2021 (9) TMI 315 - SC - Indian Laws

Legislative Power to make laws with respect to Multi-state Co-operative Societies - Power of Center versus Power of State - Application of the Doctrine of Severability - Vires of the Constitution (Ninety Seventh Amendment) Act, 2011 which inter alia introduced Part IXB under the chapter heading The Co-operative Societies - whether Part IXB is non est for want of ratification by half of the States under the proviso to Article 368(2)? As per R.F. Nariman, J. It is entirely a matter for the States to legislate upon, being the last subject matter mentioned in Entry 32 List II. At this stage, it is important to note that Entry 43 of List I, which deals with incorporation, regulation and winding up of trading corporations including banking, insurance and financial corporations expressly excludes co-operative societies from its ambit. Entry 44 List I, which is wider than Entry 43 in that it is not limited to trading corporations, speaks of corporations with objects not confined to one State. This Court has therefore held, on a reading of these entries, that when it comes to Multi State Co-operative Societies with objects not confined to one state, the legislative power would be that of the Union of India which is contained in Entry 44 List I. It may thus be seen that there is no overlap whatsoever so far as the subject co-operative societies is concerned. Co-operative societies as a subject matter belongs wholly and exclusively to the State legislatures to legislate upon, whereas multi-State cooperative societies i.e., co-operative societies having objects not confined to one state alone, is exclusively within the ken of Parliament. This being the case, it may safely be concluded, on the facts of this case, that there is no overlap and hence, no need to apply the federal supremacy principle as laid down by the judgments of this court - If the subject matter of an amendment falls within the proviso, then the additional procedural requirement is that such amendment shall also be required to be ratified by the legislatures of not less than one half of the States by resolution to that effect passed by those legislatures before the bill making provision for such amendment is presented to the President for assent. A challenge to a constitutional amendment may, therefore, be on procedural or substantive grounds. The present case concerns itself with the procedural ground contained inArticle 368(2) proviso. There can be no doubt that our Constitution has been described as quasi-federal in that, so far as legislative powers are concerned, though there is a tilt in favour of the Centre vis- -vis the States given the federal supremacy principle outlined hereinabove, yet within their own sphere, the States have exclusive power to legislate on topics reserved exclusively to them - there can be no doubt whatsoever that Article 246(3) read with List II of the 7th Schedule of the Constitution of India reflects an important constitutional principle that can be said to form part of the basic structure of the Constitution, namely, the fact that the Constitution is not unitary but quasi-federal in character. It is clear that the exclusive legislative power that is contained in Entry 32 List II has been significantly and substantially impacted in that such exclusive power is now subjected to a large number of curtailments. Indeed, Article 243ZI specifically mandates that the exclusive legislative power contained in Entry 32 List II of the State Legislature is now severely curtailed as it can only be exercised subject to the provisions of Part IXB; and further, Article 243ZT makes it clear that all State laws which do not conform to the restrictions mentioned in Part IXB automatically come to an end on the expiration of one year from the commencement of the Constitution 97th Amendment Act. It is clear, therefore, that the Scheme qua multi-State cooperative societies is separate from the Scheme dealing with other cooperative societies , Parliament being empowered, so far as multi-State cooperative societies are concerned, and the State legislatures having to make appropriate laws laying down certain matters so far as other cooperative societies are concerned. The effect of Article 246ZR is as if multi-State co-operative societies are separately dealt with in a separate sub-chapter contained within Part IXB, as is correctly contended by the learned Attorney General. Also, there is no doubt that after severance what survives can and does stand independently and is workable - the amendments made in Article 19 and the addition of Article 43B would also have to be struck down, which was not pleaded or argued before either the High Court or before us. This being the case, we declare that Part IXB of the Constitution of India is operative insofar as multi-State co-operative societies are concerned. The judgment of the High Court is upheld except to the extent that it strikes down the entirety of Part IXB of the Constitution of India - it is declared that Part IXB of the Constitution of India is operative only insofar as it concerns multi-State cooperative societies both within the various States and in the Union territories of India - Appeal disposed off. As per K.M. JOSEPH, J. I am in complete agreement with the reasoning and conclusion in regard to the provisions relating to Article 240ZI to Article 243ZQ and Article 243ZT, being unconstitutional for non-compliance, with the mandate of the proviso to Article 368(2) of the Constitution of India. However, I regret my inability to concur with the view taken that the Doctrine of Severability will apply to sustain Article 243ZR and Article 243ZS to the multistate cooperative societies operating in the Union Territories, and that, it would not apply to cooperative societies confined to the territories of the Union Territories. Article 243ZH is the definition clause. It is clear that the provisions contained in Articles 243ZI to 243ZQ and Article 243ZT are all meant to apply in regard to cooperative societies, which are born under laws made by the State Legislature. It is beyond the pale of doubt that the legislative powers of the State Legislature, in regard to cooperative societies , falling in Entry 32 of List II of the Seventh Schedule, has been conditioned, cribbed and confined, though no change, as such, is made in the Entry 32 - It is clear that what is relevant is, whether by direct or indirect means, there is a substantive impact on the provisions covered by the proviso to Article 368(2). There is also a clear impact on Article 246(3), which deals with the exclusive powers of the State Legislature and, therefore, there is a change brought about in regard to the provisions contained in Chapter I of Part XI of the Constitution, which is contained in clause (b) to the proviso of Article 368(2). The provisions of Article 243ZI to 243ZQ and Article 243ZT are undoubtedly afflicted with the vice of non-compliance with the procedure, which is mandatory. Resultantly, the said provisions must be treated as still born. These provisions are void in law. The definition clause Article 243ZH clearly would have no meaning and would cease to be workable - the intention discernible was that Parliament intended to provide a uniform set of legislative norms and create rights, liabilities and powers across the board through the length and breadth of the country. In fact, it was to inform all cooperative societies, whether they were governed by laws made by the State Legislatures, falling under Entry 32 of List II of Seventh Schedule, or the appropriate Entry under List I. Once the Court has painted the relevant provisions, which are the substantial provisions (Article 243ZI to 243ZQ), with the brush of unconstitutionality, rendering those provisions, still born, it would appear that the provisions contained in Article 243ZR and Article 243ZS would not have the crutches without which these provisions cease to be workable and are impossible to sustain. The unconstitutional part, which is to be an integral part of Article 243ZR and Article 243ZS, must continue to exist, if the provisions , in question, are to bear life. I respectfully disagree with the view taken by my learned and esteemed Brother in regard to the application of the Doctrine of Severability. - Appeal dismissed. Dissenting orders passed in regard to the application of the Doctrine of Severability.

