October 7, 2022

Lukmaan IAS

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SC ANNULS PART OF CO OPERATIVES AMENDMENT

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THE CONTEXT: In a major boost for federalism, the Supreme Court struck down parts of a Constitution amendment which shrank the exclusive authority of States over its cooperative societies.

Analysis

  • Part IXB, introduced in the Constitution through the 97th Amendment of 2011, dictated the terms for running cooperative societies.
  • The provisions in the amendment are passed by Parliament without getting them ratified by State legislatures as required by the Constitution.
  • The amendment even went to the extent of determining the number of directors a society should have or their length of tenure and even the necessary expertise.
  • In a majority judgment authored by Justice Nariman, the court held that cooperative societies come under the “exclusive legislative power” of State legislatures.
  • Part IX B, which consists of Articles 243ZH to 243ZT, has “significantly and substantially impacted” State legislatures’ “exclusive legislative power” over its cooperative sector under Entry 32 of the State List.
  • The SC, however, said the Centre had power over multi-State cooperative societies.

ABOUT CO-OPERATIVE SOCIETIES

  • Co-operative societies are based on the principles of voluntary formation, democratic member- control, member-economic participation and autonomous functioning.
  • The 97th Constitutional Amendment Act of 2011 gave a constitutional status and protection to co- operative societies. In this context, it made the following three changes in the constitution:
  • It made the right to form co-operative societies a fundamental right (Article 19).
  • It included a new Directive Principle of State Policy on promotion of co-operative societies (Article 43-B).
  • It added a new Part IX-B in the Constitution which is entitled “The Co-operative Societies” (Articles 243-ZH to 243-ZT).

PART IX-B OF THE CONSTITUTION CONTAINS THE FOLLOWING PROVISIONS

  • The board directors of a co-operative society shall consist of such number of directors as may be provided by state legislature. But, maximum number of directors of a co-operative society shall not exceed 21.
  • The state legislature shall provide for the reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on the board.
  • Term of office of elected members of the board – five years from the date of election
  • The functional directors of a co-operative society shall also be the members of the board and such members shall be excluded for the purpose of counting the total number of directors
  • No board shall be superseded or kept under suspension for a period exceeding six months.
  • Accounts of every co-operative society shall be audited within six months of the close of the financial year
  • The audit report of the accounts of an apex co-operative society shall be laid before the state legislature.
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