97th Constitution (Amendment) Act, 2011 – Indian Polity Notes

The 97th Amendment to the Indian Constitution provides legal recognition and protection to cooperative societies, as well as an endeavour to solve all of their problems and develop acceptable management procedures. The 97th amendment to the Constitution includes a vital element in Article 19(1)(c) by recognising people's freedom to organise cooperative organisations as a basic right. It also intends to develop cooperative economic initiatives that benefit rural India. This article explains the 97th Constitutional (Amendment) Act, 2011 which is important for UPSC IAS Exam Indian Polity Preparation.

97th Constitution (Amendment) Act, 2011

• The 97th Constitutional Amendment Act of 2011 gives co-operative societies constitutional status and protection.
• The amendment was intended to guarantee democratic and independent functioning of cooperatives, as well as management openness with members and other stakeholders.
• It made the following three constitutional amendments:
• It established the right to form cooperative societies as a fundamental right (Article 19).
• It included a new Directive Principle of State Policy on the Promotion of Cooperative Societies (Article 43-B).
• It added a new Part IX-B to the Constitution titled "The Co-operative Societies" (Articles 243-ZH to 243-ZT).
• The new Part IX-B comprises a number of requirements designed to guarantee that the country's cooperative societies operate in a democratic, professional, independent, and economically sound manner. 
• It authorises the Parliament to establish relevant laws in the case of multi-state cooperative societies and state legislatures in the case of other cooperative societies.

Historical Background

• On December 7, 2004, a conference of Ministers from several states dealing with cooperatives agreed to amend the Constitution.
• To ensure democratic, autonomous, and professional functioning of cooperatives;
• To address key issues of cooperative empowerment through voluntary formation, autonomous functioning, democratic control, and professional management
• To ensure regular and timely conduct of elections, general body meetings, and professional audit.
• The rationale for the Amendment was considered as the shortcomings' in preserving the interests of Co-operative members and attaining the aims of these organisations.
• Fundamental changes were necessary to revitalise these institutions so that they might contribute to the country's economic development and serve the interests of members and the general public, while also ensuring their autonomy, democratic functioning, and professional administration.

Provisions

• "Co-operative societies" is a subject enumerated in Entry 32 of the state list of the Seventh Schedule of the Constitution
• The words "cooperative societies" were inserted in Part III of the Constitution under article 19, clause (1), sub-clause (c).
• Part IV of the Constitution was amended to include a new Article 43-B which states that "the state shall endeavor to promote voluntary formation, autonomous functioning, democratic control, and professional management of cooperative societies."
• Part IX-B of the constitution includes the following provisions concerning cooperative societies:
  • Provisions for the incorporation, regulation, and dissolution of cooperative societies are founded on democratic member control, member economic participation, and autonomous operation.
  • A maximum number of directors of a cooperative society can not exceed 21 members.
  • In relation to the nominated board members and its office bearers, a fixed period of 5 years from the date of election is provided.
  • A maximum time limit of six months during which a Cooperative Society's board of directors may be kept in supersession or suspension.
  • Audit by an independent professional.
  • Members of Co-operative Societies have the right to information.
  • Providing State Governments with the authority to obtain periodic reports on the activities and accounts of Co-operative Societies.
  • Reservation of one seat for Scheduled Castes or Scheduled Tribes and two seats for women on the boards of all cooperative societies with individuals from such categories as members.
  • Penalties for offences relating to cooperative societies.
  • The election of a board shall be held prior to the expiration of the board's term.
  • Within six months of the end of each fiscal year, each co-operative society must file returns with the authority designated by the State Government.

Co-operative societies

• A cooperative society is often a non-profit organisation created by the poor or weaker parts of society. 
• A free and voluntary organisation, such as this one, exists to improve the lives of its members. 
• This type of body is made up of like-minded people who share common aims.
• A cooperative society does not bound any of its members in its choice of association. 
• Anyone, regardless of caste or creed, who wishes to voluntarily join such an organisation is welcome to do so. 
• They can only cease their relationship with the mentioned group by submitting a notice of termination in advance.
• Any member of society, regardless of caste, creed, or religion, can join a cooperative society; the organisation does not discriminate on the basis of social or religious background.
• Though it operates freely, the cooperative society is always subject to the authority of the state government. 
• This implies that it must keep all records and be liable for its operations in the event of an audit.

