Relevance:

GS-2 Federalism; FRs; Cooperatives; Working of the Parliament.

Context:

• The Supreme Court recently struck down certain provisions of the Constitution (97th Amendment) Act, 2011 in so far as it introduced clauses dealing with the working of cooperative societies working within a state, saying the subject matter fell in the state list and “belongs wholly and exclusively to the State legislatures to legislate upon” and any change would require the ratification by at least one-half of the state legislatures as per Article 368(2) of the Constitution.
• In this article we will understand the 97th Constitutional Amendment act and the SC judgement in detail.

Introduction:

• The Constitution (97th Amendment Act), 2011 makes provisions for Co-operative societies in India. The Amendment provided legal status and protection to Co-operative societies, and it makes an effort to address all of their issues and develop effective management techniques. It also aims to promote Co-operative economic activities that advance rural India. The amendment was expected to ensure Co-operatives’ democratic and autonomous operation, as well as management transparency with members and other stakeholders.

What is Co-operative?

• According to the International Labour Organization (ILO), a Co-operative is an organisation that is autonomously run by people who have voluntarily come together to address a shared economic, social, or cultural need through a joint and democratically controlled enterprise.
• A ‘Co-operative Society’ is defined as any society that is registered or presumed to be registered under any co-operative society law currently in force in any State. (97th Amendment Act)

Need for the 97th Amendment Act:

• The Co-operatives have grown greatly since the time the Amendment was established, but their qualitative performance hasn't kept up with expectations. In light of the necessity for modifications in the State Co-operative Societies Acts, numerous consultations with state governments and gatherings of state cooperative ministers have taken place. As a result, there was a critical need to alter the Constitution in order to safeguard cooperatives' autonomy, democratic operation, and protection from unwarranted outside meddling.
• The “deficiencies” in defending the interests of cooperative members and attaining these institutions' goals were seen as the justification for the Amendment.
• To ensure that these institutions serve the interests of their constituents and the general public, contribute to the economic development of the nation, and function democratically and professionally, fundamental reforms were necessary to revitalise them.
• The Central Government was committed to ensuring that the country’s Co-operative societies operated democratically, competently, independently, and proficiently. In order to implement the required reforms, it was proposed to add a new section to the Constitution that would cover essential aspects of Co-operative society operation, such as democratic, autonomous, and professional functioning.
• Since 'co-operative societies' were recognised in the Seventh Schedule as being covered by Entry 32 of the State List, it was proposed in the Amendment to provide a overall framework for co-operative society functioning. Cooperatives should be governed by state legislation that adhere to the framework.

The 97th Amendment Act:

The Amendment makes the right to form Co-operatives a fundamental right. Articles 243-ZH to 243-ZT provide an explanation of Co-operative societies. The Amendment resulted in a number of significant modifications to the Indian Constitution as follows:

Fundamental Right:

• The words ‘Co-operative societies’ were added to Part III of Article 19(1)(c) of the Constitution.
• The 97th Amendment to the Constitution adds this important clause to Article 19(1)(c) by recognising people’s right to form Co-operative societies as a fundamental right. In addition to providing them greater managerial capabilities and operational autonomy, it recognises them as being protected from political interference.
• It declared the freedom to form Co-operative societies as a fundamental right.

DPSP:

• A new Article 43B was added to the Directive Principles of State Policy (Part IV) relating to the ‘Promotion of Co-operative Societies,’ which states that the State shall endeavour to promote Co-operative societies’ voluntary formation, autonomous functionality, and professional management.

New Part:

• The Amendment added a new Part IX-B to the Constitution, following Part IX-A, titled ‘The Co-operative Societies’ (Articles 243-ZH to 243-ZT).

Constitutional validity of the 97th Amendment Act:

What is the issue:

• As a result of the subject of ‘Co-operative Societies’ being listed in Entry 32 of the State List of the Seventh Schedule of the Constitution, state legislatures have passed legislation on the subject.
• ’The Amendment included provisions governing the operation of Co-operative societies within a State. According to Article 368(2) of the Constitution, the subject was on the State list and “belongs wholly and exclusively to the State legislatures to legislate upon,” so any changes would need to be approved by at least half of the state legislatures. The 97th Amendment’s provisions, however, were approved by Parliament without being ratified by state legislation.
• This makes it clear that the power granted by Article 368 of the Constitution namely, the power of Parliament to amend the Constitution was used to enforce the introduction of Part IX-B.  It could be argued that since the State Legislature alone has jurisdiction over local self-government institutions, Parliament could not have passed any legislation pertaining to them without Article 368. It would be a questionable use of power for Parliament to attempt to encroach on territory that the State Legislature has exclusive authority over. In other words, Parliament tried to accomplish something indirectly that it was unable to accomplish directly by amending the Constitution to include provisions relating to local self-government

The Gujarat High Court decision regarding 97th Amendment:

• The 97th Amendment Act was challenged in several High Courts across the country. 
• The Gujarat High Court was pleased to rule that the aforementioned Act was unconstitutional in Rajendra N. Shah v. Union of India.
• The petitioner in the aforementioned case, among other things, contested the constitutionality of the 97th Amendment because ‘Co-operative Societies’ are solely a matter for state legislatures to pass laws. In other words, only the State Legislature has the power to pass legislation governing Co-operative societies. The petitioner based his argument on Entry 32 in List II of Schedule VII.

The Supreme Court’s decision regarding 97th Amendment Act:

• The SC upheld a 2013 Gujarat High Court verdict that struck down parts of the amendment.
• However, the three-judge bench of the top court by a 2:1 majority held that the Constitution (97th Amendment) Act 2011 will be valid and operational with regard to multistate cooperative societies which relate to cooperative societies existing across many states or union territories.