Telangana High Court
Telangana Cooperative Central Banks ... vs Telangana State Cooperative Apex Bank ... on 6 October, 2020
Equivalent citations: AIRONLINE 2020 TEL 140
Author: P.Naveen Rao
Bench: P.Naveen Rao
*THE HONOURABLE SRI JUSTICE P.NAVEEN RAO
+ W.P.No.17920 OF 2019
% 06.10.2020
# Telangana Co-operative Central Banks Employees'
Association (Regd.No.H-1100), (Affiliated to AP & TBEF),
4-1-896, 2nd Floor, Sri Rama Towers, Boggulkunta,
Tilak Road, Hyderabad, rep.by its General Secretary
Sri V.Surender.
.... Petitioner
Vs.
$ Telangana State Co-operative Apex Bank Limited
(Govt. Partnered Scheduled Bank), Troop Bazar,
Hyderabad, rep.by its Managing Director and
others.
.... Respondents
!Counsel for the petitioner : Sri Goda Siva
Counsel for the Respondents: Mr. Hari Haran for 1st respondent;
Govt.Pleader for respondents 2 & 3;
Mr. Srinivas Polavarapu for
respondents 6 & 7;
<Gist :
>Head Note:
? Cases referred:
1996 SCC Online AP 937
(2005) 9 SCC 129
(2012) 3 SCC 255
(2013) 7 SCC 25
2017 (5) ALT 535
PNR,J
WP No.17920 of 2019
2
IN THE HIGH COURT FOR THE STATE OF TELANGANA
********
WRIT PETITION NO.17920 of 2019
Between:
Telangana Co-operative Central Banks Employees'
Association (Regd.No.H-1100), (Affiliated to AP & TBEF),
4-1-896, 2nd Floor, Sri Rama Towers, Boggulkunta,
Tilak Road, Hyderabad, rep.byits General Secretary
Sri V.Surender.
.....Petitioner
And
Telangana State Co-operative Apex Bank Limited
(Govt. Partnered Scheduled Bank), Troop Bazar,
Hyderabad, rep.by its Managing Director and
two others.
.....Respondents
JUDGMENT PRONOUNCED ON : 06.10.2020
THE HON'BLE SRI JUSTICE P.NAVEEN RAO
1. Whether Reporters of Local Newspapers may : NO
be allowed to see the Judgments ? :
2. Whether the copies of judgment may be marked : YES
To Law Reporters/Journals :
3. Whether Their Ladyship/Lordship wish to : NO
See fair Copy of the Judgment ? :
PNR,J
WP No.17920 of 2019
3
HONOURABLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION NO.17920 OF 2019
ORDER:
Heard Mr. Goda Siva, learned counsel for petitioner, learned counsel Mr Hari Haran for the 1st respondent, (hereinafter referred to as the Apex Bank) learned counsel Mr. Srinivas Polavarapu for respondents 6 & 7, and learned Government Pleader representing the State of Telangana and the Commissioner for Cooperation & Registrar of Cooperative Societies.
2. Petitioner is a Registered Association claiming to represent large section of employees working in the District Cooperative Central Banks (DCCBs) in the State of Telangana. In this writ petition, petitioner is challenging the recruitment notification issued by the Telangana State Co-operative Apex Bank Limited (for short, "Apex Bank") on 09.08.2019, calling for applications to make recruitment to the post of Chief Executive Officer (CEO) in Hyderabad, Mahabubnagar, Karimnagar, Khammam, Warangal and Nizamabad District Cooperative Central Banks. The challenge to the recruitment notification is on the issue of prescribing the age of eligibility to apply for the post as 62 years. This challenge is on the ground that the age of superannuation of all the employees working in the DCCBs is 58 years as prescribed in Rule 28 (6) of the Telangana Co-operative Societies Rules, 1964 (for short, the Rules) and Regulation 49 of the DCCB Service Regulations and therefore, prescribing age of eligibility at 62 years, is ex facie illegal and, therefore, the entire selection process is vitiated on this ground.
PNR,J WP No.17920 of 2019 4
3. The learned counsel Mr. V.Hari Haran, appearing for the counsel on record Sri Rohit Pogula for the 1st respondent, raised preliminary objection on maintainability of the writ petition by the petitioner-association challenging the recruitment notification on the ground that conditions of services of members of petitioner Association are not affected by the terms of recruitment notification and petitioner-association has no locus standi to maintain the writ petition challenging the recruitment notification.
4. Two issues arise for consideration: firstly, whether writ petition by the Employees' Association challenging the validity of the recruitment notification for the post of Chief Executive Officer is maintainable ?; secondly, whether the decision of DCCBs to apply age of entry as 62 years and age of exit as 65/70 years to the post of CEO without amending Rule 28(6) of 1964 Rules and Regulation 49 of the DCCB Service Regulations is legal and valid ? ISSUE NO.1: Whether writ petition by the Employees' Association challenging the validity of the recruitment notification for the post of Chief Executive Officer is maintainable?
5. On the issue of maintainability, learned counsel Sri Hari Haran submitted that the post of CEO is to be filled up by way of open market recruitment and is a tenure post. The Service Regulations have not provided promotion channel to the serving employees of respondent-banks. Thus, the service conditions of the members of the petitioner association are no way affected, warranting the petitioner-association to challenge the recruitment notification. Once the conditions of service of employees of DCCBs are not affected in any manner, it cannot be the concern of PNR,J WP No.17920 of 2019 5 petitioner-association on age of entry and age of retirement of CEO. Thus, the petitioner association has no locus; petitioner association cannot be the person aggrieved. Therefore, the writ petition is not maintainable.
