Managing Director Chhattisgarh State Co-Operative Bank Maryadit vs Zila Sahkari Kendriya Bank Maryadit & Ors.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 1961 of 2020 (Arising out of SLP (C) No 28165 of 2018)

Managing Director Chhattisgarh State Co-Operative ...Appellant Bank Maryadit

Versus

Zila Sahkari Kendriya Bank Maryadit & Ors. ...Respondent(s)

JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1 This appeal has arisen from a judgment of a Division Bench of the High

Court of Chhattisgarh dated 7 August 2018. Allowing a Letters Patent Appeal, the

Division Bench set aside the judgment of a Single Judge dated 19 January 2018. Signature Not Verified Digitally signed by The Division Bench held that the appointment made by the appellant on 11 CHETAN KUMAR Date: 2020.03.04 17:35:31 IST Reason: 1 August 2017 of the Chief Executive Officer 1 of the first respondent bank and its

subsequent ratification by the Registrar of Cooperative Societies, were without

the authority of law. Consequently, the decision of the appellant was held to be

not binding on the first respondent.

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 19602.

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 19883. Upon being produced

before the designated Court, he was remanded to custody and placed under

suspension from his office of the CEO.

4 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 Directors4. 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

1 “CEO” 2 “1960 Act” 3 “PC Act” 4 “BoD”

2 India5. 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 Act.

5 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 Petition6 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 respondent.

5 “RBI” 6 W.P (C) 3875 of 2017

3 7 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 respondent.

8 Aggrieved by the order of the learned Single Judge, the first respondent

filed a Writ Appeal7 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

7 Writ Appeal No. 96 of 2018 4 set aside.

9 Before we note the rival submissions, it is necessary to advert to the

relevant provisions of law, as applicable to the present dispute.

10 Section 49-E of the 1960 Act deals with the appointment of a Managing

Director and CEO, as its marginal notes indicates, “in certain circumstances”.

Section 49-E provides as follows:

“49-E. Appointment of Managing Director and Chief Executive Officer in certain circumstances.-

(1)(a) Notwithstanding anything contained in this Act or rules or byelaws made thereunder for any Apex Society where the State Government has contributed to its share capital or has given loans or financial assistance or has guaranteed the repayment of loans granted in any other form, there shall be a Managing Director, not below the rank of a Class I Officer, who shall be selected by a committee constituted at the State level consisting of the Agriculture Production Commissioner, Chairman of the Apex Society, Registrar Co-operative Societies and one Director nominated by the Board of Apex Society:” Provided that if the committee fails to select the Managing Director unanimously, the matter shall be referred to the State Government whose decision thereon shall be final.

(b) The Managing Director shall be ex-officio member of the committee.

(c) The Managing Director shall be the Chief Executive Officer of the society and shall perform such duties and exercise such powers as may be prescribed.

(2)(a) Notwithstanding anything contained in this Act, or the Rules or byelaws made thereunder for every Central society where the State Government has contributed to its share capital or has given loans or financial assistance or has guaranteed the repayment of loans, debentures, or advances or has given grants in any other form, there shall be a Managing Director or a General Manager not below the rank of a Class II Officer who shall be the Chief Executive Officer of the society and ex-officio member of the committee:

(b) The Chief Executive Officer shall be appointed:

(i) from among the Officers of the cadre maintained under Section 54 if such a cadre has been created;

5 (ii) in other cases with the prior approval of the Registrar.

(c) The Chief Executive Officer shall perform such duties and exercise such powers as may be prescribed.”

11 Sub-section (1) of Section 49-E deals with the appointment of the

Managing Director and CEO of an Apex Society. The expression „Apex Society‟

is defined in Section 2(a-i) to mean

“a society whose principal object is to provide facilities for the operation of other societies affiliated to it and whose area of operation extends to the whole State…”

Sub-section (2) deals with the appointment of a Managing Director or a General

Manager who shall be the CEO of a Central Society. The expression „Central

Society‟ is defined in Section 2(c-i) as follows:

““Central Society” means a Co-operative Land Development Bank or any other society whose area of operation is confined to a part of the State and which has as its principal object the promotion of the principal objects and the provision of facilities for the operation of same type of societies and for other societies affiliated to it and not less than five members of which are societies.”

12 Sub-section (1) applies to an Apex Society while sub-section (2) applies to

a Central Society. Sub-section (2), with which we are concerned, applies to a

Central Society to which the State Government has: (i) contributed the share

capital; or (ii) granted loans or financial assistance; or (iii) guaranteed the

repayment of loans, debentures, or advances; or (iv) given grants in any other

form. Sub-section (2)(b) provides that the CEO of every Central Society shall be

appointed from among the officers of the cadre maintained under Section 54, if

such a cadre has been created and, in other cases, with the prior approval of the

6 Registrar.

13 Section 49-E(2)(b)(i) refers to the cadre of officers maintained under

Section 54. Section 54 is in the following terms:

“54. Appointment of Managers, Secretaries and other officers.-(1) No society shall appoint a Manager, Secretary, Accountant or other paid officer unless he holds such qualifications as may be prescribed.

