MANAGING DIRECTOR CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT versus ZILA SAHKARI KENDRIYA BANK MARYADIT & ORS. on 4 March 2020

MANAGING DIRECTOR CHHATTISGARH STATECO-OPERATIVE BANK MARYADIT

v.

ZILA SAHKARI KENDRIYA BANK MARYADIT & ORS.

(Civil Appeal No.1961 of 2020)

MARCH 04, 2020

[DR. DHANANJAYA Y CHANDRACHUD AND

AJAY RASTOGI, JJ.]

Chhatisgarh Cooperative Societies Act, 1960 - ss.49-E(2),56(3) – Appellant, a State Cooperative body is the apex body ofCooperative Banks in the State of Chhatisgarh – First respondentis a District Central Cooperative Bank – Appointment of the CEOof the first respondent – Division Bench of High Court held that interms of s.54(3), appellant had no role in the appointment of theCEO and the power to appoint a CEO could only be exercised bythe Registrar upon the failure of the District Central CooperativeBank to make an appointment within a specified time period – Held:Sub-section (1) of s.49E deals with appointment of CEO of an ApexSociety while sub-section (2) with CEO of Central Society – s.54talks about the cadre of officers – Sub-section (3) of s.54 makes itobligatory upon such class of societies to accept and appoint cadreofficers on cadre posts as and when they are deputed by the Apexor Central Societies – Provisions of s.54(3) was amended byAmendment Act 2016 – Present dispute arose by virtue of the 2016Amending Act which inserted clauses (a) and (b) in s.54(3) of the1960 Act – Clause (a) of sub-section (3) stipulated that the eligibilitycriteria for the post of CEO of a Cooperative Bank are thoseprescribed by the RBI in this regard and clause (b) stipulated that ifthe concerned Cooperative Bank failed to appoint a CEO underthe eligibility criteria within a specified period, the Registrar mayappoint an eligible officer of the Bank – The term ‘class of societies’in s.54(3) excluded Cooperative Banks for the limited purpose ofthe appointment of their CEO – However, where a Cooperative Bankis a Central Society within the ambit of s.49-E(2), the CEO shall beappointed from among the officers of the cadre constituted andmaintained under s.54, where such cadre has been constituted –

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AState Government is empowered to issue a notification in pursuanceof the power conferred upon it under s.54(3) specifying that suchCooperative Bank shall appoint its CEO from the cadre maintainedby the Apex Society as notified therein – The notified Apex Societyshall forward to the concerned Cooperative Bank a panel of officers,from which the Cooperative Bank shallappoint its CEO, subject toBsuch officer possessing the eligibility criteria as stipulated by theRBI; and where no cadre has been constituted under s.54, the CEOof a Cooperative Bank which is a Central Society under s.49-E(2)shall be appointed with the prior approval of the Registrar asstipulated in s.49-E(2)(b)(ii) – In the instant case, first respondentCis a Central Society falling within the ambit of s.49-E(2) of the 1960Act– In exercise of the power conferred by s.54(3) of the 1960 Act,the State Government issued a notification dated 12 January 1971specifying that Central Cooperative Banks were obligated to employofficers, according to their availability, only from the cadres createdby the State Cooperative Bank – Seventh respondent is not an officerDfrom the cadre maintained by the appellant – Consequently, theaction of the first respondent in seeking to appoint the seventhrespondent as the CEO was not sustainable in law – Appointmentof sixth respondent by the appellant as the CEO of first respondentwas ratified by the Registrar of Societies and accepted by the BoDEof the first respondent – Thus, appointment of sixth respondent wasin terms of s.54(3) and was legally sustainable – Order of DivisionBench of High Court set aside.

Conclusion

Interpretation of Statutes: Harmonious construction – Held:In interpreting two provisions of a statute, courts must adopt theFinterpretation which does not defeat either provision and advancesthe remedy envisaged by their enactment – It is settled principle oflaw that where two provisions of an enactment appear to conflict,courts must adopt an interpretation which harmonises, to the bestextent possible, both provisions – Where two provisions of anenactment appear to be in conflict, courts do not readily presumeGan ‘either/or’ situation – Courts must construe the provisionsharmoniously to ensure, as far as possible, the effective operationof both provisions in a manner that furthers the purpose of theenactment – Every provision, phrase, clause and word must beinterpreted in a manner to further the object of the enactment – NoHword 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 theappointment of Managers, Secretaries and other officers ofsocieties. Sub-section (1) stipulates that a Manager, Secretary,Accountant or other paid officer shall be appointed only if theypossess the prescribed qualifications. A reading of the sub-sectiondenotes that the power to make appointments vests with thesociety itself. Sub-section (2) of Section 54 casts an obligationupon Apex and Central Societies to maintain such cadre of officersas the State Government may, by order, direct. The Registrar isempowered to frame the conditions of service of the members ofthe cadre so constituted. [Paras 21, 22][327-E-F]

2. Section 49-E of the 1960 Act deals specifically with theappointment of Managing Directors and Chief Executive Officersin certain circumstances. The provision deals only with theappointment of the Managing Director and the CEO. It coversappointments “in certain circumstances,” which are specifiedtherein. Sub-section (1) of Section 49-E deals with theappointment of the Managing Director of an Apex Society. Sub-section (2) deals with the appointment of the Managing Director(who shall be the CEO) of Central Societies. Section 49-E appliesto a situation where the State Government has: contributed tothe share capital; or given loans or financial assistance; orguaranteed the repayment of loans, debentures or advances; orgiven grants in any other form. The provisions of both sub-sections (1) and (2) of Section 49-E begin with an overriding non-obstante stipulation. The provisions operate notwithstandinganything contained to the contrary in the 1960 Act, rulesthereunder or bye-laws of the society. Section 49-E thus carvesout an exception to the power vested in societies to makeappointments under Section 54(1). Sub-section (2)(a) stipulatesthat for every Central Society, there shall be a Managing Directornot below the rank of a Class-II officer, who shall be the CEO ofthe society. Clause (b) of Section (2) stipulates that the CEOwould be appointed from among the officers of the cadremaintained under Section 54, if such a cadre has been constitutedand in all other cases, with the prior approval of the Registrar of A

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ACooperative Societies. Thus, for Central Societies which fallwithin the purview of Section 49-E(2), the source of appointmentfor the Managing Director or the General Manager (who shall bethe CEO) must be from the officers drawn from the cadreconstituted under Section 54, if such cadre has been constituted.In all other cases, the Central Society may appoint the ManagingBDirector or General Manager with the prior approval of theRegistrar of Cooperative Societies. [Para 23][327-G-H;328-A-E]

3. A pre-requisite to bring a Central Society within the foldof Section 49-E(2) is that the State Government has contributedCto its share capital, given loans or financial assistance, guaranteedthe repayment of loans, debentures or advances or has givengrants in any other form. Evidently, this provision has beenintroduced by the legislature as an effort to maintain regulatorycontrol over Central Societies to whom financial assistance hasDbeen extended by the State Government in the terms set out inthe provision. For this reason, where the society is a CentralSociety that satisfies the requirements of Section 49-E(2), thegeneral power vested in it to appoint its CEO under Section 54(1)is limited to appointment from the cadres constituted andmaintained under Section 54. [Para 24][328-F-G]E

4. Sub-section (3) of Section 54 empowers the StateGovernment to specify, by notification, the class of societies whichshall employ officers from cadres maintained by Apex or CentralSocieties as specified therein. The provision stipulates that uponthe issuance of such notification, it shall be obligatory for theFclass of societies notified therein to accept and appoint such cadreofficers on cadre posts as and when deputed by the Apex or CentralSociety, as the case may be. Upon the issuance of a notificationunder Section 54(3), an exception is carved to the power ofappointment conferred upon the notified class of societies underGSection 54(1). Where a class of societies has been notified by theState Government to employ officers from cadres constituted bythe Apex or Central Society, the power of appointment vests withthe Apex or Central Society, as specified in the notification. Thenotified class of societies is under an obligation to accept and appoint cadre officers deputed to cadre posts by the Apex orCentral 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 sub-section (3) stipulates that the eligibility criteria for the post ofCEO of a Cooperative Bank are those prescribed by the RBI inthis regard. Clause (b) stipulates that if the concernedCooperative Bank fails to appoint a CEO under the eligibilitycriteria within a specified period, the Registrar may appoint aneligible officer of the Bank. While Section 54(3) deals with a classof societies, clauses (a) and (b), as inserted by the 2016Amendment Act are specific in their application to onlyCooperative Banks. Furthermore, while Section 54(3) deals withthe appointment of deputed cadre officers on cadre posts, clauses(a) and (b) deal only with the appointment of the CEOs ofCooperative Banks. Clause (a) contemplates that the eligibilityguidelines prescribed by the RBI will apply to officers holdingthe post of the CEO of a Cooperative Bank. Significantly, clause(b) of Section 54(3) beings with the words “if the concerning co-operative Bank fails to appoint” which denotes an intention tovest with Cooperative Banks the power to appoint their CEO.The provision also stipulates that where the Cooperative Bankfails to appoint the CEO within a specified period, the Registrarmay appoint an eligible officer of the bank. The stipulation that inthe case of default, the CEO shall be an officer of the bank andnot an officer from the cadre as notified under Section 54(3)demonstrates the intention of the legislature to vest withCooperative Banks the power to appoint their CEO. Evidently,by virtue of the 2016 Amendment Act, clauses (a) and (b) wereinserted as specific provisions for the appointment of the CEOof Cooperative Banks, vesting in them the power of appointment.Where two interpretations of potentially conflicting provisionsare possible, courts must adopt the interpretation that furthersthe intention of the legislature as encapsulated in the maxim Verbaita sunt intelligenda ut res magis valeat quam pereat. In this viewof the matter, a harmonious construction of Section 54(3) andclauses (a) and (b) of the 2016 Amendment Act leads to the AB