6. Replying to this objection, learned counsel for petitioner submitted that the CEO is the Administrative Head of the DCCB, and all administrative matters are handled by him, including regulation of conditions of service of employees. Thus, the functioning of the DCCB depends on the competency of the CEO. There can be grave danger to the very existence of DCCB, if ineligible person or incompetent person is selected and appointed as CEO. Learned counsel contended that Rule 28 (6) prescribed age of superannuation of all employees as 58 years, including the CEO. Thus, prescribing age of entry at 62 years in the recruitment notification is ex-facie illegal. As representative of the employees working in DCCBs, the petitioner association can espouse the cause of their members and challenge the manner in which the recruitment process is taken up to appoint CEO, when such appointment is ex-facie in violation of Rule 28(6) of the Rules,1964 and Regulation 49 of the Service Regulations of the DCCBs and, therefore, writ is maintainable. In support of his contention that the association can espouse the cause on behalf of its members who are all employees working in different cadres of the DCCBs, learned counsel placed reliance on the decision of the learned single Judge of this Court in Andhra Bank Officers Union and another vs Andhra Bank and others1.
1 1996 SCC Online AP 937 PNR,J WP No.17920 of 2019 6
7. As held by the learned single Judge of this Court in Andhra Bank Officers Union (supra) an association of employees can espouse the cause on behalf of the employees' when arbitrary decision is taken by the Management, affecting the conditions of service of employees across the board. However, to appreciate the contentions of the learned counsel for petitioner, it is necessary to dwell into the facts in issue in that case. The respondent therein was working as General Manager of the then Andhra Bank. The Management accepted his plea to alter the date of birth in service record to a date later to the date as entered in the service record. By virtue of the said decision, respondent therein was entitled to continue in service beyond original date of retirement. In view of this he was blocking the promotional chances of not only officers working in the immediate feeder category, but all officers working in other lower cadres and as such, blocking would have cascading effect in the hierarchy of posts as a chain reaction. In such circumstances, this Hon'ble Court held that instead of individual employees, who are affected, challenging alteration of date of birth, the association can espouse the cause on behalf of its members.
8. In the case on hand, the post of CEO is always filled up by bringing outsiders on a tenure basis, and no promotion avenue is provided for in service employees. Thus, promotional avenues of the employees working in DCCBs are no way affected by the present decision to prescribe higher age of entry and age of exit to the post of CEO. Thus, facts in the Andhra Bank Officers Union (supra) do not fit into this case. However, CEO is the executive head of the DCCB. He is the appointing authority and authority competent to take disciplinary action on his subordinates. All the PNR,J WP No.17920 of 2019 7 members of the petitioner Association work under his control and supervision. According to petitioner Association, no person can hold the office of CEO if he has crossed age of 58 years and therefore appointment of a person as CEO who has already crossed 58 years is ex-facie illegal and such person cannot be the administrative head and deal with their conditions of service. If prescribing age of entry as 62 years is held invalid, it goes to the root of the matter and the appointment of a person who has already crossed 62 years becomes ex facie illegal. Further, the issue of competence of CEO to deal with service conditions of employees may come up whenever he takes a decision. As a corollary, decisions taken by him as appointing authority and disciplinary authority are susceptible for challenge. Thus, in the larger perspective of administrative affairs of the DCCB, employees represented by its association, to this limited extent, can challenge the recruitment process to select and appoint a CEO. Therefore, the larger issue of interplay between Rule 28(6) of 1964 Rules, and Regulations 12, 15, 16 and 49 of the Service Regulations of the DCCBs and the provisions of the 1964 Act requires consideration in the over all context of the role of a CEO, and to put quietus to the litigation. There is a need to lift the veil of suspicion on fixing seemingly improbable age of entry as 62 years and age of exist as 70 years to the post of CEO. In the peculiar facts of the case, the objection on locus standi of petitioner-Association to maintain the writ petition is rejected.
ISSUE NO.2: Whether the decision of DCCBs to apply age of entry as 62 years and age of exit as 65/70 years to the post of CEO PNR,J WP No.17920 of 2019 8 without amending Rule 28(6) of 1964 Rules and Regulation 49 of the DCCB Service Regulations is legal and valid ?
9. Learned counsel for petitioner made the following submissions:
(i) The DCCBs are governed by 1964 Rules. Rule 28 deals with conditions of services and formulation of service regulations in the DCCBs. Rule 28 (6) prescribes age of superannuation to all the categories, except last grade service, as 58 years, and to the last grade service as 60 years. All the DCCBs have formulated service regulations. According to the learned counsel, Regulation No.7 deals with categories of the posts and classification as mentioned in Annexure-A. Regulation 12 deals with appointment of a CEO. The post of CEO is also governed by Rule 28(6) and Regulation 49. Regulation 49 deals with age of superannuation, which is the same as prescribed in Rule 28(6). Neither Rule 28(6) nor Regulation 49 is amended. Without amending Rule 28(6) and Regulation 49, age of entry and superannuation to the post of CEO cannot be increased beyond 58 years.
