# MANAGING DIRECTOR CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT v. ZILA SAHKARI KENDRIYA BANK MARYADIT & ORS

- **Citation:** [2020] 5 S.C.R. 307
- **Court:** Supreme Court of India
- **Decided:** 2020-03-04
- **Case number:** Civil Appeal No.1961 of 2020
- **Bench:** Dr. Dhananjaya Y Chandrachud, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/managing-director-chhattisgarh-state-co-operative-bank-maryadit-v-zila-sahkari-34480
- **Pages:** 37

## Headnote

Chhatisgarh Cooperative Societies Act, 1960 - ss.49-E(2),
56(3) - Appellant, a State Cooperative body is the apex body of
Cooperative Banks in the State of Chhatisgarh - First respondent
is a District Central Cooperative Bank - Appointment of the CEO
of the first respondent - Division Bench of High Court held that in
terms of s.54(3), appellant had no role in the appointment of the
CEO and 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 - Held:
Sub-section (1) of s.49E deals with appointment of CEO of an Apex
Society while sub-section (2) with CEO of Central Society - s.54
talks about the cadre of officers - Sub-section (3) of s.54 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 - Provisions of s.54(3) was amended by
Amendment Act 2016 - Present dispute arose by virtue of the 2016
Amending Act which inserted clauses (a) and (b) in s.54(3) of the
1960 Act - Clause (a) of sub-section (3) stipulated that the eligibility
criteria for the post of CEO of a Cooperative Bank are those
prescribed by the RBI in this regard and clause (b) stipulated that if
the concerned Cooperative Bank failed to appoint a CEO under
the eligibility criteria within a specified period, the Registrar may
appoint an eligible officer of the Bank - The term 'class of societies'
in s.54(3) excluded Cooperative Banks for the limited purpose of
the appointment of their CEO - However, where a Cooperative Bank
is a Central Society within the ambit of s.49-E(2), the CEO shall be
appointed from among the officers of the cadre constituted and
maintained under s.54, where such cadre has been constituted -
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State Government is empowered to issue a notification in pursuance
of the power conferred upon it under s.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 where no cadre has been constituted under s.54, the CEO
of a Cooperative Bank which is a Central Society under s.49-E(2)
shall be appointed with the prior approval of the Registrar as
stipulated in s.49-E(2)(b)(ii) - In the instant case, first respondent
is a Central Society falling within the ambit of s.49-E(2) of the 1960
Act - In exercise of the power conferred by s.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 - 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 was not sustainable in law - Appointment
of sixth respondent by the appellant as the CEO of first respondent
was ratified by the Registrar of Societies and accepted by the BoD
of the first respondent - Thus, appointment of sixth respondent was
in terms of s.54(3) and was legally sustainable - Order of Division
Bench of High Court set aside.
Interpretation of Statutes: Harmonious construction - Held:
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 - It is 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 - Where two provisions of an
enact