(2) The Apex and Central Societies shall maintain such cadres of officers and other servants as the State Government may, by order, direct and the conditions of service of members of such cadre shall be such as the Registrar may, by order, determine.

(3) The State Government may, by notification, specify the class of societies which shall employ officers from such cadres maintained by the Apex or Central Societies under sub-section (2) as may be specified therein and it shall be obligatory on the part of such class of societies to accept and appoint such cadre officers on the cadre posts as and when deputed by the Apex or Central Societies.”

Sub-section (1) of Section 54 provides that a society shall not appoint a Manager,

Secretary, Accountant or other paid officer unless the person holds such

qualifications as are prescribed. Under sub-section (2), Apex and Central

Societies have to maintain such cadres of officers and other servants as the

State Government may, by order, direct. Under sub-section (3), the State

Government is empowered to issue a notification specifying the class of societies

which shall employ officers from the cadres maintained by the Apex or Central

Societies. Sub-section (3) also makes it obligatory upon such class of societies to

accept and appoint cadre officers on cadre posts, as and when they are deputed

by the Apex or Central Societies.

7

14 In exercise of the power conferred by sub-section (3) of Section 54, a

notification was issued by the State of Madhya Pradesh (prior to its

reorganisation) on 12 January 1971. The notification is extracted below:

“Notification No. 258-413-Fifteen-1.71 dated 12.01.1971 By exercising powers under sub-section 3 of section 54 of Madhya Pradesh Cooperative Societies Act 1960 (No. 17 of 1961), The State Govt. vide this notification notifies that the cooperative societies mentioned in column 3 of the schedule given below shall appoint officers from the cadre constituted by the Apex Cooperative Society mentioned in column 2 of the schedule given below in front of them as per their availability.

SCHEDULE

Sl. Name of Apex Name of Cooperative No Cooperative Society Society . (1) (2) (3) 1 M.P. State Cooperative Central Cooperative Bank Bank Ltd. 2 Madhya Pradesh State Primary Cooperative Land land Development Bank Development Bank 3 Madhya Pradesh State Primary Cooperative Cooperative Marketing Marketing Societies and Federation Process Committee

(Published in part-1 of Gazette of M.P. dated 19.02.1971)”

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

8 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 Chhattisgarh.

16 The provisions of Section 54(3) were amended by the Chhattisgarh

Cooperative Societies (Amendment) Act 20168, with effect from 14 December

2016. The following provisions were inserted at the end of Section 54(3):

“(a) The eligibility criteria to hold the office of Chief Executive Officer of any Co-operative Bank shall be as such as may be prescribed by the Reserve Bank in this regard.

(b) If the concerning Co-operative Bank fails to appoint the Chief Executive Officer under the eligibility criteria within a specified period, in such a condition the Registrar may appoint such eligible officer of the Bank.”

17 The present dispute has been occasioned by the insertion of clauses (a)

and (b) in Section 54(3) of the 1960 Act by virtue of the Amending Act of 2016.

18 The appellant has urged the following submissions:

(i) The CEO of the first respondent (which is a District Central Cooperative

Bank) is a paid officer whose appointment is regulated by Section

54(1), which mandates the appointment of only persons who possess

the prescribed qualifications. The appointment which was made by the

first respondent was of a person who did not fulfill the prescribed

qualifications;

(ii) Section 54(2) mandates the first appellant to maintain cadre of officers

as the State Government may, by order, direct. In exercise of the power 8 “2016 Amendment Act”

9 conferred by Section 54(3), the State Government issued a notification

dated 12 January 1971 which stipulated that the Central Cooperative

Bank must appoint officers from the cadre constituted by the State

Cooperative Bank. By virtue of Section 54(3) and the notification dated

12 January 1971, 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. In the present case, the

person who was appointed by the first respondent did not fulfill the

prescribed eligibility criteria. Hence, the sixth respondent was appointed

as CEO in exercise of the appellant‟s authority under Section 54(3) to

make that appointment;

(iii) Pursuant to Section 54(3), a notification was issued on 26 June 1971

under which all Central Cooperative Banks in the state were permitted

to maintain cadres of officers from whom appointments to Village

Cooperative Societies, including Large Sized Agricultural Credit

Societies would be made. By another notification dated 26 June 1971

also under Section 54(3), Central Cooperative Banks were permitted to

maintain cadres of employees from whom managers for rural

cooperative societies would be appointed. Thus, all Central

Cooperative Banks in the State of Chhattisgarh have to maintain a

cadre of employees in terms of the above notifications dated 26 June

1971 and all Village Cooperative Societies including Large Sized

Agricultural Credit Societies shall employ officers only from the said

cadres;