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Aconclusion that clauses (a) and (b) are special provisionsconcerning the appointment of the CEO of Cooperative Bankswhich are carved out of power of the State Government to issuea notification under Section 54(3). This view is strengthened bythe deletion of Section 57-B(19) and the simultaneous insertionof clauses (a) and (b) in Section 54(3). [Paras 26, 34, 35, 36]B[329-D-F; 335-C-G]

JK Cotton Spinning and Weaving Mills Co Ltd v. Stateof Uttar PradeshAIR 1961 SC1170 : [1961] 3 SCR185; Commercial Tax Officer, Rajasthan v. M/s BinaniCements Ltd. (2014) 8 SCC 319 : [2014] 3 SCR 1;CSouth Indian Corporation (P) Ltd. v. Secretary,Boardof RevenueAIR 1964 SC 207 : [1964] 4 SCR 280;Paradip Port Trust v. Their WorkmenAIR 1977 SC 36:[1977] 1 SCR 537;Maharashtra State Board ofSecondary and Higher Education v. Paritosh BhupeshDKumar Sheth(1984) 4 SCC 27;CCE v. Jayant Oil Mills(1989) 3 SCC 343 : [1989] 2 SCR 291;P S Sathappanv. 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) 6SCC 157 : [2016] 3 SCR 1018 –Erelied on.

7. Both sub-section (2) and sub-section (3) of Section 54are not provisions confined only to Cooperative Banks. However,clauses (a) and (b) of sub-section (3) specifically deal with theappointment of CEOs of Cooperative Banks. While introducingFclauses (a) and (b) into sub-section (3) of Section 54 by the 2016Amendment Act, the legislature has nonetheless left intact theprovisions of Section 49-E. Section 49-E(2) stipulates that theCEO shall be appointed from among the officers of the cadremaintained under Section 54, where such cadre has beenGconstituted. Section 49-E is a provision governing Apex andCentral Societies to whom financial assistance has been extendedby the State Government in the forms stipulated therein. Theexpression “Central Society” is defined to mean a CooperativeLand Development Bank or any other society whose operationis confined to a part of the State, as noticed earlier in SectionH

(2) (c-i). The provisions contained in Section 49-E are intendedto bring about regulatory control of the State Government byrequiring the appointment of the CEO from among the officers ofthe cadre maintained under Section 54. The 2016 AmendmentAct which brought in the provision of clauses (a) and (b) of sub-section (3) has not affected the operation of Section 49-E. Hence,the appointment of a CEO of Central Society governed by Section49-E(2) has to be from the officers of the cadre maintained underSection 54. Significantly, sub-section (2) of Section 49-E containsa non-obstante stipulation. As a consequence, notwithstandingthe 2016 Amendment Act, the CEO of a Central Society fallingwithin the description of sub-section (2) of Section 49-E has tobe appointed from among the officers of the cadre maintainedunder Section 54, if such cadre has been constituted.[Para 38][336-C-G]

8. Section 49-E(2) is not a self-contained provision. Section49-E(2)(b)(i) merely stipulates that the CEO of a Central Societythat falls within its ambit, shall be appointed from among theofficers of the cadres maintained under Section 54. Thus, wherea cadre under Section 54 has been constituted, a Central Societyfalling within the ambit of Section 49-E(2) is obligated to appointits officer from such cadre. Neither Section 49-E nor Section 54(2)specify whether the appointment is to be made from the cadre ofthe Apex Society or Central Society as constituted under Section54(2). Section 54(3) empowers the State Government to issue anotification specifying the class of societies which shall employofficers from such cadres maintained by Apex or Central Societiesas may be specified therein. In addition to conferring upon theState Government the general power to notify the class ofsocieties which would employ officers from the cadres maintainedby Apex or Central Societies, the notification under Section 54(3)operationalizes the regulatory control of the State Governmentenvisaged 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 ofan enactment appear to conflict, courts must adopt aninterpretation which harmonises, to the best extent possible, bothprovisions. No word or part of a statute can be construed in A

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Aisolation. Courts must be mindful that an interpretation whichrenders either provision otiose must be avoided unless theconflict 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. Itcannot be said that the carving out of Cooperative Banks for theBappointment of their CEO from the enabling power conferredupon the State Government under Section 54(3) applies in equalmeasure to those Cooperative Banks that are Central Societieswithin the ambit of Section 49-E(2). The State Government isempowered to issue a notification under Section 54(3) forCCooperative Banks which are Central Societies falling within theambit of Section 49-E(2) specifying that the Cooperative Bankshall appoint its CEO from the cadre constituted by the ApexSociety. At the same time, to ensure that clauses (a) and (b) ofSection 54(3) are given effect, the notified Apex Society shallforward to the concerned Cooperative Bank a panel of officersDfrom which the it shall appoint its CEO, subject to the officersatisfying the eligibility criteria prescribed by the RBI. In thisview, the regulatory control of the State Government overCooperative Banks which have received state funding in themanner specified in Section 49-E(2) is retained, which furthersEthe object of the provision. [Paras 41, 45, 46][337-G-H;338-D-E; 341-A-D]

Principles of Statutory Interpretation byJustice G PSingh; Statutory Interpretation by Francis Benion –referred to.F

10. The State Government is empowered to issue anotification in pursuance of the power conferred upon it underSection 54(3) specifying that such Cooperative Bank shall appointits CEO from the cadre maintained by the Apex Society as notifiedtherein. The notified Apex Society shall forward to the concernedGCooperative Bank a panel of officers, from which the CooperativeBank shall appoint its CEO, subject to such officer possessingthe eligibility criteria as stipulated by the RBI; and Where nocadre has been constituted under Section 54, the CEO of aCooperative Bank which is a Central Society under Section 49-E(2) shall be appointed with the prior approval of the RegistrarHas stipulated in Section 49-E(2)(b)(ii). [Para 47][342-D-F]

M. D. CHHATTISGARH STATE CO-OPERATIVE BANK MARYADIT v.ZILA SAHKARI KENDRIYA BANK MARYADIT

11. In the instant case, it was not disputed that the firstrespondent is a Central Society falling within the ambit of Section49-E(2) of the 1960 Act. In exercise of the power conferred bySection 54(3) of the 1960 Act, the State Government issued anotification dated 12 January 1971 specifying that CentralCooperative Banks were obligated to employ officers, accordingto their availability, only from the cadres created by the StateCooperative Bank. A similar notification was issued on 26 June1971 in terms of which, Central Cooperative Banks werepermitted to maintain cadres of officers and, it was stipulatedthat Village Cooperative Societies including Large SizedAgricultural Credit Societies would have to employ officers drawnonly from the cadres maintained by the Central Cooperative Bank.Similarly, by another notification dated 26 June 1971, CentralCooperative Banks were directed to maintain cadres of officersfor the appointment of managers in rural cooperative societiesincluding Large Sized Agricultural Credit Societies. The seventhrespondent is not an officer from the cadre maintained by theappellant. Consequently, the action of the first respondent inseeking to appoint the seventh respondent as the CEO is notsustainable in law. The appointment of the sixth respondent asCEO was ratified by the Registrar of Societies and accepted bythe BoD of the first respondent. [Paras 48, 49][342-G-H;343-A-C]

Krishan Kumar v. State of Rajasthan(1991) 4 SCC258 : [1991] 3 SCR 500;British Airways Plc v.Union of India(2002) 2 SCC 95 : [2001] 5 Suppl. SCR152 – relied on.

Case Law Reference

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From the Judgment and Order dated 07.08.2018 of the High Court of Chattisgarh at Bilaspur in WA No.96 of 2018.C

Vikrant Singh Bais, Yogesh Tiwari, Advs. for the Appellant.

Sameer Shrivastava, Darpan K.M., D.K.Devesh, Rohit Singh,Advs. for the Respondents.

The Judgment of the Court was delivered byDDR. DHANANJAYA Y CHANDRACHUD, J.

1. This appeal has arisen from a judgment of a Division Bench ofthe High Court of Chhattisgarh dated 7 August 2018. Allowing a LettersPatent Appeal, the Division Bench set aside the judgment of a SingleEJudge dated 19 January 2018. The Division Bench held that theappointment made by the appellant on 11 August 2017 of the ChiefExecutive Officer[1] of the first respondent bank and its subsequentratification by the Registrar of Cooperative Societies, were without theauthority of law. Consequently, the decision of the appellant was held tobe not binding on the first respondent.F

2. The appellant – Chhattisgarh State Cooperative Bank - is theapex body of cooperative banks in the State of Chhattisgarh. The firstrespondent is a District Central Cooperative Bank which is governed bythe provisions of the Chhattisgarh Co-Operative Societies Act 1960[2].

3. The CEO of the first respondent bank was arrested on 9 AugustG2017 by the Economic Offences Wing of the State of Chhattisgarh oncharges of corruption, under the Prevention of Corruption Act 1988[3].

1 “CEO”

2 “1960 Act”H3 “PC Act”

Upon being produced before the designated Court, he was remanded tocustody and placed under suspension from his office of the CEO.

4. On 10 August 2017, the seventh respondent was appointed asan interim CEO by the Chairperson of the first respondent, pending aformal decision by the Board of Directors[4]. On 11 August 2017, theappellant appointed the sixth respondent, who was discharging duties asa ‘Special Class Managing Director’ at Raipur, as the CEO of the firstrespondent. The appellant purported to take this action as the firstrespondent had been appointed an interim CEO and the person appointeddid not fulfill the eligibility criteria prescribed by the Reserve Bank ofIndia[5]. The appellant also sought to justify its action of appointing thesixth respondent as the CEO of the first respondent with reference toSection 54(3) of the 1960 Act.

5. The sixth respondent was not given charge as the CEO of thefirst respondent on the ground that a meeting of the BoD was scheduledto be convened on 16 August 2017. On 16 August 2017, the BoD of thefirst respondent approved the appointment of the seventh respondent,who was initially serving as the interim CEO, as the CEO. The firstrespondent instituted a Writ Petition[6] before the High Court ofChhattisgarh challenging the legality of the order dated 11 August 2017,by which the appellant had appointed the sixth respondent as the CEO.Essentially, the case of the first respondent is that the appointment of itsCEO lies solely within its discretion and neither the appellant as the apexsociety nor the Registrar has the power to appoint a CEO. The BoD ofthe first respondent bank sought a clarification from the Registrar ofCooperative Societies on 17 August 2017 regarding the appointment ofthe sixth respondent as the CEO. By his communication dated 21 August2017, the Registrar stated that the appointment made by the appellant ofthe sixth respondent was in accordance with law and that the order ofappointment should be complied with.

6. On 25 August 2017, the BoD of the first respondent resolved toaccept the appointment of the sixth respondent and directed that theseventh respondent shall hand over charge of the post of the CEO to thesixth respondent.

4 “BoD”

5 “RBI”

6 W.P (C) 3875 of 2017

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A7. A learned Single Judge of the Chhattisgarh High Court by ajudgment dated 19 January 2018 dismissed the Writ Petition filed by thefirst respondent holding that the appointment of the sixth respondentwas in terms of the provisions of Section 54(3) of the 1960 Act and waslegally sustainable. The Single Judge also noted that the appointmenthad been ratified by the Registrar of Cooperative Societies and that theBappointment had also been accepted at a meeting of the BoD of the firstrespondent.

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8. Aggrieved by the order of the learned Single Judge, the firstrespondent filed a Writ Appeal[7] before the Division Bench, which wasallowed by the impugned order dated 7 August 2018. The Division BenchCheld that under the amended provisions of Section 54(3), which wereincorporated with effect from 14 December 2016, the appellant had norole in the appointment of the CEO. In the view of the Division Bench,the power to appoint a CEO could only be exercised by the Registrarupon the failure of the District Central Cooperative Bank to make anDappointment within a specified time period. This, the Division Benchheld, flows from clause (b) of Section 54(3). The Division Bench was ofthe view that there was no failure on the part of the first respondent inmaking an ad-interim arrangement, pending the meeting of the BoD on16 August 2017 to appoint a regular CEO. The Division Bench found fault with the appellant for having stepped-in to fill a vacuum when noneEexisted. Holding that this was a case of the usurpation of power by theApex Body, the Division Bench held that the ratification of the appointmentby the Registrar of Cooperative Societies was of no consequence. Thejudgment of the learned Single Judge was accordingly set aside.

9. Before we note the rival submissions, it is necessary to advertFto the relevant provisions of law, as applicable to the present dispute.

10. Section 49-E of the 1960 Act deals with the appointment of aManaging Director and CEO, as its marginal notes indicates, “in certaincircumstances”. Section 49-E provides as follows:

G“49-E. Appointment of Managing Director and Chief ExecutiveOfficer in certain circumstances.-

(1) (a) Notwithstanding anything contained in this Act or rules orbyelaws made thereunder for any Apex Society where the State Government has contributed to its share capitalor has given loans or financial assistance or has guaranteedthe repayment of loans granted in any other form, thereshall be a Managing Director, not below the rank of aClass I Officer, who shall be selected by a committeeconstituted at the State level consisting of the AgricultureProduction Commissioner, Chairman of the Apex Society,Registrar Co-operative Societies and one Directornominated by the Board of Apex Society:”

Provided that if the committee fails to select the ManagingDirector unanimously, the matter shall be referred to theState Government whose decision thereon shall be final.

(b) The Managing Director shall be ex-officio member of thecommittee.

(c) The Managing Director shall be the Chief ExecutiveOfficer of the society and shall perform such duties andexercise such powers as may be prescribed.

(2) (a) Notwithstanding anything contained in this Act, or theRules or byelaws made thereunder for every Centralsociety where the State Government has contributed toits share capital or has given loans or financial assistanceor has guaranteed the repayment of loans, debentures, oradvances or has given grants in any other form, there shallbe a Managing Director or a General Manager not belowthe rank of a Class II Officer who shall be the ChiefExecutive Officer of the society and ex-officio memberof the committee:

(b) The Chief Executive Officer shall be appointed:

(i) from among the Officers of the cadre maintained underSection 54 if such a cadre has been created; (ii) in othercases with the prior approval of the Registrar.

(c) The Chief Executive Officer shall perform such dutiesand exercise such powers as may be prescribed.”

11. Sub-section (1) of Section 49-E deals with the appointment ofthe Managing Director and CEO of an Apex Society. The expression‘Apex Society’ is defined in Section 2(a-i) to mean

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A“a society whose principal object is to provide facilities for theoperation of other societies affiliated to it and whose area ofoperation extends to the whole State…”

Sub-section (2) deals with the appointment of a Managing Directoror a General Manager who shall be the CEO of a Central Society. TheBexpression ‘Central Society’ is defined in Section 2(c-i) as follows:

“”Central Society” means a Co-operative Land Development Bankor any other society whose area of operation is confined to a partof the State and which has as its principal object the promotion ofthe principal objects and the provision of facilities for the operationCof same type of societies and for other societies affiliated to it andnot less than five members of which are societies.”

12. Sub-section (1) applies to an Apex Society while sub-section(2) applies to a Central Society. Sub-section (2), with which we areconcerned, applies to a Central Society to which the State GovernmentDhas: (i) contributed the share capital; or (ii) granted loans or financialassistance; or (iii) guaranteed the repayment of loans, debentures, oradvances; or (iv) given grants in any other form. Sub-section (2)(b)provides that the CEO of every Central Society shall be appointed fromamong the officers of the cadre maintained under Section 54, if such acadre has been created and, in other cases, with the prior approval ofEthe Registrar.

13. Section 49-E(2)(b)(i) refers to the cadre of officers maintainedunder Section 54. Section 54 is in the following terms:

“54. Appointment of Managers, Secretaries and other officers.-F(1) No society shall appoint a Manager, Secretary, Accountant orother paid officer unless he holds such qualifications as may beprescribed.

