On amending the cooperative societies Act

The government has recently introduced the Multi-State Cooperative Societies (Amendment) Bill, 2022, to improve governance and bring transparency & accountability.

Details of the Bill:

• The Bill to amend the Multi­State Cooperative Societies (MSCS) Act, 2002, has been introduced in the Lok Sabha.
• The opposition has alleged that Bill’s provisions encroached upon the rights of State governments.
• They are demanding that the Bill must be referred to a Standing Committee.

What are the issues with the cooperative sector?

• Issues regarding trust: This has brought MSCSs under multiple controls from the Centre.
• Monitoring: Monitoring from much above, takes a top­down approach as opposed to a grassroots one.

What does the Bill seek to change?

• To plug Loopholes in the MSCS Act: Bill seeks to amend the 2002 law for more “transparency” and “ease of doing business”.
• To strengthen governance, reform the electoral process, improve the monitoring mechanism, and ensure ease of doing business in multi-State cooperative societies.
• To improve the composition of boards and ensure financial discipline, besides enabling the raising of funds in the multi-State cooperative societies.
• Creation of a central Co­operative Election Authority: The Bill provides for the creation of a central Co­operative Election Authority to supervise the electoral functions of the MSCSs.
• Its composition:
  • A chairperson
  • vice chairperson, and
  • up to three members appointed by the Centre.
• Insertion of a new Section related to the “establishment of the Cooperative Rehabilitation, Reconstruction and Development Fund” for the revival of “sick multi-state cooperative societies”.
• The merger of “any cooperative society” into an existing multi-state cooperative society.

Discussion against the Bill:

• The Bill may lead to “the concentration of power of the Centre”, which could impact the “autonomy” of MSCSs and create the potential for “misuse”.
• The constitutional domain of the states in regulating cooperative societies was upheld by the Supreme Court last year when it struck down a part of the 97^th Constitution Amendment.
• It would have “restricted” the power of the states to regulate cooperative societies.
• Beyond the legislative competence of the Union as State cooperative societies are within the exclusive jurisdiction of States.
• The states already had the power to regulate cooperative societies as they fall under Entry 32 of the State List.
• Bill’s provisions encroach on the rights of State governments. It infringed on the cardinal principle of autonomous functioning as provided in Article 43B of the Constitution.

Article 43B says the government shall endeavour to promote voluntary formation, autonomous functioning, democratic control, and professional management of cooperative societies.

• Cooperative federalism should have been followed before the preparation of this Bill.
• No provision of the Constitution makes way for merging a cooperative society, which is incorporated under State law with a Multi-State Cooperative Society.

Related Constitutional Provisions:

• 97^th Constitutional Amendment Act 2011
• The right to form cooperative societies is a fundamental right (Article 19).
• New Directive Principle of State Policy on the Promotion of Cooperative Societies (Article 43-B).
• A new Part IX-B to the Constitution is titled “The Co-operative Societies” (Articles 243-ZH to 243-ZT).
• Creation of a new Ministry of Cooperation – which gave more acknowledgement to cooperative societies.