Karnataka High Court Strikes Down Amendment Limiting Co-operative Societies’ Autonomy

The amendment had been challenged by the Uppinangadi Co-operative Agricultural Society from Dakshina Kannada district, along with other primary co-operative societies and their office bearers. The petitioners argued that the amendment granted excessive, unregulated power to the Registrar of Co-operative Societies, thereby undermining the societies’ autonomy in recruiting, transferring, and disciplining their employees.

Justice Anant Ramanath Hegde, who delivered the judgement, affirmed that the fundamental right under Article 19(1)(c) of the Indian Constitution includes the ability of co-operative societies to manage their own affairs, including employee management. The court held that while the state is entitled to impose reasonable restrictions, it cannot completely eliminate a co-operative society’s rights to handle its internal operations such as recruitment, transfers, and disciplinary actions.

The state government contended that some degree of oversight was necessary to ensure that the societies functioned within a controlled framework and argued that this did not equate to a complete removal of autonomy. The Federal Societies’ counsel, involved as interveners, maintained that the right to form and manage a co-operative society remains intact, and the restrictions would not hinder the societies’ ability to operate effectively.

However, the court highlighted Article 43-B of the Constitution, which was introduced through the 97th Constitutional Amendment. This Article mandates the state to promote the voluntary formation, autonomous functioning, democratic control, and professional management of co-operative societies. Justice Hegde noted that these components are designed to enhance and fortify the co-operative sector, with reduced government interference being one of the ways to achieve this goal.

The court criticised the amendment for giving the Registrar excessively broad powers, which encroached upon the core rights of co-operative society members. Justice Hegde asserted that the essential powers related to recruitment, transfers, and disciplinary actions are fundamental to the operational integrity of co-operative societies. These powers cannot be delegated to an external entity, such as the Federal Society, which does not participate in the formation or management of the co-operative society.

This ruling reinforces the principle that while state regulation can be necessary, it should not undermine the fundamental autonomy and operational rights of co-operative societies. The decision ensures that co-operative societies maintain their essential powers and can continue to function effectively and independently.