(ii) He would submit that even the RBI and NABARD guidelines have only suggested to increase the age of entry and exit to the post of CEO. In this context, he read out RBI circular dated 04.01.2018, and NABARD regulations dated 17.01.2018. By pointing out to 2011 fit and proper criteria prescribed by the RBI, he would submit that RBI specifically stated that person to become a CEO should not be above 55 years of age at the time of appointment. This was prescribed specifically because of the age of retirement prescribed in Rule 28(6) and the Regulation 49. In PNR,J WP No.17920 of 2019 9 the present guidelines, the RBI has not mandated increasing the age without amending the rules and regulations respectively.
(iii) He would submit that the General Body of the DCCB is alone competent to amend the Service Regulations, whereas at least in three DCCBs, out of six DCCBs which have placed indent on Apex Bank to recruit, so far general body has not taken a decision to amend the Service Regulations. Further, even the decision taken by the general bodies of three DCCBs to adopt RBI guidelines to increase the age of entry and exit of CEO cannot become law until and unless Rule 28(6) of 1964 Rules and the Regulation 49 are amended. He would further submit that no policy is framed as required by Section 115-D(2) of the Act, and such a policy has to be made only by the general body.
iv) He would submit that non-obstante clause in Section 115-D does not obliterate the other provisions of the Act and the 1964 Rules are equally binding on the DCCBs.
v) He would submit that there cannot be deemed repeal of Rule 28 and same shall be in force until it is repealed or amended. The DCCBs are not competent to amend the Rules. He would therefore submit that looking from any angle, the present notification is not sustainable in law.
10. According to the learned counsel Sri Hari Haran, representing the Apex Bank, the general bodies of three DCCBs have passed resolutions accepting the fit and proper guidelines formulated by the RBI and NABARD. With reference to three other DCCBs, the Executive Committees have taken decision to follow PNR,J WP No.17920 of 2019 10 the RBI guidelines and such decisions are sufficient to increase the age of entry and exit to the post of CEO. He would submit that the decisions taken by the DCCBs were approved by the Registrar of Cooperative Societies. He further submitted that petitioner- association and the Managements entered in Memorandum of Understanding (MoU) which also incorporated adopting RBI guidelines notified from time to time and, therefore, petitioner- association cannot turn around and contest when the DCCBs wanted to comply with the RBI guidelines. He further submitted that Section 35-A of the Banking Regulation Act, 1949 vests power in the RBI to issue fit and proper guidelines and such guidelines are binding on the DCCBs. He further submitted that Section 115-D vests overriding power to the DCCBs to formulate service conditions of employees and in terms thereof, they can formulate policies to regulate service conditions of employees. He therefore justifies the decisions of DCCBs to fix age of entry as 62 years.
11. Sri Srinivas Polavarapu, representing the DCCBs of Karimnagar and Khammam Districts would submit that the general bodies of Khammam and Karimnagar DCCBs have passed resolutions and in terms thereof, it is permissible to increase the age of entry and exit to the post of CEO. He would further submit that the settlement arrived at under Section 12-(d) of the Industrial Disputes Act is equally binding on the employees and all the employees have agreed to follow the RBI fit and proper guidelines notified from time to time. By the letter of Registrar of Cooperative Societies addressed to the Telangana State Co-operative Apex Bank Limited, he has accorded approval to increase the age of retirement to 65 years to the post of CEO and impugned notification is in PNR,J WP No.17920 of 2019 11 compliance with the said decision. He would further submit that in the year 2009 the post of CEO was created and thereafter, bye-laws/service regulations were notified after approval by the general bodies of the respective DCCBs. In the year 2011, RBI issued fit and proper guidelines and entry level is prescribed as 55 years. By virtue of the present guidelines, entry level is now enhanced and the same is valid and legal. He would further submit that regulation 12 of the service regulations specifically provides that whenever fit and proper guidelines are notified by the RBI concerning the post of CEO, they are automatically applicable to the DCCBs and, therefore, there is no need for any amendment.
12. There are three aspects which require consideration to answer this issue.
(i) Is there a conflict between Section 115-D and Section 130, and if so can they be reconciled ? ;
(ii) Whether the post of CEO is governed by separate scheme and thus the entire gamut of the Service Regulations is not applicable to the post ?; and
(iii) Whether the guidelines notified by the RBI and NABARD are binding on the DCCBs ?
13. The statutory provisions, Service Regulations and instructions, which have bearing on this issue are: Sections 30 (2) (xxiii)2, 31-A (12)3, 115-D(2)4, 130(1)5 of The Telangana Cooperative 2 Section 30. Ultimate authority of Society: --
(1) xxx (2) Subject to the other provision of this Act, the following matters shall be dealt with by the General Body in the manner prescribed -
(i) to (xxii) xxx (xxiii) approval of the staffing pattern, pay and other allowances of the employees of the society and contingencies, subject to the availability of administrative and contingent fund and approval of the Registrar. 3 Section 31-A. Powers and functions of the Committee:
PNR,J WP No.17920 of 2019 12 Societies Act, 1964 (for short the Act, 1964); Sections 35-A6, 56(c)(ccvii)7 of the Banking Regulation Act, 1949; Rule 28(6)8 of the Rules, 1964; Regulations - 79, 1110, 1211, 4912, 1513, 1614, Annexure-A15 of Service Regulations of the District Cooperative Central Banks (for short, 'Service Regulations'), the Reserve Bank of India (RBI) letter dated 04.01.201816 and the National Bank for Agriculture and Rural Development (NABARD) dated 17.01.201817.
