CEO Appointment in Cooperative Banks: Supreme Court Harmonises Sections 49-E and 54 of the Chhattisgarh Co-Operative Societies Act, 1960
Case Details
| Particulars | Details |
|---|---|
| Case Name | Managing Director Chhattisgarh State Co-Operative Bank Maryadit Vs Zila Sahkari Kendriya Bank Maryadit & Ors. |
| Court | Supreme Court of India |
| Appeal Number | Civil Appeal No. 1961 of 2020 |
| Date of Order | 04/03/2020 |
Background and Context
The Supreme Court of India was called upon to resolve a significant legal question arising within the cooperative banking framework of Chhattisgarh: whether the Chhattisgarh State Cooperative Bank, functioning as the Apex Society, retained the authority to appoint the Chief Executive Officer of a District Central Cooperative Bank following the amendments introduced to Section 54(3) of the Chhattisgarh Co-Operative Societies Act, 1960 by the Chhattisgarh Cooperative Societies (Amendment) Act 2016, effective from 14 December 2016.
The matter involved competing interpretations of statutory provisions governing officer appointments in cooperative societies, the continuing relevance of a decades-old State Government notification, and the interplay between a non-obstante provision and subsequently inserted special clauses.
Factual Matrix
The sequence of events that triggered the dispute is as follows:
On 9 August 2017, the serving CEO of the first respondent — Zila Sahkari Kendriya Bank Maryadit, a District Central Cooperative Bank — was arrested by the Economic Offences Wing of the State of Chhattisgarh on charges of corruption under the Prevention of Corruption Act 1988. He was subsequently remanded to custody and placed under suspension.
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 — Chhattisgarh State Cooperative Bank — exercising what it claimed to be its authority under
Section 54(3)of the 1960 Act, appointed the sixth respondent, who was then serving as a Special Class Managing Director at Raipur, as the CEO of the first respondent. The justification offered was that the interim appointee did not satisfy the eligibility norms prescribed by the Reserve Bank of India.The sixth respondent was, however, not handed charge because the BoD meeting was slated for 16 August 2017. At that meeting, the BoD formally approved the appointment of the seventh respondent as the regular CEO.
The first respondent filed a writ petition before the High Court of Chhattisgarh challenging the legality of the appellant's order dated 11 August 2017.
On 21 August 2017, the Registrar of Cooperative Societies communicated that the appointment made by the appellant was in accordance with law.
On 25 August 2017, the BoD of the first respondent resolved to accept the appointment of the sixth respondent and directed that charge be handed over accordingly.
Journey Through the Courts
Single Judge's Decision
A learned Single Judge of the Chhattisgarh High Court, by judgment dated 19 January 2018, dismissed the writ petition filed by the first respondent. The Single Judge held that the appointment of the sixth respondent was in conformity with the provisions of Section 54(3) of the 1960 Act, had been ratified by the Registrar of Cooperative Societies, and had also been accepted at a BoD meeting of the first respondent.
Division Bench's Ruling
The first respondent filed a Letters Patent Appeal before the Division Bench of the Chhattisgarh High Court. By the impugned judgment dated 7 August 2018, the Division Bench allowed the appeal and set aside the Single Judge's order. The Division Bench reasoned as follows:
- Following the 2016 amendment to
Section 54(3), the Apex Bank had no role whatsoever in the appointment of the CEO of a District Central Cooperative Bank. - The power to appoint a CEO, post-amendment, resided exclusively with the Registrar of Cooperative Societies — and even that power was conditional, arising only upon the failure of the cooperative bank to make an appointment within a stipulated period, as prescribed under clause (b) of
Section 54(3). - No vacancy or failure had occurred on the part of the first respondent, since an ad-interim arrangement had been made pending the BoD meeting on 16 August 2017.
- The Apex Bank had stepped in to fill a vacuum that did not exist, amounting to usurpation of power.
- The subsequent ratification by the Registrar could not cure the illegality.
Aggrieved by this decision, the appellant approached the Supreme Court.
Statutory Framework: Key Provisions
Section 54 — Appointment of Managers, Secretaries and Other Officers
Section 54 of the Chhattisgarh Co-Operative Societies Act, 1960 reads as follows: