Context

In Union of India vs Rajendra N. Shah, the Supreme Court of India partially struck down the 97th Constitutional Amendment.

Background of the 97th Constitutional Amendment

• The 97th Constitutional Amendment came into effect from February 15 2012.
• The amendment added “cooperative societies” to the protected forms of association under Article 19(1)(c), elevating it to a fundamental right.
• It also inserted Part IXB in the Constitution which laid down the terms by which cooperative societies would be governed, in more granular detail than was palatable.

Why was the Amendment struck down?

• The Constitution can be amended only by the procedure provided in Article 368.
• The amendment procedure requires a majority of the total strength of each of the Houses of Parliament and two-thirds majority of those present and voting.
• A proviso to the Article lists out some articles and chapters of the Constitution, which can be amended only by a special procedure.
• The special procedure requires that the amendment will also have to be ratified by the legislatures of half of the States.
• It is precisely on the grounds of violation of this additional requirement that the 97th Constitutional Amendment was challenged.
• The Gujarat High Court struck down the amendment in 2013 on the grounds that it had failed to comply with the requirements under Article 368(2) by virtue of not having been ratified by the States and had also given an additional finding that the 97th Amendment violated the basic structure of the Constitution.
• The Union Government challenged the Gujarat High Court judgment before the Supreme Court, arguing that the amendment neither directly nor effectively changed the scheme of distribution of powers between the Centre and the States.
• The court took the example of the 73rd and 74th Amendments which were similar in impact on the legislative power of the States, had been passed by the special procedure involving ratification by State legislatures.
• Procedural lacuna: The court noted that the procedure had not been followed in this case.
• The Supreme Court clarified that the does not go into the question of the amendment being violative of the basic structure of the Constitution.
• The judgment makes a distinction between cooperative societies operating in one State and multi-State cooperative societies and holds that while a ratification by half the State legislatures would have been necessary insofar as it applies to cooperative societies in one State.

Increasing control of the Union government

• Union government has been acquiring incrementally greater control of cooperative societies over the years.
• Cooperative banks have been brought under the purview of the Reserve Bank of India.
• Union Government recently established Union Ministry for Cooperation.

Issues with Central control over cooperative sector

• Domain of States: The idea that the cooperative sector ought to be controlled at the State level and not at the central or Union level goes back all the way to the Government of India Act, 1919 which placed cooperatives in the provincial list.
• Part of State list: Entry 32 of the State List in the Seventh Schedule of the Constitution confer power on the State legislatures to make laws pertaining to incorporation, regulation and the winding up of cooperative societies.
• The cooperative sector has always been in the domain of the States or provinces.
• Different organising principles: The organising principles and mechanism of these cooperatives differ from area to area and depend on the industry or crop which forms the fulcrum of the cooperative.
• Homogeneity nor require: Homogeneity in this area would only result in the creation of round holes in which square pegs no longer fit.
• They also would not really serve to break the control some political interests have taken over cooperatives.

Conclusion

It is best that the Government takes this judgment in the right spirit and stays away from further meddling in the cooperative sector, notwithstanding the creation of the new Ministry.

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