(12) fix the staffing pattern, qualifications, pay scales and other allowances to the employees of the society, subject to the availability of the administrative and contingent fund and approval of the General Body and Registrar;4
Section 115-D. Special Provisions applicable to Co-operative Credit Societies:
Sub-section (2). The Co-operative Credit Society shall have autonomy in all financial and internal administrative matters, subject to the guidelines of Reserve Bank of India/National Bank for Agriculture and Rural Development in the following areas:
(i) Interest rates on deposits and loans, (ii) Borrowing and investments, (iii) Loan policies and individual loan decisions, (iv) Personnel policy, staffing, recruitment, posting, and compensation to staff, and (v) Internal control systems, appointment of auditors and compensation for the audit.5
S. 130. Power to make rules:
(1) The Government, may, by notification published in the Telangana Gazette, make rules for carrying out all or any of the purposes of this Act for the whole or any part of the State and for any class of societies.6
S. 35-A. Power of the Reserve Bank to give directions.--- (1) Where the Reserve Bank is satisfied that ---- (a) in the public interest or; or (aa) in the interest of banking policy; or (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect. 7 S. 56. Act to apply to co-operative societies subject to modifications:-
(c) in Section 5,--- xxxxx (ccvii) "central co-operative bank", " primary rural credit society " and "state co-operative bank" shall have the meaning respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981.8
Rule 28. Officers and servants of societies: -
(1) to (5) xxx (6) Notwithstanding anything contained in the Bye-laws/special bye-laws service regulations or common cadre regulations of the co-operative societies every paid servant and officer of the society other than those in the last grade service shall retire from service on the after noon of the last date of the month on which he attains the age of 58 years.9
Regulation 7. Category of posts - classification of staff (as shown in Annexure-A): 10
Regulation 11. Appointing Authority:
(i) the following shall be the appointing authorities in respect of various cadres of staff of the bank.
(a) President in respect of CEO
(b) CEO in respect of officers, clerical and support staff
(ii) The appointing authorities as mentioned above shall appoint the staff as under as per guidelines of RBI/NABARD.
(a) CEO on the recommendation of the Selection Committee constituted by the Committee of the Bank.
(b) Officers, Clerks and Supporting Staff by the CEO on the approval of the Committee.11
Regulation 12. Appointment of CEO:
The Chief Executive of the Bank shall be appointed for a tenure of 3 years by the Management Committee as per the Fit & Proper guidelines issued by RBI from time to time.12
Regulation 49. Superannuation & Retirement:
Every employee shall retire from service with effect from the last day of the month in which he/she attains the age of 58 years. For subordinate staff, the retirement age shall be 60 years.13
Regulation 15: Regulation 15. Qualifications for Direct Recruitment:
The qualifications prescribed in the case of Direct Recruitment for various categories of posts are detailed hereunder:
Category of Age Minimum Educational Recruitment Remarks
Staff Qualifications process
Xx xx Xxx xx Xx
Xx Xx Xxx Xx Xx
Group-A (Officers) 18-30 Xx Xx Xx
years
Relaxation to candidates under categories of reservation will be as under: xxxx 14 Regulation 16: Age of entry:
a) For all direct recruitments, the candidate shall be within the age limit as per the above table. However the age limit is relaxable in the case of SC/ST/BC/PH/Ex-servicemen candidates as above following the Roster and the guidelines issued by the government.
b) No person shall be employed in the service of the Bank if he has been dismissed from service by any of his previous employers or he has been convicted by a competent court of law for an offence involving mortal turpitude.
c) The age of entry may be relaxed by the Committee up to a maximum period of 5 years in the case of persons having continuous service either in cooperative Banks or other Banks and who joined the other institution/s prior to attaining the age of 30.15
Annexure-A - Classification of Staff :
(a) Officers:
This class consists of :
SM I - CEO, GM
16
Letter of the RBI, dated 04.01.2018:
Xxx
2. In this connection, we request you to revise the age limit for Chief Executive officers (CEOs) in State/Central Cooperative Banks (SICBs/DCCBs) to the extent instructions issued in July, 2011 as under:
(i) For entry level eligibility to be relaxed to 62 years.
(ii) For superannuation, the upper age limit to be fixed at 70 years. However, the age of superannuation may be decided by RCS of the respective States after taking into consideration the recommendations, if any, of the Board of Directors of the individual StCB/DCCBs. Within the overall limit of 70 years, individual StCB/DCCB Boards are free to prescribe a lower retirement age for the CEO, as an internal policy, subject to approval of RCS of the respective State.17
Letter of the NABARD dt 17.01.2018:
Xxx
2. Accordingly, the States are requested to make necessary revisions in the appointment criteria of the CEOs of StCBs/DCCBs, based on the State Service Rules and Regulations, within the entry level eligibility of 62 years and overall upper age limit of 70 years. The same may also be placed before the individual Boards of StCBs/DCCBs for approval and adoption in the respective service regulations.