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[2020] 5 S.C.R. 307
307
MANAGING DIRECTOR CHHATTISGARH STATE
CO-OPERATIVE BANK MARYADIT
v.
ZILA SAHKARI KENDRIYA BANK MARYADIT & ORS.
(Civil Appeal No.1961 of 2020)
MARCH 04, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
AJAY RASTOGI, JJ.]
Chhatisgarh Cooperative Societies Act, 1960 - ss.49-E(2),
56(3) - Appellant, a State Cooperative body is the apex body of
Cooperative Banks in the State of Chhatisgarh - First respondent
is a District Central Cooperative Bank - Appointment of the CEO
of the first respondent - Division Bench of High Court held that in
terms of s.54(3), appellant had no role in the appointment of the
CEO and 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 - Held:
Sub-section (1) of s.49E deals with appointment of CEO of an Apex
Society while sub-section (2) with CEO of Central Society - s.54
talks about the cadre of officers - Sub-section (3) of s.54 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 - Provisions of s.54(3) was amended by
Amendment Act 2016 - Present dispute arose by virtue of the 2016
Amending Act which inserted clauses (a) and (b) in s.54(3) of the
1960 Act - Clause (a) of sub-section (3) stipulated that the eligibility
criteria for the post of CEO of a Cooperative Bank are those
prescribed by the RBI in this regard and clause (b) stipulated that if
the concerned Cooperative Bank failed to appoint a CEO under
the eligibility criteria within a specified period, the Registrar may
appoint an eligible officer of the Bank - The term 'class of societies'
in s.54(3) excluded Cooperative Banks for the limited purpose of
the appointment of their CEO - However, where a Cooperative Bank
is a Central Society within the ambit of s.49-E(2), the CEO shall be
appointed from among the officers of the cadre constituted and
maintained under s.54, where such cadre has been constituted -
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State Government is empowered to issue a notification in pursuance
of the power conferred upon it under s.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 where no cadre has been constituted under s.54, the CEO
of a Cooperative Bank which is a Central Society under s.49-E(2)
shall be appointed with the prior approval of the Registrar as
stipulated in s.49-E(2)(b)(ii) - In the instant case, first respondent
is a Central Society falling within the ambit of s.49-E(2) of the 1960
Act - In exercise of the power conferred by s.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 - 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 was not sustainable in law - Appointment
of sixth respondent by the appellant as the CEO of first respondent
was ratified by the Registrar of Societies and accepted by the BoD
of the first respondent - Thus, appointment of sixth respondent was
in terms of s.54(3) and was legally sustainable - Order of Division
Bench of High Court set aside.
Interpretation of Statutes: Harmonious construction - Held:
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 - It is 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 - 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 should be construed in isolation -
Chhatisgarh Cooperative Societies Act, 1960.
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Allowing the appeal, the Court
HELD: 1. 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. 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. [Paras 21, 22][327-E-F]
2. 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. Subsection (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: contributed to
the share capital; or given loans or financial assistance; or
guaranteed the repayment of loans, debentures or advances; or
given grants in any other form. The provisions of both subsections (1) and (2) of Section 49-E begin with an overriding nonobstante 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
M. D. CHHATTISGARH STATE COOP. BANK MARYADIT v. ZILA
SAHKARI KENDRIYA BANK MARYADIT
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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. [Para 23][327-G-H;
328-A-E]
3. 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
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. [Para 24][328-F-G]
4. 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
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appoint cadre officers deputed to cadre posts by the Apex or
Central Society, as the case may be. [Para 25][328-H; 329-A-C]
5. By virtue of the 2016 Amending Act, clauses (a) and (b)
was inserted in Section 54(3) of the 1960 Act. Clause (a) of subsection (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 Bank. While 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 cooperative 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. 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 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. 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
M. D. CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT v.
ZILA SAHKARI KENDRIYA BANK MARYADIT
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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). This view is strengthened by
the deletion of Section 57-B(19) and the simultaneous insertion
of clauses (a) and (b) in Section 54(3). [Paras 26, 34, 35, 36]
[329-D-F; 335-C-G]
JK Cotton Spinning and Weaving Mills Co Ltd v. State
of Uttar Pradesh AIR 1961 SC 1170 : [1961] 3 SCR
185; Commercial Tax Officer, Rajasthan v. M/s Binani
Cements Ltd. (2014) 8 SCC 319 : [2014] 3 SCR 1;
South Indian Corporation (P) Ltd. v. Secretary, Board
of Revenue AIR 1964 SC 207 : [1964] 4 SCR 280;
