Amidst the recent cabinet shuffle, Prime Minister Narendra Modi announced the creation of a new Ministry of Co-operation at the central level, which will be presided over by Home Minister Amit Shah. This move was first announced by the Finance Minister, Nirmala Sitaraman, in the Annual Budget, where she emphasized the need to streamline cooperative societies. This decision, Nirmala Sitaraman added, was to realize the Modi government's vision of "Sahkar se Samriddhi", which translates to "prosperity through cooperation".
The Cabinet Secretariat announced, through a press release, that the new Ministry had been formed with the aim to provide a "separate administrative, legal and policy framework for strengthening the cooperative movement in the country". The press release further stated that the new Ministry of Co-operation will expand the reach of co-operatives to the grassroot levels. Furthermore, the new Ministry aims to increase the efficiency of the co-operatives by simplifying the process for "ease of doing business" and by enabling the development of Multi-State Co-operatives (MSCs).
CRITICISMS AGAINST FORMATION OF MINISTRY OF CO-OPERATION
The decision to create a new Ministry for Co-operation has been receiving a lot of criticism from opposition parties, who argue that the decision to form this new Ministry is an attack on Indian federalism, as co-operative societies is a subject mentioned in the State List, and not the Union or the Concurrent List, of the Seventh Schedule of the Indian Constitution.
Entry number 32 under the State List mentions that co-operative societies are a state subject. Along with that, Entry number 43 of the Union List specifically states that co-operative societies are not a Union subject. This Entry states that the Union has power to make rules regarding "Incorporation, regulation and winding up of trading co-operations, including banking, insurance and financial co-operations, but not co-operative societies."
However, Entry 44 of the Union List states that the Centre is allowed to make legislations regarding Multi State Co-operative Societies. To this effect, the Multi-State Co-operative Societies Act, 2002 was also introduced, to register any co-operative societies that function in multiple states. Furthermore, it becomes important to note here that there already exist other Ministries at the Centre, who focus on Entries that are primarily in the State List. One such example of this would be the Union Ministry of Health and Family Welfare. Although the Ministry is formed at the Central level, public health still remains to be an item of the State List.
97TH CONSTITUTIONAL AMENDMENT ACT
The debate regarding formation of the Ministry of Co-operation has garnered more attention recently. On 22nd July 2021, a three-judge bench of the Supreme Court, consisting of Justices RF Nariman, KM Joseph, and BR Gavai, in the Rajendra N. Shah v. Union of India and Anr case, declared certain parts of the 97th Constitutional Amendment Act to be unconstitutional.
The 97th Constitutional Amendment Act introduced many changes relating to co-operative societies to the Constitution. For instance, the word "co-operatives" was added to Article 19 (1)(c) of the Constitution. This gave the citizens the Fundamental Right to form co-operative societies. Along with this, Article 43B was added to the Constitution, under Part IV, which contains the Directive Principles of State Policy. This Article was added to promote the formation of co-operative societies. However, perhaps the most crucial, yet controversial Amendment was the addition of Part IXB to the Constitution.
Part IXB of the Amendment redefined the powers of the State legislatures and the Centre with respect to incorporation, regulation, elections and governing of the co-operative societies. The issue that was raised in Court was that the 97th Constitutional Amendment was passed by the Parliament without ratification of half of the states.
The Requirement of Ratification
Article 368(2) of the Constitution lays down the rules of two types of amendments. Firstly, by the special majority of the Parliament and secondly, by the special majority of the Parliament, combined with a simple majority of half of the State Legislatures. The latter is listed under proviso to Article 368 (2) and is required when the Parliament amends laws regarding the topics mentioned within the proviso. One of them relates to any Amendments that are to be carried out in the Seventh Schedule.
The issue that arose before the court was whether the 97th Constitutional Amendment Act was passed without the aforementioned ratification. The petitioners had argued that Part IX B of the Constitution would limit the powers of the State Legislatures with respect to making laws and regulations about co-operative societies. This, they stated, is a direct attack on federalism and disturbs the harmony between the Centre and the states.
Judgement of the Supreme Court
The Bench upheld the judgment of the Gujarat High Court in part and agreed some Articles of part IX B of the 97th Constitutional Amendment Act, 2012, are unconstitutional and must be struck down. The Bench further found that the states' powers were being curtailed due to this Amendment. The Court, therefore, struck down Articles 240ZI to 243ZQ and Article 243ZT, which curtailed the State's powers regulated co-operative societies.
The Court clarified that ratification of the State Legislatures was necessary to enact such an Amendment and since it was missing, this Amendment would be unconstitutional. However, the bench in a 2:1 majority stated that the Centre still had power to legislate upon Multi State Co-operative Societies.
THE WAY FORWARD
In the light of the judgement passed in the Rajendra N. Shah v. Union of India and Anr case, it becomes imperative to ask whether the creation of the Ministry is constitutional or not.
As per the press release of the Press Information Bureau, the new Ministry is aimed at strengthening the co-operative sector in India. The Ministry has many goals that they wish to fulfill- streamlining the co-operative sector of India, promoting ease of doing business and development of Multi-State Co-operative Societies, providing an administrative, legal and policy framework, and ensuring that the co-operative movement reaches to the grassroot levels in India.
As mentioned before, co-operatives are a state subject and each of the states have a separate registrar of co-operative societies. Furthermore, the Reserve Bank of India monitors the activities of the co-operative banks. Keeping all these factors in mind, the important question that has to be considered is whether the new Ministry of Co-operation can achieve its stated goals with the present constitutional framework?
Bringing A Positive Structural Change?
The Union Ministries have always kept a check on the different co-operative societies of India. For instance, the Ministry of Agriculture keeps an eye on the agricultural co-operatives of India. However, merely having a division in the Ministry to oversee the workings of the whole of the agricultural co-operatives of India is not efficient enough, especially since there has been an increase in the cases of corruption within such co-operatives.
The new Ministry of Co-operation is formed to oversee the functioning of the entire co-operative sector. However, it is not clear how far the new Ministry can bring measures for a positive structural change in the entire co-operative sector when its law making power is limited to Multi-State Co-operative Societies. The 97th Constitutional amendment was brought by the UPA government in the year 2012. The Gujarat High Court struck down the amendment inserting Part IX B, in the year 2013. The new Ministry was announced on 6th July, 2021 while the Supreme Court delivered its judgment, confirming the judgment of the Gujarat High Court, on 20th July, 2021.
The central government obviously was not oblivious of its limited role in dealing with the co-operative sector. If the new Co-operative Ministry intends to implement its object of strengthening the co-operative sector, government will have to amend the Constitution in the manner provided in Article 368. Hence, at present, though the creation of the new Ministry cannot be considered to be against the constitutional framework, it will not be effective unless the powers of the parliament for making laws relating to the co-operative sector are expanded through a constitutional amendment.
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