Co- operatives and the Constitution of India

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The shareholder is now the King of the Cooperative Movement. If he is vigilant and upright, participates in the affairs of his society on regular basis and avails of its minimum prescribed services, the Cooperatives in India can play a major role in the Economic Development of the Country.

(Historic importance 97^th Amendment of Constitution of India)

“.... The people must in the main be left to work out their salvation on their own lines, the function of Government being confined to hearty sympathy,  assistance and advice.” .... Sir Denzil Ibbetson.

United Nations have declared 2012 as the International Co- operative year. The celebration coincides with the 122^nd anniversary of the Indian Co- operative movement. Mr. Kavthekar of Baroda established the first Co- operative in India in the year 1890. It became an instant success. The tiny seed took strong roots. It spread in Gujarat and Maharashtra. Stalwarts like Vaikunth Mehta and Dhananjay Gadgil provided it with sound philosophical and workable models. An illiterate farmer called VithalraoVikhe Patil from the drought prone district of Ahmednagar in Maharastra started Asia’s first Co- operative Sugar Mill on the banks of river Pravara. He was honoured with “Padmashri” by Pandit Nehru’s Government. Soon Co- operative leaders like Vasant Dada Patil, Ratnappa Kumbhar and others took the movement to distant villages and to lofty heights. Western Maharashtra in particular witnessed an agro-based industrial revolution which further spawned educational Institutions and health care facilities and brought about a revolutionary improvement in the living standards of the people. Co- operative leadership led to political leadership and Maharashtra became their bastion.

The first Co- operative Societies Act was enacted in the year 1904. The Act was further strengthened and improved upon in the following years. New Cooperative laws were passed in the years 1912 and 1925. Provincial Legislatures and Princely States also passed their own          Cooperative Laws. Independence brought in its wake a great awakening. Pandit Nehru was one of the great champions of cooperative movement. He declared that the Village Panchayat, the Village School and the Village Cooperative would be the pillars of rural development. The Planning Commission adopted a mixed model of development consisting of Public, Private and Cooperative sectors. State legislatures passed their own cooperative laws one after the other after India adopted its Constitution. State legislatures got these powers, as the subject of Cooperatives became a part of the Schedule VII List II of the Constitution. There were, however, Cooperative Societies operating in more than one States. Multi State Cooperative Societies Act 1984 governed such Societies.

All these laws created the office of the Registrar of Cooperative Societies who as events would certify, proved more of a monster rather than Regulator, guide and philosopher of the movement he was expected to be. Armed with weapons like power to inspect books of accounts, issue directions for working of Cooperatives from time to time, suspend elected Directors and Boards of Management, appoint Administrators to manage the affairs and follow it up with criminal cases against the alleged wrong doers, the Registrars held a complete sway over the Co- operatives. Matters became worse when Political masters of the Co- operative Registrars used them for their ulterior motives of settling scores with their opponents in charge of the Cooperative Institutions.

Resentment against this attitude of the Registrars and growing instances of Political interference in the affairs of the Cooperatives grew by the day. National Federation of Urban Co- operative Banks(NAFCUB), National Co- operative  Union of India(NCUI),  and other National and State Federations of Cooperatives as well as Cooperative leaders and grass root workers who had either borne the brunt of the Registrars or their political masters or both, began a sustained campaign for reforms of the Cooperative sector. The Political leadership too, having experienced green and grey patches in their careers realized the need for respecting the democratic credentials of Co-operatives on the lines of local self-government institutions, Legislative Assemblies and Parliament. Though it took a long time, good counsel finally prevailed and the Government of India, in 1990, appointed Chowdhary Brahma Prakash Committee to study all aspects of the Cooperatives and to suggest Reforms in the Cooperative laws based on the principles of internal autonomy, democratic control and professional management of the Co- operatives. The Committee suggested drastic changes. They prepared a Model draft Bill on Cooperatives. Government of India circulated it among all States but no State showed any interest in adopting it. A few States like Andhra Pradesh, Bihar, Orissa etc passed a law called Mutually Aided Cooperative Societies Act, which of course was a vast improvement over the existing Cooperative Societies Act. The old Act was however not repealed. It remained in force and was applicable to all existing Cooperatives. Some States even went to the extent of further consolidating their control over the Cooperatives.

