In light of the Supreme Court's 2021 interpretation of Part IXB, analyse the Union's role in cooperative governance and its implications for federalism.

The 97th Constitutional Amendment (2011) added Part IXB to bring all cooperatives under one constitutional code. In Union of India v. Rajendra N. Shah (July 2021), the Supreme Court limited Part IXB to Multi-State Cooperative Societies (MSCS) [1]. The ruling made the Union's reach in cooperatives smaller in scope but clearer in authority.

Constitutional basis after 2021

• Entry 32, State List: States regulate cooperatives that work within one State [1].
• Entry 44, Union List: Parliament legislates for MSCS [1]. The Union's field is now narrow but complete.

Union's role within this field

• Institutional: A separate Ministry of Cooperation (2021) works under the vision "Sahkar se Samriddhi" [2].
• Legislative: The MSCS (Amendment) Act, 2023 created a Cooperative Election Authority and a Rehabilitation Fund paid for by profitable societies [1].
• Regulatory: Concurrent audit applies to MSCS with turnover or deposits above ₹500 crore [3]. MSCARO, 2026, issued under Section 73(6), applies CARO-style audit and risk-based supervision by the CRCS [4].
• Why: 76 MSCS, including banks, were under liquidation in December 2022 [1]. The Supreme Court had to route ₹5,000 crore through the CRCS to repay Sahara cooperatives' depositors [5].

Implications for federalism

Strengthening:

• The federal division holds: The Union cannot reshape State cooperatives through an amendment that States have not ratified [1].
• Clarity: Fewer overlapping claims, with MSCS rules serving as a model States may adopt voluntarily.

Concerns:

• Centralisation inside the Union's field: Boards can now be superseded wherever the government holds any shares or has given any loan or guarantee. Earlier this needed a 51% stake [1].
• Autonomy: PRS warns that some provisions "may go against" cooperative autonomy. Experts cite "politicisation and excessive role of the government" as a long-standing weakness of cooperatives [1].
• Wide reach of the Ministry: A Union ministry for a mostly State subject could weaken the States' lead role if its schemes are not coordinated with them.

Way forward

• Draft model laws for States through consultation, not imposition.
• Publish clear rules on which audit red flag triggers an inspection, an inquiry or a supersession. Keep supersession for proven wrongdoing only.

The 2021 verdict draws the line: States lead in cooperatives, and the Union regulates MSCS. Used with restraint and transparency, the Union's tools can protect members without overriding States. That is cooperative federalism, and it fits the member control that Article 43B envisages.