Goa State Co-operative Bank Ltd. and Others Vs. State of Goa and Others - Court Judgment

Dr. Couto J.

1. The short question that this writ petition gives rise to is whether it was open to the Government to appoint a chief executive to the petitioner-bank after it became a multi- State co-operative society.

2. The first petitioner is a society registered under the provisions of the Maharashtra Co-operative societies Act, 1960, as applied to the Union Territory of Goa, Daman and Diu. Its authorised share capital is Rs. 1,25,00,000, the total subscribed capital being Rs. 1,26,79,400, out of which Rs. 50,39,000, had been subscribed by the Government of Goa. The petitioner-bank's borrowings and debentures are guaranteed by the Government of Goa and besides, the bank has purchased Government bonds worth Rs. 60,00,000. Its area of operation and the objects extended to the whole territory of the then existing Union Territory of Goa, Daman and Diu and it has branches in Goa, Daman and Diu. The Multi State Co-operative Societies Act, 1984 (for short, 'the Act'), came into force on September 16, 1985, but the bye-laws of the first petitioner continued as originally framed without being altered or rescined, and on October 14, 1988, the Government of Goa issued an order appointing Shri Shakti Sinha, I.A.S., Secretary (G.A), managing directory of the petitioner-bank. The petitioners contend that the aforesaid appointment is violative of the provisions of the Act, as the right to appoint the chief executive is exclusively vested in the board of directors by section 42(2)(d) and reiterated in section 44, and not in Government.

3. In order to elaborate the above submissions, Mr. S.K.Kakodkar, learned counsel appearing for the petitioners, invited our attention to the relevant provision of the Act, particularly to section 2(b) which makes the Act applicable to all multi-State co-operative societies and to section 3(k) which defines a multi- State co-operative society as a society registered or deemed to be registered under the Act, including a national co-operative society. He then took us through section 95 which deals with the co-operative societies functioning immediately before the reorganisation of a State and urged that with the reorganisation of the Union Territory of Goa,Daman and Diu and the creation of the State of Goa by the Goa, Daman and Diu Reorganisation Act, 1987, the first petitioner became a multi-State co-operative society governed by the provisions of the Act. Its section 95, inter alia, provides, he argued, that the existing bye-laws of a co-operative society which became a multi-State co-operative society after the reorganisation of the State within whose territory it had its objects, will continue to govern such society inasmuch as they are not inconsistent with the provisions of the Act, Now, bye-law 43 of the petitioner-bank's bye-laws imposes on the Government the obligation to appoint a managing director for it on such terms and conditions as the Government may deem fit. Such managing director is an ex-officio member of the board of directors and also is, by virtue of its clause (b), the chief executive of the bank who is responsible for its general administration. This bye-law, particularly the aforesaid clause (b) being, according to Mr. Kakodkar, inconsistent in principle with the provisions of the Act inasmuch as the power to appoint the chief executive is vested in the board of directors and not in the Government, could not have been taken recourse to by the Government to appoint a managing director, and by necessary implication, a chief executive to the first petitioner. He, therefore, contended that the impugned order appointing Shri Shakti Sinha as managing director of the petitioner-bank is not valid as he will necessarily also be by virtue of the aforesaid clause (b) of the bye-law 43, the chief executive of the bank. The learned Advocate-General did not dispute most of the above propositions, and in particular, he conceded that after the reorganisation of the format Union Territory of Goa, Daman and Diu and the creation of the State of Goa, the petitioner-bank has become a multi-State co-operative society, and further, that the said society is deemed to be registered as a multi-State co- operative society under the corresponding provisions of the Act. He, however, contended that bye-law 43 is not substantially inconsistent with the Act, for, although the managing director is, by virtue of its (clause b), the chief executive of the bank, the said bye-law merely contemplates the appointment of a managing director. Therefore, he urged that the impugned order is entirely valid as merely incorporating the appointment of Shri sinha as managing director of the petitioner-bank.