10

(iv) Sub-section (2) of Section 49-E specifically deals with the appointment

of the Managing Director or a General Manager who shall be the CEO

of Central Societies to which the State Government has made a

contribution of share capital, furnished loans or granted financial

assistance or any other grant. Sub-clause (b)(i) of sub-section (2)

clearly stipulates that the CEO shall be appointed from among officers

in the cadre constituted under Section 54;

(v) Rule 3 of the Central Cooperative Bank Staff Services Rules 1982

stipulates that appointments to all posts classified as Class-I posts shall

be made by the Apex Bank from the list of cadre officers maintained by

it. The Bye-laws of the first respondent stipulate that appointments to

the post of Managing Director/General Manager/Manager shall be from

the cadre of officers maintained by the Apex Bank. If a cadre officer is

not available due to unforeseen circumstances, a temporary

appointment may be made by the first respondent with the prior

permission of the appellant, subject to such terms and conditions as

may be imposed;

(vi) The 2016 Amendment Act which amended Section 54(3) must be read

together with other provisions and not independently. The amendment

in sub-section (3) only deals with the eligibility criteria and is equally

applicable to both the Apex Society and to any Central Society. Both

the appellant and the first respondent are cooperative banks. The

appellant is an Apex Society while the first respondent is a Central

Society;

11

(vii) Under sub-section (2) of Section 54, both Apex Societies and Central

Societies have to maintain cadres of officers and other servants as the

State Government may, by order, direct. Sub-section (3) makes it

obligatory on the first respondent (which is a Central Society) to accept

and appoint a cadre officer to a cadre post as and when deputed by the

appellant (which is the Apex Society). It is only if the CEO is not

appointed within a specified period, that the Registrar is empowered to

appoint an eligible officer as the CEO.

(viii) In the present case, the earlier CEO of the first respondent was

arrested on a charge of corruption under the PC Act. The Chairperson

of the first respondent appointed a Manager as an interim CEO, who

was not from the cadre of officers maintained by the Apex Bank.

Hence, the appellant in exercise of its powers under Section 54(3) read

with the notification dated 12 January 1971, deputed the sixth

respondent as CEO of the first respondent on 11 August 2017 which

appointment, the first respondent was bound to accept. On a

clarification sought by the BoD of the first respondent, the Registrar of

Cooperative Societies, by his reply dated 21 August 2017 observed that

the appointment made by the appellant was in accordance with law.

Consequently, the BoDs accepted the appointment of the sixth

respondent at a meeting on 25 August 2017. The order deputing the

sixth respondent as CEO was ratified by the Registrar and accepted by

the BoD of the first respondent; and

(ix) The learned Single Judge correctly dismissed the Writ Petition filed by

12 the first respondent. The Division Bench allowed the Writ Appeal on an

erroneous appreciation of the applicable legal regime. In the case of all

Central Cooperative Banks in Chhattisgarh, the CEO is an officer drawn

from the cadre maintained by the Apex Bank. This is in consonance

with Sections 49-E and 54(3) of the 1960 Act and notifications issued

from time to time. The consequence of the impugned decision would be

to deprive the Apex Bank of its authority to monitor the affairs of Central

Cooperative Societies. Financial control can be maintained through the

power to appoint CEOs. Such a position was occasioned as huge

amounts of public funds is at stake. The view of the Division Bench will

have far-reaching repercussions in the cooperative set up and the

beneficial purpose of the legislation would be defeated resulting in

mismanagement and misappropriation of public funds.

19 On the other hand, learned counsel appearing on behalf of the first

respondent urged that:

(i) Section 57-B of the 1960 Act was inserted by the Chhattisgarh

Cooperative Societies (Amendment) Act 20129. Sub-section (19) of

Section 57-B provides that the CEO of State Cooperative Banks and

Central Cooperative Banks shall be appointed by the members of the

board of the State Cooperative Bank and the Central Cooperative Bank, as

the case may be, from among a panel of names not exceeding three

persons eligible to hold the office of CEO in accordance with the criteria

stipulated by the RBI. The aforesaid panel was to be recommended by a

9 “2012 Amendment Act”

13 selection board consisting of the following persons, all of whom shall be

the members of the Board of the State Cooperative Bank or the Central

Cooperative Bank, as the case may be:

a) The nominee of the State government on the board;

b) The nominee of the National Bank on the board; and

c) One other member of the board, whether elected or co-opted.

