The Constitution of India
Article 243ZL
Supersession and suspension of board and interim management
(1) Notwithstanding anything contained in any law for the time being in force, no board shall be superseded or kept under supersession for a period exceeding six months:
Provided that the board may be superseded or kept under suspension in a case—
(i) of its persistent default; or
(ii) of negligence in the performance of its duties; or
(iii) the board has committed any act prejudicial to the interests of the co-operative society or its members; or
(iv) there is stalemate in the constitution or functions of the board; or (v) the authority or body as provided by the Legislature of a State, by law, under clause (2) of article 243ZK, has failed to conduct elections in accordance with the provisions of the State Act:
Provided further that the board of any such co-operative society shall not be superseded or kept under suspension where there is no Government shareholding or loan or financial assistance or any guarantee by the Government:
Provided also that in case of a co-operative society carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 shall also apply:
Provided also that in case of a co-operative society, other than a multi- State co-operative society, carrying on the business of banking, the provisions of this clause shall have the effect as if for the words ―six months‖, the words "one year" had been substituted.
(2) In case of supersession of a board, the administrator appointed to manage the affairs of such cooperative society shall arrange for conduct of elections within the period specified in clause (1) and hand over the management to the elected board.
(3) The Legislature of a State may, by law, make provisions for the conditions of service of the administrator.
Why this exists
Before the 97th Constitutional Amendment (2011) that inserted this Part IX-B, state governments often dismissed or suspended co-operative society boards for political reasons, replacing elected members with bureaucrat-administrators indefinitely. This undermined democratic self-governance in co-operatives (credit societies, sugar mills, banks, etc.). Article 243ZL was designed to protect co-operative autonomy by capping the supersession period, listing narrow grounds for it, and mandating prompt re-elections, similar to protections given to panchayats and municipalities under other constitutional provisions.
How courts read it
In 'Union of India v. Rajendra N. Shah' (2021), the Supreme Court examined Part IX-B (which includes Article 243ZL) and held that provisions applying to purely state-level co-operative societies exceeded Parliament's competence, since 'co-operative societies' is a State List subject; only provisions applicable to multi-State co-operative societies were upheld as valid. This significantly affected how much of Article 243ZL binds state co-operative societies versus multi-state ones.
Common misconceptions
- Myth: The government can dismiss any co-operative board whenever it wants.
Fact: The government can only do so for specific reasons like negligence, default, or deadlock, and only if it has a financial stake in the society. - Myth: Once dismissed, a board can stay replaced by an administrator indefinitely.
Fact: The law caps supersession at six months (or one year for state-level banking co-operatives), after which elections must be held. - Myth: This Article applies uniformly to all co-operative societies across India.
Fact: Following the Supreme Court's 2021 ruling in Rajendra N. Shah, its application to purely state co-operative societies (not multi-State ones) was constitutionally limited, since co-operatives are largely a state subject.