Case: MANAGING DIRECTOR CHHATTISGARH STATE CO OPERATIVE BANK MARYADIT Vs. ZILA SAHKARI KENDRIYA BANK MARYADIT &amp; ORS

2. The appellant – Chhattisgarh State Cooperative Bank - is the apex body of cooperative banks in the State of Chhattisgarh. The first respondent is a District Central Cooperative Bank which is governed by the provisions of the Chhattisgarh Co-Operative Societies Act 1960 (1960 Act)3. The CEO of the first respondent bank was arrested on 9 August 2017 by the Economic Offences Wing of the State of Chhattisgarh on charges of corruption, under the Prevention of Corruption Act 1988 (PC Act ). Upon being produced before the designated Court, he was remanded to custody and placed under suspension from his office of the CEO4. On 10 August 2017, the seventh respondent was appointed as an interim CEO by the Chairperson of the first respondent, pending a formal decision by the Board of Directors (BoD). On 11 August 2017, the appellant appointed the sixth respondent, who was discharging duties as a „Special Class Managing Director? at Raipur, as the CEO of the first respondent. The appellant purported to take this action as the first respondent had been appointed an interim CEO and the person appointed did not fulfill the eligibility criteria prescribed by the Reserve Bank of India (RBI). The appellant also sought to justify its action of appointing the sixth respondent as the CEO of the first respondent with reference to Section 54(3) of the 1960 Act5. The sixth respondent was not given charge as the CEO of the first respondent on the ground that a meeting of the BoD was scheduled to be convened on 16 August 2017. On 16 August 2017, the BoD of the first respondent approved the appointment of the seventh respondent, who was initially serving as the interim CEO, as the CEO. The first respondent instituted a Writ Petition W.P (C) 3875 of 2017 before the High Court of Chhattisgarh challenging the legality of the order dated 11 August 2017, by which the appellant had appointed the sixth respondent as the CEO. Essentially, the case of the first respondent is that the appointment of its CEO lies solely within its discretion and neither the appellant as the apex society nor the Registrar has the power to appoint a CEO. The BoD of the first respondent bank sought a clarification from the Registrar of Cooperative Societies on 17 August 2017 regarding the appointment of the sixth respondent as the CEO. By his communication dated 21 August 2017, the Registrar stated that the appointment made by the appellant of the sixth respondent was in accordance with law and that the order of appointment should be complied with.6. On 25 August 2017, the BoD of the first respondent resolved to accept the appointment of the sixth respondent and directed that the seventh respondent shall hand over charge of the post of the CEO to the sixth respondent7. A learned Single Judge of the Chhattisgarh High Court by a judgment dated 19 January 2018 dismissed the Writ Petition filed by the first respondent holding that the appointment of the sixth respondent was in terms of the provisions of Section 54(3) of the 1960 Act and was legally sustainable. The Single Judge also noted that the appointment had been ratified by the Registrar of Cooperative Societies and that the appointment had also been accepted at a meeting of the BoD of the first respondent8. Aggrieved by the order of the learned Single Judge, the first respondent filed a Writ Appeal Writ Appeal No. 96 of 2018 before the Division Bench, which was allowed by the impugned order dated 7 August 2018. The Division Bench held that under the amended provisions of Section 54(3), which were incorporated with effect from 14 December 2016, the appellant had no role in the appointment of the CEO. In the view of the Division Bench, the power to appoint a CEO could only be exercised by the Registrar upon the failure of the District Central Cooperative Bank to make an appointment within a specified time period. This, the Division Bench held, flows from clause (b) of Section 54(3). The Division Bench was of the view that there was no failure on the part of the first respondent in making an ad-interim arrangement, pending the meeting of the BoD on 16 August 2017 to appoint a regular CEO. The Division Bench found fault with the appellant for having stepped-in to fill a vacuum when none existed. Holding that this was a case of the usurpation of power by the Apex Body, the Division Bench held that the ratification of the appointment by the Registrar of Cooperative Societies was of no consequence. The judgment of the learned Single Judge was accordingly set aside.