PNR,J WP No.17920 of 2019 13
(i) Is there a conflict between Section 115-D and Section 130, and if so, can they be reconciled:
14. The DCCBs are governed by the Telangana State Co- operative Societies Act, 1964 and the Rules made there under. It is a comprehensive enactment dealing with all aspects of the working of the Co-operative Societies. Section 130 of the Act, 1964 vests power in the State Government to make Rules for carrying out all or any of the purposes of the Act, for the whole or any part of the State, and for any class of societies. In exercise of this power, 1964 Rules were notified. In this case, the issue revolves around Rule 28 of the 1964 Rules. Rule 28 deals with Officers and servants of the societies. It provides for broad structure of the employment, emphasizes formulation of service rules by the Societies specifying all aspects of service conditions of their employees and stipulates age of superannuation of various posts. Sub-rule (6) of Rule 28 prescribes age of superannuation to all the categories of employees, except last grade service, as 58 years, and for the last grade service as 60 years. By way of amendment, Chapter XIII-B was incorporated in the 1964 Act. Section 115-D forms part of this Chapter. Section 115-D brought out a sea change in approach of the State Government on the functioning of Co-operative Credit Societies. It broke the shackles of State control in financial and administrative matters of a DCCB.
15. To understand this metamorphosis, it is necessary to travel backwards in time.
PNR,J WP No.17920 of 2019 14
16. Major chunk of farming community has very small holdings ranging from half acre to five acres. Small and marginal farmers did not have the means to make their land cultivable, purchase seeds and pesticides and attend to their core needs for sustenance. They were forced to borrow money from private persons at a very high interest rate to attend to basic needs. However, the farm yield was so low that it was not sufficient to meet their family necessities and were unable to service the amount borrowed at a very high interest rate. Delay in repayment resulted in increased burden of interest, resulting in more often than not, further borrowings, having a spin effect on overall finances of the farmer. The farmers were caught in the whirlpool of borrowings. Failure to repay the loans and heavy financial burden and low yield in their land triggered farmers/ many times entire family, committing suicide.
17. With avowed object of alleviating the suffering of farmers from financial distress, the Cooperatives are formed at various levels. At the grass-root level is the Primary Agricultural Cooperative Society (PACS) which caters to the needs of farmers in a cluster of villages. At the District level, the District Cooperative Central Bank (the DCCB) is established, whose primary responsibility is to channel the funds to PACS and monitor the utilization. At the State level, is the Cooperative Apex Bank, whose role is mostly administrative on all matters concerning credit facilities in Agriculture sector and policy formulation.
18. Over a period of time, excessive political interference and Governmental control in the affairs of these bodies resulted in poor governance impairing their financial health and instead of serving PNR,J WP No.17920 of 2019 15 the financial needs of the small and marginal farmers, they became a liability. The pattern of mismanagement was uniform in the length and breadth of the country. This necessitated serious rethinking by the Government of India. In August, 2004, the Government of India appointed task force under the chairmanship of Professor A.Vidyanathan to suggest measures to revive the rural Cooperative Credit Institutions including legal measures. The task force has undertaken extensive research into various problems faced by farmers, the functioning of the Cooperative Credit Institutions at the grass-root level, interacted with stake holders, politicians etc., and made its recommendations (see nabard.org).
19. The Task Force findings and recommendations would reveal startling facts on the manner in which these credit institutions were functioning. The impairment was attributed to various aspects, such as not conducting elections to the Board of Directors for a long time, delay in auditing of accounts, lack of transparency in spending, State intrusion into administration and financial aspects, which included posting on deputation of Government officials to top positions, setting up common cadre for all Primary Agricultural Cooperative Societies, determination of staff pattern, interference in the operational decision making of cooperatives, etc.
20. The Task Force opined that any financial restructuring without addressing the root-causes of weaknesses of the cooperatives would not result in sustained revival of the system. The Task Force recommended for inclusion of separate chapter in the respective State enactments dealing with Agriculture and Rural Credit Societies. It has also recommended that Cooperative banks PNR,J WP No.17920 of 2019 16 should be on par with commercial banks in applying regulatory norms with a greater role assigned to the Reserve Bank of India.
21. Based on the recommendations of the Task Force, Government of India consulted all the State Governments and formulated Revival Package and requested the State Governments to implement the same.
22. After detailed deliberations, the State Government, in principle, accepted several recommendations of the Task Force and revival package of the Government of India. To give effect to the said recommendations, the State Government introduced amendments to the 1964 Act and Act No.16 of 2007 was made. These measures are intended to make the Co-operative Credit Structure member-driven, professionally managed, autonomous and financially stable, to serve the credit needs of the farmers and to boost the rural co-operative credit movement in the State (see objects and reasons to make the Act 16 of 2007). By this Amendment Act, new chapter titled 'Chapter XIII-B' was added to the 1964 Act. This Chapter incorporates Special Provisions for Cooperative Credit Societies. (DCCBs come under this category). Thus, born Section 115-D from out of this cauldron.
23. Normally the use of phrase by the legislature in a statutory provisions like, "notwithstanding anything...." is equivalent to saying that the Act shall be no impediment to the measure indicated therein. Use of such expression is another way of saying that the provision in which the non-obstante clause occurs usually would prevail over other provisions in the Act (paragraphs 45 to 47 of PNR,J WP No.17920 of 2019 17 State of Bihar Vs. Bihar Rajya M.S.E.S.K.K. Mahasangh18). The impact of "non-obstante clause" must be kept measured by the legislature policy and it has to be limited to the extent it is intended by the legislature and not beyond that (paragraph 63 of JIK Industries Limited Vs Amerlal V.Jumani19). Sections 115-D opens with non-obstante clause. Having regard to the historical background and the object behind the decision to amend 1964 Act, the intendment of the Legislature is clear, i.e., to confer on the Credit Societies full autonomy to manage their financial and internal administrative matters, without State control or supervision in the five areas mentioned in Sub-Section 2, that includes the personnel policy, staffing, recruitment, posting, etc. It has ushered in a new era. It gave wings of freedom to Cooperative Credit Societies, braking from the shackles of excessive bureaucratic involvement in the affairs of the DCCBs. Though in reality, the State ties the knots around the DCCBs and controls them by varied means, and it is impossible for these DCCBs to untie them and go off the hook of State control and supervision, but at least on paper there is complete autonomy conferred on them.
