October 7, 2022

Lukmaan IAS

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THE STRIKING DOWN OF THE 97TH AMENDMENT ACT- THE REASONS AND IMPLICATIONS

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THE CONTEXT: In July 2021, a three-judge bench of the Supreme Court partly upheld a Gujarat High Court judgment that struck down part of the 97th Amendment Act 2011 dealing with cooperative societies. In a PIL, Rajender Shah vs. Union of India, the apex court nullified Part IXB of the constitution in so far as it relates to State cooperative societies while the Gujarat HC has struck down the entire Amendment.  This article analyses various aspects of this judgment and its significance in the context of the increasing tendency of centralization of Indian polity.

THE SALIENT FEATURES OF THE 97TH AMENDMENT

  • The Parliament has enacted the 97th Constitutional Amendment act 2011 that dealt with different facets of cooperative societies in the country.
  • This Amendment brought in the following changes in the Constitution
  • Art 19 1 (c) – the word “cooperative societies “was added. Thus, a Fundamental Right to form cooperative societies came into existence.
  • Art 43B was added to DPSP. It provided that the State shall endeavour to promote voluntary formation, autonomous functioning, democratic control, and professional management of cooperative societies.
  • Part IXB inserted articles 243 ZH to 243 ZT. They provided for the powers of the Central Government and State Legislatures to regulate incorporation, elections, and governance of cooperative societies.
  • For multi-state cooperative societies, the powers of regulation lie with the Central Government while States could control those having operations within their boundary subject to Part IXB.

THE CONSTITUTIONAL ISSUES IN THE AMENDMENT

Although the Amendment was aimed at addressing the weaknesses and lack of accountability in the cooperative movements in the country, the manner of passing it has attracted judicial intervention. The problems in the Amendment are highlighted below:

AREA THE EXPLANATION
SCHEDULE  7
  • List II, Entry 32 provides exclusive power to State Legislatures to make Laws for cooperative societies.
  • The 97th Amendment restricts this power by limiting the State’s Legislative domain. For instance, the Amendment specified the maximum number of directors, the process of elections, auditing, etc.
ARTICLE 246(3)
  •  It provides that States have exclusive legislative powers in matters falling under List II. Thus, the Amendment violates this provision.
368(2)
  • Any change in schedule 7 requires ratification by at least half of the States after the Parliament passes the Amendment by a special majority. But, the 97th Amendment did not conform to this procedure as ratification by the States was not followed.
LIMITATIONS IN THE CONSTITUENT POWER OF THE PARLIAMENT
  • It means the Parliament’s power to amend the constitution is not unlimited. This power is curtailed by both “procedural and substantive (for instance, Basic Structure) “grounds.
  • The procedural requirements under 368(2) have been violated in the 97th Amendment.
DOCTRINE OF COLOURABLE LEGISLATION
  • It means what cannot be done directly cannot be done indirectly.
  • The Amendment did not shift the subject “cooperative societies” into either List 1 or List III which could have enabled the Parliament to frame Laws in the said subject.
  •  But this has not been done yet the legislative competence of States has been severely curtailed by the Amendment.
  • The Parliament could not have legislated for “cooperative societies directly, but it did it indirectly by bringing in the Amendment.
PRINCIPLE OF FEDERALISM
  •  Our Constitution has been described as quasi-federal in that there is a tilt in favour of the Centre vis-à-vis the States that have given the federal supremacy principle.
  • Yet within their sphere, the States have exclusive power to legislate on topics reserved exclusively to them.
EXPERIENCE WITH 73 RD AND 74TH AMENDMENT.
  •  Entry 5 of List II, 7th Schedule deals with the subject matter of legislation so far as Panchayats and Municipalities are concerned.
  • Both the Constitution 73rd and 74th Amendments were sent for ratification and were ratified by Legislatures of more than half of the States.
  • Like Part IXB, Part IX and IXA put restrictions on the States’ power to legislate on Entry 5 which necessitated ratification by the States.

WHAT SURVIVES IN THE 97TH AMENDMENT NOW?

