Recently, Supreme Court of India in Union of India V Rajendra N. Shah struck down a part of 97th Constitutional Amendment that the Government of India made in 2011. It was alleged that this amendment took away the powers of the state governments to regulate the cooperative societies, which comes under the state list. This judgement of the Apex Court gave a major boost to federalism, which is the part of the basic structure of the constitution.
This Judgement of Supreme Court came in the ration of 2:1. The bench consists of R.F.Nariman, K.M. Joseph, B.R.Gavai. the bench upheld the validity of the Constitutional Amendment, which talks about the effective management of the Co-operative Societies. But, it struck down the part of it which was related to the Constitution and the working process of co-operative societies. The Constitutional bench struck down a part IX B of the amendment act, but at the same time saved the amendment act.
The verdict came after the Centre challenged the decision of Gujrat High Court. In 2013, Gujrat High Court ordered for quashing down certain provisions of the amendment act and held that the Parliament exceeded its power by making laws on cooperative societies as it comes under the state list.
According to the International Labour Organisation (ILO), a cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. But, according to the IX B (c) of the 97th Amendment act, a society that is registered or deemed to be registered under any law related to cooperative societies for the time being in force in any state is known as cooperative society.
The issue was that the 97th Constitutional Amendment Act, required ratification by at least one-half of the state legislatures as per Article 368(2) of the Constitution, since since it dealt with a entry which was an exclusive state subject (co-operative societies) . The amendment act determined the number of directors a society should have, their length of tenure and even the necessary expertise required to become a member of the society. The Amendment act added the word cooperative in the Article 19(1)(c) of the Indian Constitution. Therefore, forming a cooperative society became the fundamental right of an Indian Citizen. A new Article43B was added in the Directive Principle of State Policy (Part IV) regarding the “promotion of cooperative societies”.
Supreme Court held that Part IX B of the Amendment, which consists of Articles 243ZH to 243ZT, has “significantly and substantially impacted” State legislature’s “exclusive legislative power” over its co-operative sector under Entry 32 of the State List. 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 society subject to the provisions of Part IXB of the 97th Amendment. It held that the 97th Constitutional Amendment required ratification by at least one-half of the state legislatures as per Article 368(2) of the Constitution, since it dealt with an entry which was an exclusive state subject (co-operative societies).
The Court did not strike down the portions of Part IXB of the Amendment concerning ‘Multi State Co-operative Societies (MSCS)’ due to the lack of ratification. It was because the objects of MSCS are not confined to one State, the Union of India would have the legislative powers, 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.