(ii) Section 57-B of the 1960 Act was omitted by the 2016 Amendment Act and

clauses (a) and (b) were inserted in sub-section (3) of Section 54 of the

1960 Act, whereby the power was given to the Cooperative Bank to

appoint the CEO within a specified time period and in default, the Registrar

is empowered to appoint such eligible officer of the bank as the CEO;

(iii) The language of the 1960 Act indicates that the CEO of Cooperative

Societies, be it a Primary Cooperative Society, Central Cooperative

Society or State Cooperative Society, can be appointed by that

Cooperative Society only. A plain reading of Section 54(3) (a) and (b)

makes it crystal clear that the power to appoint a CEO lies with the

Cooperative Society and not with the Apex Society. It is also clear from the

reading of the provision that the CEO of the Cooperative Bank shall be

appointed from the eligible officers of the said Cooperative Bank. This can

also be inferred from the fact that the said power was earlier given under

section 57-B of the 1960 Act but by the 2016 Amendment Act, Section 57-

B was omitted and the provision of appointment was inserted in Section

54(3)(b);

14

(iv) Clause (b) of sub-section (2) of Section 49-E enumerates that a CEO shall

be appointed from among the Officers of the cadre maintained under

Section 54, if such a cadre has been created. Section 54(1) provides that

the “no society shall appoint a Manager, Secretary, Accountant and other

paid officer unless he holds such qualifications as may be prescribed”. The

word “Society” mentioned in sub-section (1) of Section 54 includes

Primary Cooperative Societies, Central Cooperative Societies and State

Cooperative Societies, which means that every society shall appoint its

Manager, Secretary, Accountant and other paid officers;

(v) The notification dated 12 January 1971 issued by the State Government

under Section 54(3) will be considered to be nullified by the 2012

Amendment Act and subsequently by the 2016 Amendment Act. The said

notification is not applicable in appointing a CEO in view of the omission of

Section 57-B of the 1960 Act and the subsequent insertion of Section

54(3)(a) and (b). The 1960 Act does not mention that the CEO of the

Central Cooperative Bank shall be appointed by the State Cooperative

Bank from the cadre officers of the State Cooperative Bank. What is not

provided in the statute cannot be read into it. This is more so when the

language of section 54(3)(b) is plain, clear and unambiguous that the

Cooperative Society shall appoint the CEO;

(vi) It is settled law that if the language of the statute is clear, plain and

unambiguous and admits of only one meaning, then no question of

interpretation arises. The appellant cannot be permitted to add words in

the statute to make it workable for it; and

15

(vii) The action of the State Cooperative Bank in appointing the CEO of the

Central Cooperative Bank is arbitrary and illegal as it is beyond the powers

of the State Cooperative Bank under the 1960 Act.

20 The rival submissions now fall for consideration.

21 Section 54 contains provisions for the appointment of Managers,

Secretaries and other officers of societies. Sub-section (1) stipulates that a

Manager, Secretary, Accountant or other paid officer shall be appointed only if

they possess the prescribed qualifications. A reading of the sub-section denotes

that the power to make appointments vests with the society itself.

22 Sub-section (2) of Section 54 casts an obligation upon Apex and Central

Societies to maintain such cadre of officers as the State Government may, by

order, direct. The Registrar is empowered to frame the conditions of service of

the members of the cadre so constituted.

23 Section 49-E of the 1960 Act deals specifically with the appointment of

Managing Directors and Chief Executive Officers in certain circumstances. The

provision deals only with the appointment of the Managing Director and the CEO.

It covers appointments “in certain circumstances,” which are specified therein.

Sub-section (1) of Section 49-E deals with the appointment of the Managing

Director of an Apex Society. Sub-section (2) deals with the appointment of the

Managing Director (who shall be the CEO) of Central Societies. Section 49-E

applies to a situation where the State Government has:

(i) contributed to the share capital; or

16 (ii) given loans or financial assistance; or

(iii) guaranteed the repayment of loans, debentures or advances; or

(iv) given grants in any other form.

The provisions of both sub-sections (1) and (2) of Section 49-E begin with an

overriding non-obstante stipulation. The provisions operate notwithstanding

anything contained to the contrary in the 1960 Act, rules thereunder or bye-laws

of the society. Section 49-E thus carves out an exception to the power vested in

societies to make appointments under Section 54(1). Sub-section (2)(a)

stipulates that for every Central Society, there shall be a Managing Director not

below the rank of a Class-II officer, who shall be the CEO of the society. Clause

(b) of Section (2) stipulates that the CEO would be appointed from among the

officers of the cadre maintained under Section 54, if such a cadre has been

constituted and in all other cases, with the prior approval of the Registrar of

Cooperative Societies. Thus, for Central Societies which fall within the purview of

Section 49-E(2), the source of appointment for the Managing Director or the

General Manager (who shall be the CEO) must be from the officers drawn from

the cadre constituted under Section 54, if such cadre has been constituted. In all

other cases, the Central Society may appoint the Managing Director or General

Manager with the prior approval of the Registrar of Cooperative Societies.

24 A pre-requisite to bring a Central Society within the fold of Section 49-E(2)

is that the State Government has contributed to its share capital, given loans or

financial assistance, guaranteed the repayment of loans, debentures or advances

or has given grants in any other form. Evidently, this provision has been

17 introduced by the legislature as an effort to maintain regulatory control over

Central Societies to whom financial assistance has been extended by the State

Government in the terms set out in the provision. For this reason, where the

society is a Central Society that satisfies the requirements of Section 49-E(2), the

general power vested in it to appoint its CEO under Section 54(1) is limited to

appointment from the cadres constituted and maintained under Section 54.

