendment, passed by the Parliament without getting them ratified by State legislatures as required by the Constitution, went to the extent of determining the number of directors a co-operative society should have or their length of tenure and even the necessary expertise required to become a member of the society

Govt version

The Centre justified they were injecting professionalism and autonomy into the functioning of co-operative societies. Lack of accountability by the members of these societies 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.

However, a three-judge Bench led by Justice Rohinton Nariman was not impressed by the government version.

In a majority judgment authored by Justice Nariman, the court held that co-operative societies come under the “exclusive legislative power” of State legislatures. The judgment may be significant in the background of fears voiced by States whether the new Central Ministry of Cooperation would dis-empower them.

Part IX B of the Constitution, which consists of Articles 243ZH to 243ZT, has “significantly and substantially impacted” State legislatures’ “exclusive legislative power” over its co-operative sector under Entry 32 of the State List to over the co-operative sector. In fact, the court pointed out how Article 243ZI makes it clear that a State may only make law on the incorporation, regulation and winding up of a co-operative society subject to the provisions of Part IXB of the 97th Constitutional Amendment.

“There can be no doubt that our Constitution has been described as quasi-federal in that, so far as legislative powers are concerned, though there is a tilt in favour of the Centre vis-à-vis the States given the federal supremacy principle outlined hereinabove, yet within their own sphere, the States have exclusive power to legislate on topics reserved exclusively to them,” Justice Nariman wrote in his 89-page majority opinion shared with Justice BR Gavai.

The court also took exception to the fact that the amendment was passed without ratification from the States.

“The 97th amendment, which inserts the chapter dealing with co-operative societies has not been so ratified… Though an amendment of the Constitution is the exercise of constituent power which differs from ordinary legislative power, such constituent power does not convert Parliament into an original constituent assembly. Parliament being the donee of a limited power may only exercise such power in accordance with both the procedural and substantive limitations contained in the Constitution of India,” Justice Nariman observed.

However, the court did not strike down the portions of Part IXB of the amendment concerning ‘Multi State Cooperative Societies’ operating in various States and Union Territories due to the lack of ratification.

“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 List I (Union List)... It is declared that Part IXB of the Constitution is operative only insofar as it concerns Multi-State cooperative societies both within the various States and in the Union Territories,” Justice Nariman declared for the majority on the Bench.

In his dissent, Justice KM Joseph said the doctrine of severability would not operate to distinguish between single-State cooperatives and MSCS. The judge said the entire Part IXB should be struck down on the ground of absence of ratification.

Published on July 20, 2021

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