Quashing of Part of 97th Constitutional Amendment

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The Supreme Court in the majority verdict quashed part of the Constitution inserted by the 97th amendment on cooperatives.

About

• The Supreme Court in a 2:1 majority verdict upheld the validity of the 97th constitutional amendment (Part IX B) that deals with issues related to effective management of cooperative societies but struck down a part inserted by it which relates to the Constitution and working of cooperative societies.
• The ruling came from a bench of Justices R F Nariman, K M Joseph and B R Gavai which upheld a 2013 Gujarat High Court verdict that struck down parts of the amendment.

Reason for striking down

• The Amendment introduced clauses dealing with the working of cooperative societies working within a state. It was struck down stating that  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.
• It is declared that Part IXB of the Constitution of India is operative only in so far as it concerns multi-State co-operative societies both within the various States and in the Union territories of India
• The top court had said if the Centre wanted to achieve uniformity (the reason for Amendment, as quoted by Centre) then the only way available was to take the recourse under Article 252 of the Constitution which deals with the power of Parliament to legislate for two or more states by consent.
• Certain provisions of the amendment pertaining to cooperative societies violated the basic structure of federalism.

Cooperative Societies

• A co-operative society is a voluntary association of individuals having common needs who join hands for the achievement of common economic interest. 
• Its aim is to serve the interest of the poorer sections of society through the principle of self-help and mutual help. 
• Part IX B of the Constitution, inter alia, seeks to empower the Parliament in respect of multi-State co-operative societies and the State Legislatures in case of other co-operative societies to make appropriate law, laying down the following matters, namely:-
  • provisions for incorporation, regulation arid winding up of co-operative societies based on the principles of democratic member-control, member-economic participation and autonomous functioning;
  • specifying the maximum number of directors of a cooperative society to be not exceeding twenty-one members;
  • providing for a fixed term of five years from the date of election in respect of the elected members of the board and its office bearers;
  • providing for a maximum time limit of six months during which a board of directors of co-operative society could be kept under supersession or suspension;
  • providing for independent professional audit;
  • providing for right of information to the members of the co-operative societies;
  • empowering the State Governments to obtain periodic reports of activities and accounts of cooperative societies;
  • providing for the 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, which have individuals as members from such categories;
  • providing for offences relating to co-operative societies and penalties in respect of such offences.

Issues, Objections and Reforms needed

• Interests of members not safeguarded: Cooperative societies have shown weaknesses in safeguarding the interests of the members and fulfillment of objects for which these institutions were organised. 
• Indefinite Postponement of elections: There have been instances where elections have been postponed indefinitely and nominated office bearers or administrators remaining in charge of these institutions for a long time. 
• Reduced accountability: This reduces the accountability of the management of co-operative societies to their members. 
• Unprofessional behavior: Inadequate professionalism in management in many of the co-operative institutions has led to poor services and low productivity. 
• Fundamental reforms are needed: Co-operatives need to run on well established democratic principles and elections held on time and in a free and fair manner. Therefore, there is a need to initiate fundamental reforms to revitalize these institutions in order to ensure their contribution in the economic development of the country and to serve the interests of members and public at large and also to ensure their autonomy, democratic functioning and professional management.
• Qualitative performance is lacking for a long time: 
  • The “co-operative societies” is a subject enumerated in Entry 32 of the State List of the Seventh Schedule of the Constitution and the State Legislatures have accordingly enacted legislations on co-operative societies. 
  • Within the framework of State Acts, growth of co-operatives on a large scale was envisaged as part of the efforts for securing social and economic justice and equitable distribution of the fruits of development. 
  • It has, however, been experienced that in spite of considerable expansion of co-operatives, their performance in qualitative terms has not been up to the desired level. 
• Free the cooperatives from outside interference and make them independent: A strong need has been felt for amending the Constitution so as to keep the co-operatives free from unnecessary outside interferences and also to ensure their autonomous organisational set up and their democratic functioning.

Latest Developments with regard to Cooperatives

• The government announced the formation of a separate Union Ministry of Cooperation
• It will provide a separate administrative legal and policy framework for strengthening the cooperative movement in the country.
• It will help deepen Co-operatives as a true people based movement reaching upto the grassroots. 
• In our country, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility. 
• The Ministry will work to streamline processes for ‘Ease of doing business’ for co-operatives and enable development of Multi-State Co-operatives (MSCS).

Conclusion

• The co-operative sector, over the years, has made significant contributions to various sectors of the national economy and has achieved voluminous growth. 
• The cooperative societies have immense potential to serve the poorer sections of Indian society and ensure equitable economic development.

Sources: TH