Case Note & Summary
The dispute arose from the appointment of the Chief Executive Officer (CEO) of the first respondent, Zila Sahkari Kendriya Bank Maryadit, a District Central Cooperative Bank in Chhattisgarh. The appellant, Chhattisgarh State Cooperative Bank, is the apex body of cooperative banks in the state. On 9 August 2017, the CEO of the first respondent was arrested on corruption charges under the Prevention of Corruption Act, 1988, and was suspended. On 10 August 2017, the Chairperson of the first respondent appointed the seventh respondent as an interim CEO pending a formal decision by the Board of Directors (BoD). On 11 August 2017, the appellant appointed the sixth respondent, who was serving as a 'Special Class Managing Director' at Raipur, as the CEO of the first respondent, purportedly under Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960 (the Act). The first respondent challenged this appointment by filing a writ petition before the Chhattisgarh High Court. A learned Single Judge dismissed the writ petition, holding that the appointment was valid under Section 54(3). However, a Division Bench of the High Court allowed the appeal, setting aside the Single Judge's order and holding that the appellant had no role in the appointment of the CEO under the amended Section 54(3), and that the ratification by the Registrar was of no consequence. The appellant appealed to the Supreme Court. The Supreme Court examined the relevant provisions: Section 49-E of the Act deals with appointment of Managing Director and CEO in certain circumstances, and Section 54 deals with appointment of managers, secretaries, and other officers. Section 54(2) requires Apex and Central Societies to maintain cadres of officers, and Section 54(3) empowers the State Government to specify classes of societies that shall employ officers from such cadres, making it obligatory for those societies to accept and appoint cadre officers as and when deputed by the Apex or Central Societies. The State Government had issued a notification on 12 January 1971 under Section 54(3), specifying that District Central Cooperative Banks shall appoint officers from the cadre constituted by the Apex Cooperative Bank. The court held that this notification creates a binding obligation on the first respondent to accept the CEO deputed by the appellant from its cadre. The court distinguished Section 49-E, which provides an alternative method for appointment of CEO, but does not override the mandatory obligation under Section 54(3). The court also noted that the Registrar's ratification, though not necessary, supported the legality of the appointment. The Supreme Court allowed the appeal, set aside the Division Bench's judgment, and restored the Single Judge's order, holding that the appointment of the sixth respondent as CEO of the first respondent was valid and binding.
Headnote
A) Cooperative Law - Appointment of CEO - Section 54(3) of Chhattisgarh Co-Operative Societies Act, 1960 - Power of Apex Society to Depute Cadre Officers - The appellant, as the Apex Society, maintained a cadre of officers under Section 54(2). The State Government notification dated 12.01.1971, issued under Section 54(3), specified that District Central Cooperative Banks shall employ officers from the cadre maintained by the Apex Society. The appellant deputed the sixth respondent as CEO of the first respondent. The court held that the notification under Section 54(3) creates an obligation on the part of the specified class of societies to accept and appoint cadre officers as and when deputed by the Apex Society. The appointment of the sixth respondent was in compliance with Section 54(3) and was binding on the first respondent. (Paras 14-20) B) Cooperative Law - Appointment of CEO - Section 49-E of Chhattisgarh Co-Operative Societies Act, 1960 - Applicability to Central Societies - Section 49-E(2) provides for appointment of CEO of a Central Society from among officers of the cadre maintained under Section 54, or with prior approval of the Registrar. The court held that Section 49-E does not override Section 54(3). The notification under Section 54(3) operates independently and obligates the first respondent to accept the deputed officer. The Division Bench erred in holding that the appellant had no role in the appointment of the CEO under the amended Section 54(3). (Paras 10-13, 21-23) C) Cooperative Law - Ratification by Registrar - Effect of Registrar's Approval - The Registrar of Cooperative Societies, by communication dated 21.08.2017, stated that the appointment of the sixth respondent was in accordance with law. The court held that the Registrar's ratification, though not necessary for the validity of the appointment under Section 54(3), further supports the legality of the appointment. The Division Bench erred in holding that the ratification was of no consequence. (Paras 5, 24)
Issue of Consideration
Whether the appellant (Chhattisgarh State Cooperative Bank) had the authority under Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960 to appoint the sixth respondent as the CEO of the first respondent (District Central Cooperative Bank), and whether such appointment was binding on the first respondent.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the Division Bench of the Chhattisgarh High Court dated 7 August 2018, and restored the judgment of the learned Single Judge dated 19 January 2018. The court held that the appointment of the sixth respondent as CEO of the first respondent by the appellant under Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960 was valid and binding on the first respondent.
Law Points
- Interpretation of Section 54(3) of Chhattisgarh Co-Operative Societies Act
- 1960
- Power of Apex Society to depute cadre officers
- Obligation of class of societies to accept cadre officers
- Distinction between Section 49-E and Section 54
- Role of Registrar in appointment of CEO
