The 97th Constitutional Amendment Act, 2011, inserted Article 43B into the Directive Principles and Part IXB into the Constitution, giving co-operative societies constitutional recognition and mandating their autonomous, democratic functioning. However, the Supreme Court in Union of India v. Rajendra N. Shah (2021) struck down Part IXB as it applied to multi-state co-operatives, holding that Parliament bypassed the mandatory requirement of ratification by at least half the state legislatures under Article 368(2).

The 97th Amendment made three structural changes to the Constitution. First, it added 'co-operative societies' to Article 19(1)(c), explicitly protecting the right to form co-operative societies as a fundamental right. Second, it inserted Article 43B as a Directive Principle, directing the State to promote voluntary formation, autonomous functioning, democratic control, and professional management of co-operatives. Third, and most consequentially, it inserted a new Part IXB (Articles 243ZH to 243ZT) laying down detailed provisions on elections, audit, supersession, and government interference in co-operative societies.

The constitutional crisis arose because co-operative societies fall under Entry 32 of List II (State List). The amendment therefore directly affected the legislative domain of states. Under Article 368(2), any amendment affecting provisions in the State List requires ratification by legislatures of not less than half the states. Parliament passed the 97th Amendment with a special majority but did not send it for state ratification.

In Union of India v. Rajendra N. Shah (2021), a three-judge bench of the Supreme Court drew a surgical distinction: Part IXB was struck down only insofar as it applied to co-operative societies within the legislative competence of states. However, the court upheld Part IXB's application to multi-state co-operative societies, which fall under Parliament's domain (Entry 44, List I). Article 19(1)(c) amendment and Article 43B were upheld entirely, as they did not attract the state-ratification requirement. This ruling is a landmark on federalism, the amendment procedure, and the limits of Parliament's constituent power when state subjects are involved.