Supreme Court Sheds Light On The Contours Of Ministry Of Cooperation

In this backdrop lies the importance of the judgment delivered by the Supreme Court yesterday in the case Union of India vs Rajendra Shah and others which annulled Part IXB introduced by the Constitution(97^th Amendment) Act 2011 to the extent it deals with state co-operative societies. A 3-judge bench comprising Justices RF Nariman, BR Gavai and KM Joseph upheld a 2013 judgment of the Gujarat High Court which had struck down Part IXB on the ground that the amendment was passed without obtaining the ratification of at least one-half of the state legislatures as mandated by the proviso to Article 368(2) of the Constitution.

To give a brief background, the 97^th Constitutional Amendment, passed in 2011, made the following changes regarding law on cooperative societies :

1. Made right to form cooperative societies a part of fundamental right under Article 19(1)(c).
2. Introduced Part IX B to the Constitution, which laid down several stipulations for the state legislations governing cooperative societies.

A bunch of petitions were filed in the Gujarat High Court challenging the amendment as violating the basic structure of the constitution. The main argument of the petitioners was that the amendment required ratification by the legislatures of at least one-half of the states, as prescribed under Article 368(2) of the Constitution, since it impacted a subject in the state list. The ratification of state legislatures is needed if an amendment makes changes to an entry which is included in the List II(State List) of Seventh Schedule of the Constitution. It may be noted that co-operative societies is a state subject as per Entry 32 of List II of the Seventh Schedule of the Constitution. Also, Entry 43 of List I specifically says that co-operative societies is excluded from the Union List.

The Gujarat High accepted the petitioners' argument to strike down the entire Part IXB introduced by the amendment. The Supreme Court has now upheld the Gujarat High Court' judgment but saved the application of Part IXB to multi-state co-operative societies. The Attorney General for India sought to defend Part IXB by arguing that it did not take away the power of state legislatures and it did not require ratification under Article 368(2) since the state entry was left unchanged. But the Court rejected this argument by saying that a curtailment of the exclusive legislative power of the state is akin to changing the entry from the state list.

"Part IXB seeks to effect a significant change in Article246(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", the main judgment authored by Justice Nariman observed.

 Since the amendment "significantly and substantively impacted" the exclusive power of state legislatures to deal with cooperative societies, it required the ratification of at least half of the state legislatures, the Court said.

While reaching its conclusions, the judgment reaffirmed certain important principles :

1. Exclusivity of State Legislatures over entries in List II of the Seventh Schedule is a facet of the quasi-federal nature of the Constitution.
2. That the Constitution is not unitary but quasi-federal in nature is part of the basic structure of the Constitution.
3. Any significant addition or curtailment of a field of legislation in the List II will amount to a "change" of the entry from the state list, requiring ratification of state legislatures.
4. Co-operative societies is an exclusive subject of the state legislature and the legislative power of Parliament is only with respect to multi-state co-operative societies.

"There can be no doubt that our Constitution has been described as quasi-federal in that, so far as legislative powers are concerned,though there is a tilt in favour of the Centre vis-à-vis the States given the federal supremacy principle...yet within their own sphere, the States have exclusive power to legislate on topics reserved exclusively to them.

There can be no doubt whatsoever that Article 246(3) read with List II of the 7th Schedule of the Constitution of India reflects an important constitutional principle that can be said to form part of the basic structure of the Constitution, namely, the fact that the Constitution is not unitary but quasi-federal in character"  - Supreme Court.

Ultimately, the majority comprising Justices Nariman and Gavai struck down Part IXB except to the extent it applied to multi-state cooperative societies.

"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", the majority declared.

Impact on Ministry of Co-operation

While the discussions in the judgment were relating the legislative powers of the states legislatures and Parliament, they hold relevance for the executive power of the States and the Union as well.

Because, the executive power of the Union Government extends only to those matters with respect to which the Parliament has power to make laws (Article 73(1)). Likewise, the executive power of the State Government extends to those matters with respect to which the State Legislatures have power to make laws (Article 162). In other words, the executive powers are co-extensive with the legislative powers.

Hence, a pronouncement on the scope of Parliament's power over co-operative societies translates into a pronouncement on the contours of the newly created Union Ministry of Cooperation. So, going by the Constitutional scheme as explained in the Supreme Court judgment in Union of India vs Rajendra Shah, the executive power of the Union Ministry of Cooperation is with respect to multi-state co-operative societies alone.

(Manu Sebastian is the Managing Editor of Livelaw. He may be reached at manu@livelaw.in. He tweets @manuvichar)