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UNION OF INDIA V RAJENDRA N SHAH

Author: Sakshi Sharma, I year of B.A.,LL.B.(Hons.) from National Law Institute University, Bhopal


Name and Date of Judgement

Union of India v Rajendra N Shah and 20 July 2021.


Citation

(2021) SCC ONLINE SC 474


Name of Judges

  • Mr Justice Rohinton Fali Nariman

  • Mr Justice KM Joseph

  • Mr Justice BR Gavai.


Bench

Full Bench.


Number of Opinions

Two Opinions.


Types of Opinion

Leading Majority Opinion and Dissenting Opinion.


Name of the Judge who delivered Leading Majority Opinion

Mr. Justice Rohinton Fali Nariman.


Name of the Judge who delivered Dissenting Opinion

Mr. Justice KMJoseph.



CONCRETE FACTS

1. On 7 December 2004, a conference of ministers responsible for cooperatives in various states decided to amend the Constitution to ensure democratic, autonomous, and professional functioning of cooperativesas well as to address key issues such as co-operative empowerment through voluntary formation, autonomous functioning, democratic control and professional management, as well as to ensure regular and timely elections, general body meetings and professional audit.


2. The Conference noted that:

“The conference also noted that the central government has taken a laudable step by enacting the Multi-State Cooperative Societies Act2002, conforming to the thrust areas of reforms in co-operative legislation and has been widely appreciated. The conference while appreciating the initiative taken by the central government resolved that this subject too should be considered by highpower committee.


It was, therefore, resolved thathigh power committee would be constituted by the Central Government consisting of representatives of the State government, concerned Ministries of the central government, eminent co-operators and other public officials to review the achievements during the last 100 years and challenges before it and to suggest ways and means to face them and to give a new direction to movement. The constitution of the Committee and terms of reference are to be decided by the Central Government”.[i]


3. It happened prior to the 97th CA Act, which was passed after consultation with the several states and ministries. However, it was not ratified by the half of the SLs which was supposed to be done under art 368(2) of Constitution of India.


4. The amendment added the word "CS" to Art 19(1)(c), as well as inserting Art 43B for "promotion of cooperative societies." By inserting Arts 243ZH to 243ZT, a new part IX B dealing with CS was added to the Constitution.


5. The 97th CA Act was enacted by the Lok Sabha on 27 December 2011 and the Rajya Sabha on 28 December 2011. The Presidential assent to the aforementioned Amendment was given on 12 January 2012and the Amendment was published in the Indian Official Gazette on 13 January 2012, taking effect on 15 February 2012.


6. The Statement of Objects and Reasons of the aforesaid CA clears up that the co-operative sector has made indispensable support to national economy in various ways and has gone through various developments. However, various impediments are noticed in its way to safeguard the interest of its members and fulfilment of the its objectives and purposes.


7. It was acknowledged that the subject “CS” is in Entry 32 of the State List of the 7th schedule and accordingly various SLs have formulated various legislation for the regulation of CS. However, the desired growth and qualitative development is facing various impediments owing to irregular election, nominated office holders remaining in-charge for long period of time, lack of accountability and democratic processes, etc.


8. Thus, the Central Govt, after consultation with the State Govt and State Co-operative Ministers, has felt the need to bring a legislation that provides a basic uniform framework to these CS and to untie them from unnecessary hurdles.


9. A PIL was filed in the Gujarat HC in 2012 seeking to have the 97th CA Act, 2011, introducing Part IXB related to CS in states, declared ultra vires to the Indian Constitution due to a lack of ratification by half of the states under Art 368(2) as “CS” is a subject of state list under Entry 32 and the Union Govt doesn’t have the power to enact legislation for the same.


10. It is pertinent to notice that the petitioner has not challenged Art 19(1)(c) and Art 43 of Constitution of India. It has challenged only Art in Part IXB related to CS in one state. in the public interest, a Writ Petition being WP No. 166 of 2012 filed before the Gujarat HC succeeded vide the impugned judgment dated 22.04.2013, by which Part IXB was declared to be ultra vires for want of ratification by the SLs under Art 368(2) provision.


11. On 22 April 2013, the Gujarat HC delivered the judgement and agreed with the petitioners that the addition of Part IXB to the Constitution is unconstitutional since it lacks the required ratification, namely, half of the states as required by Art 368(2) in 2013. The HC declared the whole Part IXB of Constitution of India ultra vires to Constitution including the arts which are related to the Multi-state CS and CS in the UT.


