The 97th Constitutional Amendment Act of 2011 is a landmark reform that gave constitutional status and protection to co-operative societies. For aspirants, it is crucial as it connects fundamental rights, directive principles, and institutional governance under Part IX-B of the Constitution.
97th Constitutional Amendment Act, 2011 and Its Significance for Co-operative Societies
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The 97th Constitutional Amendment Act of 2011 granted constitutional recognition and safeguards to co-operative societies.
- It brought in three key reforms:
- (i) The right to establish co-operative societies was elevated as a Fundamental Right under Article 19(1).
- (ii) A new Directive Principle of State Policy was introduced to promote co-operatives under Article 43-B.
- (iii) A new Part IX-B was added, titled "The Co-operative Societies", encompassing Articles 243-ZH to 243-ZT.
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Constitutional Provisions under Part IX-B
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Incorporation of Co-operative Societies
- The State Legislature may frame laws regarding incorporation, regulation, and dissolution of co-operative societies.
- These laws must follow principles of voluntary formation, democratic member control, economic participation, and autonomous functioning.
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Board Members and Office Bearers
- The board may have up to 21 directors, as per the State Legislature.
- Reservation is mandated:
- (i) One seat for Scheduled Castes or Scheduled Tribes.
- (ii) Two seats for women.
- Tenure of elected members and office bearers is five years.
- Up to two experts from fields like banking, finance, or management may be co-opted, but they cannot vote or contest elections.
- Functional directors are also part of the board but are not counted within the maximum of 21 directors.
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Election of Board Members
- Elections must be held before expiry of the outgoing board’s term to ensure continuity of governance.
- State Legislature designates the body responsible for electoral rolls and conduct of elections.
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Supersession and Suspension of Board
- No board can be suspended beyond six months.
- Grounds for supersession:
- (i) Persistent default.
- (ii) Negligence of duties.
- (iii) Acts harmful to the society or its members.
- (iv) Deadlock in board functioning.
- (v) Failure of election authority to conduct timely elections.
- Exception: Boards without Government shareholding, loans, or guarantees cannot be superseded.
- When superseded, an administrator must conduct elections within six months and hand over control to the new board.
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Audit of Accounts
- Accounts must be maintained and audited at least once per financial year.
- Auditors must meet minimum qualifications set by law and be from a panel approved by the State Government.
- Audit reports of apex co-operative societies must be presented before the State Legislature.
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Member Rights and Responsibilities
- General Body Meetings: Annual General Meeting should be held within six months of the financial year’s end.
- Right to Information: Members should have access to society’s books, accounts, and records. The legislature may ensure member participation in management and provide co-operative education and training.
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Mandatory Returns
- Every society must file returns within six months of the financial year’s end, including:
- (a) Annual activity report.
- (b) Audited accounts.
- (c) Surplus disposal plan approved by the general body.
- (d) Amendments to by-laws.
- (e) Declaration of general body meeting date and election conduct.
- (f) Any other information as required by the Registrar.
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Offences and Penalties
- Acts considered offences include:
- (a) Filing false returns or giving false information.
- (b) Disobeying summons, requisitions, or orders under law.
- (c) Employer failing to transfer deducted employee amounts to society within 14 days.
- (d) Officer not handing over records or property to authorized persons.
- (e) Adoption of corrupt practices during elections.
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Application, Extent and Continuance of Existing Laws
- Application to Multi-State Co-operative Societies: In such cases, any mention of State Legislature, State Act, or State Government is to be interpreted as Parliament, Central Act, or Central Government respectively.
- Application to Union Territories: The provisions extend to Union Territories. However, the President holds authority to exempt or alter these through notification.
- Continuance of Existing Laws: Any state law inconsistent with the 97th Amendment will remain effective only until it is amended, repealed, or until one year has passed since the amendment’s commencement — whichever comes first.
Reasons for the 97th Constitutional Amendment on Co-operative Societies
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Need for reforming the co-operative sector due to systemic challenges
- (i) Despite its large-scale contribution to the national economy, the co-operative sector often failed in protecting members’ interests and fulfilling its objectives.
- (ii) Elections were frequently postponed, leading to nominated officials or administrators continuing in power, thereby reducing accountability.
- (iii) Lack of professionalism in management resulted in inefficiency, poor services, and low productivity.
- (iv) To restore democratic functioning, timely free and fair elections were seen as essential.
- (v) The amendment aimed to ensure co-operatives contribute effectively to economic growth while maintaining autonomy and professional standards.
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- (i) Under Entry 32, State List (Seventh Schedule), co-operatives were governed by state legislations.
- (ii) Though intended to promote social and economic justice, state co-operatives often fell short in performance and quality.
- (iii) Consultations were held with state governments and co-operative ministers at various conferences, highlighting the urgent need for reforms.
- (iv) It became necessary to amend the Constitution to protect co-operatives from external interference and ensure their independence and democratic character.
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Central Government Commitment towards Co-operative Reforms
- (i) The Central Government stressed on making co-operatives democratic, autonomous, professional, and financially sound.
- (ii) To achieve this, it proposed a new constitutional framework to safeguard co-operatives’ functioning.
- (iii) The amendment introduced provisions ensuring accountability of management to members and stakeholders, along with strong deterrents for violations.
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Articles Introduced under the 97th Amendment
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Table: Articles Related to Co-operative Societies
- (i) Article 243ZH: Definitions
- (ii) Article 243ZI: Incorporation of Co-operative Societies
- (iii) Article 243ZJ: Number and Term of Members of Board and Office Bearers
- (iv) Article 243ZK: Election of Members of the Board
- (v) Article 243ZL: Supersession and Suspension of Board and Interim Management
- (vi) Article 243ZM: Audit of Accounts of Co-operative Societies
- (vii) Article 243ZN: Convening of General Body Meetings
- (viii) Article 243ZO: Right of Members to Access Information
- (ix) Article 243ZP: Submission of Returns
- (x) Article 243ZQ: Offences and Penalties
- (xi) Article 243ZR: Application to Multi-State Co-operative Societies
- (xii) Article 243ZS: Application to Union Territories
- (xiii) Article 243ZT: Continuance of Existing Laws
The 97th Constitutional Amendment Act of 2011 was introduced to strengthen the co-operative movement in India. This amendment emphasized democratic functioning, professional management, and autonomy of co-operative societies, while also safeguarding the rights of members. Understanding the reasons behind this amendment is crucial for UPSC aspirants and students of Indian polity.
