Cooperative Societies and Constitution

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Cooperative Societies and Constitution

The history of the Cooperative movement in India has its roots in the agriculture and variously allied sector. The cooperatives have been operating in various areas of the economy such as dairying credit, production, textiles etc. In the areas of dairying, sugar, and hand-looms, the cooperatives have achieved success to a very great extent. The failure of cooperatives in the country is mainly attributable to:

a. Dormant membership
b. Lack of active participation of members in the management of cooperatives.
c. Mounting overdue in cooperative credit institution,
d. Lack of mobilization of internal resources and over-dependence on Government assistance,
e. Lack of professional management
f. Bureaucratic control  interference in the management,
g. Political interference
h. Over-politicization

The main aim of Cooperative societies is to provide the tangible benefit to all people who face similar problems. The Cooperative societies play an important role in the socio-economic development of the country. The Parliament in order to address the problem introduced 97th Amendment to the Constitution. The 97th Amendment to the Constitution enshrines within Article 19(1)(c) the right to form cooperative societies. However, the controversy arose whether the Cooperative societies are public authorities and hence come under the ambit of RTI act.

Comparative Analysis Of Case And Amendment

Case

In the case Thalappalam Coop. vs.  State of Kerala, the issue was whether the Cooperative societies are public authorities to be covered under the ambit of RTI Act. The court on the basis of Ajay Hasia vs. Khalid Mujib[2] the case concluded that the level of direct or indirect control is not deep and pervasive thus they cannot be considered as states, however, still, it can satisfy criteria of being a public authority.

The Hon’ble court scrutinizes the Right to Information Act, which gives right of access to information under the control of public authorities to citizens. The definition of “public authority” is provided under Section 2(h) of the RTI Act.[3] The court found the outline of the test required for the establishment of “control”. It was found that “mere supervision or regulation as such by a statute or otherwise of a body would not make that body a public authority under the meaning of Section 2(h)(d)(i) of RTI Act. Based on the following observation court engaged in defining the new word “substantially financed” and also established that financing can be direct or indirect. In addition to that court after referring to the case of Plaser v Grimling[4] expressed that the term “substantially financed” should not be interpreted narrowly, adding on to it that the financing must be “existing actual, positive and real”.The court also acknowledged that on many occasion the state may provide funds for various projects the provision could not be engaged in the body find it difficult to exist by the help of that fund, therefore merely providing exemptions, grants, and privileges don’t satisfy the requirement of the provision.

In case of NGO, although it is not covered under the ambit of statutory control then also it can be established that NGO is substantially financed directly or indirectly by the fund of Government. Thus, the NGO by virtue of being financed by the government would be brought under the definition of public authority. The court also declared that for getting the benefit of Right to access the information, the burden is on the applicant to prove that from the body he is seeking the information. And also declared that the court keeping in mind the privacy rights concluded that if the information is personal and does not relate to any public activity or interest, then the public authority or officer is not obliged to comply with the request of the applicant.                       

Lastly, the Cooperative Societies registered under Cooperative Societies Act would not be considered as “public authority”, since it cannot be shown that they are owned, controlled or substantially financed by the government.

Amendment

Although the Supreme Court in the case Thalappalam Services Cooperative Bank Ltd. vs. State of Kerala stated that the RTI act was not applicable to cooperative societies. But after the enactment of the 97th amendment, the conception of that time reverted and led an institution of cooperative societies towards better future

The Constitution of India, under Article 19[5] has given the right to freedom of speech and expression, to form associations or unions, to move freely throughout the territory of India, to reside and settle in a part of the territory of India and to practice any profession or to carry on any occupation, trade and business and to assemble peacefully and without arms. As we are well aware of the fact that after the 97th  Amendment, forming a cooperative society has also been recognized as a fundamental right and moreover forming the cooperative society is now also extended to fundamental duty under Article 43-B of Part IV which says that it is the duty of the states to promote autonomous functioning, democratic control, voluntary formation and professional management of the cooperatives to enhance the economic activities of India.

Also, Part IX given in Constitution of India has the provision of self-government which talks about Panchayats. Now with the advent of Part IX C, the cooperative societies have got the status of Local Self-Government. However, there is no clarity as such about the applicability of the RTI Act to the cooperative societies.

Several courts had given a contradictory view on this matter but cooperative societies were earlier considered out of the realm of the RTI Act because it was not recognized as  ‘authority’ or ‘body’ or an ‘institution’ of self-government established under the Constitution. Therefore,  attempts of bringing the cooperative societies under the RTI failed and also authorities of these cooperative societies have always taken the stand of not coming under the realm of  RTI Act.