(2) The Apex and Central Societies shall maintain such cadres ofofficers and other servants as the State Government may, by order,direct and the conditions of service of members of such cadreGshall be such as the Registrar may, by order, determine.

(3) The State Government may, by notification, specify the classof societies which shall employ officers from such cadresmaintained by the Apex or Central Societies under sub-section(2) as may be specified therein and it shall be obligatory on theHpart of such class of societies to accept and appoint such cadre officers on the cadre posts as and when deputed by the Apex orCentral Societies.”

Sub-section (1) of Section 54 provides that a society shall notappoint a Manager, Secretary, Accountant or other paid officer unlessthe person holds such qualifications as are prescribed. Under sub-section(2), Apex and Central Societies have to maintain such cadres of officersand other servants as the State Government may, by order, direct. Undersub-section (3), the State Government is empowered to issue a notificationspecifying the class of societies which shall employ officers from thecadres maintained by the Apex or Central Societies. Sub-section (3)also makes it obligatory upon such class of societies to accept and appointcadre officers on cadre posts, as and when they are deputed by theApex or Central Societies.

14. In exercise of the power conferred by sub-section (3) of Section54, a notification was issued by the State of Madhya Pradesh (prior toits reorganisation) on 12 January 1971. The notification is extracted below:

“Notification No. 258-413-Fifteen-1.71 dated 12.01.1971

By exercising powers under sub-section 3 of section 54 of MadhyaPradesh Cooperative Societies Act 1960 (No. 17 of 1961), TheState Govt. vide this notification notifies that the cooperativesocieties mentioned in column 3 of the schedule given below shallappoint officers from the cadre constituted by the ApexCooperative Society mentioned in column 2 of the schedule givenbelow in front of them as per their availability.

(Published in part-1 of Gazette of M.P. dated 19.02.1971)”

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A15. In terms of the above notification, it was stipulated that acooperative society specified in column (3) of the Schedule shall appointofficers from the cadre constituted by the Apex Cooperative Societiesmentioned in column (2) of the Schedule. The first entry in the Schedulespecifies the Madhya Pradesh State Cooperative Bank Ltd. as the ApexCooperative Society and the Central Cooperative Bank as theBCooperative Society. In other words, the Central Cooperative Bank isrequired to appoint officers from the cadre constituted by the StateCooperative Bank. This notification, it is not in dispute, applies to theState of Chhattisgarh.

16. The provisions of Section 54(3) were amended by theCChhattisgarh Cooperative Societies (Amendment) Act 2016[8], with effectfrom 14 December 2016. The following provisions were inserted at theend of Section 54(3):

“(a) The eligibility criteria to hold the office of Chief ExecutiveOfficer of any Co-operative Bank shall be as such as may beDprescribed by the Reserve Bank in this regard.

(b) If the concerning Co-operative Bank fails to appoint the ChiefExecutive Officer under the eligibility criteria within a specifiedperiod, in such a condition the Registrar may appoint such eligibleofficer of the Bank.”E17. The present dispute has been occasioned by the insertion ofclauses (a) and (b) in Section 54(3) of the 1960 Act by virtue of theAmending Act of 2016.

18. The appellant has urged the following submissions:

F(i)The CEO of the first respondent (which is a District CentralCooperative Bank) is a paid officer whose appointment isregulated by Section 54(1), which mandates the appointmentof only persons who possess the prescribed qualifications.The appointment which was made by the first respondentwas of a person who did not fulfill the prescribed qualifications;G

(ii) Section 54(2) mandates the first appellant to maintain cadreof officers as the State Government may, by order, direct. Inexercise of the power conferred by Section 54(3), the StateGovernment issued a notification dated 12 January 1971

H8 “2016 Amendment Act”

which stipulated that the Central Cooperative Bank mustappoint officers from the cadre constituted by the StateCooperative Bank. By virtue of Section 54(3) and thenotification dated 12 January 1971, the first respondent (as aDistrict Central Cooperative Bank) is obligated to accept andappoint the officer deputed by the appellant (as the ApexSociety) as the CEO. In the present case, the person whowas appointed by the first respondent did not fulfill theprescribed eligibility criteria. Hence, the sixth respondent wasappointed as CEO in exercise of the appellant’s authorityunder Section 54(3) to make that appointment;

(iii) Pursuant to Section 54(3), a notification was issued on 26June 1971 under which all Central Cooperative Banks in thestate were permitted to maintain cadres of officers fromwhom appointments to Village Cooperative Societies,including Large Sized Agricultural Credit Societies would bemade. By another notification dated 26 June 1971 also underSection 54(3), Central Cooperative Banks were permitted tomaintain cadres of employees from whom managers for ruralcooperative societies would be appointed. Thus, all CentralCooperative Banks in the State of Chhattisgarh have tomaintain a cadre of employees in terms of the abovenotifications dated 26 June 1971 and all Village CooperativeSocieties including Large Sized Agricultural Credit Societiesshall employ officers only from the said cadres;

(iv) Sub-section (2) of Section 49-E specifically deals with theappointment of the Managing Director or a General Managerwho shall be the CEO of Central Societies to which the StateGovernment has made a contribution of share capital,furnished loans or granted financial assistance or any othergrant. Sub-clause (b)(i) of sub-section (2) clearly stipulatesthat the CEO shall be appointed from among officers in thecadre constituted under Section 54;

(v) Rule 3 of the Central Cooperative Bank Staff Services Rules1982 stipulates that appointments to all posts classified asClass-I posts shall be made by the Apex Bank from the listof cadre officers maintained by it. The Bye-laws of the firstrespondent stipulate that appointments to the post of Managing A

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Director/General Manager/Manager shall be from the cadreof officers maintained by the Apex Bank. If a cadre officeris not available due to unforeseen circumstances, a temporaryappointment may be made by the first respondent with theprior permission of the appellant, subject to such terms andconditions as may be imposed;

(vi) The 2016 Amendment Act which amended Section 54(3) mustbe read together with other provisions and not independently.The amendment in sub-section (3) only deals with the eligibilitycriteria and is equally applicable to both the Apex Societyand to any Central Society. Both the appellant and the firstrespondent are cooperative banks. The appellant is an ApexSociety while the first respondent is a Central Society;

(vii) Under sub-section (2) of Section 54, both Apex Societiesand Central Societies have to maintain cadres of officersand other servants as the State Government may, by order,direct. Sub-section (3) makes it obligatory on the firstrespondent (which is a Central Society) to accept and appointa cadre officer to a cadre post as and when deputed by theappellant (which is the Apex Society). It is only if the CEO isnot appointed within a specified period, that the Registrar isempowered to appoint an eligible officer as the CEO.

(viii) In the present case, the earlier CEO of the first respondentwas arrested on a charge of corruption under the PC Act.The Chairperson of the first respondent appointed a Manageras an interim CEO, who was not from the cadre of officersmaintained by the Apex Bank. Hence, the appellant inexercise of its powers under Section 54(3) read with thenotification dated 12 January 1971, deputed the sixthrespondent as CEO of the first respondent on 11 August 2017which appointment, the first respondent was bound to accept.On a clarification sought by the BoD of the first respondent,the Registrar of Cooperative Societies, by his reply dated 21August 2017 observed that the appointment made by theappellant was in accordance with law. Consequently, theBoDs accepted the appointment of the sixth respondent at ameeting on 25 August 2017. The order deputing the sixthrespondent as CEO was ratified by the Registrar andaccepted by the BoD of the first respondent; and

(ix) The learned Single Judge correctly dismissed the Writ PetitionAfiled by the first respondent. The Division Bench allowed theWrit Appeal on an erroneous appreciation of the applicablelegal regime. In the case of all Central Cooperative Banks inChhattisgarh, the CEO is an officer drawn from the cadremaintained by the Apex Bank. This is in consonance withBSections 49-E and 54(3) of the 1960 Act and notificationsissued from time to time. The consequence of the impugneddecision would be to deprive the Apex Bank of its authorityto monitor the affairs of Central Cooperative Societies.Financial control can be maintained through the power toappoint CEOs. Such a position was occasioned as hugeCamounts of public funds is at stake. The view of the DivisionBench will have far-reaching repercussions in the cooperativeset up and the beneficial purpose of the legislation would bedefeated resulting in mismanagement and misappropriationof public funds.

