PARTIAL STRUCK DOWN OF 97TH AMENDMENT ACT

Introduction

“We have struck down part IX B of the Constitution related to cooperative societies but we have saved the amendment”- A Bench of Justices

On July 21, The Supreme Court Bench, comprising of R.F. Nariman, K.M. Joseph and B.R. Gavai, upheld a 2013 judgment of the Gujarat High Court while striking down part IX-B of the Constitution relating to cooperative societies. This Part IX was inserted in the constitution by the way of The 97th Constitutional Amendment Act, 2011. Moreover, the constitutional bench dismissed all appeals filed by the central government.

The bench accepted that ratification was required by at least one-half of the state[1] since it dealt with a subject of State List[2] (co-operative societies). As no such ratification was done, the Supreme Court declared the amendment unconstitutional. However, there was a split in the bench on the point of whether Part IX B will survive with respect to multi-state co-operative societies.

  • While the majority comprising Justices Nariman and Gavai upheld those provisions of Part IX B which deal with multi-state co-operative societies by applying the doctrine of severability[3]
  • Justice Joseph dissented on this count and held that the doctrine of severability was not applicable gave the ruling to strike down the entire act.

Background

A meeting known as the conference of ministers was held in 2004 which was solely focused on co-operatives. The questions regarding its formation, functioning, management and control was pursued. This conference addressed these concerns and came up with a plan to resolve this issue via an amendment to the constitution. The purpose was to ensure democratic functioning, autonomy and timely elections in cooperative societies. This conference was a herald which finally led to the 97th amendment in 2011.

The 97th Amendment Act came into force with effect from 15-2-2012. Shortly, a PIL was filed before Gujarat HC challenging the constitutional validity of the act. Article 368(2) mentions the provision of ratification by half of the states while dealing with a state matter. In 2014, the amendment act was declared unconstitutional as inserting Part IX-B was ultra vires without the requisite ratification. Later on, the central government challenged this judgement in the Supreme Court.

PART IX B OF THE CONSTITUTION

The 97th Amendment Act gave a constitutional status and protection to Cooperative societies. It made 3 major changes to the constitution:-

  1. It inserted the term “or co-operative societies” in Article 19(1)(c) as a part of Freedom to form associations or unions.
  2. It added Article 43-B as DPSP to promote cooperative societies.
  3. Lastly, it added a new part IX-B in the constitution which was entitled “The Co-operative Societies” [Article 243-ZH to 243-ZT]

This Part IX-B was the bone of contention between the Central and State government. This part defined powers of the state legislature and the Centre to regulate incorporation, elections and governing of these cooperative societies. It gave parliament the power to issue regulations for multi-state cooperatives and UTs. The question was raised before the SC that whether such amendment can be enforced without being ratified by at least half the states.

 The petitioners argued that the power of state legislature as defined under Part IX B would ‘restrict’ the states to regulate the cooperative societies as it also gave this right to the centre. Since the cooperative societies fall under Entry 32 of the state list which restricts centres to make any law or regulation on this matter.

Issues Raised

  1. A definite restriction has been imposed upon the State Legislatures regarding fixation of the maximum number of Directors of a Co-Operative Society (Not more than 21);
  2. The duration of the term of office of the elected members of the board and its office bearers has been fixed to be five years.
  3. Conditions related to the conduct of elections, period of audits, filing of financial accounts etc., were also introduced.
  4. Further, Part IX B prescribed the acts which would be offences relating to the co-operative societies.

In a nutshell, Part IX B laid down mandates from which the State Legislature cannot deviate.

Arguments and Statements

The amendments outcome was the Parliament invading into the domain of state legislatures.

“…in spite of the fact that the law relating to Co-Operative Societies is still in the List II of the 7th Schedule, without bringing the subject of Co-Operative Societies either into List I or List III, by way of this amendment, the Parliament has controlled the said power without complying with the provisions of Article 368 (2) of the Constitution by taking ratification of the majority of the State Legislatures”[4], the Court observed.