25 Sub-section (3) of Section 54 empowers the State Government to specify,

by notification, the class of societies which shall employ officers from cadres

maintained by Apex or Central Societies as specified therein. The provision

stipulates that upon the issuance of such notification, it shall be obligatory for the

class of societies notified therein to accept and appoint such cadre officers on

cadre posts as and when deputed by the Apex or Central Society, as the case

may be. Upon the issuance of a notification under Section 54(3), an exception is

carved to the power of appointment conferred upon the notified class of societies

under Section 54(1). Where a class of societies has been notified by the State

Government to employ officers from cadres constituted by the Apex or Central

Society, the power of appointment vests with the Apex or Central Society, as

specified in the notification. The notified class of societies is under an obligation

to accept and appoint cadre officers deputed to cadre posts by the Apex or

Central Society, as the case may be.

26 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

18 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 Bank. The submission of the first respondent, which has

found acceptance with the Division Bench of the High Court, is that as a result of

the amendment which was made in 2016, the exclusive jurisdiction to appoint a

CEO of a Cooperative Bank vests with the Bank itself. However, according to the

submission, the CEO must fulfill the eligibility criteria prescribed by the RBI.

Moreover, it is only where the Cooperative Bank fails to appoint an eligible CEO

within a specified period, that clause (b) of Section 54(3) empowers the Registrar

of Cooperative Societies to appoint an eligible officer of the bank.

27 In the submission of the first respondent, clauses (a) and (b) are special

provisions enacted for Cooperative Banks and are intended to have an overriding

effect over: (i) the power of the State Government to issue a notification in

exercise of its powers under Section 54(3); and (ii) Section 49-E(2) which

mandates that Central Societies shall appoint their CEOs from the cadre

constituted under Section 54. Clauses (a) and (b) of Section 54(3), it was

contended, vests with Cooperative Banks the absolute power to appoint their

CEOs, notwithstanding any other provision in the 1960 Act. The effect of the

amended provision may be considered in two parts: first, its effect on the power

of the State Government to issue a notification in pursuance of the power

conferred upon it under Section 54(3); and second, its effect on Section 49-E(2).

19 28 By virtue of the 2012 Amendment Act, Section 57-B was introduced as a

new Chapter V-A with provisions for short term Co-operative Credit Structure

Societies. The term „short term Co-operative Credit Structure Societies‟ was

defined as including “the State Co-operative Bank, a Central Co-operative Bank

and a Primary Agricultural Credit Co-operative Society”. Section 57-B(19)

stipulated that the Chief Executive Officer of the State Co-operative Bank and a

Central Co-operative Bank, shall be appointed by the members of the Board of

the State Co-operative Bank or the Central Co-operative Bank, as the case may

be. The appointment was to be made from a panel of names eligible to hold the

post in accordance with the criteria stipulated by the RBI. The constitution of the

Selection Board was also set out in sub-section (19). By virtue of this provision,

an exception was carved out for the appointment of the CEO of Central Co-

operative Banks and State Co-operative Banks, subject to the conditions

prescribed therein.

29 By the 2016 Amendment Act, Section 57-B was deleted and clauses (a)

and (b) were inserted in Section 54(3). Significantly, sub-section (3) of Section 54

is not confined only to Cooperative Banks. Section 54(3) empowers the State

Government to specify, by notification, the class of societies which shall employ

officers from cadres maintained by Apex or Central Societies. The term „class of

societies‟ employed in Section 54(3) includes any type of society covered by the

provisions of the 1960 Act, including Cooperative Banks (as resource societies).

This view is strengthened by Section 10 of the 1960 Act which mandates that the

Registrar of Cooperative Societies shall classify all societies under one or more

of the following heads:

20

(i) Consumer Society;

(ii) Farming Society;

(iii) Housing Society;

(iv) Marketing Society;

(v) Multipurpose Society;

(vi) Producer‟s Society;

(vii) Processing Society;

(viii) Resource Society;

(ix) General Society; and

(x) Industrial Society.

Section 10 also empowers the Registrar to further classify societies falling under

any of the above classifications into:

(i) Apex Society;

(ii) Central Society; and

(iii) Primary Society.

30 The 1960 Act covers a myriad of societies under its ambit. Though the

term „class of societies‟ includes within its ambit Cooperative Banks, the learned

counsel for the first respondent has contended that clause (a) and (b) of Section

54(3) were intended to carve out Cooperative Banks from the enabling power

conferred upon the State Government and vest with them the exclusive power to

appoint their CEOs. It was been urged that were this Court to hold that there is an

obligation upon a Cooperative Bank, as a notified society under Section 54(3), to

accept from the Apex or Central Society as specified in the notification a deputed

21 cadre officer as its CEO, clauses (a) and (b) would be rendered otiose.

