An Apex Society has power to appoint a CEO in the Cooperative bank, subject to meeting the eligibility criteria of RBI; SC.

Supreme Court of India

Justice D Y Chandrachud & Justice Ajay Rastogi

The SC {Managing Director Chhattisgarh State Co-Operative v. Zila Sahkari Kendriya Bank Maryadit & Ors.} holds Clauses (a) and (b) of Section 54(3) of Chhattisgarh Co-Operative Societies Act 1960, as special provisions for the appointment of the CEO of Cooperative Banks confer upon them the power to appoint their CEO, subject to such officer satisfying the eligibility criteria prescribed by the RBI in this regard. It was held that the term, "class of societies‟ in Section 54(3) excludes Cooperative Banks for the limited purpose of the appointment of their CEO.

Further, held that however, where a Cooperative Bank is a Central Society within the ambit of Section 49-E(2) of Chhattisgarh Co-Operative Societies Act 1960, the CEO shall be appointed from among the officers of the cadre constituted and maintained under Section 54, where such cadre has been constituted. It was held that 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.

It was also held that where no cadre has been constituted under Section 54 of Chhattisgarh Co-Operative Societies Act 1960, the CEO of a Cooperative Bank which is a Central Society under Section 49-E(2) shall be appointed with the prior approval of the Registrar as stipulated in Section 49-E(2)(b)(ii). 

It was held that 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. It was also held that 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. 

In the present case, the Division Bench of HC held that the appointment made by the appellant on 11 August 2017 of the Chief Executive Officer of the first respondent bank and its subsequent ratification by the Registrar of Cooperative Societies, were without the authority of law. Consequently, the decision of the appellant was held to be not binding on the first respondent by the HC. The said judgment was set aside by the SC - by restoring the appointments in view of aforesaid.