Court's reasoning:
15. In terms of the above notification, it was stipulated that a cooperative society specified in column (3) of the Schedule shall appoint officers from the cadre constituted by the Apex Cooperative Societies mentioned in column (2) of the Schedule. The first entry in the Schedule specifies the Madhya Pradesh State Cooperative Bank Ltd. as the Apex Cooperative Society and the Central Cooperative Bank as the Cooperative Society. In other words, the Central Cooperative Bank is required to appoint officers from the cadre constituted by the State Cooperative Bank. This notification, it is not in dispute, applies to the State of Chhattisgarh26. The present dispute has arisen by virtue of the 2016 Amending Act which inserted clauses (a) and (b) in Section 54(3) of the 1960 Act. Clause (a) of sub- section (3) stipulates that the eligibility criteria for the post of CEO of a Cooperative Bank are those prescribed by the RBI in this regard. Clause (b) stipulates that if the concerned Cooperative Bank fails to appoint a CEO under the eligibility criteria within a specified period, the Registrar may appoint an eligible officer of the Bank31. It is a settled principle of law that where two provisions of an enactment appear to conflict, courts must adopt an interpretation which harmonises, to the best extent possible, both provisions36. In this view of the matter, a harmonious construction of Section 54(3) and clauses (a) and (b) of the 2016 Amendment Act leads to the conclusion that clauses (a) and (b) are special provisions concerning the appointment of the CEO of Cooperative Banks which are carved out of power of the State Government to issue a notification under Section 54(3). We are strengthened in this view by the deletion of Section 57-B(19) and the simultaneous insertion of clauses (a) and (b) in Section 54(3)37. The difficulty in the present matters arises from the contention of the first respondent that the exception carved out by clauses (a) and (b) of Section 54(3) also applies to Central Societies that fall within the ambit of Section 49-E(2) of the 1960 Act38. As we have noted, both sub-section (2) and sub-section (3) of Section 54 are not provisions confined only to Cooperative Banks. However, clauses (a) and (b) of sub-section (3) specifically deal with the appointment of CEOs of Cooperative Banks. While introducing clauses (a) and (b) into sub-section (3) of Section 54 by the 2016 Amendment Act, the legislature has nonetheless left intact the provisions of Section 49-E. Section 49-E(2) stipulates that the CEO shall be appointed from among the officers of the cadre maintained under Section 54, where such cadre has been constituted. Section 49-E is a provision governing Apex and Central Societies to whom financial assistance has been extended by the State Government in the forms stipulated therein. The expression Central Society is defined to mean a Cooperative Land Development Bank or any other society whose operation is confined to a part of the State, as noticed earlier in Section (2)(c-i). The provisions contained in Section 49-E are intended to bring about regulatory control of the State Government by requiring the appointment of the CEO from among the officers of the cadre maintained under Section 54. The 2016 Amendment Act which brought in the provision of clauses (a) and (b) of sub-section (3) has not affected the operation of Section 49-E. Hence, the appointment of a CEO of Central Society governed by Section 49-E(2) has to be from the officers of the cadre maintained under Section 54. Significantly, sub-section (2) of Section 49-E contains a non- obstante stipulation. As a consequence, notwithstanding the 2016 Amendment Act, the CEO of a Central Society falling within the description of sub-section (2) of Section 49-E has to be appointed from among the officers of the cadre maintained under Section 54, if such cadre has been constituted39. It is necessary here to note that Section 49-E(2) is not a self-contained provision. Section 49-E(2)(b)(i) merely stipulates that the CEO of a Central Society that falls within its ambit, shall be appointed from among the officers of the cadres maintained under Section 54. Thus, where a cadre under Section 54 has been constituted, a Central Society falling within the ambit of Section 49-E(2) is obligated to appoint its officer from such cadre. Neither Section 49-E nor Section 54(2) specify whether the appointment is to be made from the cadre of the Apex Society or Central Society as constituted under Section 54(2). Section 54(3) empowers the State Government to issue a notification specifying the class of societies which shall employ officers from such cadres maintained by Apex or Central Societies as may be specified therein. In addition to conferring upon the State Government the general power to notify the class of societies which would employ officers from the cadres maintained by Apex or Central Societies, the notification under Section 54(3) operationalizes the regulatory control of the State Government envisaged in Section 49-E(2) in the manner specified therein40. This is evident in the notification dated 12 January 1971 issued by the State Government in exercise of the power conferred upon it which stipulated that the first respondent (as a District Central Cooperative Bank) is obligated to accept and appoint the officer deputed by the appellant (as the Apex Society) as the CEO. Had Section 49-E(2) an inbuilt mechanism for the determination of the officer who would be appointed as the CEO, no difficulty would arise given the use of a non-obstante provision therein. The difficulty arises precisely because of the link between Section 