By Bhima Subrahmanyam, Managing Director, National Federation of State Cooperative Banks (NAFSCOB), President International Cooperative Banking Association

The spontaneous reactions to the verdict of the Supreme Court of India on 20 July 2021 for an appeal made by the Government of India against the Judgement of Gujarat High Court on 22 April 2013 on the Constitution (97th Amendment) Act 2011 (herein after called as Act 2011), depicted a sense of shock, unhappiness, dissatisfaction, and disappointment! Some even expressed the need to relook into the discrepancies, eliminate the loopholes in the Act 2011, and reintroduce it in Parliament. In the context of these developments, it may be helpful to understand the background of the issue, the efforts put in to draft the Constitution (111th Amendment) Bill, 2009, the details of the verdict by both Gujarat High Court and the Supreme Court on the validity of the Act 2011, and the suggestions to be considered for future course of action to ensure the main objectives of the proposed Constitutional amendments as related to the cooperatives are met.

Background: On 22 November 2004, a national level meeting was held under the Chairmanship of Shri Sharad Pawar, the then Union Agriculture Minister, to consider the proposals for constitutional amendments ensuring autonomous, democratic, and professional functioning of the cooperatives. Pursuant to this suggestion, a 13-member committee constituted under the Chairmanship of Late Dr S. S. Sisodia, the then President, NCUI, met on 27 November 2004 to finalise the proposals. The committee discussed formulating a strategy, primarily because under the Government of India Act, 1919, the subject ‘cooperative societies’ was originally contained in entry 13 of the Provincial list and continued in entry 33 of the Provincial list by the Government of India Act, 1935. Later, the subject of ‘cooperative Societies’ was continued by the Constitution of India as a part of entry 32 within Schedule VII List II, i.e., the State List. I was part of both the above meetings. Subsequently, a conference of Ministers of Cooperation of various states held on 7 December 2004 resolved to amend the constitution on the lines of the above proposals i.e to address key issues of empowerment of cooperatives.

The consultations by the Government of India resulted in identifying eight areas for Constitutional Amendments: i) Number and term of members of the board and its office bearers, ii) Election of members of the board, iii) Supersession and suspension of the board and interim management, iv) Audit of accounts of cooperative societies, v) Convening of general body meetings, vi) Right of a member to get information, vii) Returns, and viii) Offences and penalties.

Constitution (111th Amendment) Bill, 2009: As a result, this Bill, 2009 was drafted, widely discussed, and introduced in the Parliament to further amend the Constitution of India to ensure the contribution of cooperatives in the country’s economic development, to serve the interests of members and the public at large, and to ensure cooperatives’ autonomy, democratic functioning, and professional management. The sitting Parliamentary Committee on Agriculture (PCA) invited me on 18 June 2010 to present my views on the proposed amendments, particularly on issues such as insertion of new article 43B, promotion of cooperative societies, definitions, incorporation of cooperative societies, application of multi-state cooperative societies (MSCS), application to Union Territories, the continuance of existing laws etc. Finally, the Act 2011 was passed by the Lok Sabha on 22 December 2011 and by the Rajya Sabha on 28 December 2011. It received the assent of the President of India on 12 January 2012 and the amendment came into force on 15 February 2012 after its notification in the Gazette of India of 13 January 2012.

Continuation of Existing Laws: The Act 2011 through the amendment provided one year, from the date of its commencement to the states to amend the state laws on cooperative societies. A National Conference was organised by NCUI on 12 October 2012 under the leadership of Dr Chandra Pal Singh Yadav, Ex. Member of Parliament & the then president of NCUI, wherein, all the states/ union territories were requested to take necessary measures to amend their State cooperative Societies’ Acts in tune with the Act 2011. By September 2012, 22 states amended their state laws according to some provisions of the Act 2011.

Gujarat High Court Verdict 2013: The Gujarat High Court on 22 April 2013 passed the judgement – “the amendment is violating the basic structure of the Constitution so long as the subject of “Co-Operative Societies” is in the List II of the 7th Schedule and at the same time, the provisions of Article 368(2) has not been complied with. The Constitution has not permitted curtailment of the power of the State Legislatures over the subject mentioned in List II without taking recourse to Article 368(2). We, therefore, allow this Public Interest Litigation by declaring that the Constitution [97th amendment] Act, 2011 inserting part IXB containing Articles 243ZH to 243ZT is ultra vires the Constitution of India for not taking recourse to Article 368(2) of the Constitution providing for ratification by the majority of the State Legislatures. This order, however, will not affect other parts of the Constitution [97th amendment] Act, 2011.” Further, the prayer for ‘stay order’ of the judgement was refused.

Supreme Court Verdict 2021: The Bench of the Supreme Court perused the impugned judgment of the Gujarat High Court and presented the judgement -

“The judgment of the High Court is upheld except to the extent that it strikes down the entirety of Part IXB of the Constitution of India. As held by us above, it is declared that Part IXB of the Constitution of India is operative only insofar as it concerns multi-state co-operative societies both within the various States and in the Union territories of India. The appeals are accordingly disposed of.”

The reportable dissenting judgement mentioned, “… More importantly, once the Court has painted the relevant provisions, which are the substantial provisions (Article 243ZI to 243ZQ), with the brush of unconstitutionality, rendering those provisions, still born, it would appear that the provisions contained in Article 243ZR and Article 243ZS would not have the crutches without which these provisions cease to be workable and are impossible to sustain. The unconstitutional part, which is to be an integral part of Article 243ZR and Article 243ZS, must continue to exist, if the provisions’, in question, are to bear life. In other words, to sustain these provisions the court would have to resurrect the dead provisions contained in Article 243ZI to 243ZQ and Article 243ZT. The Doctrine of Severability must apply on surer foundations. It is my view that unless the provisions, which have been found unconstitutional, are kept alive, Articles 243R and 243ZQ are plainly unworkable. In this view of the matter, I respectfully disagree with the view taken by my learned and esteemed Brother in regard to the application of the Doctrine of Severability. In this view of the matter, the Appeals are dismissed.”

Suggestions for Future course of Action:

• The verdict by the Supreme Court does not rule out the possibility of one or more states/ UT governments deciding to amend (reverse) the provisions of their cooperative Societies’ Acts. Such likely possibilities, if any, should not be allowed to take place.
• Now, there is an urgent need to expedite the amendments in the MSCS Act 2002 to impress upon the need to incorporate the identified eight areas of the amendment. Any further delay in amending the MSCS Act 2002 may impact the credibility of the efforts by the Government of India. Such delay shall also cause indefinite uncertainty for the state governments to bring in amendments in their state cooperative laws.
• In the context of the Verdict by the Supreme Court, the provisions of the Banking Regulations (Amendment) Act, 2020 emerged out of the amendments to the Banking Regulation Act, 1949 (AACS), as related to cooperative banks may perhaps require a re-examination of the regulation.
• Union Ministry of Cooperation may also simultaneously hold consultations considering the amendment shall also require to be ratified by the Legislatures of not less than one-half of the States by resolutions to that effect, passed by those Legislatures, before the Bill making provision for such amendment in future.
• The Government of India shall always keep into consideration that the power to make laws for the States in respect of matters listed in List II in the 7th Schedule is exclusively that of the State Legislatures.”