31 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 provisions. Justice G P Singh in his seminal work

Principles of Statutory Interpretation states:

“To harmonise is not to destroy. A familiar approach in all such cases is to find out which of the two apparently conflicting provisions in more general and which is more specific and to construe the more general one as to exclude the more specific…The principle is expressed in the maxims Generalia specialibus non derogant and Generalibus specialia.”

Similarly, Craies in Statute Law states:

“The rule is, that whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply.”

Where two provisions conflict, courts may enquire which of the two provisions is

specific in nature and whether it was intended that the specific provision is carved

out from the application of the general provision. The general provision operates,

save and except in situations covered by the specific provision. The rationale

behind this principle of statutory construction is that were there appears a conflict

between two provisions, it must be presumed that the legislature did not intend a

conflict and a subject-specific provision governs those situations in exclusion to

the operation of the general provision.

22 32 In an early decision of this Court in JK Cotton Spinning and Weaving

Mills Co Ltd v State of Uttar Pradesh10, a three judge Bench of this Court

considered whether the principle applied to conflicts within the same enactment.

Clause 5(a) of the Government Order dated 10 May 1948 conferred upon, inter

alia, any employee or a registered trade union of employers the right to move the

Board constituted under the Order to initiate an enquiry into an industrial dispute.

Clause 23 stipulated that where an enquiry is pending before the Regional

Conciliation Officer, notwithstanding the pendency of a case before the Board or

Industrial Court, no employer shall discharge or dismiss any workman. Under

Clause 24, an order of the Board, unless modified in appeal, was final and

conclusive. The appellant, representing the employer‟s union, contended that

once an order is made under Clause 5(a), Clause 23 has no application and the

employer may proceed to dismiss the workmen. The Court rejected the

contention noting that any employer could defeat the provisions of Clause 23

merely by an application under Clause 5(a). The Court held that Clause 23 was

made with a definite purpose. Consequently, where an enquiry was pending

under Clause 23, an application under Clause 5(a) was barred. The Court held:

“9…We reach the same result by applying another well- known rule of construction that general provisions yield to special provisions. The learned Attorney-General seemed to suggest that while this rule of construction is applicable to resolve the conflict between the general provision in one Act and the special provision in another Act, the rule cannot apply in resolving a conflict between general and special provisions in the same legislative instrument. This suggestion does not find support in either principle or authority. The rule that general provisions should yield to specific provisions is not an arbitrary principle made by lawyers and Judges but springs from the common understanding of men and women that when the same person gives two

10 AIR 1961 SC 1170

23 directions one covering a large number of matters in general and another to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect.

10. Applying this rule of construction that in cases of conflict between a specific provision and a general provision the specific provision prevails over the general provision and the general provision applies only to such cases which are not covered by the special provision, we must hold that clause 5(a) has no application in a case where the special provisions of clause 23 are applicable.”

This Court affirmed that the principle that the general excludes the specific is a

tool of statutory interpretation even in cases of conflict within the same

enactment. Where one of the conflicting provisions is general in nature and the

other is specific, „common understanding‟ dictates that the specific provision is

given effect, while the general provision continues to apply to all other situations.

33 In Commercial Tax Officer, Rajasthan v M/s Binani Cements Ltd.,11 the

question concerned whether the respondent-assessee was entitled for the grant

of an eligibility certificate for exemption from payment of Central Sales Tax and

Rajasthan Sales Tax under Entry 4 in Annexure „C‟ of the Sales Tax New

Incentive Scheme for Industries, 1989. Annexure „C‟ to the Scheme was titled the

„Quantum of Sales Tax Exemption under the new Scheme‟. Entry 4 of the

Annexure stipulated that „Prestigious Units‟ would be entitled to a 75% exemption

from tax liability with 100% in terms of Fixed Capital Investment. By an

amendment, Entry 1E was inserted which covered „new cement units‟ and

stipulated that large-scale units would be entitled 25% tax exemption. A two

judge Bench of this Court held:

11

Civil Appeal No. 336 of 2003, decided on 19 February 2014.

24 “27. Before we deal with the fact situation in the present appeal, we reiterate the settled legal position in law, that is, if in a Statutory Rule or Statutory Notification, there are two expressions used, one in General Terms and the other in special words, under the rules of interpretation, it has to be understood that the special words were not meant to be included in the general expression. Alternatively, it can be said that where a Statute contains both a General Provision as well as specific provision, the later must prevail.

29…It is well established that when a general law and a special law dealing with some aspect dealt with by the general law are in question, the rule adopted and applied is one of harmonious construction whereby the general law, to the extent dealt with by the special law, is impliedly repealed. This principle finds its origins in the latin maxim of generalia specialibus non derogant...”

