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Cooperatives

Cooperatives for long have been controlled by government machinery.  This had paved way to undue political interference and stifled the initiative of members and undermined the viability of most cooperatives.  Wherever cooperatives are member-owned and member-controlled, they tend to perform well.

After decades of effort, the 97th Amendment to the Constitution has been enacted in 2012, amending Article 19(1) (c) of the Constitution, giving the cooperatives the same protection available to societies and unions.  Also, by the same amendment, Article 43 B and Part IX B, relating to the cooperative societies were incorporated in the Constitution.  The Chapter IX B needlessly created a rigid structure and actually runs counter to Articles 19(1) (c) and 19 (4) in some respects.  The Gujarat High Court, in April 2013 (Rajendra N Shah vs Union of India) quashed Chapter IX B on the ground that it amounts to amendment of States’ legislative powers (cooperatives are listed in item 32 of List II of the Seventh Schedule), and the amendment did not obtain the ratification of over half the State legislatures.  The Union government appealed to Supreme Court, and the matter is pending.

 Recommendations:

  1. The Union may withdraw the appeal. Part IX B does run counter to the letter and spirit of the fundamental Right in Article 19(1) (c). Moreover, Parliament cannot amend the legislative powers of States without ratification of a majority of State legislatures [Art 368 (2) (c)].  Therefore it is best to let Part IX B lapse.  The best mechanism to make Part IX B inoperative may be decided by the Union government.

  1. The Union government may initiate the process of repeal / amendment of all cooperative laws in the country to ensure that they conform to Articles 19(1) (c) and 19 (4).  Article 19 (4) permits a legislation on Cooperatives only in the interests of the sovereignty and integrity of India or public order or morality.  Any other regulation or restriction is unconstitutional.