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19. On the other hand, learned counsel appearing on behalf of thefirst respondent urged that:

(i) Section 57-B of the 1960 Act was inserted by theChhattisgarh Cooperative Societies (Amendment) Act2012[9]. Sub-section (19) of Section 57-B provides that theCEO of State Cooperative Banks and Central CooperativeBanks shall be appointed by the members of the board ofthe State Cooperative Bank and the Central CooperativeBank, as the case may be, from among a panel of namesnot exceeding three persons eligible to hold the office ofCEO in accordance with the criteria stipulated by the RBI.The aforesaid panel was to be recommended by a selectionboard consisting of the following persons, all of whom shallbe the members of the Board of the State Cooperative Bankor the Central Cooperative Bank, as the case may be:

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a) The nominee of the State government on the board;

b) The nominee of the National Bank on the board; andc) One other member of the board, whether elected or co-opted.

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A(ii)Section 57-B of the 1960 Act was omitted by the 2016Amendment Act and clauses (a) and (b) were inserted insub-section (3) of Section 54 of the 1960 Act, whereby thepower was given to the Cooperative Bank to appoint theCEO within a specified time period and in default, theRegistrar is empowered to appoint such eligibleBofficer of the bank as the CEO;

(iii) The language of the 1960 Act indicates that the CEO ofCooperative Societies, be it a Primary Cooperative Society,Central Cooperative Society or State Cooperative Society,can be appointed by that Cooperative Society only. A plainCreading of Section 54(3) (a) and (b) makes it crystal clearthat the power to appoint a CEO lies with the CooperativeSociety and not with the Apex Society. It is also clear fromthe reading of the provision that the CEO of the CooperativeBank shall be appointed from the eligible officers of theDsaid Cooperative Bank. This can also be inferred from thefact that the said power was earlier given under section57-B of the 1960 Act but by the 2016 Amendment Act,Section 57-B was omitted and the provision of appointmentwas inserted in Section 54(3)(b); E(iv)Clause (b) of sub-section (2) of Section 49-E enumeratesthat a CEO shall be appointed from among the Officers ofthe cadre maintained under Section 54, if such a cadre hasbeen created. Section 54(1) provides that the “no societyshall appoint a Manager, Secretary, Accountant and otherpaid officer unless he holds such qualifications as may beFprescribed”. The word “Society” mentioned in sub-section(1) of Section 54 includes Primary Cooperative Societies,Central Cooperative Societies and State CooperativeSocieties, which means that every society shall appoint itsManager, Secretary, Accountant and other paid officers; G

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(v) The notification dated 12 January 1971 issued by the StateGovernment under Section 54(3) will be considered to benullified by the 2012 Amendment Act and subsequently bythe 2016 Amendment Act. The said notification is notapplicable in appointing a CEO in view of the omission ofHSection 57-B of the 1960 Act and the subsequent insertion of Section 54(3)(a) and (b). The 1960 Act does not mentionthat the CEO of the Central Cooperative Bank shall beappointed by the State Cooperative Bank from the cadreofficers of the State Cooperative Bank. What is not providedin the statute cannot be read into it. This is more so whenthe language of section 54(3)(b) is plain, clear andunambiguous that the Cooperative Society shall appoint theCEO;

(vi) It is settled law that if the language of the statute is clear,plain and unambiguous and admits of only one meaning,then no question of interpretation arises. The appellantcannot be permitted to add words in the statute to make itworkable for it; and

(vii) The action of the State Cooperative Bank in appointing theCEO of the Central Cooperative Bank is arbitrary and illegalas it is beyond the powers of the State Cooperative Bankunder the 1960 Act.

20. The rival submissions now fall for consideration.

21. Section 54 contains provisions for the appointment of Managers,Secretaries and other officers of societies. Sub-section (1) stipulatesthat a Manager, Secretary, Accountant or other paid officer shall beappointed only if they possess the prescribed qualifications. A reading ofthe sub-section denotes that the power to make appointments vests withthe society itself.

22. Sub-section (2) of Section 54 casts an obligation upon Apexand Central Societies to maintain such cadre of officers as the StateGovernment may, by order, direct. The Registrar is empowered to framethe conditions of service of the members of the cadre so constituted.

23. Section 49-E of the 1960 Act deals specifically with theappointment of Managing Directors and Chief Executive Officers incertain circumstances. The provision deals only with the appointment ofthe Managing Director and the CEO. It covers appointments “in certaincircumstances,” which are specified therein. Sub-section (1) of Section49-E deals with the appointment of the Managing Director of an ApexSociety. Sub-section (2) deals with the appointment of the ManagingDirector (who shall be the CEO) of Central Societies. Section 49-Eapplies to a situation where the State Government has:

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(ii) given loans or financial assistance; or

(iii) guaranteed the repayment of loans, debentures or advances; or

(iv) given grants in any other form.

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The provisions of both sub-sections (1) and (2) of Section 49-Ebegin with an overriding non-obstante stipulation. The provisions operatenotwithstanding anything contained to the contrary in the 1960 Act, rulesthereunder or bye-laws of the society. Section 49-E thus carves out anCexception to the power vested in societies to make appointments underSection 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-IIofficer, who shall be the CEO of the society. Clause (b) of Section (2)stipulates that the CEO would be appointed from among the officers ofthe cadre maintained under Section 54, if such a cadre has been constitutedDand in all other cases, with the prior approval of the Registrar ofCooperative Societies. Thus, for Central Societies which fall within thepurview of Section 49-E(2), the source of appointment for the ManagingDirector or the General Manager (who shall be the CEO) must be fromthe officers drawn from the cadre constituted under Section 54, if suchEcadre has been constituted. In all other cases, the Central Society mayappoint the Managing Director or General Manager with the priorapproval of the Registrar of Cooperative Societies.

24. A pre-requisite to bring a Central Society within the fold ofSection 49-E(2) is that the State Government has contributed to its shareFcapital, given loans or financial assistance, guaranteed the repayment ofloans, debentures or advances or has given grants in any other form.Evidently, this provision has been introduced by the legislature as aneffort to maintain regulatory control over Central Societies to whomfinancial assistance has been extended by the State Government in theterms set out in the provision. For this reason, where the society is aGCentral Society that satisfies the requirements of Section 49-E(2), thegeneral power vested in it to appoint its CEO under Section 54(1) islimited to appointment from the cadres constituted and maintained underSection 54.

25. Sub-section (3) of Section 54 empowers the State GovernmentHto 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, itshall be obligatory for the class of societies notified therein to acceptand appoint such cadre officers on cadre posts as and when deputed bythe Apex or Central Society, as the case may be. Upon the issuance ofa notification under Section 54(3), an exception is carved to the powerof appointment conferred upon the notified class of societies under Section54(1). Where a class of societies has been notified by the StateGovernment to employ officers from cadres constituted by the Apex orCentral Society, the power of appointment vests with the Apex or CentralSociety, as specified in the notification. The notified class of societies isunder an obligation to accept and appoint cadre officers deputed to cadreposts by the Apex or Central Society, as the case may be.

26. The present dispute has arisen by virtue of the 2016 AmendingAct which inserted clauses (a) and (b) in Section 54(3) of the 1960 Act.Clause (a) of sub-section (3) stipulates that the eligibility criteria for thepost of CEO of a Cooperative Bank are those prescribed by the RBI inthis regard. Clause (b) stipulates that if the concerned Cooperative Bankfails to appoint a CEO under the eligibility criteria within a specifiedperiod, the Registrar may appoint an eligible officer of the Bank. Thesubmission of the first respondent, which has found acceptance with theDivision Bench of the High Court, is that as a result of the amendmentwhich was made in 2016, the exclusive jurisdiction to appoint a CEO ofa Cooperative Bank vests with the Bank itself. However, according tothe submission, the CEO must fulfill the eligibility criteria prescribed bythe RBI. Moreover, it is only where the Cooperative Bank fails to appointan eligible CEO within a specified period, that clause (b) of Section54(3) empowers the Registrar of Cooperative Societies to appoint aneligible officer of the bank.

27. In the submission of the first respondent, clauses (a) and (b)are special provisions enacted for Cooperative Banks and are intendedto have an overriding effect over: (i) the power of the State Governmentto issue a notification in exercise of its powers under Section 54(3); and(ii) Section 49-E(2) which mandates that Central Societies shall appointtheir CEOs from the cadre constituted under Section 54. Clauses (a)and (b) of Section 54(3), it was contended, vests with Cooperative Banksthe absolute power to appoint their CEOs, notwithstanding any otherprovision in the 1960 Act. The effect of the amended provision may be

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Aconsidered in two parts: first, its effect on the power of the StateGovernment to issue a notification in pursuance of the power conferredupon it under Section 54(3); and second, its effect on Section 49-E(2).

