97th Constitutional Amendment Act 2011, Provisions, SC Ruling

The 97th Constitutional Amendment Act, 2011, sought to strengthen the co-operative sector by giving co-operative societies greater constitutional recognition. It amended Article 19(1)(c), inserted Article 43B, and added Part IXB (Articles 243ZH–243ZT) dealing with co-operative societies. It introduced provisions to strengthen the co-operative sector.

The Amendment aimed to improve member participation, accountability and professional management of co-operatives. However, certain provisions later faced concerns relating to federalism and State legislative powers.

97th Amendment of Indian Constitution Background

The co-operative sector had expanded significantly and contributed to various areas of the economy, but concerns emerged regarding the protection of members’ interests and the effective functioning of co-operative institutions.

• Pre-Independence Era: The co-operative movement in India began during the colonial period with the Co-operative Credit Societies Act, 1904, which focused on providing institutional credit.
  • The Co-operative Societies Act, 1912 subsequently expanded the legal framework to cover wider co-operative activities.
• Need for Reform: Concerns over the functioning of co-operatives created a need for greater autonomy, democratic control and accountability.
• Constitutional Initiative: The 97th Constitutional Amendment Bill, 2011, was introduced to provide a stronger constitutional framework for co-operative societies.
• Parliamentary Approval: The Bill was passed by the Lok Sabha on 27 December 2011 and the Rajya Sabha on 28 December 2011.
• Enactment: Presidential assent was given on 12 January 2012, and the Amendment came into force on 15 February 2012.

97th Constitutional Amendment Act Objectives

The 97th Constitutional Amendment Act, 2011 aimed to strengthen the co-operative sector by ensuring greater autonomy, democratic functioning, and accountability. Its main objectives were:

• Autonomous Functioning: Provide co-operative societies greater independence in their day-to-day administration and decision-making, while reducing unnecessary external interference.
• Democratic Control: Promote regular elections, member participation, and democratic decision-making, ensuring that co-operatives remain controlled by their members.
• Professional Management: Encourage efficient and professional administration of co-operative institutions through better management practices and greater institutional accountability.
• Member Accountability: Make the management of co-operative societies more responsive to their members and ensure that elected bodies function in accordance with the interests of the membership.
• Transparency: Strengthen auditing, reporting and disclosure mechanisms to improve financial discipline and transparency in the functioning of co-operative societies.
• Economic Development: Enable co-operative societies to play a greater role in economic and social development, particularly by encouraging collective participation and self-help among their members.

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97th Constitutional Amendment Act Features and Changes

The 97th Constitutional Amendment Act, 2011 introduced constitutional provisions like amending Article 19, inserting Article 43B, and adding Part IXB to the Constitution.

• Article 19(1)(c): The right to form co-operative societies was added to the fundamental right to form associations or unions, giving co-operative formation a constitutional basis.
• Article 43B: A new Directive Principle directed the State to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies.
• Part IXB: A new Part, Part IXB (Articles 243ZH–243ZT), was inserted to establish a constitutional framework dealing with the incorporation, regulation and functioning of co-operative societies.
• Democratic Elections: The Amendment provided for regular elections to the boards of co-operative societies, with the elected board generally having a maximum term of five years.
• Audit and Accountability: It provided for regular auditing of co-operative societies, thereby seeking greater financial transparency and accountability in their functioning.
• Multi-State Co-Operatives: The constitutional framework also addressed multi-State co-operative societies, which fall within Parliament's legislative competence.

97th Amendment of Indian Constitution Issues

The 97th Constitutional Amendment Act, 2011, faced challenges mainly concerning the federal structure and legislative competence because co-operative societies operating within a State fall under the State List.

• Federalism Concerns: Co-operative societies operating within a State fall under Entry 32 of the State List, creating concerns that the Amendment imposed excessive constitutional requirements on an area primarily within State legislative competence.
• Absence of State Ratification: The Supreme Court consequently invalidated Part IXB insofar as it concerned single-State co-operative societies.
• Political Interference: Co-operative institutions have faced interference from political actors, which can affect their autonomy and independent decision-making.
• Weak Democratic Functioning: Delays in elections and excessive control over elected boards can weaken member participation and democratic management of co-operatives.

97th Constitutional Amendment SC Ruling

The constitutional validity of the 97th Constitutional Amendment Act, 2011 was examined by the Supreme Court of India in Union of India v. Rajendra N. Shah (2021). The main issue was whether Part IXB, dealing with co-operative societies, required ratification by at least half of the State Legislatures under Article 368(2).

• Federal Structure: The Court noted that co-operative societies operating within a State fall under Entry 32 of the State List, giving States legislative competence over them. Part IXB imposed constitutional restrictions on this State legislative field.
• Need for State Ratification: Since Part IXB affected the distribution of legislative powers between the Union and States, the Court held that ratification by at least half of the State Legislatures was mandatory under Article 368(2).
• Ratification Not Obtained: The required ratification had not been obtained, making the insertion of Part IXB constitutionally defective.
• Majority Judgment: By a 2:1 majority, the Court held Part IXB unconstitutional insofar as it applied to co-operative societies operating within a State.
• Article 19(1)(c) and Article 43B: The Court did not invalidate the amendments relating to the right to form co-operative societies under Article 19(1)(c) and Article 43B.
• Multi-State Co-operatives: The majority held that Part IXB continues to operate in relation to multi-State co-operative societies, including those operating in Union Territories.