Bank cannot appoint CEO from outside specified cadre under Section 54(3) of 1960 Act

The SC set aside the HC judgment regarding CEO appointment in a cooperative bank. The bank attempted to appoint an officer not from the cadre maintained by the appellant, violating Section 54(3) of the 1960 Act and state notifications requiring Central Cooperative Banks to employ officers only from specified cadres. The court held that the 2016 Amendment Act's provisions regarding CEO eligibility criteria must be read harmoniously with existing cadre requirements. The Registrar's ratification of the alternative CEO appointment was upheld as legally sustainable. Appeal allowed.

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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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