Part 9B of Indian Constitution, Background, Articles, Provisions

Part 9B of the Indian Constitution deals with cooperative societies. It gives them a constitutional status and ensures they are managed in a democratic and transparent way. This part helps cooperatives play an important role in India’s economic and social development, especially for farmers, workers and small producers. Part 9B of the Indian Constitution has been discussed extensively in this article.

Part 9B of Indian Constitution Background

• Cooperative societies have been an important part of India for a long time. Farmers, workers and small businesses often come together to form cooperatives to help each other financially and socially. Before Part 9B, cooperatives were mainly governed by state laws, and there was no uniform rule or recognition across the country.
• This caused problems like mismanagement, lack of transparency, and weak coordination. To fix this, the 97th Constitutional Amendment in 2011 added Part 9B to the Constitution. Now, cooperatives have a constitutional status, which means they are officially recognized and protected. The main aim is to make sure cooperatives are democratic, transparent, and efficient, so they can really help in India’s economic and social development.

Part 9B of Indian Constitution Articles

• Article 243 ZH : Definitions

(a) Authorised person – A person referred to in Article 243ZQ.

(b) Board – The governing body or board of directors entrusted with the management and control of a cooperative society.

(c) Co-operative society – A society registered or deemed registered under the relevant State law on cooperatives.

(d) Multi-State co-operative society – A cooperative society operating in more than one State and registered under the applicable central law.

(e) Office bearer – President, Vice-President, Chairperson, Vice-Chairperson, Secretary, Treasurer, or any person elected by the board.

(f) Registrar – The Central Registrar for multi-State cooperatives, or the State Registrar appointed under the respective State law.

(g) State Act – A law made by a State Legislature.

(h) State level co-operative society – A cooperative society operating across the entire State, as defined under State law.

• Article 243 ZI : Incorporation of co-operative societies

Subject to this Part, a State Legislature may make laws for the incorporation, regulation, and winding up of cooperative societies, ensuring voluntary formation, democratic control, member participation and autonomous functioning.

• Article 243ZJ: Number and term of members of board and its office bearers

(1) The State Legislature shall determine the number of directors, but the board shall not exceed 21 members, including 1 seat for SC/ST and 2 seats for women in societies with individual members.

(2) The term of elected directors and office bearers shall be 5 years, co-terminous with the board. Casual vacancies may be filled by nomination from the same category if less than half the original term remains.

(3) The Legislature shall provide for co-option of up to 2 expert members (banking, finance, management, etc.). 

Such members shall have no voting rights and cannot be elected as office bearers. Functional directors shall be board members but excluded from the 21-member limit.

• Article 243ZK: Election of members of board

(1) Board elections shall be held before term expiry to ensure immediate assumption of office by the new board.

(2) Election control, including electoral rolls, shall vest in an authority prescribed by State law, which may also set procedures and guidelines.

• Article 243ZL: Supersession and suspension of board and interim management

(1) Board supersession/suspension shall not exceed six months.

Provided that it may occur in cases of:

(i) persistent default;

(ii) negligence;

(iii) acts prejudicial to the society/members;

(iv) stalemate in constitution or functioning;

(v) failure to conduct elections as per State law.

Provided further that no supersession where there is no Government shareholding/loan/assistance/guarantee.

Provided also that for co-operative banks, the Banking Regulation Act, 1949 applies.

Provided also that for banking co-operatives (other than multi-State), “six months” shall be read as “one year.”

(2) On supersession, the administrator shall conduct elections within the specified period and hand over to the elected board.

(3) State Legislature may prescribe service conditions of the administrator.

• Article 243ZM: Audit of accounts of co-operative societies

(1) State Legislature may provide for maintenance and annual audit of co-operative society accounts.

(2) State law shall prescribe minimum qualifications/experience for eligible auditors/audit firms.

(3) Every society shall get its accounts audited by an auditor/audit firm under clause (2), appointed by the general body:

Provided that such auditor/audit firm shall be from a State-approved panel.