Articles Related to Co-operative Societies at Glance

Significance

• It addressed issues concerning the effective management of co-operative societies in the country.
• The amendment was enacted to bring uniformity to cooperative society management.
• It is assumed that the cooperatives will be immune to political interference and will be able to function autonomously.
• The amendment seeks to bring uniformity in cooperative laws across India by establishing the right to form cooperatives as a fundamental right in Part III, Article 19 of the Constitution.
• It also aims to give sectors more autonomy and managerial skills, while emphasising a uniform legal regime across the board.
• The cooperative sector has made significant contributions to various sectors of the national economy while experiencing rapid growth.
• The Act addresses the issue of representation, ensuring one reserved seat for SC/ST and two for Women on the board of each cooperative society.
• The Act also allows cooperatives to establish agencies to monitor the election process.
• The provisions made are expected to ensure not only the autonomous and democratic functioning of co-operatives, but also the accountability of management to members and other stakeholders, as well as deterrence for violations of the law's provisions.

Criticism

• There is a risk that the managerial element will take precedence over the concerns of the members, and there will be insufficient room for effective state intervention when necessary.
• However, it has been observed that, despite significant expansion of co-operatives, their qualitative performance has not been up to the desired level.
• It fails to establish what constitutional amendments cannot do in terms of reviving institutions and may fall victim to rival political institutions at the state level.
• It is feared that state-level politicians will do to this cooperative amendment what they did to the panchayat amendment.
• With exceptions in a few sectors and states, the cooperative sector, particularly cooperative credit societies with over 120 million members, has been in shambles for a long time, with all kinds of vested interests using them as personal fiefdoms and ladders to political power and personal glorification.
• As per the Gujarat High court ruling, the Parliament's procedure for enacting the law was invalid because cooperative societies were a subject reserved solely for states under the Seventh Schedule. Any change needed the approval of half of the state legislatures.

Recent Updates

• The Supreme Court (SC) recently upheld a 2013 Gujarat High Court decision that knocked down key parts of the 97th Amendment Act, 2011.
• The 97th Amendment reduced the exclusive jurisdiction of states over their cooperative societies, a sector regarded to be a significant contributor to the economy.

Issues

• The amendment's provisions were enacted by Parliament without being confirmed by state legislatures, as required by the Constitution.
• It even went so far as to determine the number of directors a society should have, the duration of their tenure, and the skill required to become a member of the society.
• It found that, under Article 368(2) of the Constitution, the 97th Constitutional Amendment needed approval by at least one-half of the state legislatures since it dealt with an entry that was an exclusive state issue (co-operative societies).
• Parliament can change the Constitution by enacting a Bill with a special majority under Article 368(2).
• Because such ratification did not occur in the instance of the 97th amendment, it was likely to be overturned.

Supreme Court Verdict

• The court applied the law of severability to determine that the 97th amendment's vestiges should be abolished.
• The court found that the 97th Amendment Act did not acquire the minimum approval from half of the states, as required by Indian Constitution Article 368(2).
• The Supreme Court concluded that Parliament cannot enact legislation controlling cooperative societies since it is a state matter.
• Part IXB of the Indian Constitution presently applies solely to multi-State co-operative organisations that operate within India's several States and Union territories.

Conclusion

Given the need for reforms in the state Cooperative Societies Acts, consultations with state governments and conferences of state co-operative ministers have taken place on several occasions. Many elements of the national economy have been strongly influenced by the cooperative sector. They've expanded tremendously throughout the years. These societies have immense capacity to aid the less fortunate elements of Indian society. Furthermore, it ensures equitable economic progress.

FAQs

MCQs

Question: Consider the following statements about the cooperative societies

1. "Co-operative societies" is a subject enumerated in Entry 32 of the concurrent list.
2. The words "cooperative societies" were inserted in Part III of the Constitution underArticle 19.

Which of the above statements is/are correct.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2