28. By virtue of the 2012 Amendment Act, Section 57-B wasintroduced as a new Chapter V-A with provisions for short term Co-Boperative Credit Structure Societies. The term ‘short term Co-operativeCredit Structure Societies’ was defined as including “the State Co-operative Bank, a Central Co-operative Bank and a Primary AgriculturalCredit Co-operative Society”. Section 57-B(19) stipulated that the ChiefExecutive Officer of the State Co-operative Bank and a Central Co-operative Bank, shall be appointed by the members of the Board of theCState Co-operative Bank or the Central Co-operative Bank, as the casemay be. The appointment was to be made from a panel of names eligibleto hold the post in accordance with the criteria stipulated by the RBI.The constitution of the Selection Board was also set out in sub-section(19). By virtue of this provision, an exception was carved out for theDappointment of the CEO of Central Co-operative Banks and State Co-operative Banks, subject to the conditions prescribed therein.

29. By the 2016 Amendment Act, Section 57-B was deleted andclauses (a) and (b) were inserted in Section 54(3). Significantly, sub-section (3) of Section 54 is not confined only to Cooperative Banks.ESection 54(3) empowers the State Government to specify, by notification,the class of societies which shall employ officers from cadres maintainedby Apex or Central Societies. The term ‘class of societies’ employed inSection 54(3) includes any type of society covered by the provisions ofthe 1960 Act, including Cooperative Banks (as resource societies). Thisview is strengthened by Section 10 of the 1960 Act which mandates thatFthe Registrar of Cooperative Societies shall classify all societies underone or more of the following heads:

(i) Consumer Society;

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(vii) Processing Society;

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(ix) General Society; and

(x) Industrial Society.

Section 10 also empowers the Registrar to further classify societiesfalling under any of the above classifications into:

(i) Apex Society;

(ii) Central Society; and

(iii) Primary Society.

30. The 1960 Act covers a myriad of societies under its ambit.Though the term ‘class of societies’ includes within its ambit CooperativeBanks, the learned counsel for the first respondent has contended thatclause (a) and (b) of Section 54(3) were intended to carve out CooperativeBanks from the enabling power conferred upon the State Governmentand vest with them the exclusive power to appoint their CEOs. It wasbeen urged that were this Court to hold that there is an obligation upon aCooperative Bank, as a notified society under Section 54(3), to acceptfrom the Apex or Central Society as specified in the notification a deputedcadre officer as its CEO, clauses (a) and (b) would be rendered otiose.

31. It is a settled principle of law that where two provisions of anenactment appear to conflict, courts must adopt an interpretation whichharmonises, to the best extent possible, both provisions. Justice G PSingh in his seminal work Principles of Statutory Interpretation states:

“To harmonise is not to destroy. A familiar approach in all suchcases is to find out which of the two apparently conflictingprovisions in more general and which is more specific and toconstrue the more general one as to exclude the morespecific…The principle is expressed in the maxims Generaliaspecialibus non derogant and Generalibus specialia.”

Similarly, Craies in Statute Law states:

“The rule is, that whenever there is a particular enactment and ageneral enactment in the same statute, and the latter, taken in itsmost comprehensive sense, would overrule the former, theparticular enactment must be operative, and the general enactment A

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Amust be taken to affect only the other parts of the statute to whichit may properly apply.”

Where two provisions conflict, courts may enquire which of thetwo provisions is specific in nature and whether it was intended that thespecific provision is carved out from the application of the generalBprovision. The general provision operates, save and except in situationscovered by the specific provision. The rationale behind this principle ofstatutory construction is that were there appears a conflict between twoprovisions, it must be presumed that the legislature did not intend a conflictand a subject-specific provision governs those situations in exclusion tothe operation of the general provision.C

32. In an early decision of this Court in JK Cotton Spinningand Weaving Mills Co Ltd v State of Uttar Pradesh[10], a three judgeBench of this Court considered whether the principle applied to conflictswithin the same enactment. Clause 5(a) of the Government Order dated10 May 1948 conferred upon, inter alia, any employee or a registeredDtrade union of employers the right to move the Board constituted underthe Order to initiate an enquiry into an industrial dispute. Clause 23stipulated that where an enquiry is pending before the RegionalConciliation Officer, notwithstanding the pendency of a case before theBoard or Industrial Court, no employer shall discharge or dismiss anyEworkman. Under Clause 24, an order of the Board, unless modified inappeal, was final and conclusive. The appellant, representing theemployer’s union, contended that once an order is made under Clause5(a), Clause 23 has no application and the employer may proceed todismiss the workmen. The Court rejected the contention noting that anyemployer could defeat the provisions of Clause 23 merely by an applicationFunder Clause 5(a). The Court held that Clause 23 was made with adefinite purpose. Consequently, where an enquiry was pending underClause 23, an application under Clause 5(a) was barred. The Court held:

“9…We reach the same result by applying another well-knownrule of construction that general provisions yield to specialGprovisions. The learned Attorney-General seemed to suggest thatwhile this rule of construction is applicable to resolve the conflictbetween the general provision in one Act and the special provisionin another Act, the rule cannot apply in resolving a conflict betweengeneral and special provisions in the same legislative instrument.

H10 AIR 1961 SC 1170

This suggestion does not find support in either principleor authority. The rule that general provisions should yieldto specific provisions is not an arbitrary principle made bylawyers and Judges but springs from the commonunderstanding of men and women that when the sameperson gives two directions one covering a large numberof matters in general and another to only some of them hisintention is that these latter directions should prevail asregards these while as regards all the rest the earlierdirection should have effect.

10. Applying this rule of construction that in cases of conflictbetween a specific provision and a general provision the specificprovision prevails over the general provision and the generalprovision applies only to such cases which are not covered by thespecial provision, we must hold that clause 5(a) has no applicationin a case where the special provisions of clause 23 are applicable.”

This Court affirmed that the principle that the general excludesthe specific is a tool of statutory interpretation even in cases of conflictwithin the same enactment. Where one of the conflicting provisions isgeneral in nature and the other is specific, ‘common understanding’dictates that the specific provision is given effect, while the generalprovision continues to apply to all other situations.

33. In Commercial Tax Officer, Rajasthan v M/s BinaniCements Ltd.,[11] the question concerned whether the respondent-assessee was entitled for the grant of an eligibility certificate for exemptionfrom payment of Central Sales Tax and Rajasthan Sales Tax under Entry4 in Annexure ‘C’ of the Sales Tax New Incentive Scheme for Industries,1989. Annexure ‘C’ to the Scheme was titled the ‘Quantum of SalesTax Exemption under the new Scheme’. Entry 4 of the Annexurestipulated that ‘Prestigious Units’ would be entitled to a 75% exemptionfrom tax liability with 100% in terms of Fixed Capital Investment. By anamendment, Entry 1E was inserted which covered ‘new cement units’and stipulated that large-scale units would be entitled 25% tax exemption.A two judge Bench of this Court held:

“27. Before we deal with the fact situation in the present appeal,we reiterate the settled legal position in law, that is, if in a Statutory 11 Civil Appeal No. 336 of 2003, decided on 19 February 2014.

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ARule or Statutory Notification, there are two expressions used,one in General Terms and the other in special words, under therules of interpretation, it has to be understood that the specialwords were not meant to be included in the general expression.Alternatively, it can be said that where a Statute contains both aGeneral Provision as well as specific provision, the later mustBprevail.

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29…It is well established that when a general law and a speciallaw dealing with some aspect dealt with by the general law are inquestion, the rule adopted and applied is one of harmoniousconstruction whereby the general law, to the extent dealt with byCthe special law, is impliedly repealed. This principle finds its originsin the latin maxim of generalia specialibus non derogant...”

The Court held that where two provisions are in question – one ofgeneral application and the other specific in nature, a harmoniousinterpretation would mean that the general law, to the extent it is dealtDwith by the special law, is impliedly repealed. This Court, relying on theprinciple generalia specialibus non derogant held that Item 1E is a“subject specific provision”. The Court noted that the amendmentremoved “new cement industries” from the non-eligible Annexure ‘B’and placed it into Annexure ‘C’ amongst the eligible industries.EConsequently, the Court rejected the contention of the respondent-assessee and held that as Item 1E concerned the more specific unit, itwas excluded in its application from other general entries.

The principle that the general provision excludes the more specifichas been consistently applied by this Court in South Indian CorporationF(P) Ltd. v Secretary, Board of Revenue[12], Paradip Port Trust vTheir Workmen[13], Maharashtra State Board of Secondary andHigher Education v Paritosh Bhupesh Kumar Sheth[14], CCE vJayant Oil Mills,[15]P S Sathappan v Andhra Bank Ltd[16], SarabjitRick Singh v Union of India[17] and Pankajakshi v Chandrika[18].