  • 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.
  • Part IXB of the Constitution of India is operative only insofar as it concerns multi-State cooperative societies both within the various States and in the Union territories of India.
  • This means the Parliament can make laws concerning the regulation of multi-state cooperative societies that have operations in more than one State.
  • Changes to Article 19 (c) and insertion of Article 43 B are not touched and remain intact.
  • Thus, the Fundamental Right to form cooperatives and the duty of the State to take steps for effective management of cooperatives still exist in the Constitution.

THE DISSENT NOTE: THE DOCTRINE OF SEVERABILITY

The majority judgment by Justice RF Nariman (Justice BR Gavai concurring) invoked the Doctrine of Severability to hold that Part IXB of the Constitution of India is operative insofar as multi-State co-operative societies are concerned. However, Justice Joseph, in his dissent, held that the provisions of Part IXB dealing with multi-State co-operative societies cannot be saved. According to him, the Doctrine of Severability cannot be applied to sustain Article 243ZR and Article 243ZS to the multi-State cooperative societies operating in various States and Union Territories. Justice Joseph held that once the substantial provisions of Part IXB have been found unconstitutional, the other articles cannot survive.

The doctrine of severability: The doctrine of severability states that when some particular provisions of a statute infringe or violate the Fundamental Rights, but the provision is severable from the rest of the statute, then only that offending provision will be declared void by the courts and not the entire statute. In simple words, the unconstitutional and Constitutional parts of the Law can be separated. Then, the Constitutional part can be held valid which will enable the Law to survive.

The doctrine derives its applicability from Article 13(1) of the Constitution which says that the Laws which are inconsistent with the provisions of Fundamental Rights guaranteed by the Constitution shall to the extent of that inconsistency be considered void.

This doctrine enables judicial review of pre-Constitutional laws also in that it widens the scope of the judicial review. Similarly, the doctrine also provides scope for saving the Laws made by the Legislature by upholding those provisions that pass Constitutional muster.

In the R.M.D.C v. the State of Bombay, the SC laid down the following principles concerning this doctrine:

THE PRINCIPLE OF LEGISLATIVE INTENTIONS
  • To find out whether the valid part of the statute can be separated from the invalid part, the intention of the Legislature is the determining factor.
  • To find the legislative intent behind a statute, it will be legitimate to take into account the history, object, title, and preamble
THE PRINCIPLE OF INSEPARABILITY
  •  In case the valid and non-valid parts of a particular statute are inseparable then it will invariably result in the invalidity of the entire statute.
THE PRINCIPLE OF INDEPENDENCE
  • When the statute stands independently after the invalid portion is struck out then it will be upheld, notwithstanding that the rest of the statute has become unenforceable.
THE PRINCIPLE OF UNITY
  • In cases where the valid and invalid parts are separable but both of them were intended to be part of the same scheme, then the whole scheme will be invalid.
THE PRINCIPLE OF COMPLETENESS
  • Severability is to be determined by reading the statute as a whole and not specific provisions or parts.

SIGNIFICANCE IN THE CONTEXT OF INCREASING CENTRALISATION

There has been a tendency towards increasing the unitisation of Indian polity recently. It is held that the Union Government has been encroaching upon the legislative, policy, and administrative domains of the States. The many States have argued that this centralizing approach has disturbed the federal nature of Indian governance and is making the States “glorified municipalities”!  They provide few examples of this alleged encroachment which are briefly discussed below:

FARM LAWS ENACTMENT
  • Agriculture, Agri trade and market, etc are State subjects. But the Union brought crucial Laws through the colourable exercise of power.
NATIONAL EDUCATION POLICY
  • States have not been consulted at all in its formulation and the governance structure proposed has no role for States
15TH FINANCE COMMISSION
  • The terms of reference to the Commission like whether revenue deficit grants are to be provided to States, making grants conditional on implementing the pet schemes of the Centre, etc have been criticized by States.
ISSUE OF GST COMPENSATION
  • States argue that despite the pandemic hitting their revenue badly, the Centre has not fulfilled the commitment to compensate the States under GST.
THE ELECTRICITY AMENDMENT BILL 2021
  • The Bill mandated that States privatize their DISCOMs, remove subsidies and provide for DBT and vesting the tariff deciding power with a central body etc (Although the Centre has earlier agreed to withdraw the Bill in the context of farmers’ protest, it has introduced the Bill in the just concluded Monsoon Session)
NATIONAL INVESTIGATION AGENCY ACT 2008
  • The NIA Act has been challenged by the Chhattisgarh Government in the SC alleging that the Act encroaches into the “policing” function. Police is an exclusive State subject and the NIA exercising the power of a police force is contrary to the federal division of subjects in Schedule 7.
DOWNGRADING A STATE INTO A UT
  • After the repeal of Art 370 and 35A, through the Jammu Kashmir Reorganization Act, the State of J&K has been downgraded into a UT.