12. The HC's decision, however, had no effect on Art 19(1)(c) which talk about right to form CS and the addition of Art 43B since they are not challenged in the aforesaid PIL. Art 243ZH to Art 243ZT of Part IXB have been declared ultra vires to Constitution of India.



13. The Union of India filed a request for a stay of the Gujarat HC's decision, which was denied by the HC. As a result, the Union of India, aggrieved by the judgement of Gujarat HC filed an appeal before the SC for its kind perusal on the decision.


MATERIAL FACTS

1. The 97th CA Act was enacted by the Lok Sabha on 27 December 2011 and the Rajya Sabha on 28 December2011. The Presidential assent to the aforementioned Amendment was given on 12 January 2012 and CA was published in the Indian Official Gazette on 13 January 2012 taking effect on 15 February 2012.


2. The aforementioned CA was passed under Art 368(1) of Indian Constitution and introduced Part IXB which encompasses Art 243ZH to Art 243ZT and brought Art 19(1)(c) and Art 43 in the Constitution of India.


3. The “CS” is a state subject under Entry 33 of List Ⅱ of Seventh Schedule and states have the power to enact legislations concerned with it under Art 246(3) of Constitution of India.


4. The Union Govt has power related to multi-state co-operatives under Entry 44 of List Ⅰ of Seventh Schedule and power to enact legislations for the same under Art 246(1) of Constitution of India.


5. The Union Govt passed the aforesaid CA which tends to regulate the state subject that is “CS” without the ratification of half of the states as required under Art 368(2).


6. As per Art 368(2), any amendment to Seventh Schedule by the Parliament requires the ratification by half of the SLs before presenting such amendment for the assent of President.


7. The Part IXB related to CS in one state of the said amendment was challenged by filing a PIL in the Gujarat HC in 2012. The HC declared whole Part IXB of Constitutional of India ultra vires on procedural grounds.


IMMATERIAL FACTS

1. Two British Acts, the Cooperative Societies Act of 1904 and the Cooperative Societies Act of 1912 are credited with establishing the co-operative movement in India. The Government of India Act 1935 followed this trendwith 'CS' listed in entry 33 of the Provincial list.


2. After the 97th Amendment, 17 out of 28 states had already implemented legislative measures in accordance with Part IXB, implying that more than half of the states had accepted and applied the requirements of Part IXB.


3. The 97th CA to the Constitution was preceded by extensive consultation with state governments and state co-operative ministers. A committee was constituted by the UG consisting of members of the State governments, various ministers of the central government and public officials to recommend ways for effective co-operative organisations.


4. The development and growth of CS in India is not up to the mark. They were facing impediments like delay in election, holding of office for long period of time by nominated officers, lack of democratic process and accountability. Thus, the Union Govt felt the need to provide a basic legal and uniform framework for their regulation after consultation with state and state government and state co-operative ministers.


5. No state govt has challenged the said provision till now. Thus, it implies that they concur with the said amendment and has no grievances over this CA.


GENERALIZATION OF THE MATERIAL FACTS

1. Any addition or removal, or any amendment, or any change to an article, or any list of subjects or any chapter, or any part, or any schedule, or Constitution of India, or any body of laws,


2. by any Government, or any Statutory or Non-Statutory body, or any authority,


3. provided that such change to the body of laws requires any consultation, or any ratification, or any method, or any procedure, or any course of action to be taken beforehand according to the Constitution of India,


4. on the condition that such course of action is followed partly, or inadequately or not followed at all as per the Constitution of India,


5. provided that such change to the body of law restricts rights or powers of any Govt, or any Statutory or Non-Statutory body or any authority,


6. notwithstanding that such authority has not shown any disapproval of such change being done without following required course of action,


7. irrespective of the fact such course of action is followed indirectly or can be inferred from circumstances,


8. will make such change to the body of laws by any authority ultra vires to the Constitution of India.


QUESTIONS OF LAW

The SC didn’t formulate the questions of law and following are questions of law identified in the light of the case[ii] -

  • Whether the approval of half of the states of the Union of India is required for Part IXB of 97thCA to be constitutional.


  • Whether the Arts related to Multi-state CS in Part IXB are severable from Part IXB.


