The State says it's reform. 30 petitions say it's a takeover of cooperatives.

When the State rewrites the rules of cooperation: 30 petitions, one amendment, and a High Court test

Babu K. Korah is a president of a cooperative bank in Kerala. He is not alone. Along with him, presidents and members of cooperative banks and societies across the State walked into the High Court of Kerala at Ernakulam with a single grievance: the Kerala government had, through Act 9 of 2024, rewritten the Kerala Co-operative Societies Act, 1969 in a way that, they argued, destroyed the very idea of a cooperative. Thirty writ petitions were filed. The stakes were not academic. Every provision touched money, membership, elections, and the daily governance of institutions that hold the savings and livelihoods of millions.

What the amendment actually did

The Kerala Co-operative Societies (Amendment) Act, 2023 — notified as Act 9 of 2024 — was a comprehensive overhaul. It touched share capital, financial status, seat reservation, election eligibility for managing committees, appointment of administrative committees, accounting standards, a cooperative revival fund, loan sanctions, and other governance matters. But one provision became the flashpoint: Section 28(2A). It barred any member from serving more than three consecutive terms on the managing committee of a credit society. For the petitioners, this was not a minor tweak. It was a guillotine on democratic continuity.

The petitioners also challenged Sections 14AA(2A)-(2E) (compulsory share capital contribution to subsidiary institutions), Section 32(2)(ii) and 32(4)(ii) (power of administrative committees to enrol members), Section 34A (mandatory common accounting software and a technical cell), Section 56A(1)(d) (5% of net profit to a Professional Education Fund), and Section 57E (creation of a Co-operative Revival Fund Scheme). Each provision, they argued, was an encroachment on the autonomy guaranteed to cooperatives under Part IXB of the Constitution, inserted by the 97th Amendment.

The argument that hit hardest

The petitioners' lead counsel did not merely argue that the amendments were inconvenient. They argued that Section 28(2A) was manifestly arbitrary under Article 14. They cited Association for Democratic Reforms v. Union of India (Electoral Bond Scheme), (2024) 5 SCC 1, where the Supreme Court held that a provision lacks an adequate determining principle if its purpose is not consonant with constitutional values. They also relied on Pankajaksy v. George Mathew, 1987 (2) KLT 723, which held that legislation can be questioned as unreasonable in the sense of being manifestly arbitrary.

The argument was simple: why only credit societies? Why only three consecutive terms? What rational basis justified singling out one category of cooperative for a restriction that did not apply to others? The petitioners pointed to AP Dairy Development Corp. v. B. Narasimha Reddy, (2011) 9 SCC 286, where the Supreme Court held that from the standpoint of structure and basic cooperative principles, all cooperative societies are alike. If that was true, the petitioners argued, the State could not pick and choose which societies to burden with term limits without a constitutionally valid reason.

The administrator's power to enrol members

Another provision that drew fire was the amendment to Section 32, which allowed administrative committees appointed by the government to enrol new members. The petitioners cited T.K. Porinchu v. Joint Registrar of Co-operative Societies, 2004 (1) KLT 281, where the High Court had held that an interim administrator under Section 33 has no power to enrol new members. The amendment, they argued, was a direct legislative override of that judicial interpretation. They invoked Indian Aluminium Co. v. State of Kerala, (1996) 7 SCC 637, which held that while a legislature cannot indirectly overrule court decisions, it can make decisions ineffective by removing the base. The question was whether the amendment had crossed that line.

The autonomy argument

The petitioners leaned heavily on Thalappalam Service Co-operative Bank v. State of Kerala, (2013) 16 SCC 82, where the Supreme Court held that the final authority of a society vests in the General Body, and that State control over cooperatives is not deep and all-pervasive. The amendments, they argued, inverted this principle. By giving administrators the power to enrol members, by mandating common accounting software, by compelling contributions to a Professional Education Fund, and by creating a Revival Fund Scheme, the State was effectively running the cooperatives from the Secretariat.

The respondents — the State of Kerala — defended the amendments as regulatory measures necessary for financial discipline, transparency, and the long-term health of the cooperative sector. They argued that the three-term limit prevented the entrenchment of cliques and promoted fresh leadership. The common accounting software, they said, was to prevent fraud and ensure uniformity. The Revival Fund was to rescue failing societies. The Professional Education Fund was to train committee members and staff.

The constitutional framework the court had to apply

The High Court was not writing on a blank slate. The 97th Amendment to the Constitution had inserted Part IXB, which lays down the fundamental principles of cooperative governance — democratic control, autonomy, and professional management. The petitioners argued that the amendments violated these constitutional guarantees. They also invoked Article 19(1)(c) — the right to form associations — and argued that the amendments effectively destroyed the substance of that right by making cooperatives instruments of State policy rather than voluntary associations of members.

The court also had to consider Article 254 — repugnancy between State and Union laws — since the Kerala amendments potentially conflicted with the multi-State cooperative framework under the central law. The petitioners argued that the State amendments, by overriding the cooperative principles embedded in Part IXB, were repugnant to the constitutional scheme.

The truncated judgment — what we know, and what we don't

The judgment text available is truncated at paragraph 31, during the discussion of Section 14AA(2A)-(2E). The operative order — whether the amendments were struck down, read down, or upheld — is not available. The ratio decidendi cannot be extracted. The court's final word on the three-consecutive-term limit, the administrator's power to enrol members, the common accounting software, the Professional Education Fund, and the Revival Fund Scheme remains unknown from the provided text.

What is clear is that the court heard extensive arguments on all provisions. The petitioners framed their challenge on two grounds: lack of legislative competence and violation of fundamental rights, relying on State of A.P. v. McDowell and Co., (1996) 3 SCC 709, and Hari Hara Krishnan v. State of Kerala, 2014 (4) KLT 576. The court reserved judgment on 14 August 2024.

What this means for cooperative governance in Kerala

Even without the final order, this case is a landmark for one reason: it forced the High Court to confront the tension between State regulation and cooperative autonomy in the post-97th Amendment era. The amendments challenged here are not unique to Kerala. Several States have moved to tighten control over cooperatives in the name of financial discipline. The question — how much regulation is too much — is now squarely before the courts.

For practitioners, the key takeaway is the structure of the challenge. The petitioners did not merely argue that the amendments were bad policy. They argued that they were unconstitutional — that they violated the fundamental character of cooperatives as voluntary, democratic, member-controlled institutions. They used the manifest arbitrariness standard from Association for Democratic Reforms, the equality principle from AP Dairy Development Corp., and the autonomy principle from Thalappalam. That combination of constitutional arguments, if accepted, could reshape how courts review cooperative legislation across India.

THE PLAY: When challenging a cooperative law amendment, do not stop at policy arguments. Frame the challenge as a violation of the constitutional character of cooperatives under Part IXB, using the manifest arbitrariness standard under Article 14 and the right to form associations under Article 19(1)(c).

The bottom line

Until the High Court delivers its operative order, every cooperative bank and society in Kerala operates under a cloud of uncertainty — unsure whether the three-term limit will apply, whether administrators can enrol members, and whether the State can mandate accounting software and fund contributions. The judgment, when it comes, will not just decide the fate of 30 petitions. It will define the boundary between State regulation and cooperative democracy in Kerala for a generation.