Provisions of 97th Amendment Struck Down: SC

 Recently, the Supreme Court (SC) upheld a 2013 judgment of the Gujarat High Court and struck down certain provisions of the Constitution (97th Amendment) Act, 2011.

It gave a major boost for federalism as the 97th Amendment shrank the exclusive authority of States over its co-operative societies, a sector considered as a massive contributor to the economy.

Co-operatives

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.

There are many types of cooperatives such as Consumer Cooperative Society, Producer Cooperative Society, Credit Cooperative Society, Housing Cooperative Society and Marketing Cooperative Society.

The United Nations General Assembly had declared the year 2012 as the International Year of Cooperatives.

India is an agricultural country and laid the foundation of World’s biggest cooperative movement in the world.

Recently, a separate ‘Ministry of Co-operation’ has been created by the Central Government to give a new push to the cooperative movement.

Key Points

Issue:

Part IXB, introduced into the Constitution through the 97th Amendment, dictated the terms for running co-operative societies.

The provisions in the Amendment, passed by Parliament without getting them ratified by State legislatures as required by the Constitution.

It went to the extent of determining the number of directors a society should have or their length of tenure and even the necessary expertise required to become a member of the society.

Other Major Provisions of the 97th Amendment

The word “cooperatives” was added after “unions and associations” in Article 19(1)(c) under Part III of the Constitution. This enables all the citizens to form cooperatives by giving it the status of fundamental right of citizens.

A new Article 43B was added in the Directive Principles of State Policy (Part IV) regarding the “promotion of cooperative societies”.

Central Government's Argument:

It justified that the government was injecting ‘professionalism’ and autonomy into the functioning of the societies.

Lack of accountability by the members 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.

SC’s Ruling:

Exclusive Legislation of States:

The 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.

Quasi-federalism means an intermediate form of state between a unitary state and a federation.

However, within their own sphere, the States have exclusive power to legislate on topics reserved exclusively to them.

Part IX B, 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.

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.

Not Ratified by the States:

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).

Under Article 368(2), Parliament can amend the Constitution by passing a Bill with a special majority.

Since such ratification was not done in the case of the 97th amendment, it was liable to be struck down.

Upheld the Validity of Provisions related to Multi State Cooperative Societies:

It 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.

When it comes to 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.

Lists to Differentiate Legislative Powers

There are three Lists which provide for distribution of legislative powers (under 7th Schedule to the Constitution):

Union List (List I) - It contains 98 subjects (originally 97) and comprises the subjects which are of national importance and admit of uniform laws for the whole of the country.

Only the Union Parliament can legislate with respect to these matters e.g. Defence, Foreign Affairs, Banking, Currency, Union Taxes, etc.

State List (List II) - It contains 59 subjects (originally 66) and comprises subjects of local or State interest.

It lies within the legislative competence of the State Legislatures, viz. Public Order and Police, Health, Agriculture, etc.

Concurrent List (List III) - It contains 52 subjects (Originally 47) with respect to which; both Union Parliament and the State Legislature have concurrent power of legislation. The Concurrent List (not found in any federal Constitution) was to serve as a device to avoid excessive rigidity to a two-fold distribution.

It is a 'twilight zone', as for not so important matters, the States can take initiative, while for the important matters, the Parliament can do so.