G12 AIR 1964 SC 20713 AIR 1977 SC 3614 (1984) 4 SCC 2715 (1989) 3 SCC 34316 (2004) 11 SCC 67217 (2008) 2 SCC 417H18 (2016) 6 SCC157

34. While sub-section (3) of Section 54(3) deals with a class ofsocieties, clauses (a) and (b), as inserted by the 2016 Amendment Actare specific in their application to only Cooperative Banks.Furthermore, while Section 54(3) deals with the appointment of deputedcadre officers on cadre posts, clauses (a) and (b) deal only with theappointment of the CEOs of Cooperative Banks. Clause (a) contemplatesthat the eligibility guidelines prescribed by the RBI will apply to officersholding the post of the CEO of a Cooperative Bank. Significantly, clause(b) of Section 54(3) beings with the words “if the concerning co-operativeBank fails to appoint” which denotes an intention to vest with CooperativeBanks the power to appoint their CEO. The provision also stipulates thatwhere the Cooperative Bank fails to appoint the CEO within a specifiedperiod, the Registrar may appoint an eligible officer of the bank. Thestipulation that in the case of default, the CEO shall be an officer of thebank and not an officer from the cadre as notified under Section 54(3)demonstrates the intention of the legislature to vest with CooperativeBanks the power to appoint their CEO.

35. Evidently, by virtue of the 2016 Amendment Act, clauses (a)and (b) were inserted as specific provisions for the appointment of theCEO 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 thelegislature as encapsulated in the maxim Verba ita sunt intelligenda utres magis valeat quam pereat. Craies on Legislation states:

“…if two constructions of a provision are possible on its face, andone would clearly advance the legislative purpose and the otherwould clearly achieve little or nothing, the former is to bepreferred.”

36. In this view of the matter, a harmonious construction of Section54(3) and clauses (a) and (b) of the 2016 Amendment Act leads to theconclusion that clauses (a) and (b) are special provisions concerning theappointment of the CEO of Cooperative Banks which are carved out ofpower of the State Government to issue a notification under Section54(3). We are strengthened in this view by the deletion of Section 57-B(19) and the simultaneous insertion of clauses (a) and (b) in Section54(3).

37. The difficulty in the present matters arises from the contentionof the first respondent that the exception carved out by clauses (a) and A

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A(b) of Section 54(3) also applies to Central Societies that fall within theambit of Section 49-E(2) of the 1960 Act. In this submission, where aCooperative Bank as a Central Society has received funds from theState Government in the manner stipulated in Section 49-E(2), suchCentral Banks may independently appoint a CEO and would not beobligated to appoint its CEO from the cadre constituted under SectionB54, even if such cadre has been constituted.

38. As we have noted, both sub-section (2) and sub-section (3) ofSection 54 are not provisions confined only to Cooperative Banks.However, clauses (a) and (b) of sub-section (3) specifically deal withthe appointment of CEOs of Cooperative Banks. While introducing clausesC(a) and (b) into sub-section (3) of Section 54 by the 2016 AmendmentAct, the legislature has nonetheless left intact the provisions of Section49-E. Section 49-E(2) stipulates that the CEO shall be appointed fromamong the officers of the cadre maintained under Section 54, wheresuch cadre has been constituted. Section 49-E is a provision governingDApex and Central Societies to whom financial assistance has beenextended by the State Government in the forms stipulated therein. Theexpression “Central Society” is defined to mean a Cooperative LandDevelopment Bank or any other society whose operation is confined toa part of the State, as noticed earlier in Section (2)(c-i). The provisionscontained in Section 49-E are intended to bring about regulatory controlEof the State Government by requiring the appointment of the CEO fromamong the officers of the cadre maintained under Section 54. The 2016Amendment Act which brought in the provision of clauses (a) and (b) ofsub-section (3) has not affected the operation of Section 49-E. Hence,the appointment of a CEO of Central Society governed by Section 49-FE(2) has to be from the officers of the cadre maintained under Section54. Significantly, sub-section (2) of Section 49-E contains a non-obstantestipulation. As a consequence, notwithstanding the 2016 AmendmentAct, 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 officersof the cadre maintained under Section 54, if such cadre has beenGconstituted.

39. It is necessary here to note that Section 49-E(2) is not a self-contained provision. Section 49-E(2)(b)(i) merely stipulates that the CEOof a Central Society that falls within its ambit, shall be appointed fromamong the officers of the cadres maintained under Section 54. Thus,Hwhere a cadre under Section 54 has been constituted, a Central Society falling within the ambit of Section 49-E(2) is obligated to appoint itsofficer from such cadre. Neither Section 49-E nor Section 54(2) specifywhether the appointment is to be made from the cadre of the ApexSociety or Central Society as constituted under Section 54(2). Section54(3) empowers the State Government to issue a notification specifyingthe class of societies which shall employ officers from such cadresmaintained by Apex or Central Societies as may be specified therein.In addition to conferring upon the State Government the general powerto notify the class of societies which would employ officers from thecadres maintained by Apex or Central Societies, the notification underSection 54(3) operationalizes the regulatory control of the StateGovernment envisaged in Section 49-E(2) in the manner specified therein.

40. This is evident in the notification dated 12 January 1971 issuedby the State Government in exercise of the power conferred upon itwhich stipulated that the first respondent (as a District CentralCooperative Bank) is obligated to accept and appoint the officer deputedby the appellant (as the Apex Society) as the CEO. Had Section 49-E(2) an inbuilt mechanism for the determination of the officer who wouldbe appointed as the CEO, no difficulty would arise given the use of anon-obstante provision therein. The difficulty arises precisely becauseof the link between Section 49-E and the notification issued by the StateGovernment under Section 54(3). To hold that clauses (a) and (b) vest inCooperative Banks which are Central Societies falling within the ambitof Section 49-E(2) the overriding power to appoint their CEO wouldrender the provision inoperative. This would defeat the salient purposeof ensuring the regulatory control of the State Government over Societiesto which it has made a financial contribution. On the other hand, to holdthat a Cooperative Bank which is a Central Society within the ambit ofSection 49-E(2) must accept and appoint the cadre officer deputed bythe Apex Society, defeats the special provision inserted for CooperativeBanks in clauses (a) and (b) of Section 54(3). Both Section 49-E(2)(b)and clauses (a) and (b) of Section 54(3) deal with the appointment of aCEO.

41. As we have noted before, it is settled principal of law thatwhere two provisions of an enactment appear to conflict, courts mustadopt an interpretation which harmonises, to the best extent possible,both provisions. Justice G P Singh in his seminal work Principles ofStatutory Interpretation states:

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“…It is the duty of the court to avoid “a head on clash” betweentwo sections of the same Act and, “whenever it is possible to doso, to construe provisions which appear to conflict so that theyharmonise.”

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“Inconsistent enactments – A common application of the principleis in relation to contradictory enactments within the same Act.Enactment A may in itself be clear and unambiguous. So mayenactment B, located elsewhere in the Act. But if they contradicteach other, they cannot both be applied literally. A undoes B, andCB undoes A. The court must do the best it can to reconcile them,but this can be achieved only by giving one or both a strainedconstruction.”

Where two provisions of an enactment appear to be in conflict,courts do not readily presume an ‘either/or’ situation. Courts mustDconstrue the provisions harmoniously to ensure, as far as possible, theeffective operation of both provisions in a manner that furthers the purposeof the enactment. Every provision, phrase, clause and word must beinterpreted in a manner to further the object of the enactment. No wordor part of a statute can be construed in isolation. Courts must be mindfulthat an interpretation which renders either provision otiose must be avoidedEunless the conflict does not yield any possible reconciliation.

