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2020 (3) TMI 1464 - SC - Indian LawsAppointment of the Chief Executive Officer (CEO) of the first Respondent bank and its subsequent ratification by the Registrar of Cooperative Societies - applicability of 2016 Amending Act which inserted Clauses (a) and (b) in Section 54(3) of the 1960 Act - HELD THAT - Clause (a) of Sub-section (3) stipulates that the eligibility criteria for the post of CEO of a Cooperative Bank are those prescribed by the RBI in this regard. Clause (b) stipulates that if the concerned Cooperative Bank fails to appoint a CEO under the eligibility criteria within a specified period the Registrar may appoint an eligible officer of the Bank. 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). In Commercial Tax Officer Rajasthan v. M/s. Binani Cements Ltd. 2014 (3) TMI 905 - SUPREME COURT 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. 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). In the present case it was not disputed that the first Respondent is a Central Society falling within the ambit of Section 49-E(2) of the 1960 Act. In exercise of the power conferred by Section 54(3) of the 1960 Act the State Government issued a notification dated 12 January 1971 specifying that Central Cooperative Banks were obligated to employ officers according to their availability only from the cadres created by the State Cooperative Bank. A similar notification was issued on 26 June 1971 in terms of which Central Cooperative Banks were permitted to maintain cadres of officers and it was stipulated that Village Cooperative Societies including Large Sized Agricultural Credit Societies would have to employ officers drawn only from the cadres maintained by the Central Cooperative Bank. 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. The impugned judgment and order of the High Court dated 7 August 2018 is set aside - appeal allowed.
Issues Involved:
1. Legality of the CEO's appointment by the Appellant. 2. Interpretation of Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960. 3. Applicability of notifications issued under Section 54(3) concerning cadre officers. 4. Regulatory control of the State Government over Cooperative Banks. 5. Harmonious construction of conflicting statutory provisions. Detailed Analysis: 1. Legality of the CEO's Appointment by the Appellant: The Division Bench of the High Court set aside the Single Judge's decision, holding that the Appellant's appointment of the CEO was without legal authority. The Division Bench emphasized that the power to appoint a CEO lies with the Registrar upon the failure of the District Central Cooperative Bank to make such an appointment within a specified period, as per Section 54(3)(b) of the 1960 Act. The Division Bench found no failure on the part of the first Respondent in making an ad-interim arrangement, thus ruling the Appellant's action as an usurpation of power. 2. Interpretation of Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960: Section 54(3) was amended to include Clauses (a) and (b), which prescribe the eligibility criteria for the CEO as set by the RBI and empower the Registrar to appoint a CEO if the Cooperative Bank fails to do so within a specified period. The Appellant argued that the appointment of the CEO should be from the cadre maintained under Section 54. However, the Division Bench interpreted that the power to appoint a CEO lies solely with the Cooperative Bank, and only in the case of failure does the Registrar step in. 3. Applicability of Notifications Issued Under Section 54(3) Concerning Cadre Officers: The Appellant relied on a notification dated 12 January 1971, which mandated that Central Cooperative Banks must appoint officers from the cadre constituted by the State Cooperative Bank. The Appellant argued that this notification, along with Section 54(3), obligated the first Respondent to accept the appointed cadre officer. The Division Bench, however, held that the 2016 Amendment Act, which inserted Clauses (a) and (b) in Section 54(3), nullified the applicability of the 1971 notification for appointing CEOs. 4. Regulatory Control of the State Government Over Cooperative Banks: The Appellant contended that the regulatory control over Cooperative Banks is necessary to prevent mismanagement and misappropriation of public funds. The Division Bench's decision, according to the Appellant, would undermine this control. The Supreme Court noted that Section 49-E(2) and Section 54(3) should be read harmoniously to retain the State Government's regulatory control while allowing Cooperative Banks some autonomy in appointing their CEOs. 5. Harmonious Construction of Conflicting Statutory Provisions: The Supreme Court emphasized the need for a harmonious construction of Section 49-E(2) and Section 54(3) to avoid rendering either provision otiose. The Court held that while Cooperative Banks have the power to appoint their CEOs, this power is subject to the eligibility criteria prescribed by the RBI. For Central Societies falling within Section 49-E(2), the CEO must be appointed from the cadre maintained under Section 54, if such a cadre exists. The State Government can issue a notification under Section 54(3) specifying that Cooperative Banks must appoint their CEOs from the cadre maintained by the Apex Society. The Apex Society should provide a panel of eligible officers to the Cooperative Bank for this purpose. Conclusion: The Supreme Court allowed the appeal, setting aside the High Court's judgment and upholding the Single Judge's decision, though for different reasons. The Court clarified that Cooperative Banks have the power to appoint their CEOs from a panel of eligible officers provided by the Apex Society, ensuring both regulatory control and compliance with eligibility criteria. The appointment of the seventh Respondent as CEO was deemed unsustainable, and the appointment of the sixth Respondent was upheld.
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