MULTI-STATE COOPERATIVE SOCIETIES (AMENDMENT) BILL,
2022 - POLITY
News: On
amending the cooperative societies Act
What's in the news?
● The
Bill to amend the Multi-State Cooperative Societies Act, 2002, was introduced
in the Lok Sabha on December 7.
● Opposite
parliamentarians alleged that the provisions encroached upon the rights of the
state government, demanding that it be referred to a Standing Committee.
What are Multi-State Cooperatives?
● According
to the International Cooperative Alliance (ICA), cooperatives are people-centered enterprises jointly owned and
democratically controlled by and for their members to realize common economic,
social and cultural needs and aspirations.
● Multi-State
cooperatives are societies that have operations in more than one state. For
instance, a farmer-producers organization which procures grains from farmers
from multiple states.
● The
board of directors are from all the states these collectives operate in and
control all the finances and administration.
● There
are close to 1,500 MSCSS registered in India with the highest number being in Maharashtra.
Issues with the cooperative sector:
● The
independent and autonomous character
of cooperative societies was to be crucial in their functioning. However, the
inclusion of cooperatives in the planning process as development instruments
made the sector an avenue for dispensing patronage to the supporters of ruling
political parties.
● The
policy of State Governments to
contribute to the share capital of the cooperatives enabled governments,
"in the name of public interest" to directly intervene in the working
of cooperatives which are legally autonomous.
● Notably,
the potency of cooperatives as an apparatus
of political control can be seen in states such as Maharashtra, Kerala,
Gujarat, parts of Karnataka, Tamil Nadu, Madhya Pradesh and West Bengal.
● The
MSCSS were formed to ease the operation of collectives throughout the country.
On the contrary, MSCSS are facing issues
regarding trust, which is the very basis of cooperation.
● Lack of autonomy and
multiple controls from the central
government leads to ineffective functioning of MSCSS.
Key features of the Amendment Bill:
● To
plug the loopholes in the MSCSS Act, 2002, the Centre introduced a Bill seeking
to amend the 2002 law for more "transparency"
and "ease of doing business".
● The
amendment also seeks
○ to
improve governance
○ reform
the electoral process
○ strengthen
monitoring mechanisms
○ improve
the composition of the board and ensure financial discipline
○ enabling
the raising of funds and
○ enhance
transparency and accountability.
● The
Bill provides for the creation of a
Central Co-operative Election Authority to supervise the electoral
functions of MSCSS.
○ The
Authority will have a chairperson, vice-chairperson, and up to three members
appointed by the Centre.
● It
also envisages the creation of a
Co-operative Rehabilitation, Reconstruction and Development Fund for the
revival of sick Multi-State Co-operatives Societies.
○ This
fund shall be financed by existing profitable Multi-State Co-operative
Societies which will have to deposit either 1 crore or 1% of the net profit
into the Fund.
● In
order to make the governance of Multi-State Cooperative Societies more
democratic, the Bill has provisions for appointing a Cooperative Information Officer and a Cooperative Ombudsman.
● To
promote equity and facilitate inclusiveness, provisions relating to the representation of Women and Scheduled
Caste/Tribe members on the boards of multi-State cooperative societies have
also been included.
Issues:
● The
Bill may lead to "the concentration
of power of the center", which could impact the "autonomy"
of MSCSS and create potential for "misuse".
● Contradiction with the SC
Judgement:
○ The
constitutional domain of states in regulating cooperative societies was upheld
by the Supreme Court last year when it struck down a part of the 97th
Constitution Amendment.
● Additional burden on the
MSCSS:
○ The
deposit of either 1 crore or 1% of the net profit by the existing profitable
MSCSS into the Co-operative Rehabilitation, Reconstruction and Development Fund
will hamper their finances and functions.
Go back to basics:
97th Constitution Amendment Act, 2011:
● The
Constitution (97th Amendment) Act, 2011 relates to the cooperative societies
working in India.
● It
aims to overcome all the problems faced by these societies and bring about an
efficient way to manage them.
● The
97th Constitution Amendment Act, 2011 provided for amendment of following
things:
○ It
amended Article 19(I) c by
inserting, after the words ‘or unions’ the words ‘or Co-operative Societies’.
○ It
also inserted Article 43B in Part IV of
the Constitution as “The State Shall endeavor to promote Voluntary
formation, autonomous functioning, democratic Control and professional
management of the Co-operative societies” and
○ After
Part IX-A of the Constitution, Part IX-B
was inserted. Part IX-B extended from Article 243ZH to Article 243ZT.
Key features:
The
Major features of the Act are as follows.
● Incorporation,
regulation and winding up of cooperative Societies based on the principles of
Voluntary formation, democratic member Control, member economic participation
and autonomous functioning;
● Maximum
number of directors of a Co-operatives Society to be not exceeding twenty-one members;
● A
fixed term of five years from the
date of election in respect of the elected members of the board and its office
bearers; and an authority or body for the Conduct of elections to a Cooperative
Society;
● A
maximum time limit of Six months during which board of directors of a
Co-operative Society Could be kept under Supersession or suspension;
● Independent professional
audit;
● Right of information
to the members of the Co-operative Societies;
● Empowering
the State Governments to obtain periodic reports of activities and accounts of
Co-operatives Societies;
● Reservation of one seat
for the Scheduled Castes or the Scheduled Tribes and two Seats for women on the
board of every Cooperative Society,
which have individuals as members from such categories; and
● Penalties
in respect of offences relating to Co-Operatives Societies.
Recent SC Judgement:
● The Supreme Court in a
2:1 majority verdict upheld the validity of the 97th constitutional amendment
(Part IX B) that deals with issues related to effective management of
cooperative societies but struck down a part inserted by it which relates to
the Constitution and working of cooperative societies.
○ The
Amendment introduced clauses dealing with the working of cooperative societies
working within a state. It was struck down stating that the subject matter fell
in the state list and “belongs wholly and exclusively to the State legislatures
to legislate upon” and any change would require the ratification by at least
one-half of the state legislatures as per Article 368(2) of the Constitution.
○ It
is declared that Part IXB of the Constitution of India is operative only in so
far as it concerns multi-State co-operative societies both within the various
States and in the Union territories of India
○ The
top court had said if the Centre wanted to achieve uniformity (the reason for
Amendment, as quoted by Centre) then the only way available was to take the
recourse under Article 252 of the Constitution which deals with the power of
Parliament to legislate for two or more states by consent.
○ Certain
provisions of the amendment pertaining to cooperative societies violated the
basic structure of federalism.