MAIN POINTS OF ARGUMENTS BY APPELLANT

Shri K.K. Venugopal, the learned Attorney General for India appearing on the behalf of Union of India has urged before the SC of India that-


1. Shri K.K. Venugopal, the learned Attorney General, said the 97th CA Act has been critical in bringing crucial social and economic progress to cooperative societies, a sector that has contributed significantly to the country's economy.


2. He went on to say that part IX-B provides provisions for both CS and Multi-state CS, which are split into two parts. However, the Gujarat HC has “thrown out the baby with the bathwater” by ruling down the entire Part IXB despite the fact that Multi-State CS were not challenged.


3. He based his arguments strongly upon Sankari Prasad Singh Deo v Union of India[iii],Sajjan Singh v State of Rajasthan[iv], KihotoHollohan v Zachillhu[v] and dissenting judgments of Wanchoo J, Ramaswamy J and Bachawat J in Golak Nath v State of Punjab.[vi]


4. He goes on to explain that 17 of the 28 states have passed legislation that is in compliance with the amendment. So yet, no state govt has objected because the CA was put to considerable deliberation prior to its implementation.


5. He further submitted that in fact, a reading of part IX B reveals that the Union has no new legislative authority over cooperative societies, and that it is entirely under the jurisdiction of the states.


6. The division bench of the Gujarat HC held that the amendment violated basic structure of the Constitution of India. The learned Attorney General argued that such contention of the HC is "uncalled and unjustified" because the true question is whether ratification is required or not.


7. He went on to say that the application of the doctrine of severability in “Part IX-B should be preserved, at least as far as multi-state co-operative organisations are concerned.”


8. Shri Prakash Jani, learned senior advocate appearing on behalf of the Mehsana District Co-operative Milk Producers Union, agreed with the Attorney General's arguments and added that, in inserting part IX-B, parliament exercised used its "constituent" power rather than its "legislative" power. He relied upon the judgement delivered in Vipulbhai M. Chaudhary v Gujarat Coop. Milk Mktg. Federation Ltd.[vii]


9. He then stated that, in fact, Part IXB, when read in conjunction with Art 43B, strengthens the Constitution's fundamental framework. The amendment is a significant step toward introducing uniformity and structure to India's cooperative movement.


MAIN POINTS OF ARGUMENTS BY RESPONDENT

Shri Masoom K. Shah, learned senior counsel, appearing for the Respondent argued that-


1. Shri Masoom K. Shah, while referring to the Parliament, contented that “donee of a limited amending power cannot do indirectly what it is not permitted to do directly”. He further submitted that “unfettered power of the SL” has now been “fettered by the arts of Part IXB” after the enactment of 97thCA Act.


He made reference to Builders’ Assn. of India v Union of India[viii], K. Damodarasamy Naidu & Bros. v State of TN[ix] and Cellular Operators Assn. of India v TRAI.[x]


2. He goes on to state that the power of the SL with respect to several aspects has been curtailed. For instance, fixation of the maximum number of directors of CS, the reservation policy contained in Art 243ZJ, the duration of the term of elected members of the board of CS, etc.


3. The 97th CA must be invalidated due to a lack of ratification. It affects important aspects of the Indian Constitution such as the federal structure and the division of legislative powers between the Union and the States.


4. He went on to say that even if 17 states pass laws in support of the 97th amendment, it still lacks the required approval under Art 368(2). It falls short of the procedural requirements as per the Constitution.


5. The learned counsel maintained that whether a state government accepts or contests a constitutional change has no bearing on its legitimacy. With regard to Multi-state CS, given the severability tests, Multi-state CS are "inextricably entwined with CS". He further states that the goal of the 97th CA would not have been on the table if it had been enacted solely for Multi-state CS.


6. He further submitted that if the amendment is permitted to pass “Constitutional muster without ratification,” it will eventually strip the States of their legislative power, effectively turning the federal system into a unitary one.


7. He argued that because the amendment makes a direct inroad into Art 246(3) and Entry 32 List 2 and it must be struck down for lack of ratification because it affects a critical part of the Constitution, namely the federal structure and the distribution of legislative powers between the Union and the States.