Paradip Port Trust v. Their Workmen AIR 1977 SC 36:
[1977] 1 SCR 537; Maharashtra State Board of
Secondary and Higher Education v. Paritosh Bhupesh
Kumar Sheth (1984) 4 SCC 27; CCE v. Jayant Oil Mills
(1989) 3 SCC 343 : [1989] 2 SCR 291; P S Sathappan
v. Andhra Bank Ltd (2004) 11 SCC 672 : [2004] 5 Suppl.
SCR 188; Sarabjit Rick Singh v. Union of India (2008)
2 SCC 417 : [2007] 13 SCR 321; Pankajakshi v.
Chandrika (2016) 6 SCC 157 : [2016] 3 SCR 1018 -
relied on.
7. 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
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(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 subsection (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.
[Para 38][336-C-G]
8. 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.
[Para 39][336-H; 337-A-C]
9. It is 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. No word or part of a statute can be construed in
M. D. CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT v.
ZILA SAHKARI KENDRIYA BANK MARYADIT
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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. 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). 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. In this
view, 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. [Paras 41, 45, 46][337-G-H;
338-D-E; 341-A-D]
Principles of Statutory Interpretation by Justice G P
Singh; Statutory Interpretation by Francis Benion -
referred to.
10. 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 Where no
cadre has been constituted under Section 54, the CEO of a
Cooperative Bank which is a Central Society under Section 49E(2) shall be appointed with the prior approval of the Registrar
as stipulated in Section 49-E(2)(b)(ii). [Para 47][342-D-F]
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11. In the instant 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 Societies. 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 and accepted by
the BoD of the first respondent. [Paras 48, 49][342-G-H;
343-A-C]
Krishan Kumar v. State of Rajasthan (1991) 4 SCC
258 : [1991] 3 SCR 500; British Airways Plc v.
Union of India (2002) 2 SCC 95 : [2001] 5 Suppl. SCR
152 - relied on.
Case Law Reference
[1961] 3 SCR 185
relied on
Para 32
[2014] 3 SCR 1
relied on
Para 33
[1964] 4 SCR 280
relied on
Para 33
[1977] 1 SCR 537
relied on
Para 33
(1984) 4 SCC 27
relied on
Para 33
[1989] 2 SCR 291
relied on
Para 33
M. D. CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT v.
ZILA SAHKARI KENDRIYA BANK MARYADIT
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[2004] 5 Suppl. SCR 188
relied on
Para 33
[2007] 13 SCR 321
relied on
Para 33
[2016] 3 SCR 1018
relied on
Para 33
[1991] 3 SCR 500
relied on
Para 42
[2001] 5 Suppl. SCR 152
relied on
Para 43
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1961
of 2020.
From the Judgment and Order dated 07.08.2018 of the High Court
of Chattisgarh at Bilaspur in WA No.96 of 2018.
Vikrant Singh Bais, Yogesh Tiwari, Advs. for the Appellant.
Sameer Shrivastava, Darpan K.M., D.K.Devesh, Rohit Singh,
Advs. for the Respondents.
The Judgment of the Court was delivered by
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. The Division Bench held that the
appointment made by the appellant on 11 August 2017 of the Chief
Executive Officer1 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.
1 "CEO"
2 "1960 Act"
3 "PC Act"
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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
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.
M. D. CHHATTISGARH STATE COOP. BANK MARYADIT v. ZILA SAHKARI
KENDRIYA BANK MARYADIT [DR. DHANANJAYA Y CHANDRACHUD, J.]
4 "BoD"
5 "RBI"
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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 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
7 Writ Appeal No. 96 of 2018
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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; (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
M. D. CHHATTISGARH STATE COOP. BANK MARYADIT v. ZILA SAHKARI
KENDRIYA BANK MARYADIT [DR. DHANANJAYA Y CHANDRACHUD, J.]
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"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 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
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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.
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.
No.
Name of Apex
Cooperative Society
Name of Cooperative
Society
(1)
(2)
(3)
1
M.P. State Cooperative
Bank Ltd.
Central Cooperative Bank

2
Madhya Pradesh State
land Development Bank
Primary Cooperative Land
Development Bank
3
Madhya Pradesh State
Cooperative Marketing
Federation
Primary Cooperative
Marketing Societies and
Process Committee
(Published in part-1 of Gazette of M.P. dated 19.02.1971)"
M. D. CHHATTISGARH STATE COOP. BANK MARYADIT v. ZILA SAHKARI
KENDRIYA BANK MARYADIT [DR. DHANANJAYA Y CHANDRACHUD, J.]
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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 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 conferred by Section 54(3), the State
Government issued a notification dated 12 January 1971
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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;
(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
M. D. CHHATTISGARH STATE COOP. BANK MARYADIT v. ZILA SAHKARI
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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;
(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.