(4) Audit shall be completed within six months of the close of the financial year.

(5) Audit report of an apex co-operative society shall be laid before the State Legislature as per State law.

• Article 243ZN: Convening of general body meetings

The Legislature of a State may, by law, provide that every co-operative society shall convene its annual general body meeting within six months of the close of the financial year to transact business as prescribed by such law.

• Article 243ZO: Right of a member to get information

(1) State Legislature may provide members access to books, information and accounts of the co-operative society.

(2) State Legislature may ensure member participation in management, including minimum meeting attendance and service utilisation as prescribed by law.

(3) State Legislature may provide for co-operative education and training of members.

• Article 243ZP: Returns

(1) Every co-operative society shall file returns within six months of the close of the financial year to the designated authority, including:

(a) annual activity report;

(b) audited accounts;

(c) surplus disposal plan approved by the general body;

(d) amendments to bye-laws, if any;

(e) declaration of general body meeting and election conduct; and

(f) other information as required by the Registrar under the State Act.

• Article 243ZQ: Offences and penalties

(1) State Legislature may, by law, provide for offences and penalties relating to co-operative societies.

(2) Such law shall include as offences:

(a) wilfully making false returns/information or failing to furnish required information;

(b) disobeying lawful summons, requisition or written order under the State Act;

(c) employer’s failure to remit deducted amounts to the society within 14 days;

(d) wilful failure to hand over books, accounts, records, cash or property to an authorised person;

(e) adoption of corrupt practices before, during or after board/office-bearer elections.

• Article 243ZR: Application to multi-State co-operative societies

The provisions of this Part shall apply to multi-State co-operative societies, subject to the modification that references to “Legislature of a State”, “State Act” or “State Government” shall be construed as “Parliament”, “Central Act” or “Central Government”, respectively.

• Article 243ZS: Application to Union territories

This Part applies to Union Territories; in a UT without a Legislative Assembly, “Legislature of a State” means the Administrator under Article 239, and in a UT with a Legislative Assembly, it means that Assembly: Provided that the President may, by notification, exempt any UT or part thereof.

• Article 243ZT : Continuance of existing laws

Notwithstanding this Part, any inconsistent State law on co-operative societies existing before the Constitution (97th Amendment) Act, 2011 shall continue until amended, repealed, or for one year from commencement, whichever is earlier.

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The Constitution (Ninety-Seventh) Amendment Act, 2011

• The 97th Constitutional Amendment gave constitutional status to co-operative societies.
• It made three important changes:
  • It added the words “co-operative societies” in Article 19(1)(c). This made the right to form co-operative societies a Fundamental Right.
  • It inserted Article 43B in the Directive Principles of State Policy. This directs the State to promote voluntary and democratic co-operative societies.
  • It added Part 9B (Articles 243ZH to 243ZT) in the Constitution. This part deals with the incorporation, regulation and winding up of co-operative societies.
• The Amendment came into force on 15 February 2012.
• The 97th Amendment was passed by Parliament but not ratified by at least half of the State legislatures, as required under Article 368(2).
• In Union of India v. Rajendra N. Shah (2021), the Supreme Court applied the doctrine of severability.
• Valid provisions: Those concerning multi-State cooperative societies and societies in Union Territories remain operative.
• Invalid provisions: Those affecting single-State cooperative societies were rendered inoperative due to lack of ratification.

Part 9B of Indian Constitution Case Laws

• Rajendra N. Shah v. Union of India (2013) : In 2013, the Gujarat High Court held that Part 9B was invalid because the Amendment required ratification by at least half of the State Legislatures under Article 368(2), which was not done. However, the rest of the Amendment remained valid.
• Union of India v. Rajendra N. Shah(2021) : In 2021, the Supreme Court held that Part 9B is valid only for Multi-State Co-operative Societies, and not for State co-operative societies.
• The Multi-State Co-operative Societies (Amendment) Bill, 2023 aims to strengthen governance, improve transparency, increase accountability and reform the election process in Multi-State Co-operative Societies.