Ministry of cooperation and federalism: Lessons from a Gujarat High Court verdict

Ministry of cooperation and federalism: Lessons from a Gujarat High Court verdict

The setting up of the new ministry of cooperation, and appointment of Amit Shah as its first minister, has once again raised interesting questions about Centre–state relations. The new ministry deals with cooperative societies, a lifeline in many states for farmers and small entrepreneurs. Some opposition parties have termed it as an encroachment on the powers of the state. Senior Congress leader Ramesh Chennithala termed it as “an unconstitutional and communal move by the Modi government to gain control of cooperative societies in states like Kerala, Karnataka and Maharashtra where the cooperative movement has a strong presence”. Sitaram Yechury, CPI(M) general secretary, doubted the motive of the Union government and saw it as striking “at the relation between the Centre and the state governments which is a basic structure” of the Constitution.

However, senior NCP leader Sharad Pawar had a slightly different take on it. While asserting that the Centre had no powers to interfere with the laws made by the legislative assembly of the state, he did not think that there was “any truth that the Centre is encroaching on the powers of the state”. These objections are raised as, under the Constitutional scheme, the subject ‘cooperative societies’ is under the exclusive legislative and executive jurisdiction of states (Entry 32, List II of the Seventh Schedule). However, the Union has power to legislate on multi-state cooperative societies under Entry 44 List I of the Seventh Schedule. The Multi State Cooperative Societies Act, 2002, is the governing law as far as these cooperatives are concerned. 

Consistent with the established practice

When one closely examines the Constitutional practice, there is nothing wrong in the creation of the new ministry. It may be noted here that there are no Constitutional provisions as to the creation of different ministries and departments. It is a striking feature that the Parliamentary form of government with the president as a figurative head is not specifically provided for in the Constitution. In fact, even the word ‘cabinet’ and ‘ministers of cabinet rank’ were introduced in the Constitution only in 1978 by the 44th amendment. Article 53 vests the executive power of the Union on the president, and Article 74 provides that ‘there shall be a council of ministers with the prime minister at the head to aid and advise the president’. Article 77 (3) empowers the president to make rules for the ‘more convenient transaction of the business of the government of India, and for the allocation among the ministers of the said business.’ By virtue of this power, the Allocation of Business Rules has been issued by the president. The first schedule of the Rules of 1961 contains the details about the ministries, departments, secretariates and offices under the government of India, and second schedule provides for the distribution of subjects among the ministries and departments. New ministries have been created and renamed from time to time by amending the first and second Schedules. By an order issued on July 6, 2021, the ‘ministry of cooperation’ was created by amending the First Schedule. Till that time the subject ‘cooperation’ was handled by the department of agriculture, cooperation and farmers welfare in the ministry of agriculture and farmers welfare. 

Going by the practice of formation of ministries, the criticism that since ‘cooperative societies’ is a subject in the state list, the Union cannot have a separate ministry does not hold good. As mentioned earlier, Union has power over multi-state cooperative societies. Second, there are many important ministries in the Union government that are on subjects predominantly in the state list. Ministries of home affairs; agriculture and farmers welfare; health and family welfare; fisheries, animal husbandry and dairying; jal shakti; panchayati raj etc are examples.  

Co-operation and not confrontation is the Constitutional mantra

A judgment of the Gujarat High Court Division Bench in April 2013 may provide valuable guidance for the newly carved out ministry. In ‘Rajendra N Shah v. Union of India’, the petitioner challenged the validity of the 97th Constitutional Amendment Act, 2011. This amendment specifically dealt with the subject of cooperative Societies. The three changes introduced by the amendment were: Right to form cooperative societies was made a fundamental right under Article 19 (1) (c); a directive principle of state policy was inserted mandating the state ‘to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies’ (Article 43B); and insertion of a new part (Part IX B) titled the cooperative societies. The provisions in Part IX B mandated periodic elections to the director board, prescribed the maximum number of directors, provided for mandatory inclusion of women and persons belonging to Scheduled Castes and Scheduled Tribes in the director board, compulsory annual auditing, convening of annual general body meetings etc.

The Gujarat High Court struck down Part IX B as unconstitutional as it did not go through the special procedure of amendment contemplated under the proviso to Article 368 (2). Article 368 provides for two separate procedures for amendment of the Constitution. As per the first procedure, most of the provisions of the Constitution can be amended by a special majority in both houses of Parliament. Regarding certain provisions that affect Centre-state relations, including amendment of the seventh schedule, in addition to the special majority, ratification by half of the state legislatures is also mandated.

What is interesting about Part IX B is that it did not amend any of the provisions that needed ratification by states. Even then the court ruled that ratification was necessary for introducing a new part on cooperative societies. The court’s reasoning was that as ‘cooperative societies’ was a subject under the state list, states had absolute freedom to legislate. With the introduction of the new part, the autonomy of the State has been curtailed. Now any state law on the subject must mandatorily comply with the newly introduced constitutional provisions. This in effect was amounting to shifting the subject from state list. Thus, according to the court, as the effect of the amendment was a change in the fields of legislation, it required ratification by states in addition to special majority in Parliament. The court also agreed with the contention of the petitioner that Part IX B violated federalism which is a basic feature of the Constitution. Appeal against this decision was filed in 2013 itself and is still pending in the Supreme Court. As per the latest report, the final hearings on the Appeal concluded on 8th July 2021 and it is reserved for final orders.

Whatever may be the decision of the Supreme Court, the Gujarat High Court verdict is significant in many respects. This is the first time that a high court has struck down a constitutional amendment. What is significant about the verdict for the present controversy is the importance that the court attaches to state autonomy when it comes to cooperative societies. It seems that it is the appointment of Amit Shah as cabinet minister for cooperation that has rattled the opposition, rather than the creation of a new ministry. One could hope that the new minister and the new ministry will follow the path of cooperation rather than confrontation in their working.

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