The 97th Constitutional Amendment Act, enacted in 2011, has played a significant role in recognizing and protecting co-operative societies in India. Co-operative societies are organizations where individuals come together to achieve common economic, social, or cultural goals. The amendment brought several important changes to the Indian Constitution, enhancing the legal framework under which these societies operate.

Firstly, the amendment made it a fundamental right for people to form co-operative societies. This change was incorporated under Article 19 of the Constitution, which guarantees certain freedoms to all citizens. By including the right to form cooperative societies as part of these freedoms, the government is acknowledging the importance of collective action and cooperation in promoting economic and social welfare.

Secondly, the amendment introduced a new Directive Principle of State Policy related to the promotion of co-operative societies, specifically under Article 43-B. Directive Principles are guidelines for the state's policies to ensure social and economic justice. By highlighting the promotion of co-operative societies, Article 43-B encourages the government to create favorable conditions for these entities, thus promoting self-reliance and collective welfare among citizens.

Lastly, the 97th Amendment established a new section in the Constitution, designated as Part IX-B. This section, which comprises Articles 243-ZH to 243-ZT, specifically addresses the governance and operational structure of co-operative societies. This part provides a framework for the formation, registration, and management of co-operative societies, ensuring that they operate democratically and transparently.

The inclusion of these provisions in the Constitution reflects the Indian government's commitment to empower citizens through cooperative movements. Co-operative societies can play a crucial role in areas such as agriculture, dairy, housing, and consumer goods, contributing to rural development and economic growth.

The 97th Amendment has also paved the way for state legislatures to enact detailed laws governing co-operative societies, ensuring that they function effectively and protect the interests of their members. This includes provisions for ensuring democratic governance within these societies, promoting accountability, and safeguarding against malpractices.

In summary, the 97th Constitutional Amendment Act of 2011 has significantly strengthened the legal position of co-operative societies in India by recognizing the right to form them as a fundamental right, promoting their development through state policy, and providing a clear legal framework for their operation. Through these measures, the government aims to encourage collective effort among citizens, enabling them to achieve their common goals more effectively.

Constitutional Provisions for Co-operative Societies in India

The Indian Constitution has specific rules for co-operative societies, which are outlined in Part IX-B. Co-operative societies are organizations owned and run by their members for their mutual benefit. They play an important role in the economy by promoting self-help and sharing resources among members.

Formation and Regulation of Co-operative Societies

The state legislatures can form rules regarding how co-operative societies are set up, managed, and shut down. This is based on certain principles, such as allowing individuals to freely form societies, ensuring democratic control by members, encouraging economic participation among them, and promoting independent functioning. This aims to create a legal framework that encourages cooperation among individuals while protecting their interests.

Board Composition and Governance

Co-operative societies are governed by a board of directors. The size of this board, set by state laws, can have a maximum of twenty-one members. Importantly, state laws must also reserve positions on the board for specific groups, including one seat for Scheduled Castes (SC), one for Scheduled Tribes (ST), and two for women, if such members are present in the society. Board members are elected for a term of five years.

Moreover, states can allow experienced individuals in fields like banking and finance to join the board as co-opted members, although their number is limited to two and they do not have voting rights. Functional directors are also part of the board but do not count towards the total number of directors.

Election Process

Elections for the board must occur before the current board's term ends, ensuring that new members can take over immediately. The state legislature decides who will manage the preparation of electoral rolls and oversee the elections.

Supersession and Management

In certain situations, the board can be suspended or dissolved for a maximum of six months. Conditions leading to this can include irregularities in operations, negligence, or any actions detrimental to the society’s interests. If a board is suspended, an administrator will manage the society and must organize new elections within six months.

Financial Accountability

The state legislature is responsible for establishing rules regarding financial practices in cooperatives. Every co-operative society must keep financial records and undergo at least one audit each financial year. The qualifications for auditors must be defined, and audits must be conducted within six months after the financial year ends. The audit results of larger co-operative societies, termed apex societies, need to be presented to the state legislature as well.

General Meetings and Member Rights

Every co-operative society is required to hold an annual general meeting (AGM) within six months after the financial year closes. Members of the society have the right to access information, including the society's financial records, encouraging transparency and engaging them in management decisions. The state can also promote education and training for members to improve their understanding and participation.

Reporting and Compliance

Each year, co-operative societies must submit several documents within six months of the financial year closure. These documents include an annual report, audited accounts, a plan for surplus disposal, any updates to their rules, and information regarding elections.

Offences and Penalties

State legislatures may enact laws to address infractions involving co-operative societies. Offences can include submitting false information, failing to pay dues, or creating corruption during elections. Such laws are essential for maintaining integrity in the operations of co-operative societies.

Special Application for Multi-state Societies and Union Territories

The rules laid out in this part also apply to multi-state co-operative societies but will refer to the "Parliament" and "Central Government" instead of state equivalents. The provisions apply to Union Territories as well, although the President can exempt certain territories from these rules.

Continuing Existing Laws

If there are laws regarding co-operative societies that existed before the amendment in 2011, those laws will remain until they are amended or repealed within one year.

