Editorials/Opinions Analyses for UPSC – 23 July 2021

Contents:

1. Limits of cooperation

Limits of cooperation

Context:

• The Supreme Court on July 20 in a 2:1 majority verdict upheld the validity of the 97th constitutional amendment that deals with issues related to effective management of cooperative societies but struck down a part inserted by it which relates to the Constitution and working of cooperative societies.

Relevance:

• GS Paper 2: Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein.

Mains Questions:

1. Reforms in cooperative sector should not be at the cost of federal principles. Discuss the statement with regard to recent SC judgement on 97th Constitutional Amendment. 15 Marks

Dimensions of the Article:

• About 97th Constitutional Amendment Act
• Recent SC Judgement
• Co-operative Movement in India
• Way Forward:

About 97th Constitutional Amendment Act:

• The 97th Constitution Amendment Act, 2011 provided for amendment of following things:
  • It amended Article 19(I) c by inserting, after the words ‘or unions’ the words ‘or Co-operative Societies’.
  • It also inserted Article 43B in Part IV of the Constitution as “The State Shall endeavor to promote Voluntary formation, autonomous functioning, democratic Control and professional management of the Co-operative societies” and
  • After Part IX-A of the Constitution, Part IX-B was inserted. Part IX-B extended from Article 243ZH to Article 243ZT.

• The Major features of the Act are as follows:
  • Incorporation, regulation and winding up of cooperative Societies based on the principles of Voluntary formation, democratic member Control, member economic participation and autonomous functioning;
  • Maximum number of directors of a Co-operatives Society to be not exceeding twenty-one members;
  • A fixed term of five years from the date of election in respect of the elected members of the board and its office bearers; and an authority or body for the Conduct of elections to a Cooperative Society;
  • A maximum time limit of Six months during which board of directors of a Co-operative Society Could be kept under Supersession or suspension;
  • Independent professional audit;
  • Right of information to the members of the Co-operative Societies;
  • Empowering the State Governments to obtain periodic reports of activities and accounts of Co-operatives Societies;
  • Reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two Seats for women on the board of every Cooperative Society, which have individuals as members from Such Categories ; and
  • Penalties in respect of offences relating to Co-Operatives Societies.

Recent SC Judgement:

• The 97th Constitution Amendment, which came into effect in 2012, was a major step towards infusing autonomy, democratic functioning and professional management.
• The recent Supreme Court verdict holding the amendment unconstitutional to the extent it applied to cooperative societies under the control of the States is a reminder that even well-intentioned efforts towards reforms cannot be at the cost of the quasi-federal principles underlying the Constitution.
• The amendment added Part IXB to the Constitution, concerning cooperative societies. Part IXB delineated the contours of what State legislation on cooperative societies ought to contain, including provisions on the maximum number of directors in each society, reservation for seats for SCs, or STs, and women, besides the duration of the terms of elected members, among others.
• The question before the Court was whether the 97th Amendment impacted the legislative domain of the State Legislatures and, therefore, required ratification by half the legislatures, in addition to the required two-thirds majority in Parliament.
• The Gujarat High Court had found the amendment invalid for want of such ratification.
• The Supreme Court, by a 2:1 majority, upheld the judgment holding the amendment invalid, but only in relation to cooperatives under the States. The elaborate amendment would hold good for multi-State cooperative societies, on which Parliament was competent to enact laws.
• A key principle from the judgment is that the ratification requirement will apply if there is any attempt to fetter the State legislatures in any way while enacting a law in their own domain, even if there is no attempt to alter the distribution of legislative powers between the Union and States.
• Thus, in the absence of ratification by the States, the amendment that sought to prescribe the outlines of State laws on a State subject did not pass constitutional muster.

Co-operative Movement in India:

• Co-operative Movement in Pre-Independence Era:
  • The Cooperatives were first started in Europe and the British Government replicated it in India to mitigate the miseries of the poor farmers, particularly harassment by moneylenders.
  • The term Cooperative Societies came into existence when the farmers of Pune and Ahmednagar (Maharashtra) spearheaded an agitation against the money lenders who were charging exorbitant rates of interest.
  • British government came forward and passed three acts- the Deccan Agricultural Relief Act (1879), the Land Improvement Loan Act (1883) and the Agriculturists Loan Act (1884).
  • The first credit cooperative society was formed in Banking in 1903 with the support of the Government of Bengal. It was registered under the Friendly Societies Act of the British Government.
    • But the enactment of the Cooperative Credit Societies Act, 1904 gave Cooperative a definite structure and shape.
  • In 1919, cooperation became a provincial subject and the provinces were authorised to make their own cooperative laws under the Montague-Chelmsford Reforms.
    • The categorization carried on to the Government of India Act, 1935.
  • In 1942, the Government of British India enacted the Multi-Unit Cooperative Societies Act to cover Cooperative Societies with membership from more than one province.

• Co-operative Movement in Post-Independence Era:
  • After independence, cooperatives became an integral part of Five-Year Plans.
  • In 1958, the National Development Council (NDC) had recommended a national policy on cooperatives and also for training of personnel and setting up of Co-operative Marketing Societies.
  • National Cooperative Development Corporation (NCDC), a statutory corporation, was set up under National Cooperative Development Corporation Act, 1962.
  • In 1984, Parliament of India enacted the Multi-State Cooperative Societies Act to remove the plethora of different laws governing the same types of societies.
  • The Government of India announced a National Policy on Co-operatives in 2002.

• Importance of Cooperatives:
  • It provides agricultural credits and funds where state and private sectors have not been able to do very much.
  • It provides strategic inputs for the agricultural-sector; consumer societies meet their consumption requirements at concessional rates.
  • It is an organization for the poor who wish to solve their problems collectively.
  • It softens the class conflicts and reduces the social cleavages.
  • It reduces the bureaucratic evils and follies of political factions;
  • It overcomes the constraints of agricultural development;
  • It creates a conducive environment for small and cottage industries.

Way Forward:

• The judgment may mean that the concern expressed by some about the adverse implications of the formation of a new Ministry of Cooperation on federal principles could be true. However, there is no denying that the scope for democratising the functioning of cooperative societies and enhancing their autonomy remains unchanged.