97th Constitutional Amendment — Co-operative Societies
The 97th Constitutional Amendment Act of 2011 represented a landmark step in elevating co-operative societies to a secure constitutional footing, providing them with both recognition and protection under the law.
This amendment wrought three pivotal changes. First, it enshrined the right to form co-operative societies as a fundamental right under Article 19(1)(c), empowering citizens to pursue this activity freely alongside other associational freedoms. Second, it introduced a new Directive Principle of State Policy through Article 43B, obliging the state to promote the voluntary formation, autonomous functioning, democratic control, and professional management of such societies. Third, it inserted Part IXB into the Constitution—titled "The Co-operative Societies" and spanning Articles 243ZH to 243ZT—which lays down a comprehensive framework for their incorporation, regulation, and governance at the grassroots level.
Constitutional Provisions for Cooperative Societies
Part IX-B of the Indian Constitution, introduced through the Constitution (Ninety-Seventh Amendment) Act, 2011, empowers state legislatures to enact laws governing cooperative societies. These provisions emphasize core principles such as voluntary formation, democratic member control, economic participation by members, and autonomous functioning. They aim to strengthen cooperatives as democratic, member-driven institutions while ensuring accountability and transparency.
State legislatures may provide for the incorporation, regulation, and winding up of cooperative societies. A society's board of directors is limited to a maximum of 21 members, as specified by the legislature, though functional directors—such as those handling day-to-day operations—are excluded from this count. To promote inclusivity, every cooperative society with members from Scheduled Castes or Scheduled Tribes must reserve one board seat for these groups, along with two seats for women. Elected board members and office bearers serve a five-year term from the date of election.
Legislatures can also allow the co-option of up to two experts in fields like banking, management, finance, or related areas to the board, beyond the 21-director limit. However, these co-opted members cannot vote in society elections or hold office-bearer positions. Board elections must occur before the outgoing board's term ends, ensuring seamless transition to new members. The state legislature designates the authority responsible for electoral roll preparation, superintendence, direction, and control of these elections.
To prevent prolonged interference, no board can be superseded or suspended for more than six months, and only under specific circumstances: persistent default, negligence in duties, acts prejudicial to the society or its members, stalemate in board functions, or failure by the election body to conduct polls as per state law. This restriction does not apply to societies without government shareholding, loans, financial assistance, or guarantees. Upon supersession, an appointed administrator must organize elections within six months and transfer management to the elected board.
Auditing forms another cornerstone of accountability. Societies must maintain accounts, audited at least once per financial year by qualified auditors or firms from a state-approved panel, appointed by the society's general body. Audits must conclude within six months of the financial year-end, with reports for apex societies laid before the state legislature. Complementing this, legislatures must mandate annual general body meetings within six months of the year-end. Members gain rights to access books, information, and accounts, alongside provisions for their participation in management, cooperative education, and training.
Every cooperative society must submit annual returns to a designated state authority within six months of the financial year close. These include the annual activity report, audited accounts, surplus disposal plan approved by the general body, by-law amendments, a declaration on general body meetings and elections, and any additional details required by the registrar under state law.
Offences and penalties are also addressed, targeting willful misconduct such as false returns or information, disobedience of summons or orders, employer delays in remitting employee deductions (beyond 14 days), failure by officers to hand over society assets, and corrupt practices in board elections.
These provisions extend to multi-state cooperative societies, with references to "state legislature," "state act," or "state government" read as Parliament, central act, or central government, respectively. For Union territories, they apply unless the President notifies otherwise for specific areas. Existing state laws inconsistent with Part IX-B remain valid until amended, repealed, or one year after the amendment's commencement, whichever comes first. This framework balances autonomy with oversight, fostering robust cooperative governance across India.
Reasons for the **97th Constitutional Amendment
The 97th Constitutional Amendment Act, 2011, introduced key provisions to strengthen India's cooperative sector by embedding principles of democracy, autonomy, and professionalism directly into the Constitution. This reform addressed longstanding challenges that had undermined the sector's potential despite its substantial contributions to the national economy.
Over the decades, cooperatives have played a vital role across agriculture, banking, housing, and other areas, achieving remarkable scale. Yet, they have often fallen short in protecting members' interests and fulfilling their foundational objectives. Frequent issues included the indefinite postponement of elections, prolonged tenures for nominated office-bearers or administrators, and a resulting erosion of accountability to members. Many institutions also suffered from inadequate professional management, leading to subpar services and low productivity. To thrive, cooperatives required adherence to robust democratic norms—timely, free, and fair elections—prompting the need for fundamental reforms. These changes aimed to revitalize the sector, ensuring its ongoing role in economic development while safeguarding members' interests, public welfare, autonomy, democratic governance, and professional standards.
Cooperative societies fall under Entry 32 of the State List in the Seventh Schedule, empowering state legislatures to enact relevant laws. This framework initially spurred large-scale growth as part of broader efforts toward social and economic justice, alongside equitable distribution of development benefits. However, qualitative performance lagged despite quantitative expansion. Extensive consultations with state governments, including conferences of state cooperative ministers, highlighted the urgency of reforming state Cooperative Societies Acts. A constitutional amendment emerged as essential to shield cooperatives from excessive external interference, fostering truly autonomous structures and genuine democratic functioning.
The Central Government remained steadfast in its commitment to transforming cooperatives into democratic, professional, autonomous, and economically vibrant entities. By inserting a new part into the Constitution, the amendment targeted core aspects of their operations. These provisions were designed not only to guarantee autonomy and democracy but also to enforce management accountability to members and stakeholders, while incorporating safeguards against violations of the law.