– Ankit Gupta
The Supreme Court will decide whether the co-operative societies will remain a political tool or emerge as an independent democratic institution.
Introduction and Background
Amidst the major constitutional amendments and ensuing litigation post-2014, we lost sight of the challenge to the constitutionality of the Constitution (Ninety-Seventh) Amendment Act, 2011 (97th Amendment Act). The matter took its time in getting heard and is currently posted before the Supreme Court for final hearing.[1]
The importance of the 97th Amendment Act lies in the fact that it is concerned with co-operative societies. A co-operative society means autonomous associations of persons united voluntarily to meet their common economic, social, cultural needs, and aspirations through a jointly-owned and democratically-controlled enterprise.[2] AMUL, the largest dairy co-operative in the country is perhaps the most prominent example of a cooperative society.
Vide the 97th Amendment Act, the right to form co-operative societies has been made a fundamental right by inserting the word ‘co-operative societies’ in Article 19(1)(c). The Amendment has also inserted Part IX-B into the Constitution which provides for certain checks and balances on the incorporation, election of board members, term of members, audit of accounts, offences, penalties etc. in relation to a co-operative society.
The Constitutional Challenge
The problem herein arises due to the legislative scheme provided under the Seventh Schedule. The subject matter of co-operative societies is provided under Entry 32 of the state list. Simultaneously, Entry 43 of the Union List expressly excludes ‘co-operative societies’ from the legislative power of the Union Parliament. Thus, there is a prima facie issue of competence on any law passed by the Parliament with respect to co-operative societies.
The 97th Amendment Act has also come under attack for non-compliance with Article 368(2). This Article provides that any amendment which seeks to make a change in any of the lists in the seventh schedule needs to be ratified by legislature of not less than one-half of the states before the amendment is presented to the President for assent. Therefore, it has been argued that since the 97th Amendment Act seeks to make a ‘change’ in the seventh schedule, then it must have adhered to the process of Article 368(2).
Thus, two questions of constitutional interpretation arise for our consideration. First, whether the constituent powers of the Parliament under Article 368 are subject to the same restrictions as that of the plenary powers under Article 246 since federalism is a part of the basic structure of the Constitution.[3] Second, whether the 97th Amendment Act sought to ‘change’ the entries under the seventh schedule and therefore, it was mandatory to fulfill requirements under Article 368(2)(c).
Before the Gujarat High Court
The challenge first arose before the Gujarat HC in Rajendra N. Shah v. Union of India and Anr.[4], wherein the Gujarat HC struck it down as unconstitutional. As regards the first question, the Gujarat HC rightly relied upon the judgment of the SC in Sasank Sekhar Maity and Ors. v. Union of India and Ors.[5], which held that exercise of powers under Art. 368 would not be subject to the limitations of plenary powers to make laws under Articles 245-246. The power under Article 368 is one of ‘constituent’ nature which can in-turn be exercised to amend any part of the constitution. This is however, not the case with the ordinary legislative powers where the subject-matters are defined. Therefore, Article 368 is not limited by legislative competence.
With respect to the second question, the Gujarat HC declared that provisions of 97th Amendment Act which inserted Part IXB containing Articles 243ZH to 243ZT were ultra vires the Constitution of India. This was premised on the sole reason that the mandatory provision under Article 368(2) of the Constitution was not followed to effect such an amendment.
The matter is now pending in appeal before the SC and one of the primary questions before the SC would be whether the 97th Amendment Act requires state ratification as per Article 368(2).
