[JUDGEMENT] States Have Exclusive Power To Make Laws On Subject Of Cooperative Societies Operating Within A State: Supreme Court

  • Shruti Kakkar
  • 06:07 PM, 21 Jul 2021

The Supreme Court in its judgement dated July 20 declared Part IX B of the Constitution of India as unconstitutional in as much as it curtailed State’s exclusive power to make laws with regard to the subject of co-operative societies operating within a state.

The judgement was delivered by a bench of Justice RF Nariman, Justice KM Joseph and Justice BR Gavai.

In its 89 page majority Judgement authored by Justice RF Nariman, bench of Justice RF Nariman and Justice BR Gavai while upholding the Gujarat High Court judgement and striking down Part IX B to the extent it curtailed state's power on cooperative societies within the state observed that,

“The judgment of the High Court is upheld except to the extent that it strikes down the entirety of Part IXB of the Constitution of India. As held by us above, it is declared that Part IXB of the Constitution of India is operative only insofar as it concerns multi-State co- operative societies both within the various States and in the Union territories of India.”

In his dissent, Justice KM Joseph observed that, “I regret my inability to concur with the view taken that the Doctrine of Severability will apply to sustain Article 243ZR and Article 243ZS to the multistate cooperative societies operating in the Union Territories, and that, it would not apply to cooperative societies confined to the territories of the Union Territories.”

The division bench of Gujarat High Court in its judgement dated April 22, 2013 declared the 97th Constitutional Amendment which inserted Part IX B as ultra vires of the Constitution of India since it was not ratified by the State Legislature under Article 368(2) proviso. 

The High Court said that the judgement would impact the amendments that have been made in Article 19(1)(c) and in inserting Article 43B in the Constitution of India.

The Union of India had therefore filed an appeal in the Top Court challenging the Gujarat High Court judgement. 

The question before the Top Court was whether the Part IXB of the 97th Constitutional Amendment Act, 2011 was non est for want of ratification by half of the States under the proviso to Article 368(2). 

Court observed that Part IX B 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.

“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 in as much 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.” bench added.

Taking a note of the restrictions which were included under Part IX B of the Constitution of India, 1950 by way of 97th Constitutional Amendment Act, 2011, the Court observed that the it was clear that the exclusive legislative power contained in Entry 32 List II had been significantly and substantially impacted in that such exclusive power was now subjected to a large number of curtailments. 

Measuring the impact of the said amendment, Court said, “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.”

The Court further added that, “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 243 ZT 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.

On the issue of overlap between cooperative societies operating within a state (Article 243 ZI to Article 243 ZQ) and multi cooperative societies (Article 243 ZR and Article 243 ZS) , the bench of Justice RF Nariman and Justice BR Gavai observed that, “Co-operative societies as a subject matter belongs wholly and exclusively to the State legislatures to legislate upon, whereas multi-State co- operative societies i.e., co-operative societies having objects not confined to one state alone, are exclusively within the ken of Parliament. This being the case, it may safely be concluded, on the facts of this case, that there is no overlap and hence, no need to apply the federal supremacy principle as laid down by the judgments of this court.

In addition to this, the bench also added that scheme qua multi-State cooperative societies is separate from the Scheme dealing with “other cooperative societies”, Parliament being empowered, so far as multi-State cooperative societies are concerned, and the State legislatures having to make appropriate laws laying down certain matters so far as “other cooperative societies” are concerned.

On the other hand, Justice KM Joseph in his dissent observed that, 

Once the Court has painted the relevant provisions, which are the substantial provisions (Article 243ZI to 243ZQ), with the brush of unconstitutionality, rendering those provisions, still born, it would appear that the provisions contained in Article 243 ZR and Article 243 ZS would not have the crutches without which these provisions cease to be workable and are impossible to sustain. The unconstitutional part, which is to be an integral part of Article 243 ZR and Article 243 ZS, must continue to exist, if the provisions’, in question, are to bear life. In other words, to sustain these provisions the court would have to resurrect the dead provisions contained in Article 243ZI to 243ZQ and Article 243ZT. The Doctrine of Severability must apply on surer foundations. It is my view that unless the provisions, which have been found unconstitutional, are kept alive, Articles 243R and 243ZQ are plainly unworkable.”

Case Title: Union Of India V. Rajendra N. Shah And Another| Civil Appeal No(S). 9108-9109 Of 2014