In this backdrop, the SC judgment striking down the substantial portion of Part IXB has breathed new life to federalism. The SC held that exclusivity of State Legislatures over entries in List II of the Seventh Schedule is a facet of the quasi-federal nature of the Constitution. The Constitution is not unitary but quasi-federal in nature is part of the Basic Structure of the Constitution, the court observed.

Any significant addition or curtailment of a field of legislation in List II will amount to a “change” of the entry from the State list, requiring ratification of State Legislatures. As mentioned above, this judgment sets the background for hearing the challenges against the Farm Laws brought in by the Union. This judgment provides an insight into the philosophy of the thinking of the apex court.

If the sentiment expressed in this judgment is analyzed, then the court is highly likely to uphold the federal ethos in the Farm Laws case too, States believe. The importance of Art 368(2) which acts as the bulwark against legislative overreach by the Union and protects States’ interests has been reaffirmed by the SC.

It is noteworthy that the 97th Amendment has been challenged by “citizens” and not by” States”. The court rejected the argument by the Union that no States have challenged the Amendment and thereby they (the States) have accepted it. The court observed, “When a citizen of India challenges a Constitutional Amendment as being procedurally infirm, the court must examine such challenge on merits as the Constitution of India is a national charter of governance affecting persons, citizens, and institutions alike”.

MINISTRY OF COOPERATION vis-à-vis THE SC JUDGMENT

In this backdrop, the striking down part IX in so far as they deal with State cooperatives has implications to the scope of the new Ministry of Cooperation. Because the executive power of the Union Government extends only to those matters concerning which the Parliament has the power to make Laws (Article73 (1)).

Likewise, the executive power of the State Government extends to those matters for which the State Legislatures have the power to make Laws (Article 162). In other words, the executive powers are co-extensive with the legislative powers.

So, going by the Constitutional scheme as explained by SC in Rajendra Shah vs Union of India, the executive power of the Union Ministry of Cooperation is concerning multi-State co-operative societies alone.

The Centre will not be in a position to compel the States to bring the laws relating to cooperatives in conformity with the Centre’s vision. Thus, as of now, this new Ministry may have to confine itself to administering the Multi-State Cooperative Societies Act 2002. It can also set broad policy frameworks for cooperatives and persuade and incentivize the States to adopt them.

THE WAY FORWARD:

  • The Union can re-enact the Amendment and get it ratified by half of the States as per Art 368(2). That cooperatives need reforms is not doubted by anybody and thus an approach based on cooperative federalism can herald new opportunities for the cooperative sector in India.
  • The Union should not be seen as treating the States as mere appendages. States are independent constitutional entities in their own domains. Consultative and collaborative federalism is the need of New India.
  • In a democracy run by a Constitutional system, adherence to procedures is vital for the Rule of Law and Constitutionalism. Thus, all organs of the State especially the Governments must follow them in letter and spirit.
  • The principle “decentralise whenever possible and centralise whenever utmost necessary “must guide the Indian polity.
  • Cooperatives have great potential to facilitate holistic socio-economic and political development in the country. The apex court decision must not be seen as a setback by the Centre in its approach to develop this sector.

THE CONCLUSION: This judicial review must lead to reaffirming the commitment of the Governments at various levels to be faithful to the procedural aspects of governance. At the same time, the esteemed objectives of providing a binding broader framework to regulate and develop the cooperative landscape must be pursued with greater vigour.

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