Andhra Pradesh which had passed the Mutually Aided Cooperative Societies Act directed re registration of all Dairy cooperatives under the old law and placed them all under Administrators.  Meanwhile Government of India constituted a few more committees in succession to study the Cooperative Sector and to recommend appropriate reforms. The recommendations of these committees, Mirdha Committee 1996, Jagdish Kapoor Committee 2000, Vikhe Patil Committee 2001, Vyas Committee 2001 & 2004 did not receive the expected response from the State Governments. In 2002, the Government of India enacted the Multi-state Co-operative Societies Act, and declared its National Policy on Cooperatives. Its main thrust was on autonomy and democratic control of the Cooperatives. This was a enormous step forward in the march of the Co-operatives towards unshackling the movement from excessive government control and investing the shareholders with powers to “work out their salvation on their own lines...” as spelt out by Sir Denzil Ibberton, Governor of Punjab during British Raj.

This dichotomy in the Central and State Laws applicable to the Cooperatives and the policy decision of the government of India to unshackle the Cooperatives further emboldened the Co-operators and their State and National Federations to demand a law which would be universally applicable throughout the Country. Co-operation being a State subject included in List II of the Seventh Schedule of the Constitution, the demand had no meaning unless relevant provisions were made a part of the Constitution itself.

Shri. Sharad Pawer, the Minister for Agriculture, Union of India from Maharashtra, where the Co-operative movement has been most successful, gave the final push. He appointed a Committee under Shri. Shivajirao Patil, veteran Cooperator to study the demand for amending the Constitution of India National Co- operative Union of India (NCUI), National Federation of Urban Co- operative Banks (NAFCUB), Indian Farmers Fertilizers Co- operative limited (IFFCO),and the other Apex level federations stepped in to provide the necessary inputs. Several conferences and confabulations later the Committee Report was finally accepted and the 97^th constitution Amendment came into force with effect from 13^th January 2012, in the International Cooperative year.  

97^th Amendment can only be compared to the 73^rd and 74^th Amendments of the Constitution, which have revolutionized the Panchayat Raj system in the Country. Article 19 of the constitution of India guarantees to the Citizen of India certain Fundamental Rights like freedom of speech and freedom to form Associations and Unions. To this has now been added the right to form Cooperatives. Article 43B which has been recently added enjoins upon the Government to promote Cooperatives on democratic principles, internal autonomy and professional management. Part IX of the Constitution has been amended to incorporate following provisions.

1. Incorporation of Co-operatives based on principles of voluntary formation, democratic Control, members’ economic participation and autonomous functioning.

2. Strength of the board of Management is limited to 21 with reservation of one seat for schedule castes / schedule tribes and two seats for women.

3. Term of Board of Management is limited to 5 years.

4. Cooption of not more than 2 experts having expertise in the fields of Banking, Management, Finance etc.

5. Timely election to the Board of Directors

6. Suspension and super-session of Board of Directors limited to 6 months (one year for Banking Co-operatives) only on the ground of:-

i) Persistent default;

ii) Negligence in the performance  of duties;

iii) Acts prejudicial to the interests of the Society or its members

iv) Stalemate in the Constitution or functioning of the Board of Directors;

v) Failure to conduct elections;

7. Audit and Inspection by Auditors appointed by General Body out of a panel of four approved by Government;

8. Holding of Annual General Meetings within 6 Months of the close of financial year;

9. Right to Information etc;

Every State Legislature will now have to modify its laws to make them compatible with the Constitutional provisions. The Mahout, who has thus far manipulated the Cooperation behemoth, has been dethroned. The shareholder is now the King of the Cooperative Movement. If he is vigilant and upright, participates in the affairs of his society on regular basis and avails of its minimum prescribed services, the Cooperatives in India can play a major role in the Economic Development of the Country. Eighty Million shareholders and the rest of the Citizens, most of whom are apathetic to this sector, will have to rise to the occasion.

Agriculture, which is the bedrock of India’s economy, has potential to feed the whole world. The historicity of the 97^th Constitution Amendment must sink in the minds of our people and awaken them to strengthen the movement and through it our Democracy.