42. In Krishan Kumar v State of Rajasthan,[19] the RajasthanState Road Transport Corporation, Jaipur proposed a scheme in 1977under Section 68-C of the Motor Vehicles Act 1939[20] for the exclusiveoperation of the disputed road. Upon the enactment of the Motor VehiclesFAct 1988[21], a Writ Petition was filed contending that due to undue delayin notifying the scheme under 1939 Act, the scheme was not saved bythe 1988 Act. Section 100(4) of the 1988 Act stipulated that a draftscheme must be finalized within one year from the date of its publication,failing which it would lapse. Section 217(2)(e) stipulated thatGnotwithstanding the repeal of the 1939 Act, a scheme proposed underSection 68-C, if pending immediately before the commencement of the1988 Act, shall be finalised in accordance with the provisions of Section100 of the 1988 Act. The Court noted that, contrary to legislative intent, 19 (1991) 4 SCC 258H20 “1939 Act”

19 (1991) 4 SCC 258H20 “1939 Act”

no scheme under the 1939 Act would be saved if schemes under thatAct were to be assessed with reference to the date of their publication.Noting the apparent conflict between the two provisions, a two judgeBench of this Court interpreted both provisions harmoniously and held:

“10. There appears to be some apparent conflict between Section100(4) and Section 217(2)(e) of the Act. While Section 217(2)(e)permits finalisation of a scheme in accordance with Section 100of the new Act sub-section (4) of Section 100 lays down that ascheme if not finalised within a period of one year shall be deemedto have lapsed. If the appellant’s contention is accepted thenSection 217(2)(e) will become nugatory and no scheme publishedunder Section 68-C of the old Act could be finalised under thenew Act. On the other hand if the period of one year as prescribedunder Section 100(4) is not computed from the date of publicationof the scheme under Section 68-C of the old Act and instead theperiod of one year is computed from the date of commencementof the Act both the provisions could be given full effect.

11. It is settled principle of interpretation that where there appearsto be inconsistency in two sections of the same Act, the principleof harmonious construction should be followed in avoiding a headon clash. It should not be lightly assumed that what the Parliamenthas given with one hand, it took away with the other. The provisionsof one section of statute cannot be used to defeat those of anotherunless it is impossible to reconcile the same.”

The Court held that where the Parliament confers a benefit, itmust not be readily assumed that it intends to withdraw a benefit at thesame time. Furthermore, the provisions of one section cannot be used todefeat another, unless there is no possibility of reconciling the twoconflicting provisions.

43. In British Airways Plc v Union Of India[22], the appellantwas an aircraft carrier engaged in the business of international air transportof passengers and cargo. It was contended that as they were not a“person-in-charge” as defined in Section 2(31) of the Customs Act 1962,no penalty can be imposed upon them under Section 116 for shortages inoffloading the quantity of goods consigned. Section 42 required an officerunder the Act to issue a written order for the conveyance of the goods 21 “1988 Act”

22 (2002) 2 SCC 95

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Afrom the customs house. Clause (e) of sub-section (2) of Section 42prescribes that no such order shall be given until the person-in-charge ofthe conveyance has satisfied the proper officer that no penalty is leviableon them under Section 116 or the payment of any penalty that may belevied upon them under that section has been secured by such guaranteeor deposit of such amount as the proper officer may direct. The appellantBcontended that once a clearance order is issued, no liability can be imposedon them.

44. A two judge Bench of this Court noted held that while Section42 operated to expedite the clearance of goods, Section 116 operated toensure the protection of cargo. Consequently, the two provisionsCsubserved different purposes. Further, by an amendment in Section 148which was a provision for the liability of an agent of the person in charge,sub-section (2) was inserted which stipulated that any person whorepresents himself to any officer of customs as an agent of any suchperson-in-charge, and is accepted as such by that officer, shall be liableDfor the fulfillment of any obligation of the person-in-charge. The Courtheld that effect must be given to the amendment, which would be renderedredundant if the contention of the appellant was accepted. Relying onthe principle of harmonious interpretation, the Court held:

“It is a cardinal principle of construction of a statute that effortEshould be made in construing the different provisions so that eachprovision will have its play and in the event of any conflict aharmonious construction should be given. The well-known principleof harmonious construction is that effect shall be given to all theprovisions and for that any provision of the statute should beconstrued with reference to the other provisions so as to make itFworkable. A particular provision cannot be picked up andinterpreted to defeat another provision made in that behalf underthe statute. It is the duty of the court to make such construction ofa statute which shall suppress the mischief and advance theremedy.”GThis Court held that courts must ensure that every provision isconstrued in a manner to render seemingly contradictory provisionsworkable. In interpreting two provisions of a statute, courts must adoptthe interpretation which does not defeat either provision and advancesthe remedy envisaged by their enactment.

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45. 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 letterof law. It cannot be said that the carving out of Cooperative Banks forthe appointment of their CEO from the enabling power conferred uponthe State Government under Section 54(3) applies in equal measure tothose Cooperative Banks that are Central Societies within the ambit ofSection 49-E(2). We hold that the State Government is empowered toissue a notification under Section 54(3) for Cooperative Banks whichare Central Societies falling within the ambit of Section 49-E(2) specifyingthat the Cooperative Bank shall appoint its CEO from the cadreconstituted 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 Societyshall forward to the concerned Cooperative Bank a panel of officersfrom which the it shall appoint its CEO, subject to the officer satisfyingthe eligibility criteria prescribed by the RBI.

46. In the view which we have taken, the regulatory control ofthe State Government over Cooperative Banks which have receivedstate funding in the manner specified in Section 49-E(2) is retained, whichfurthers the object of the provision. The High Court was in error inholding that in the matter of an appointment of the CEO, “the ApexBody or the Central Society have no power or role to play”. The decisionof the High Court will have serious ramifications in terms of divestingthe regulatory control over the affairs of Central Societies. At the sametime, conferring the power to the Cooperative Bank to appoint its CEOfrom a panel gives effect to the special provision inserted by virtue ofclauses (a) and (b) in Section 54(3). This view is strengthened by virtueof the fact that prior to its deletion, Section 57-B(19) was a provision inChapter VA of which sub-section (1) read thus:

“Notwithstanding anything contained in this Act or Rulesframed there under or bylaws of any registered society or ordersissued there under, the provisions of this chapter shall haveoverriding effect.”

(Emphasis supplied)

Section 57-B(19), which was intended to have overriding effect,was deleted and clauses (a) and (b) were inserted in Section 54(3) ofthe 1960 Act. The absolute power conferred upon Cooperative Banksto appoint the CEO was deleted. In this view, Section 49-E(2) and clauses

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A(a) and (b) of Section 54(3) are to be read harmoniously in the mannernoted above.

47. The position of law that emerges from the above discussion is thus:

(i) Clauses (a) and (b) of Section 54(3), as special provisions forBthe appointment of the CEO of Cooperative Banks conferupon them the power to appoint their CEO, subject to suchofficer satisfying the eligibility criteria prescribed by the RBIin this regard. The term ‘class of societies’ in Section 54(3)excludes Cooperative Banks for the limited purpose of theCappointment of their CEO;

(ii) However, where a Cooperative Bank is a Central Societywithin the ambit of Section 49-E(2), the CEO shall be appointedfrom among the officers of the cadre constituted andmaintained under Section 54, where such cadre has beenDconstituted. The State Government is empowered to issue anotification in pursuance of the power conferred upon it underSection 54(3) specifying that such Cooperative Bank shallappoint its CEO from the cadre maintained by the Apex Societyas notified therein. The notified Apex Society shall forwardto the concerned Cooperative Bank a panel of officers, fromEwhich the Cooperative Bank shall appoint its CEO, subject tosuch officer possessing the eligibility criteria as stipulated bythe RBI; and

(iii) Where no cadre has been constituted under Section 54, theCEO of a Cooperative Bank which is a Central Society underFSection 49-E(2) shall be appointed with the prior approval ofthe Registrar as stipulated in Section 49-E(2)(b)(ii).

48. In the present case, it was not disputed that the first respondentis a Central Society falling within the ambit of Section 49-E(2) of the1960 Act. In exercise of the power conferred by Section 54(3) of theG1960 Act, the State Government issued a notification dated 12 January1971 specifying that Central Cooperative Banks were obligated to employofficers, according to their availability, only from the cadres created bythe State Cooperative Bank. A similar notification was issued on 26June 1971 in terms of which, Central Cooperative Banks were permittedto maintain cadres of officers and, it was stipulated that VillageH

Cooperative Societies including Large Sized Agricultural Credit Societieswould have to employ officers drawn only from the cadres maintainedby the Central Cooperative Bank. Similarly, by another notification dated26 June 1971, Central Cooperative Banks were directed to maintaincadres of officers for the appointment of managers in rural cooperativesocieties including Large Sized Agricultural Credit Societies.

49. The seventh respondent is not an officer from the cadremaintained by the appellant. Consequently, the action of the firstrespondent in seeking to appoint the seventh respondent as the CEO isnot sustainable in law. The appointment of the sixth respondent as CEOwas ratified by the Registrar of Societies by his reply dated 21 August2017 and accepted by the BoD of the first respondent on 25 August2017.

50. We accordingly allow the appeal and set aside the impugnedjudgment and order of the High Court dated 7 August 2018. Inconsequence, we uphold the order of the learned Single Judge dismissingthe Writ Petition, though for the reasons that we have indicated above.There shall be no order as to costs.

Devika Gujral

Appeal allowed.

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