The New System of Panchayats, Municipalities and CO-Operative Societies
THE village Panchayat was a unit of local administration since the early History. British days, but they had to work under Government control. When Indian leaders pressed for local autonomy at the national level, the British Government sought to meet this demand by offering concession at the lowest level, at the initial stage, by giving powers of self-government to Panchayats in rural area and municipalities in urban areas, under various local names under different enactments, e.g. the Bengal Local Self-Government Act, 1885; the Bengal Village Self-Government Act, 1919; the Bengal Municipal Act, 1884.
In the Government of India Act, 1935, the power to enact legislation was specifically given to the Provincial Legislature by Entry 12 in the Provincial Legislative List. By virtue of this power, new Acts were enacted by many other States vesting powers of administration, including criminal justice, in the hands of the Panchayats.
Notwithstanding such existing legislation, the makers of the Constitution of Independent India were much satisfied with the working of these local bodies as institutions of popular government and, therefore, a Directive was included in the Constitution of 1949 in Art. 40 as follows:
“The state shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government.”
But notwithstanding this Directive in Art. 40, not much attention was given to hold elections in these local units as a unit of representative democracy in the country as a whole. During the time of Mr. Rajeev Gandhi it was considered necessary to further the organisation of these local units by inserting specific provisions in the Constitution itself on the basis of which the Legislatures of the various States might enact detailed laws according to the guidelines provided by the Constitutional provisions.
The 73rd and 74th Constitution Amendment Acts
The ideas so evolved, culminated in the passing of Constitution 73rd and 74th Amendment Acts, 1992 which inserted Parts IX and IX-A in the Constitution. While Part IX relates to the Panchayats, containing Arts. 243 to 243-0, Part IXA relates to the Municipalities, containing Arts. 243P to 243ZG. The provisions in Parts IX and IXA are more or less parallel or analogous.
Special Features of New System
Before entering into details, it may be pointed out that new system contained certain novel provisions, for example, direct election by the people in the same manner as at the Union and State levels; reservation of seats for women; an Election Commission to conduct election, a Finance Commission to ensure financial viability of these institutions.
Another striking feature is that the provisions inserted in the Constitution by Arts. 243-243ZG are in the nature of basic provisions which are to be supplemented by laws made by the respective State Legislatures, which will define the details as to the powers and functions of the various organs, just mentioned.
It is to be recalled that ‘local Government’ including self-Government institutions in both urban and rural areas is an exclusive State subject under Entry 5 of List II of the 7th Sch., so that the Union cannot enact any law to create rights and liabilities relating to these subjects. What the Union has, therefore, done is to outline the scheme which would be implemented by the several States by making laws, or amending their own existing laws to bring them in conformity with the provisions of the 73rd and 74th Constitution Amendment Acts.
After implementing legislation was enacted by the States, elections have taken place in most of the States and the Panchayats and Municipalities have started functioning under the new law. These amendments do not apply to Jammu & Kashmir, Meghalaya, Mizoram, Nagaland and National Capital Territory of Delhi.
The 97th Constitution Amendment Act, 2011 and Controversy
The Parliament passed the Constitution (Ninety Seventh Amendment) Act, 2011 with an objective to promote voluntary formation, autonomous functioning, democratic control and professional management of Co-operative Societies which inserted “co-operative societies” in
Part III, in Article 19(1)(c); inserted a new ‘Article 43B’ in Part IV and further inserted Parts IX-B in the Constitution containing Articles 243ZH to 243ZT. Soon after passing of the Constitution (Ninety Seventh Amendment) Act 2011 much controversy has arisen with regard to the constitutional validity of the said Amendment Act and the real intention of Parliament in encroaching upon the subject which belongs to states. Moreover, various restrictions have been imposed upon the State Legislatures while enacting law relating to Co-Operative Societies which was earlier unfettered prior to the incorporation of Chapter IXB. For instance, in Article 243ZI, it is said that the Legislature of a State may, by law, make provisions with respect to the incorporation, regulation and winding-up of co-operative societies based on the principles of voluntary formation, democratic member-control, member-economic participation and autonomous functioning but such law must be subject to the provisions of Part IXB. In Article 243ZJ, a definite restriction has been imposed upon the State Legislatures regarding fixation of maximum number of Directors of a Co-Operative Society which shall not exceed twenty-one. Further, the State Legislatures have been asked to provide for reservation of one seat for the Scheduled Castes or the Scheduled Tribes and two seats for women on board of every co-operative society consisting of individuals as members and having members from such class or category of persons. Similarly, in sub-Article  of Article 243ZJ, the duration of the term of office of the elected members of the board and its office bearers has been fixed to be five years and in sub-Article (3) thereof, a further direction has been given upon State Legislatures in the matter of enacting law relating to Co-Operative Societies regarding co-option of the member in the board of director and further provisions regarding the rights of such co-opted members have also been made. Similarly in Article 243ZK, a further condition has been imposed that the election of a board shall be conducted before the expiry of the term of the board so as to ensure that the newly elected members of the board assume office immediately on the expiry of the term of the office of members of the outgoing board. In Article 243ZL, a further condition has been imposed that no board shall be suspended or kept under suspension for a period exceeding six months and has also provided various conditions under which a Board may be superseded or kept under suspension. In Article 243ZM, it is mandatorily prescribed that the account of every society should be audited within six months from the close of the financial year to which the accounts relate. Article 243ZP casts a duty upon the society to file return within the period fixed there in and there is no scope of ignoring the same. Article 243ZQ prescribes the acts which would be the offences relating to the co-operative societies and the State Legislature cannot deviate from those mandates.
Further the law relating to Co-Operative Societies is still in the List II of the 7th Schedule, without bringing the subject of Co-Operative Societies either into List I or List HI, by way of this amendment, the Parliament has controlled the said power without complying with the provisions of Article 368 (2) of the Constitution by taking ratification of the majority of the State Legislatures.
Amid aforesaid controversy a PIL was filed in the Gujarat High court in 2012 for declaring the Constitution (Ninety Seventh Amendment) Act 2011 as ultra vires the Constitution. The Gujarat High Court; considering the aforesaid aspects of the controversy and in the light of the various judgments of the Supreme court; vide order(2) dated 22-04-2013 held that the amendment is violating the basic structure of the Constitution so long as the subject of “Co-Operative Societies” is in the List II of the 7th Schedule and at the same time, the provisions of Article 368(2) has not been complied with.2 The Constitution has not permitted curtailment of the power of the State Legislatures over the subject mentioned in List II without taking recourse to Article 368 (2) and as such violative of principle of federalism” which has been declared as basic structure of the Constitution by the Hon’ble Supreme Court.
Now, the aforesaid controversy is before the Supreme Court of India and it is only a matter of time as to what decision is taken to put to rest the controversy.