How to deal with a lazy class?

It's a very difficult position you are in. The school does not want you to fail all the students and it seems the students might know that and are cooperating to overrule you. This is the like the two prisoners (in the Prisoner's Dilemma) finding a way to coordinate their actions. In this case, as I said, you have a very difficult situation.

It seems to me that three major issues in this case:

1. The school says they give you power but they really don't. If this is the case, then you must deal with your boss (or higher) to find out what you can do and what you cannot. One way to test that power is to tell your boss that you will fail all the students because they are actively resisting course requirements. If your boss says that you must find a way to get the students to do the work, then you know you do not have any power and you must decide if this is acceptable to you or not. If not, go somewhere else (if you can). Otherwise, you have to live with it.

2. You may be out of touch with what the students are capable of doing. This is quite common for new teachers. For myself (when I was starting to teach undergraduate students), I thought the students would all be hard-working and dedicated to their studies but later found that they were just like most undergraduates trying to get around the work and they didn't understand the importance of studying or the importance of their university degree. I was comparing them to my graduate-level classmates (since those were my most recent memories) but that was clearly wrong of me and I was far too expecting and too strict. If you are putting on them more than they can do, then perhaps you need to reflect on the requirements you've created. Are they really reasonable for the students you are teaching?

3. The students might simply not understand how to do what you are asking them (this is related to point 2). Some students (especially 'unprepared students') need more attention and more explanations in order to do the work required in higher education. You might need to spend more time on general study skills (inside and outside of class) and less time on course content. That is, teach them how to research, how to write a lengthy report, etc. as opposed to simply teaching them about Theory A, B, and C.

There is a fourth issue which I raised in the initial paragraph and that is the students might be working together to overpower your authority. If this is the case, you must balance between finding out why they feel the need to do that - see points 2 and 3 above - (and solving the underlying problem) and maintaining your own power of authority (which requires you to challenge them back but then you're back to dealing with point 1 above).