Illustration, in Maharashtra which is known for having a large number of cooperative societies where politics is also influenced by the cooperative sector. There the scale of corruption, scam, and illegalities in this sector is also very high. Irresponsibility in this sector is also very high and also on the name of information that current statistics of cooperative societies are also not easily available. The statistics of the department of cooperative societies of Maharashtra in 2009-10 show that there were 2, 18,320 cooperative societies in Maharashtra and the total membership of these societies was five crores forty-two lakhs. Thus, one can imagine how this sector such as this was uncontrolled and unaccountable until the amendment came into existence. After the promulgation of the 97th amendment, one can hope that in future this sector will move in a positive direction. This is evident from the fact that a large number of states is taking positive steps by amending their earlier provisions. Now there are various provisions came into effect imposing penalty imposing a penalty for defaults, not ordering an election within a specified time, corruption, irregularity etc.[6]

It is pertinent to note that before 1992 panchayats and municipalities were not recognized bodies by the Constitution of India that did not mean that at that time there were no panchayats or municipalities. These bodies were in existence. But due to the independent status, their functioning was arbitrary. Thus they did not acquire the reputation of being a responsible entity because of the absence of regular elections, prolonged suspension and insufficient representation of the weaker section etc. Therefore, to give continuity certainty and strength to panchayat raj Part IX was inserted in the Constitution. Also, Urban Local Bodies were not able to perform effectively as vibrant democratic units of self-government but with the insertion of Part IX B, municipality acquires the new reputation of being a prominent democratic unit. Now with the 97th Amendment, Part IX B has been inserted to give cooperative societies a status of local self-government.[7]

As per RTI Act section 2 (h) “public authority” means any authority or body or institution of self-government established or constituted—

(a) by or under the Constitution;

(b) by any other law made by Parliament;

(c) by any other law made by State Legislature;

(d) by notification issued or order made by the appropriate Government, and now as per section 2 (h) (a) of RTI act, Cooperative Societies have become an “authority” or “body” or “institution of self-government” established or constituted by or under the Constitution and hence are under the ambit of the RTI Act.

Conclusion

After the 97th amendment i.e. right to form cooperative societies and it’s including it in Article 19 of the Constitution, the practice of forming cooperative societies has become one of the fundamental rights of an Indian citizen. In addition to that, they have also been given the status of local self-government in the line of rural and urban municipal bodies in Part 9 of the Constitution. Cooperative societies have thus come under the ambit of the Right to Information Act. But now also there is no surety that constitutional amendment will fully revive this institution. The dark shadow of state-level politician will continue to remind us of the memories of parochialism which was done in case of panchayat amendment. But the coming of Cooperative societies under RTI act in future will hopefully deter numerous loopholes and will push this institution in a positive direction.

Frequently Answered Questions(FAQs)

1. Are Cooperative Societies are liable to pay taxes to Government?

There are different types of cooperatives, like housing cooperatives, who collect monthly subscription from the members and spends the same to meet the various joint expenses of the society. In this process even if any surplus is generated, it is not chargeable to tax as it is exempt based on the ‘concept of Mutuality’. The cardinal requirement in case of mutual association is that ‘All the contributors to the common fund must be entitled to participate in the surplus & all the participators to the surplus must be contributors to the common trade. Thus in simple words, there should be a complete identity between the contributors and the participators. Thus if the cooperative earns interest from a bank or parking income from non-members or rental income by letting roof for mobile towers, hoardings etc then all these incomes are chargeable.

2. How are Cooperative societies formed?

The Cooperative societies are formed by under the Cooperative Societies Act, 1912 or under any of the relevant laws prevalent their respective State. Min. members required formed should be 10 adult members. The members willing to form society should also have a common bond, i.e. should have trust and faith over each other and should work for not only themselves but also for its members and others. The basic idea behind the formation of such a society should be for achieving a common objective.

3. How do Cooperative societies function?

Different Cooperative has a different functioning system like agricultural cooperative society functions is to serve its members with the raw materials which they need at less and affordable prices, i.e. they grow up in such a way such that none of the members of their society are left. They collect the profit so earned by such formations and then accordingly use them as per the need of the cooperation and also helps from such profit it’s lacking member to come up. Like every other Cooperative society works or functions for the benefit of their members.

Edited by Ankita Jha

 References

[2] Ajay Hasia v Khalid Mujib, 1981 AIR 487, 1981 SCR (2)    

[3] Section 2(h) of RTI Act, “public authority” means any authority or body or institution of self-government established or constituted—

(a) by or under the Constitution;

(b) by any other law made by Parliament;

(c) by any other law made by State Legislature;

(d) by notification issued or order made by the appropriate Government

[4] Palser v. Grimling. (1948) 1 All ER 1, 11 (HL)

[5] 19. Protection of certain rights regarding freedom of speech etc

(1) All citizens shall have the right

(a) to freedom of speech and expression;

(b) to assemble peaceably and without arms;

(c) to form associations or unions;

(d) to move freely throughout the territory of India;

(e) to reside and settle in any part of the territory of India; and

(f) omitted

(g) to practice any profession, or to carry on any occupation, trade or business

(2) Nothing in subclause (a) of clause ( 1 ) shall affect the operation of any existing law, or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offense

(3) Nothing in subclause (b) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the sovereignty and integrity of India or public order, reasonable restrictions on the exercise of the right conferred by the said sub-clause

(4) Nothing in subclause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the sovereignty and integrity of India or public order or morality, reasonable restrictions on the exercise of the right conferred by the said sub-clause

(5) Nothing in subclauses (d) and (e) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe

(6) Nothing in subclause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,

(i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or

(ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise

[6] Co-operative societies under RTI, Money Life, available at http://www.moneylife.in/article/co-operative-societies-now-come-under-rti-act/32147.html,last seen on 27/02/17

[7] Supra 6