24. While Section 130 vests residuary power in the State to formulate Rules to give effect to the provisions of the Act, Section 115-D(2) is a special provision dealing with specific aspects provided therein. The 1964 Rules made in exercise of power under Section 130 of the 1964 Act, have force of law and binding on all Cooperative Credit Societies, but they yield place when specific Regulation is made/policy decision is taken by a DCCB, traceable 18 (2005) 9 SCC 129 19 (2012) 3 SCC 255 PNR,J WP No.17920 of 2019 18 to Section 115-D(2), to the extent of inconsistency, i.e., 'generalia specialibus derogant'. [S. Prakash Vs K.M.Kurian-(1999) 5 SCC 624]. At this stage, I am reminded of two cardinal principles of statutory interpretation. Firstly, the legislative intent and secondly, to reconcile two provisions of a statute, if there appears a conflict/ seeming contradiction in area of application/ intendment. Knowing the legislative intent is necessary to understand why a statute / a provision in the statute is made. Further, it has to be predicated that every provision in a statute is important and has a place in the scheme of the Act. Thus, the endeavor of the Court would always be to adopt a rule of harmonious construction, keeping in mind the legislative intent in incorporating the non-obstante clause in a provision and not beyond that. Thus, if there is a seeming contradiction between two provisions of a statute, firstly Court has to reconcile both and only in extreme case where it is not possible to reconcile, to strike it down. Applying these two cardinal principles, having regard to the historical background and on a careful assessment of the two provisions, it is apparent that Section 130 and Section 115-D(2) of the 1964 Act co-exist and are in harmony. There is no conflict in the application and area of operation.
(ii) Whether the post of CEO is governed by separate scheme and thus the entire gamut of the Service Regulations is not applicable to the post:
25. The power to make Service Regulations by DCCBs is traceable to Section 115-D(2) of the Act, 1964. Even Rule 28 requires framing Service Rules by the Societies. All the DCCBs PNR,J WP No.17920 of 2019 19 have formulated identical service regulations. Regulation 7 of the Service Regulations deals with categorization of posts and classification of staff as adumbrated in Annexure-A. Annexure-A classifies the staff as Officers, Clerical Staff and Support Staff. Paragraph-1(a) of Annexure-A deals with Officers. The Chief Executive Officer and General Manager are classified as Senior Management Grade-I. Regulation 11 prescribes appointing authorities to various categories of posts. For the post of CEO, the President of the Bank is the appointing authority. Regulation 12 provides for appointment of CEO. Regulation 15 prescribes qualifications for Direct Recruitment. For Group-A posts age limit prescribed is 18-30 years with applicable relaxations to social groups. Regulation 16 deals with age of entry into service as prescribed in Regulation 15. Regulation 49 prescribes age of superannuation. It stipulates age of retirement as 58 years to all the employees, except for subordinate staff, whose age of superannuation is prescribed as 60 years. Regulation 49 of the Service Regulations is in accord with Rule 28 (6) of 1964 Rules.
26. Therefore, the scope of consideration now narrows down as to whether Regulation 12 of the Service Regulations carves out an exception to the scheme of Rule 28 of the 1964 Rules and Regulations 15, 16 and 49 of the Service Regulations ?
27. From the scheme of the Regulations, it is discernible that though CEO is also one of the posts born in the service of a DCCB, the nature of appointment and tenure of appointment to the post of CEO is not the same as compared to other posts. Appointment of CEO is for a fixed tenure, unlike appointments to all other posts.
PNR,J WP No.17920 of 2019 20 For all other posts, maximum age of entry into service is very low, i.e., 30 years, relaxable to social groups. Further, if a person is substantively appointed, ordinarily, he shall be in service until he attains the age of 58/60 years. Even according to petitioner, a person aged about 55 years was being appointed with a tenure of 3 years, to retire when that person attains age of 58 years. Thus, strangely, petitioner was only harping on age of exit, but not on age of entry, though Service Regulations deal with both aspects. It is thus apparent that the age restriction on entry into service in Regulation 15 is not made applicable to the post of CEO even before RBI issued directions on 04.01.2018. Further, unlike recruitment to other posts, appointment and tenure of CEO depends on the directions of the RBI/NABARD issued from time to time. Thus, these aspects make the appointment to the post of CEO stand on a different pedestal as compared to other posts.