The Court held that where two provisions are in question – one of general

application and the other specific in nature, a harmonious interpretation would

mean that the general law, to the extent it is dealt with by the special law, is

impliedly repealed. This Court, relying on the principle generalia specialibus non

derogant held that Item 1E is a “subject specific provision”. The Court noted that

the amendment removed “new cement industries” from the non-eligible Annexure

„B‟ and placed it into Annexure „C‟ amongst the eligible industries. Consequently,

the Court rejected the contention of the respondent-assessee and held that as

Item 1E concerned the more specific unit, it was excluded in its application from

other general entries.

The principle that the general provision excludes the more specific has been

consistently applied by this Court in South Indian Corporation (P) Ltd. v

Secretary, Board of Revenue12, Paradip Port Trust v Their Workmen13,

12 AIR 1964 SC 207 13 AIR 1977 SC 36

25 Maharashtra State Board of Secondary and Higher Education v Paritosh

Bhupesh Kumar Sheth14, CCE v Jayant Oil Mills,15 P S Sathappan v Andhra

Bank Ltd16, Sarabjit Rick Singh v Union of India17 and Pankajakshi v

Chandrika18.

34 While sub-section (3) of Section 54(3) deals with a class of societies,

clauses (a) and (b), as inserted by the 2016 Amendment Act are specific in their

application to only Cooperative Banks. Furthermore, while Section 54(3) deals

with the appointment of deputed cadre officers on cadre posts, clauses (a) and

(b) deal only with the appointment of the CEOs of Cooperative Banks. Clause (a)

contemplates that the eligibility guidelines prescribed by the RBI will apply to

officers holding the post of the CEO of a Cooperative Bank. Significantly, clause

(b) of Section 54(3) beings with the words “if the concerning co-operative Bank

fails to appoint” which denotes an intention to vest with Cooperative Banks the

power to appoint their CEO. The provision also stipulates that where the

Cooperative Bank fails to appoint the CEO within a specified period, the Registrar

may appoint an eligible officer of the bank. The stipulation that in the case of

default, the CEO shall be an officer of the bank and not an officer from the cadre

as notified under Section 54(3) demonstrates the intention of the legislature to

vest with Cooperative Banks the power to appoint their CEO.

35 Evidently, by virtue of the 2016 Amendment Act, clauses (a) and (b) were

inserted as specific provisions for the appointment of the CEO of Cooperative

14 (1984) 4 SCC 27 15 (1989) 3 SCC 343 16 (2004) 11 SCC 672 17 (2008) 2 SCC 417 18 (2016)6SCC157

26 Banks, vesting in them the power of appointment. Where two interpretations of

potentially conflicting provisions are possible, courts must adopt the interpretation

that furthers the intention of the legislature as encapsulated in the maxim Verba

ita sunt intelligenda ut res magis valeat quam pereat. Craies on Legislation

states:

“…if two constructions of a provision are possible on its face, and one would clearly advance the legislative purpose and the other would clearly achieve little or nothing, the former is to be preferred.”

36 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 Act. In this submission, where a Cooperative Bank as a Central Society has

received funds from the State Government in the manner stipulated in Section

49-E(2), such Central Banks may independently appoint a CEO and would not be

obligated to appoint its CEO from the cadre constituted under Section 54, even if

such cadre has been constituted.

27 38 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 constituted.

28 39 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 therein.

40 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

29 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

CEO.

41 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 provisions. Justice G P

Singh in his seminal work Principles of Statutory Interpretation states:

“…It is the duty of the court to avoid “a head on clash” between two sections of the same Act and, “whenever it is possible to do so, to construe provisions which appear to conflict so that they harmonise.”

Francis Benion in his work Statutory Interpretation states:

“Inconsistent enactments – A common application of the principle is in relation to contradictory enactments within the same Act. Enactment A may in itself be clear and unambiguous. So may enactment B, located elsewhere in the Act. But if they contradict each other, they cannot both be applied literally. A undoes B, and B undoes A. The court must do the best it can to reconcile them, but this can be achieved only by giving one or both a strained construction.”

30 Where two provisions of an enactment appear to be in conflict, courts do not

readily presume an „either/or‟ situation. Courts must construe the provisions

harmoniously to ensure, as far as possible, the effective operation of both

provisions in a manner that furthers the purpose of the enactment. Every

provision, phrase, clause and word must be interpreted in a manner to further the

object of the enactment. No word or part of a statute can be construed in

isolation. Courts must be mindful that an interpretation which renders either

provision otiose must be avoided unless the conflict does not yield any possible

reconciliation.

42 In Krishan Kumar v State of Rajasthan,19 the Rajasthan State Road

Transport Corporation, Jaipur proposed a scheme in 1977 under Section 68-C of

the Motor Vehicles Act 193920 for the exclusive operation of the disputed road.