4. It is seen from the above rival contentions that it is common ground that after the reorganisation of the former Union Territory of Goa, Daman and Diu and the creation of the Goa State, the petitioner's society has become a multi-State co- operative society. Section 95 of the Act indeed provides that where, by virtue of the precisions of Part II of the States Reorganisation Act, 1956, or any other enactment relating to reorganisation of States, any co-operative society which immediately before the day on which the reorganisation takes place, had its objects confined to one State becomes, as from that day, a multi-State co-operative society and shall be deemed to be a multi-State co-operative society registered under the corresponding provisions of the Act, It further provides that the bye-laws of such society shall, in so far as they are not inconsistent with the provisions of the Act, continue to be in force until altered or rescinded. It is thus clear that a co- operative society which had its objects confined to one State and has become a multi-State co-operative society as a result of the reorganisation of that State will continue to be governed by its old bye-laws inasmuch as these bye-laws are not inconsistent with the Act until they are altered or rescinded.

5. Admittedly, the bye-laws of the first petitioner which were framed prior to its becoming a multi-State co-operative society had not yet been altered, nor were they rescinded. Hence, the question that falls for our determination is whether bye-law 43 is inconsistent with the provisions of the Act. It reads as under:

'(a) There shall be a managing director appointed by the Government of Goa, Daman and Diu on such terms and conditions as the Government may think fit. The managing directory shall be the ex-officio member of the board of directors and all committees appointed by the board. The managing director shall be an officer not below the rank of secretary or joint secretary to the Government of Goa, Daman and Diu.

(b) The managing director will be the chief executive of the bank and will be responsible for the general administration of the bank.

(c) After the return of the share capital and loans provided, of any, by the State Government, the managing director may be appointed by the board of the bank.'

6. In turn, section 42 of the Act, which deals with the powers and functions of the board of directors, provides in its sub-section (1) that the board may exercise all such powers as may be necessary or expedient for the purpose of carrying out its functions under the Act, and lays down in sub-section(2) that without prejudice to the generality of the aforesaid power, such power shall include, inter alia, the power to appoint a chief executive. Then, section 44 deals with the chief executive and in its sub-section (1) provides that there shall be a chief executive, by whatever designation called, of every Multi-State Co-operative Society, to be appointed by the board and he shall be a full-time employee of such multi-State co-operative society. It is thus clear from the above provisions of the Act and it is, as such, undisputable that the power to appoint a chief executive is exclusively vested in the board, and further, that the chief executive shall be a full-time employee of the multi-State co- operative society. Now, under bye-law 43, the managing director is to be appointed by the Government and he shall be an ex- officio member of the board of directors as well as the chief executive of the bank who will be responsible for its general administration.

7. It unquestionable flows from the above, and without any hesitation we so hold, that clause (b) of bye-law 43 under which the managing director appointed by the Government becomes the chief executive of the bank is materially inconsistent with the provisions of section 42(2)(d) as well as of section 44 of the Act. Indeed, the managing director of the bank appointed under bye-law 43 will be, by virtue of its clause (b), its chief executive, although under clause (d) of section 42(2), the power to appoint the chief executive is vested in the board and not in the Government. In addition, section 44 of the Act postulates that the chief officer appointed by the board shall be a full- time employee of the multi-state co-operative society, whereas bye-law 43(a) prescribes that the managing director appointed by the Government shall be an officer not below the rank of secretary or joint secretary. This circumstance, namely, that the managing directory appointed by the Government shall be an officer not below the rank of secretary or joint secretary is a pointer and indicates that such managing director appointed by the Government under bye-law 43(a) will not, in all probability, be a full-time employee of the multi-State co-operative society as required by section 44 of the Act. In our view, although there is no bar and it will be permissible for the Government under the Multi-State Co-operative Societies Rules, 1985, to appoint under bye-law 43(a), a managing director to a multi-State co-operative society, such managing director shall, in truth, be merely a nominee of the Government and he shall not be entitled to exercise the powers and to discharge the functions of the chief executive since, under section 42(2)(d) of the Act, the power to appoint the chief executive is exclusively vested in the board, with the result that as regards multi-State co-operative societies, the Government has ceased to have the powers of appointment which were vested in it by bye-law 43(b).

8. Mr. Kakodkar is, therefore, entirely right in his submission that the managing director appointed by the Government under bye- law 43 cannot be the chief executive of the first petitioner. However, in the view we have taken, it does not become necessary to quash the impunged order dated October 14, 1988, whereby Shri Shakti Sinha has been appointment constitutes, in the facts and circumstances of the case, a mere nomination to the board of directors of the first petitioner. Mr. Sinha is, therefore, on the strength of such appointment, the Government's nominee to the said board, but definitely not the only chief executive of the petitioner-bank.

9. The result, therefore is that the rule is made absolute as aforesaid. There will be no order as to costs in the circumstances of the case.