28. On an interactive analysis of the scheme of Section 115-D (2) of the 1964 Act and the Service Regulations, it is apparent that the age of entry, age criteria for eligibility and the age of superannuation, presently pegged at 58 years to all the employees, other than last grade service, is not applicable to the post of CEO. Any other interpretation of the Regulations would defeat the object sought to be achieved by the scheme of the Act and the Regulations. Further, the scope and purport of Regulation 12 has to be understood, having due regard to historical background leading to introduction of Section 115-D in the 1964 Act. Thus, merely because, the DCCBs were appointing persons, of the age of or about 55 years as CEO for a tenure of 3 years, from which practice petitioner draws inspiration to contend that even for CEO PNR,J WP No.17920 of 2019 21 age of exit is 58 years only, does not ipso facto mean that age of superannuation of 58 years was made applicable to that post also and is not inflexible. It would be doing disfavour to the Amendment Act 16 of 2007 and the whole scheme of the 1964 Act as it stands now. It is thus, beyond pale of doubt that Regulation 12 carves out exception on appointment to the post of CEO and is a special provision. All other provisions of the Service Regulations dealing with eligibility to enter the service and exit the service are not applicable to the post of CEO.
(iii) Whether the guidelines notified by the RBI and NABARD are binding on the DCCBs:
29. The skill of the draughtsman is evident in drafting Regulation 12. A well thought out use of words and phrases. Regulation 12 has two components. In the first limb, it fixes tenure of 3 years and in the second limb it seeks to regulate appointment of CEO 'as per fit and proper guidelines issued by RBI/NABARD'. The second limb is elastic enough to take in its fold future directions/ instructions of RBI and NABARD. This means that, there is no need to amend the regulation whenever a direction/guideline is notified by RBI. It thus implies that any direction/guideline issued by the RBI regarding the post of CEO would per force apply and the DCCB must give effect to such direction/ guideline.
30. However, to consider this aspect, it is also necessary to briefly note the role of the RBI and the NABARD in regulating institutions dealing with transactions in money.
PNR,J WP No.17920 of 2019 22
31. It is discernible from the scheme of the Act as amended, while granting internal autonomy to DCCB from the State control in five areas listed in Section 115-D(2), its functions are made subject to fit and proper guidelines of RBI.
32. The Reserve Bank of India is custodian of all monetary transactions in the country. The Banking Regulation Act, 1949 (Act 10 of 1949) and Reserve Bank of India Act, 1934 (Act 2 of 1934) infused enough fire power in the Reserve Bank of India to regulate the banking activities in the Country including the credit societies. Part V is introduced into the 1949 Act by way of amendment. This part deals with application of the Act to co- operative banks. Section 56 forms part of this Part. By Section 56, Act 1949 is made applicable to the Cooperative Banks. By this Section, Clause-(ccvii) defining 'Central Cooperative Bank' is incorporated in Section 5 of the 1949 Act. According to this definition, 'Central Cooperative Bank' will have the same meaning as assigned in 'the National Bank for Agriculture and Rural Development Act, 1981. Section 2 (d) of NABARD Act, 1981 defines 'Central Cooperative Bank' as the principal Cooperative Society in a District in a State with the primary object of financing other Cooperative Societies in that district i.e., the District Cooperative Central Bank.
33. Section 35A of the Act, 1949 confers powers in the Reserve Bank of India to give directions to the 'Banking Company'. The scope of term 'Banking Company' is expanded to include Cooperative Banks. In accordance with the provisions contained in Section 56, the provisions of Section 35A of the Act, 1949 are made PNR,J WP No.17920 of 2019 23 applicable to District Cooperative Central Banks. Thus, the directions issued by the RBI are binding on all the Cooperative Central Banks.
34. NABARD is the apex development bank in the field of agriculture and rural development. It is established under 'the National Bank for Agriculture and Rural Development Act, 1981'. Its main function is to provide refinance to various financing institutions for promotion of agriculture and allied activities. As these credit societies are involved in banking transactions in the field of Agriculture, the NABARD is also competent to regulate functioning of these societies. In exercise of powers vested in it by the Act, 1981 and / or on the directions of the RBI, NABARD can conduct inspection on the affairs of the DCCB. [State of Madhya Pradesh and others Vs. Sanjay Nagayach and others20]. Section 35 of the 1949 Act empowers RBI to conduct inspection of the affairs of a banking company. Under Sub Section 6 of Section 35, RBI can authorise NABARD to exercise such powers.
35. Section 115-D of the 1964 Act also recognises this overarching power of RBI and NABARD. Thus, though enough autonomy is given to the Cooperative Credit Societies from the State control; exercise of such autonomy to take decisions and formulate policies in the five areas mentioned in Sub Section (2) of Section 115-D of the Act, 1964 is subject to the over all control and the guidelines notified by the RBI and NABARD from time to time. The RBI and the NABARD are vested with power to regulate their activity and to ensure that the DCCBs do not cross laxmana reka 20 (2013) 7 SCC 25 PNR,J WP No.17920 of 2019 24 and follow strict norms in handling the money. This is made amply clear by the Hon'ble Division Bench in L.S Reddy and others vs. Principal Secretary Co-op., Department and others21 (W.A.No.1291 of 2017, dated 07.09.2017). The Hon'ble Division Bench held:
"9. ...... The effect of the non-obstante clause in Section 115-D is that the provisions of Section 115-D would prevail not withstanding anything contrary thereto in any of the provisions of the Act. It is only if Section 51 is held to contravene Section 115-D, would exercise of power under Section 51, to the extent of contravention, be impermissible. Section 115-D(2) confers autonomy on cooperative credit societies in all financial and internal administrative matters in the areas referred to in Clauses
(i) to (v) there under. These areas are confined to interest rates on deposits and loans, borrowings and investments, loan policies and individual loan decisions, personal policy, staffing, recruitment of staff, etc and internal control systems, appointment of auditors and compensation for audit. It does not extend to fraudulent acts or to misappropriation of funds. The autonomy conferred on co-operative credit societies in the aforesaid five areas is also made subject to the guidelines issued by RBI/NABARD. It is evident, therefore, that the autonomy granted to cooperative credit societies is not unfettered or absolute, but is circumscribed by twin limitations i.e. (1) the autonomy is limited to the five areas mentioned in Section 115-D(2), and (2) even in these five areas, the autonomy is subject to the guidelines issued by RBI and NABARD."
