Multistate co-operative societies attracts neither A.246(3) nor entry 32 list II of the 7th schedule

The aforesaid analysis of Part IXB of the Constitution leads to the result that though Article 246(3) and Entry 32, List II of the 7th Schedule have not been ‘changed’ in letter, yet the impact upon the aforesaid articles cannot be said to be insignificant. On the contrary, it is clear that by curtailing the width of Entry 32, List II of the 7th Schedule, Part IXB seeks to effect a significant change in Article 246(3) read with Entry 32 List II of the 7th Schedule inasmuch as the State’s exclusive power to make laws with regard to the subject of co-operative societies is significantly curtailed thereby directly impacting the quasi-federal principle contained therein. Quite clearly, therefore, Part IXB, insofar as it applies to co-operative societies which operate within a State, would therefore require ratification under both sub-clauses (b) and (c) of the proviso to Article 368(2) of the Constitution of India.(Para 67)

UNION OF INDIA V. RAJENDRA N. SHAH AND ANOTHER

CIVIL APPEAL NO(S). 9108-9109 OF 2014 along with

CIVIL APPEAL NO. 2826 OF 2021

CIVIL APPEAL NO. 2825 OF 2021.

CIVIL APPEAL NO.282 OF 2020

CIVIL APPEAL NO. 2827 OF 2021

CIVIL APPEAL NO.281 OF 2020

Decided on JULY 20, 2021.

The Two-Judge bench comprising Justice R. F. Nariman and Justice B.R. Gavai decided the present case. Except for striking down the entirety of Part IXB of the Constitution of India, the Supreme Court upheld the judgment of the High Court.

A conference of ministers for cooperatives in the various states in December 2004 adopted an amendment to the Constitution to ensure the independent, democratic and professional functioning of cooperatives. By addressing key areas such as voluntary formation, autonomy, democratic control, professional management, and regular and timely conduct of elections, general meetings, and audits, it has empowered communities of cooperatives.

After consulting the state government, the Constitution (Ninety Seventh Amendment) Act, 2011 was passed and a new Part IXB, “The Co-operative Societies”, was inserted.

As a result of a writ petition filed with the Gujarat High Court in 2012, it was ruled that part IXB of the Constitution is ultra vires because the state legislatures did not ratify it under Article 368 (2). Aggrieved by the decision of the Gujarat High Court, the present appeal is before the Supreme Court.

According to Shri K.K. Venugopal, the learned Attorney General for India, the Constitution 97th Amendment Act seeks to achieve vital social and economic objectives. Part IXB, he explained, has two parts - one on multi-State cooperative societies that have ramifications beyond just one State, and one on cooperative societies that exist within a particular state. He further argued that the Constitution 97th Amendment was preceded by a detailed consultation with the State Governments and not a single state government has challenged the same, adding more, he stated that 17 out of 28 states have already enacted legislation conforming to Part IXB, making more than half of the states to have accepted the provisions in Part IXB.

Shri Prakash Jani, learned senior advocate appearing on behalf of the Mehsana District Co-operative Milk Producers Union in Civil Appeal No. 282 of 2020 supported the arguments of the learned Attorney General while also adding that while inserting Part IXB into the Constitution of India, Parliament has exercised its ‘constituent’ power and not ‘legislative’ power.

As pointed out by Shri Masoom K. Shah, learned counsel appearing for the Respondent No1 , a careful reading of Part IXB of the Constitution reveals that several material provisions of that Part have now affected the unfettered power of the State legislatures which existed before the amendment. He relied strongly upon Articles 243ZI & 243ZT, making it clear that there is a direct assault on Entry 32, List II of the 7th Schedule. Additionally, he cited Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 and argued that even if no legislative power is transferred from the States to the Union in regard to co-operative societies, this type of expansion will certainly amount to a "change" both in Article 246(3) and in the legislative lists and would thus require ratification.

After hearing the arguments put forward by both parties, the supreme court stated, “It is always important to remember that in matters affecting the Constitution of India, form always gives way to substance. There can be no manner of doubt that had exceptions been provided in Entry 32 List II itself, such amendment to Entry 32 List II would require ratification. There can also be no doubt that in effect if the subject matter “co-operative societies” had been either expanded or curtailed by adding a definition clause in Article 366 of the Constitution of India, such expansion or curtailment would also require ratification as significant changes have been made in effect in Entry 32 List II of the Constitution of India. Likewise, if a separate part is added in the Constitution of India, the direct effect of adding such part being to curtail the width of Entry 32 List II in a significant manner, again, in effect Entry 32 List II is directly impacted, again requiring ratification. It is of no moment that one method is chosen or preferred to another so long as Entry 32 List II is curtailed either by adding or deleting words in Entry 32 itself or by doing so through an indirect methodology, namely, adding a new definition clause in Article 366 or adding a new part to the Constitution of India.” (Para 61)

The Court after analysing the Part IXB stated that, “From all the above, it is clear that the exclusive legislative power that is contained in Entry 32 List II has been significantly and substantially impacted in that such exclusive power is now subjected to a large number of curtailments. Indeed, Article 243ZI specifically mandates that the exclusive legislative power contained in Entry 32 List II of the State Legislature is now severely curtailed as it can only be exercised subject to the provisions of Part IXB; and further, Article 243ZT makes it clear that all State laws which do not conform to the restrictions mentioned in Part IXB automatically come to an end on the expiration of one year from the commencement of the Constitution 97th Amendment Act.” (Para 65)

The Court further stated that, “The aforesaid analysis of Part IXB of the Constitution leads to the result that though Article 246(3) and Entry 32, List II of the 7th Schedule have not been ‘changed’ in letter, yet the impact upon the aforesaid articles cannot be said to be insignificant. On the contrary, it is clear that by curtailing the width of Entry 32, List II of the 7th Schedule, Part IXB seeks to effect a significant change in Article 246(3) read with Entry 32 List II of the 7th Schedule inasmuch as the State’s exclusive power to make laws with regard to the subject of co-operative societies is significantly curtailed thereby directly impacting the quasi-federal principle contained therein. Quite clearly, therefore, Part IXB, insofar as it applies to co-operative societies which operate within a State, would therefore require ratification under both sub-clauses (b) and (c) of the proviso to Article 368(2) of the Constitution of India.”(Para 67)

The Court concluded by stating that, “We now come to the argument of Shri Shah that even so far as multi-State co-operative societies are concerned, since Entry 44 List I gets truncated in the same manner as Entry 32 List II, the Constitutional Amendment would require ratification so far as multiState co-operative societies are concerned since a change in effect is made in List I, which would be covered by clause (c) of the proviso to Article 368 of the Constitution. On a reading of the writ petition filed before the High Court, no such ground has been raised. On the contrary, all the grounds raised have reference to infraction of the federal principle and the fact that the subject “cooperative societies”is affected by the amendment needing ratification. Though the prayer to the writ petition may be to strike down the entirety of Part IXB, no ground having been raised and no argument either having been raised on this score before the High Court, we need not deal with this argument of Shri Shah. ”(Para 79)

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Utkarsh Kumar Jayaswal