Article 243ZR

Article 243ZR of the Indian Constitution provides for the application of Part IXB—which governs co-operative societies—to Multi-State Co-operative Societies (MSCS). Introduced through the 97th Constitutional Amendment Act, 2011, this provision ensures that co-operatives operating across more than one state are regulated under a uniform central framework. It aligns the governance of multi-state co-operatives with constitutional principles of democracy, transparency, and accountability, while accounting for their inter-state character.

Background and Constitutional Context

Co-operative societies have traditionally been governed by State laws under Entry 32 of the State List (Seventh Schedule). However, the growth of co-operatives transcending state boundaries—such as agricultural credit unions, banking co-operatives, and housing societies—necessitated a centralised legal framework.
To address this need, the Multi-State Co-operative Societies Act, 2002, was enacted to regulate co-operatives whose operations extend across multiple states. The 97th Constitutional Amendment later elevated co-operatives to constitutional status and introduced Part IXB (Articles 243ZH to 243ZT). Within this framework, Article 243ZR explicitly applies these provisions to multi-state co-operatives, ensuring consistency in their governance at the national level.

Key Provisions of Article 243ZR

1. Application of Part IXB to Multi-State Co-operativesArticle 243ZR extends the applicability of the provisions of Part IXB—originally framed for state-level co-operative societies—to Multi-State Co-operative Societies with suitable modifications. It ensures that principles such as democratic elections, term limits, financial accountability, audit compliance, and member participation apply uniformly across all co-operatives operating in more than one state.
2. Substitution of TerminologyTo adapt the provisions of Part IXB to the central framework, Article 243ZR mandates certain textual substitutions:

• The expression “Legislature of a State” is replaced with “Parliament.”
• The term “State Act” is replaced with “Central Act.”
• References to “State Government” are replaced with “Central Government.”

These substitutions ensure that all legislative and executive powers concerning multi-state co-operatives vest in the Union Government and Parliament, thereby eliminating overlapping jurisdictions.
3. Governing Legislation – Multi-State Co-operative Societies Act, 2002The Multi-State Co-operative Societies Act, 2002 serves as the principal legislation governing the registration, regulation, and functioning of multi-state co-operatives. The Act covers:

• Formation and registration of multi-state co-operatives;
• Membership, governance, and elections;
• Audit and accountability standards;
• Dispute resolution mechanisms;
• Amalgamation, division, and winding up procedures.

The Act operationalises the constitutional principles outlined in Article 243ZR and Part IXB.

Institutional and Administrative Framework

The implementation and regulation of multi-state co-operative societies are overseen by the Central Registrar of Co-operative Societies, functioning under the Department of Co-operation, Ministry of Cooperation, Government of India.
The Central Registrar is responsible for:

• Registration of multi-state co-operatives;
• Supervision and audit compliance;
• Settlement of disputes between societies and their members;
• Monitoring adherence to constitutional and statutory provisions;
• Ensuring democratic management through timely elections.

This centralised administrative structure provides a consistent regulatory mechanism for co-operatives functioning across multiple states.

Context and Characteristics of Multi-State Co-operative Societies

Multi-State Co-operative Societies (MSCS) are institutions whose members and areas of operation extend beyond the boundaries of a single state. They are primarily established to:

• Promote economic cooperation and integration between states;
• Provide financial, agricultural, industrial, or consumer services to members across regions;
• Facilitate collective decision-making and equitable development at the inter-state level.

Examples of prominent multi-state co-operatives include:

• Indian Farmers Fertiliser Co-operative (IFFCO);
• Krishak Bharati Co-operative Ltd. (KRIBHCO);
• National Co-operative Development Corporation (NCDC);
• National Co-operative Bank.

Judicial Interpretations and Case Law

The judiciary has played a crucial role in delineating the jurisdictional boundaries and operational autonomy of co-operative societies under Part IXB and Article 243ZR:

• Union of India v. Rajendra N. Shah (2021): The Supreme Court held that the 97th Amendment is valid only with respect to Multi-State Co-operative Societies, as co-operatives within states fall under the exclusive jurisdiction of state legislatures. This judgment reaffirmed that Article 243ZR is constitutionally valid and essential for central regulation of multi-state co-operatives.
• State of Maharashtra v. Sant Dnyaneshwar Shikshan Shastra Mahavidyalaya (2006): The Court recognised co-operative societies as vital instruments for democratic and economic development, operating within both state and central jurisdictions depending on their scope.
• K. C. S. R. v. State of Karnataka (2008): This case discussed the interplay between state and central legislative powers, reinforcing that multi-state co-operatives are governed exclusively by central law.

These decisions collectively establish the constitutional position that while intra-state co-operatives are subject to state legislation, multi-state co-operatives fall under Parliament’s legislative competence.

Significance of Article 243ZR

Article 243ZR plays a pivotal role in promoting uniformity, accountability, and coordination in the co-operative sector. Its constitutional importance lies in the following:

• Uniform Legal Framework: Establishes a single, centralised legal and administrative regime for multi-state co-operatives, avoiding conflicts between different state laws.
• Enhanced Transparency: Ensures standardised procedures for audit, reporting, and elections.
• Facilitates Inter-State Operations: Enables co-operatives to operate seamlessly across state borders, supporting trade and agricultural integration.
• Promotes Good Governance: Upholds democratic principles and ensures professional management within co-operatives.
• Strengthens Economic Federalism: Balances the division of powers between the Union and States while maintaining consistency in inter-state co-operative regulation.

Challenges and Issues

Despite its constitutional clarity, the implementation of Article 243ZR faces several challenges:

• Jurisdictional Conflicts: Disputes sometimes arise between state and central authorities regarding the regulation of societies that operate both within and across state boundaries.
• Overlapping Legislation: Some provisions of state co-operative laws conflict with those of the Multi-State Co-operative Societies Act, 2002.
• Administrative Inefficiency: Limited manpower and procedural delays within the Central Registrar’s office hinder timely supervision.
• Governance Gaps: Issues of political interference, inadequate audits, and irregular elections persist in several multi-state co-operatives.

Reforms and Future Considerations

To enhance the effectiveness of Article 243ZR and the governance of multi-state co-operatives, several reforms are under discussion:

• Amendments to the Multi-State Co-operative Societies Act, 2002 to align it with modern governance standards.
• Digitisation of registration and compliance systems to improve transparency.
• Stronger regulatory mechanisms to prevent misuse of funds and ensure accountability.
• Capacity building and training programmes for board members and auditors.
• Constitution of a National Co-operative Tribunal to resolve inter-state disputes efficiently.