49-E and the notification issued by the State Government under Section 54(3). To hold that clauses (a) and (b) vest in Cooperative Banks which are Central Societies falling within the ambit of Section 49-E(2) the overriding power to appoint their CEO would render the provision inoperative. This would defeat the salient purpose of ensuring the regulatory control of the State Government over Societies to which it has made a financial contribution. On the other hand, to hold that a Cooperative Bank which is a Central Society within the ambit of Section 49-E(2) must accept and appoint the cadre officer deputed by the Apex Society, defeats the special provision inserted for Cooperative Banks in clauses (a) and (b) of Section 54(3). Both Section 49- E(2)(b) and clauses (a) and (b) of Section 54(3) deal with the appointment of a CEO41. As we have noted before, it is settled principal of law that where two provisions of an enactment appear to conflict, courts must adopt an interpretation which harmonises, to the best extent possible, both provisions45. In this view, this Court must ensure that neither provision – Section 49-E(2) nor Sections 54(3)(a) and (b) is reduced to a dead letter of law. It cannot be said that the carving out of Cooperative Banks for the appointment of their CEO from the enabling power conferred upon the State Government under Section 54(3) applies in equal measure to those Cooperative Banks that are Central Societies within the ambit of Section 49-E(2). We hold that the State Government is empowered to issue a notification under Section 54(3) for Cooperative Banks which are Central Societies falling within the ambit of Section 49-E(2) specifying that the Cooperative Bank shall appoint its CEO from the cadre constituted by the Apex Society. At the same time, to ensure that clauses (a) and (b) of Section 54(3) are given effect, the notified Apex Society shall forward to the concerned Cooperative Bank a panel of officers from which the it shall appoint its CEO, subject to the officer satisfying the eligibility criteria prescribed by the RBI46. In the view which we have taken, the regulatory control of the State Government over Cooperative Banks which have received state funding in the manner specified in Section 49-E(2) is retained, which furthers the object of the provision. The High Court was in error in holding that in the matter of an appointment of the CEO, the Apex Body or the Central Society have no power or role to play. The decision of the High Court will have serious ramifications in terms of divesting the regulatory control over the affairs of Central Societies. At the same time, conferring the power to the Cooperative Bank to appoint its CEO from a panel gives effect to the special provision inserted by virtue of clauses (a) and (b) in Section 54(3)47. The position of law that emerges from the above discussion is thus:(i) Clauses (a) and (b) of Section 54(3), as special provisions for the appointment of the CEO of Cooperative Banks confer upon them the power to appoint their CEO, subject to such officer satisfying the eligibility criteria prescribed by the RBI in this regard. The term „class of societies? in Section 54(3) excludes Cooperative Banks for the limited purpose of the appointment of their CEO;(ii) However, where a Cooperative Bank is a Central Society within the ambit of Section 49-E(2), the CEO shall be appointed from among the officers of the cadre constituted and maintained under Section 54, where such cadre has been constituted. The State Government is empowered to issue a notification in pursuance of the power conferred upon it under Section 54(3) specifying that such Cooperative Bank shall appoint its CEO from the cadre maintained by the Apex Society as notified therein. The notified Apex Society shall forward to the concerned Cooperative Bank a panel of officers, from which the Cooperative Bank shall appoint its CEO, subject to such officer possessing the eligibility criteria as stipulated by the RBI; and(iii) Where no cadre has been constituted under Section 54, the CEO of a Cooperative Bank which is a Central Society under Section 49-E(2) shall be appointed with the prior approval of the Registrar as stipulated in Section 49-E(2)(b)(ii)48. In the present case, it was not disputed that the first respondent is a Central Society falling within the ambit of Section 49-E(2) of the 1960 Act. In exercise of the power conferred by Section 54(3) of the 1960 Act, the State Government issued a notification dated 12 January 1971 specifying that Central Cooperative Banks were obligated to employ officers, according to their availability, only from the cadres created by the State Cooperative Bank. A similar notification was issued on 26 June 1971 in terms of which, Central Cooperative Banks were permitted to maintain cadres of officers and, it was stipulated that Village Cooperative Societies including Large Sized Agricultural Credit Societies would have to employ officers drawn only from the cadres maintained by the Central Cooperative Bank. Similarly, by another notification dated 26 June 1971, Central Cooperative Banks were directed to maintain cadres of officers for the appointment of managers in rural cooperative societies including Large Sized Agricultural Credit Societies49. The seventh respondent is not an officer from the cadre maintained by the appellant. Consequently, the action of the first respondent in seeking to appoint the seventh respondent as the CEO is not sustainable in law. The appointment of the sixth respondent as CEO was ratified by the Registrar of Societies by his reply dated 21 August 2017 and accepted by the BoD of the first respondent on 25 August 2017.