(emphasis supplied)
36. On 04.01.2018, RBI issued orders directing the DCCB's to increase the age of entry to the post of CEO to 62 years and age of superannuation up to 70 years. While emphasizing the need to increase the age of entry as 62 years, RBI left to the discretion of the DCCBs to fix age of superannuation with outer limit at 70 years. This is reiterated by NABARD in their circular dated 17.1.2018. This means that DCCBs have to prescribe eligibility for appointment as CEO by persons up to the age of 62 years but they have discretion to restrict the age of exit between 62 and 70 years. These directions are traceable to Section 115-D (2) of the 1964 Act and Regulation 12 of the Service Regulations read with the 1949 21 2017 (5) ALT 535 PNR,J WP No.17920 of 2019 25 Act. The DCCB is mandated to give effect to them while appointing the CEO.
37. At this stage, it is also apt to be reminded of why the Task Force headed by Prof. Vaidyanathan in its report has indicated the need to have proper financial management. It attributed one major cause for the financial troubles of Cooperative Credit Societies is that that they are not professionally managed. One of the recommendations of the Task Force reads as under:
"The Chief Executive Officers of Cooperative Banks shall be appointed by the respective banks themselves. However, as these are banking institutions, the Reserve Bank of India will prescribe minimum qualifications of the Chief Executive Officer to be appointed and the names proposed by the Cooperative Banks for the post of Chief Executive Officer would have to be approved by the Reserve Bank of India."
38. It is appropriate to note that RBI and NABARD assigned special status to the post of CEO. The RBI and NABARD want a matured and experienced person to occupy the post of CEO. He must be a person having sufficient work experience at the level of the middle/senior management cadre in banking sector. This is because the CEO is the Administrative Head of the DCCB and occupies pivotal position. Above him, is the President and the Board of Directors, who are elected members. The CEO is required to advise and guide them, more particularly in all financial matters, as ordinarily public representatives are not trained to deal with financial aspects of the Bank. It is his responsibility to ensure proper utilization of funds at its disposal and channelling the funds systematically. A better qualified and experienced person as CEO would go a long way in ameliorating the suffering of the PNR,J WP No.17920 of 2019 26 farmers. It is apt to note at this stage that DCCBs occupy key position in extending credit facilities to agriculture activity. The RBI and the NABARD are in a better position to identify the needs of Cooperative Credit Societies and guide them, with objective to ensure their proper functioning. Prescribing the eligibility criteria for the post of CEO is a policy guideline of the RBI and NABARD issued in exercise of powers vested in them by the Banking Regulation Act, 1949, the Reserve Bank of India Act, the National Bank for Agriculture and Rural Development Act, 1981 and Section 115 D of the 1964 Act and Regulation 12 of the Service Regulations.
39. The success of the Cooperative Credit movement largely depends on the financial strength of the credit societies. They cater to the financial needs of the small and marginal farmers, who are wholly dependent on agriculture and are the backbone of the country's economy. Dysfunction or financial indiscipline, as happened earlier, can cause severe damage to agriculture sector in general, and farming community in particular and put to greater risk the financial needs of these vulnerable sections of the society. Thus, well qualified and experienced person as CEO is imperative in the larger public interest.
40. On proper analysis, it is seen that the issue falls in line with the Task Force recommendations, revival package and incorporation of chapter-XIII (B) to 1964 Act.
41. Having regard to above analysis of the 2nd issue, the conclusions are recorded as under:
PNR,J WP No.17920 of 2019 27
(i) There is no repugnancy between Section 130 and Section115-D and both are in harmony and co-exist.
(ii) Rules formulated in exercise of power under Section 130 of the 1964 Act have force of law, but operate till a Regulation is made/ a decision is taken referable to power under Section 115-D (2). Once any such Regulation is made/ decision is taken, the 1964 Rules yield place and have no force of law to that extent.
(iii) The Directions issued by the RBI and the NABARD on various aspects of appointment to the post of CEO are binding on DCCBs.
(iv) The post of CEO holds a special status; the other Service Regulations dealing with entry into service and exit from service are not applicable to the post of CEO; appointment as CEO is for a fixed tenure; and appointment as CEO depends on RBI guidelines/ orders, distinct from all other posts born in the cadre of a DCCB.
(v) Having regard to the scheme of the 1964 Act, and the Service Regulations, there is no need to amend Regulation 12 of the Service Regulations before increasing the age of entry and exit of an incumbent to the post of CEO of a DCCB.
42. Thus, the impugned recruitment notification is legal and valid and no interference is called for. The Writ Petition fails and is accordingly dismissed. Pending miscellaneous petitions if any shall stand closed.
___________________________ JUSTICE P.NAVEEN RAO Date: 06.10.2020 Kkm/tvk Note: Mark LR copy - YES PNR,J WP No.17920 of 2019 28 HONOURABLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION NO.17920 OF 2019 Date: 06.10.2020 Kkm/tvk