The Gujarat HC was of opinion that the Central government is trying to shift the subject of cooperative societies to the Union List. However, such a shifting of the subject would require ratification by a majority of the states. “…what could not be achieved except by complying with the provisions of Article 368 (2) of the Constitution, the self-same purpose has been sought to be achieved by the amendment impugned in this writ-application without complying with the provisions of Article 368 (2) of the Constitution”, the High Court division bench of the then Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala held. “…A constitutional authority cannot do indirectly what it is not permitted to do directly”, the Court observed.

Therefore, the Gujarat High Court struck down the provisions of Part IX B introduced by the Constitution (97th Amendment) Act 2011 to the extent they related to cooperative societies.

Union of India Vs. Rajendra N Shah, 2021

The majority judgment observed that the exclusive legislative power given to states in matters under the Second List of the 7th Schedule. There can be no doubt that our Constitution has been described as quasi-federal in that, so as far as legislative powers are concerned, though there is a tilt in favour of the Centre vis-à-vis the States have given the federal supremacy principle. Referring to the precedent in Builders’ Assn. of India v. Union of India, Justice Nariman’s judgment said:

“…any significant addition or curtailment of a field of legislation which is contained in an Entry in List II of the 7th Schedule of the Constitution would also amount to a ‘change’ to attract the proviso to Article 368(2). It is not necessary, as has been contended by the learned Attorney General, that a change referred to in the proviso to Article 368(2) would only be if some part of a subject matter given to the States were transferred to Parliament or vice-versa. Even without such transfer, if there is an enlargement or curtailment of the subject matter contained in a field of legislation exclusively reserved to the States, and then in effect, a change has been made to an entry in legislative lists, which change, if significant, would attract the proviso to Article 368(2) and therefore require ratification”.

On the contrary, it is clear that by curtailing the width of Entry 32, List II of the 7th Schedule, Part IXB seeks to effect a significant change in Article 246(3) read with Entry 32 List II of the 7th Schedule in as much as the State’s exclusive power to make laws concerning the subject of co-operative societies is significantly curtailed thereby directly impacting the quasi-federal principle contained therein.

“Quite clearly, therefore, Part IX-B, in so far as it applies to co-operative societies is significantly curtailed thereby directly impacting the quasi-federal principle contained therein.”

The bench mentioned that during the introduction of municipal corporations and panchayats under the 73rd and 74th amendments, they were also sent for ratification by states. The Court also rejected AG’s argument that ratification has been done through implication as most of the states changed their laws in tune with Part IXB.

The Court Held, “We reiterate that our judgment is confined to the procedural aspect of Article 368(2) proviso, there being no substantive challenge to Part IX-B on the ground that it violates the basic structure doctrine as laid down in Kesavananda Bharati’s case”, the judgment stated.

But Court upheld [5]

  • 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.

Conclusion

Although, most of the amendment was struck down due to the technicality. Still, it can’t be ignored that the amendment was a necessary one. It gave cooperative societies a proper structure and ideals to strive towards. Owing to this amendment, it is now our fundamental right to form a cooperative society which has huge implications. However, the amendment impacted the exclusive legislative power of state legislatures. It is my firm belief that here both citizens and SC has performed their duty extremely well and the dissent has always been welcomed in our country. As William Fulbright said, In a democracy, a dissent is an act of faith”.

Author(s) Name: Arun Shekhar Jawla (Chandigarh University, Punjab)

References:

[1] Article 368(2) of the Constitution

[2] Entry 32 of State List

[3] Union Of India vs. Rajendra N Shah, 2021

[4] Union of India vs. Rajendra N. Shah & Anr. [Civil Appeal Nos. 9108-9109 of 2014]

[5] https://main.sci.gov.in/supremecourt/2013/21321/21321_2013_32_1501_28728_Judgement_20-Jul-2021.pdf

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