Summary

Issues Involved:
1. Constitutionality of the Constitution (Ninety Seventh Amendment) Act, 2011.
2. Requirement of ratification by States under Article 368(2) proviso.
3. Impact on the legislative powers of State Legislatures under Article 246(3) and Entry 32 List II.
4. Application of the Doctrine of Severability.

Detailed Analysis:

1. Constitutionality of the Constitution (Ninety Seventh Amendment) Act, 2011:
The Constitution (Ninety Seventh Amendment) Act, 2011 introduced Part IXB under the chapter heading 'The Co-operative Societies'. The amendment aimed to ensure democratic, autonomous, and professional functioning of co-operative societies. The Gujarat High Court declared Part IXB ultra vires for want of ratification by the State Legislatures under Article 368(2) proviso. The Supreme Court upheld this view, stating that the amendment significantly impacted the exclusive legislative power of the States under Entry 32 List II.

2. Requirement of Ratification by States under Article 368(2) Proviso:
The Supreme Court emphasized that the procedural requirement under Article 368(2) proviso was mandatory. The amendment, affecting the legislative powers of the States, required ratification by the legislatures of not less than one-half of the States. The failure to obtain such ratification rendered the amendment non est. The Court cited previous constitutional amendments like the 73rd and 74th Amendments, which were ratified by the States, reinforcing the necessity of ratification for amendments impacting State powers.

3. Impact on the Legislative Powers of State Legislatures under Article 246(3) and Entry 32 List II:
The Court noted that the amendment introduced several provisions that curtailed the legislative powers of the States regarding co-operative societies. These provisions included restrictions on the number of directors, reservation of seats, term of office, and audit requirements, among others. The Court held that these provisions significantly impacted the States' exclusive power under Entry 32 List II, thereby necessitating ratification under Article 368(2) proviso.

4. Application of the Doctrine of Severability:
The Supreme Court applied the Doctrine of Severability to determine whether the valid parts of the amendment could be separated from the invalid parts. The Court held that Part IXB, insofar as it applied to multi-State co-operative societies, could be severed and upheld. The provisions applicable to State co-operative societies were declared invalid for want of ratification. The Court emphasized that the doctrine allows for the separation of valid provisions from invalid ones, provided the valid provisions can stand independently and are workable.

Separate Judgment by K.M. Joseph, J.:
Justice K.M. Joseph concurred with the majority on the invalidity of Articles 243ZI to 243ZQ and Article 243ZT for non-compliance with the ratification requirement. However, he disagreed on the application of the Doctrine of Severability. He argued that Articles 243ZR and 243ZS, which applied the provisions to multi-State co-operative societies and Union territories, were not workable without the invalidated provisions. He emphasized that the intention behind the amendment was to create uniformity across all co-operative societies, and severing the provisions would defeat this purpose.

Conclusion:
The Supreme Court upheld the Gujarat High Court's decision declaring Part IXB ultra vires for want of ratification by the States. However, it applied the Doctrine of Severability to uphold the provisions applicable to multi-State co-operative societies. Justice K.M. Joseph dissented on the application of the Doctrine of Severability, arguing that the provisions could not stand independently without the invalidated parts.