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 – 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.
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 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 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 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 (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 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]
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.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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