MAIN POINTS OF ARGUMENTS BY INTERVENORS

1. Smt. Ritika Sinha, learned counsel appearing for the Intervenor, emphasised the language of Arts 243ZI and 243ZT. She stated that these arts have cleared up that the “competence of the SL with regard to CS is subject to the stipulation of Part IX B” with respect to Entry 32 of List II.


2. It is clear keeping in consideration notwithstanding clause in Art 243ZT that SL’s power to enact law has now been edged out to make way for the provisions of Part IXB. She stated that a direct and considerable inroad into Entry 32 List II of the 7th Schedule had been accomplished.


3. She relied upon Vipulbhai M. Chaudhary v Gujarat Coop. Milk Mktg. Federation Ltd[xi], Sajjan Singh v State of Rajasthan[xii] and Wanchoo J’s judgment in Golak Nath v State of Punjab.[xiii]


4. She further submitted relying on D.C. Wadhwa v State of Bihar[xiv]that what cannot be accomplished directly can now be accomplished indirectly through the addition of Part IXB to the Indian Constitution.


5. Shri Maruthi Rao, learned counsel appearing for another Intervenor, mostly agreed with Shri Masoom K. Shah and Ms. Ritika Sinha's arguments.


CONCRETE JUDGEMENT

  • The SC held thatCooperative societies is a subject on which SLs have sole authority to act, although multi-state cooperative societies are "exclusively within the ken of Parliament." While determining the facts of the case, the court determined that the federal supremacy concept will not apply as stated in this court's decisions because there is no overlap.


  • Under Art 246(3) read with Entry 32 of List II, the SLs have sole legislative authority over CS.


  • The SC further clarified that "When it comes to Multi-State CS with goals not confined to one state, the legislative power would be that ofthe Union of India, as contained in Entry 44 List I". Art 243ZR of Part IXB makes it clear that all of the provisions of this Part that apply to Multi-State CS will continue to apply, with the exception that any reference to a "Legislature of a State, State Act, or State Government" will be construed as a reference to "Parliament, Central Act, or the Central Government" respectively.


  • While referring to the constituent power of the SC under Art 368(1), it stated the power to amend the Constitution is different from legislative power but it doesn’t place Parliament as Original Constituent Assembly. The present case is with reference to procedural requirement that need to be followed contained in Art 368(2) and there is no substantive challenge to Part IXB on the reasons that it infringes the basic structure doctrine.


  • Thus, the judgement of the Gujarat HC of striking down the entire Part IXB of the Constitution of India is affirmed in part by the SC of India as it declared that a Part IXB of the Constitution related to Multi-state CS both within the States and in the UT of India is constitutional.


RATION DECIDENDI

  • India has federal supremacy with a tilt in favour Centre vis-à-vis the States. The Constitution has been described as quasi-federal in terms of legislative powers. However, the states have exclusive power to legislate on topics reserved exclusively to them.


  • If the subject matter of an amendment comes within the provision of List II, it must be confirmed by the legislatures of not less than half of the states by resolution enacted by those legislatures before the bill containing the amendment is presented to the President for assent.


  • Parliament, as “the donee of a limited power,” may only exercise it in conformity with “the procedural and substantive limitations” set down in the Indian Constitution.


  • The competence of the law-making authority is used to determine whether a law is valid. The competence of law-making authority is determined by the scope of the legislative power it possesses, as well as the constraints laid on its legislative power and mode to exercise that legislative power.


  • Though the amending power of the Constitution is in the nature of a constituent power and differs in content from legislative power, the constituent power may be subject to substantive and procedural constraints. A CA might be challenged on procedural or substantive grounds.

[i]https://main.sci.gov.in/supremecourt/2013/21321/21321_2013_32_1501_28728_Judgement_20-Jul-2021.pdf [ii]https://main.sci.gov.in/supremecourt/2013/21321/21321_2013_32_1501_28728_Judgement_20-Jul-2021.pdf [iii] (1952) SCR 89. [iv] (1965) 1 SCR 933. [v] (1992) Supp (2) SCC 651. [vi] (1967) 2 SCR 762. [vii] (2015) 8 SCC 1. [viii] (1989) 2 SCC 645. [ix] (2000) 1 SCC 521. [x] (2016) 7 SCC 703. [xi] (2015) 8 SCC 1. [xii] (1965) 1 SCR 933. [xiii] (1967) 2 SCR 762. [xiv] (1987) 1 SCC 378.