The need of the 97th Amendment Act
Before we address that question on constitutionality, let us discuss certain considerations distinct from the purely legal ones which the SC should keep in mind when finally ruling on the matter. The outcome of this dispute will affect a sector that covers approximately 99% of Indian villages and 71% of total rural households in the country.[6] The cooperative movement in India today is the largest in the world, with more than 6 lakh individual cooperatives covering sectors such as credit and banking, fertilizer, sugar, dairy, marketing, consumer goods, handloom, handicrafts, fisheries, tribal development, labour, housing, and catering to over 24 crore members. The total working capital base in the cooperative sector is estimated at Rs. 73,000 crore.[7]
The 97th Amendment Act was brought about to ensure democratic, autonomous, and professional functioning of the cooperatives inter-alia, ensuring timely conduct of elections and proper audit of their accounts. It became necessary because of excessive political and bureaucratic interference which reduced the status of these co-operatives to a means of furthering personal interests.[8]
The greatest threat, however, is from the excessive politicisation of the co-operative institutions which has made the entire institution hollow. The High Powered Committee on Co-operatives, 2009 noted that there have been instances wherein, changes in political authority at State level have resulted in wholesale supersession of co-operative institutions in many States. It also noted instances of political parties in power assuming control over large-sized cooperatives through methods such as appointing an active member of the party to the position of Chairman, nominating persons of its choice on the Board, issuing directions to them and the official nominees to vote for a particular candidate as Chairman etc. Further, when elections are held, they are fought on party lines with panels of political parties keenly contesting to gain control of the organization. In many instances, politicians who are Chairman of cooperative Boards refuse to call for elections, continuing to be entrenched in positions of authority.[9] These are certain lived experiences that propelled the Parliament to amend the Constitution.
The constitutional question
Coming back to the question of state ratification under Article 368, clause 2(c) provides that if any amendment seeks to make a change in any of the lists of the seventh schedule, the amendment shall also be ratified more than one-half of the States before such an amendment is presented to the President for assent. In the present case, since such a ratification was absent the Guj HC declared the 97th Amendment Act unconstitutional before going into the question of interpretation of the word ‘change’. The Guj HC reasoned that since the 97th Amendment Act implicitly restricted the scope of Entry 32 of State List, the same is to be construed as ‘change’ and therefore, in absence of ratification as per Article 368(2), the 97th Amendment Act was unconstitutional[10]. If such an interpretation is adopted, the Co-operative societies will continue to remain a handmaiden of political parties because no State will ever be willing to surrender their control over such an important sector of the economy and any such future amendment will never be ratified. It is well-nigh possible that political interests may ruin this sector which is otherwise the bread and butter of rural India.
Conclusion – What Should the Supreme Court Do?
In these circumstances, the SC should give a meaningful interpretation to the word ‘change’ under Article 368(2). In these specific facts and circumstances it should be interpreted to mean ‘addition, deletion or renaming’. This will then render the 97th Amendment Act constitutional since by such an interpretation, the restriction of state ratification under Article 368(2)(c) will not come in way since the 97th Amendment Act has not added, deleted or renamed any entry in the seventh schedule. Moreover, any ancillary or implied effect on any entry in the seventh schedule would also not be construed as making a ‘change’. This interpretation is reasonable in the context of the 97th Amendment Act since the entire law-making power still vests in the State government. Nowhere has the Central govt. been appropriated powers to administer co-operative societies which is otherwise a state subject. All that is sought to be achieved is to provide for certain checks and balances. Provisions such as reservation of two seats for women and one seat for the Scheduled Caste/Scheduled Tribes[11] on the board of every co-operative society along with clearly defined powers of supersession[12] is nothing but a noble attempt to save an entrenched institution of the Indian economy. Therefore, this attempt to ensure that the democratic nature of the co-operatives remains inviolable should be upheld.
The author, Ankit Gupta, is a final year law student at the National Law Institute University, Bhopal.
[1] Union of India v. Rajendra N. Shah, SLP(C) No. 025266 – 025267 of 2013 (S.C.) (Pending).
[2] International Cooperative Alliance Website, available at https://www.ica.coop/en/cooperatives/cooperative-identity#definition-of-a-cooperative (Last visited on April 14, 2020).
[3] Kesavananda Bharati Sripadagalvaru and Ors. v. State of Kerala and Anr., (1973) 4 SCC 225.
[4] (2013) 2 GLR 1698.
[5] (1980) 4 SCC 716.
[6] Report on the high powered committee on agriculture, Ministry of Agriculture, May 2009 available at http://www.indiaenvironmentportal.org.in/files/hpcc2009new.pdf (Last visited on April 14, 2020).
[7] M. Hamid Ansari, Addresses the Foundation Day Celebrations of Nagpur Nagarik Sahakari Bank (8 July, 2016). https://pib.gov.in/newsite/mberel.aspx?relid=146930 (Last visited on April 19, 2020)
[8] Supra note 6, 12.
[9] Supra note 6, 27.
[10] Supra note 4, ¶ 10.
[11] The Constitution of India, 1950, Art. 243ZJ.
[12] The Constitution of India, 1950, Art. 243ZL.
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