Upon the enactment of the Motor Vehicles Act 1988 21, a Writ Petition was filed

contending that due to undue delay in notifying the scheme under 1939 Act, the

scheme was not saved by the 1988 Act. Section 100(4) of the 1988 Act stipulated

that a draft scheme must be finalized within one year from the date of its

publication, failing which it would lapse. Section 217(2)(e) stipulated that

notwithstanding the repeal of the 1939 Act, a scheme proposed under Section

68-C, if pending immediately before the commencement of the 1988 Act, shall be

finalised in accordance with the provisions of Section 100 of the 1988 Act. The

Court noted that, contrary to legislative intent, no scheme under the 1939 Act

would be saved if schemes under that Act were to be assessed with reference to

19 (1991) 4 SCC 258 20 “1939 Act” 21 “1988 Act”

31 the date of their publication. Noting the apparent conflict between the two

provisions, a two judge Bench of this Court interpreted both provisions

harmoniously and held:

“10. There appears to be some apparent conflict between Section 100(4) and Section 217(2)(e) of the Act. While Section 217(2)(e) permits finalisation of a scheme in accordance with Section 100 of the new Act sub-section (4) of Section 100 lays down that a scheme if not finalised within a period of one year shall be deemed to have lapsed. If the appellant's contention is accepted then Section 217(2)(e) will become nugatory and no scheme published under Section 68-C of the old Act could be finalised under the new Act. On the other hand if the period of one year as prescribed under Section 100(4) is not computed from the date of publication of the scheme under Section 68-C of the old Act and instead the period of one year is computed from the date of commencement of the Act both the provisions could be given full effect.

11. It is settled principle of interpretation that where there appears to be inconsistency in two sections of the same Act, the principle of harmonious construction should be followed in avoiding a head on clash. It should not be lightly assumed that what the Parliament has given with one hand, it took away with the other. The provisions of one section of statute cannot be used to defeat those of another unless it is impossible to reconcile the same.”

The Court held that where the Parliament confers a benefit, it must not be readily

assumed that it intends to withdraw a benefit at the same time. Furthermore, the

provisions of one section cannot be used to defeat another, unless there is no

possibility of reconciling the two conflicting provisions.

43 In British Airways Plc v Union Of India22, the appellant was an aircraft

carrier engaged in the business of international air transport of passengers and

cargo. It was contended that as they were not a “person-in-charge” as defined in

Section 2(31) of the Customs Act 1962, no penalty can be imposed upon them

22 (2002) 2 SCC 95

32 under Section 116 for shortages in offloading the quantity of goods consigned.

Section 42 required an officer under the Act to issue a written order for the

conveyance of the goods from the customs house. Clause (e) of sub-section (2)

of Section 42 prescribes that no such order shall be given until the person-in-

charge of the conveyance has satisfied the proper officer that no penalty is

leviable on them under Section 116 or the payment of any penalty that may be

levied upon them under that section has been secured by such guarantee or

deposit of such amount as the proper officer may direct. The appellant contended

that once a clearance order is issued, no liability can be imposed on them.

44 A two judge Bench of this Court noted held that while Section 42 operated

to expedite the clearance of goods, Section 116 operated to ensure the

protection of cargo. Consequently, the two provisions subserved different

purposes. Further, by an amendment in Section 148 which was a provision for

the liability of an agent of the person in charge, sub-section (2) was inserted

which stipulated that any person who represents himself to any officer of customs

as an agent of any such person-in-charge, and is accepted as such by that

officer, shall be liable for the fulfillment of any obligation of the person-in-charge.

The Court held that effect must be given to the amendment, which would be

rendered redundant if the contention of the appellant was accepted. Relying on

the principle of harmonious interpretation, the Court held:

“It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well- known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other

33 provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy.”

This Court held that courts must ensure that every provision is construed in a

manner to render seemingly contradictory provisions workable. In interpreting two

provisions of a statute, courts must adopt the interpretation which does not defeat

either provision and advances the remedy envisaged by their enactment.

45 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 RBI.

46 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

34 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). This view is strengthened by virtue of the fact that prior

to its deletion, Section 57-B(19) was a provision in Chapter VA of which sub-

section (1) read thus:

“Notwithstanding anything contained in this Act or Rules framed there under or bylaws of any registered society or orders issued there under, the provisions of this chapter shall have overriding effect.” (Emphasis supplied)

Section 57-B(19), which was intended to have overriding effect, was deleted and

clauses (a) and (b) were inserted in Section 54(3) of the 1960 Act. The absolute

power conferred upon Cooperative Banks to appoint the CEO was deleted. In this

view, Section 49-E(2) and clauses (a) and (b) of Section 54(3) are to be read

harmoniously in the manner noted above.

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;

35

(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

36 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 Societies.

49 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.

50 We accordingly allow the appeal and set aside the impugned judgment

and order of the High Court dated 7 August 2018. In consequence, we uphold the

order of the learned Single Judge dismissing the Writ Petition, though for the

reasons that we have indicated above. There shall be no order as to costs.

…………...…...….......………………........J. [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J. [Ajay Rastogi]

New Delhi;

March 04, 2020.

37