Relevant Constitutional Articles

These provisions related to co-operative societies primarily originate from the 97th Constitutional Amendment Act of 2011, which added Part IX-B to the Constitution of India. This amendment aimed to promote mutual aid among the society and provide clarity in the regulations governing co-operative societies.

In summary, Part IX-B of the Constitution emphasizes the importance of co-operative societies as a means to empower individuals, ensure democratic governance, promote transparency, and maintain accountability in financial dealings. These provisions are vital for facilitating self-help and fostering socio-economic development across communities.

Reasons for the 97th Amendment to the Indian Constitution

The 97th Amendment to the Indian Constitution aimed to improve the functioning of co-operative societies in the country. When this amendment was discussed in Parliament, the Government of India highlighted several important reasons for making these changes.

Co-operative societies have played a vital role in India's economy. Over the years, they have contributed significantly to many sectors and have experienced considerable growth. However, despite this progress, these societies have faced challenges, particularly in protecting the interests of their members and achieving the goals for which they were created. For instance, there were cases where elections were postponed for extended periods, allowing appointed officials to run these societies without accountability. This situation can lead to a lack of responsibility in how co-operatives are managed, negatively affecting their members.

Additionally, many co-operative societies suffer from inadequate professional management. This can result in poor service and lower productivity. It is essential that co-operatives operate under democratic principles, with timely and fair elections. Because of these issues, there was a pressing need for fundamental reforms to revitalize these institutions. The goal was to ensure that co-operatives could continue to contribute to the economic progress of the country while serving the interests of their members and the public.

The Constitution of India recognizes "co-operative societies" under Entry 32 of the State List in the Seventh Schedule. This means that state governments have the authority to legislate on matters related to co-operatives. State laws were introduced with the intent of promoting the growth of co-operatives as a means to achieve social and economic justice. However, despite the growth in numbers, the quality of performance in many co-operatives did not meet expectations.

In light of this, the government has held discussions with various state governments and convened conferences for state co-operative ministers to address the issues and find ways to improve the current system. There was a strong consensus on the need to amend the Constitution. This amendment would help ensure that co-operatives can function without undue external interference and maintain an autonomous organizational structure, along with democratic operations.

The central government committed itself to ensure that co-operative societies operate in a way that is not only democratic but also professional and economically viable. The objective was to introduce a new part into the Constitution that would outline essential provisions governing the operation of co-operative societies. These new rules would focus on ensuring that co-operatives function democratically, autonomously, and with professional management.

Moreover, it was anticipated that these provisions would create a framework for holding management accountable to both members and other stakeholders. This increased accountability would help deter any violations of the laws governing co-operative societies. Overall, the 97th Amendment aims to strengthen the role of co-operatives in India's economy while safeguarding the rights and interests of their members.

In terms of legal framework, articles such as Article 19(1)(c) and Article 43B of the Constitution are particularly relevant. Article 19(1)(c) provides the right to form associations or unions, including co-operative societies, while Article 43B directs the state to promote the formation of co-operatives on a voluntary basis as a means for achieving social and economic welfare. These articles support the principles that the 97th Amendment seeks to reinforce, thereby facilitating the growth of strong, democratic, and autonomous co-operative societies in India.

The 97th Constitutional Amendment in India

The 97th Constitutional Amendment, enacted in 2011, added Part IX-B to the Constitution of India. This part specifically focuses on the governance of cooperative societies. However, this amendment faced legal challenges, particularly highlighted in the Rajendra Shah case.

In 2013, the Gujarat High Court ruled that the 97th Constitutional Amendment was not valid because it did not receive the necessary approval from the states, as required by Article 368 of the Indian Constitution. Article 368 outlines the process of amending the Constitution and specifies that certain amendments should have the ratification of at least half of the state legislatures.

Despite this ruling, the court noted that the changes made to Article 19(1)(c) and Article 43-B remained intact. Article 19(1)(c) grants individuals the fundamental right to form cooperative societies, while Article 43-B emphasizes the need to promote cooperative societies as a directive principle of state policy. These articles underscore the government's commitment to supporting cooperative enterprises, which are important for the economic development of the country.

The Union of India appealed the Gujarat High Court's decision, and in 2021, the Supreme Court reviewed the case. The Supreme Court agreed with many aspects of the High Court's decision, particularly regarding the lack of ratification for Part IX-B. However, it clarified that Part IX-B could still apply to multi-state cooperative societies. This means that while the specific governance rules introduced in this part may not be fully operational for all cooperative societies, they are effective for those that operate across multiple states and within union territories.

This legal ruling emphasizes the balance between federal and state power in India and reflects the ongoing evolution of cooperative governance in the country. It reaffirms the importance of cooperation at both local and national levels, particularly as India aims to enhance the cooperative movement to support rural and agricultural development.

Relevant Constitutional Articles

The journey of the 97th Amendment illustrates the complexities involved in constitutional law and the significance of cooperative societies in India’s socio-economic landscape. Understanding these articles and the legal framework surrounding them is crucial for grasping the broader implications for cooperative governance in the country.