Supreme Court Upholds RBI’s Power to Supersede Multi-State Co-op Bank Boards Beyond 6 Months
Case Title: SANDEEP S. GHANDAT & ORS. VERSUS RESERVE BANK OF INDIA & ORS.
Case No.: CIVIL APPEAL NOS. 5351 – 5352 OF 2025
Coram: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
Court Observation
“…the power of RBI to supersede BoD of a multi-State co-operative bank under Section 36AAA (1) of BR Act is not circumscribed by the 6-month limit prescribed in Article 243ZL (1) of the Constitution.”
“…the third proviso by making the provisions of BR Act also applicable, in case of a multi-State co-operative bank enlarges the scope of main Article that is Article 243ZL(1), instead of restricting its scope, therefore, the same is not a proviso but is an independent provision. The words “shall also apply” employed in third proviso to the said Article makes it abundantly clear that provisions of the BR Act are applicable to the multi-State co-operative bank.”
“To read the third proviso to Article 243ZL(1) as excluding multi-State co-operative banks from the reach of the BR Act and thereby confining the RBI’s regulatory hand to a rigid six-month period, ill-suited to the time genuinely required to nurse a distressed bank back to health, would be to subordinate the protection of depositors and the discipline of the banking system to a truncated and overly technical reading of a constitutional proviso. Such a construction would defeat the very object which impelled the Parliament to enact a third proviso, namely, to ensure that co-operative societies carrying on the business of banking remain, notwithstanding their co-operative character, subject to the specialised, continuous and expert regulatory oversight of the RBI under the BR Act.”
“…the construction which sub serves the object of protecting depositors and preserving financial discipline in the banking system must be preferred over one which would fragment regulatory authority and expose multi-State co-operative banks to a supervisory vacuum upon the expiry of an artificially truncated period. It is this need to preserve, rather than dilute, the RBI’s regulatory reach over multi-State co-operative banks that lends both textual and purposive coherence to the scheme of Article 243ZL. Therefore, the inevitable conclusion is that provisions of BR Act apply to multi-State co-operative banks.”
“Once the BoD stands superseded, the Board ceases to exist and all its powers vest in the Administrator…the order of supersession passed under Section 36AAA(1) of BR Act can be extended beyond the term of office for which the BoD of a multi-State co-operative bank had originally been elected.”
“Insofar as the submission made on behalf of the appellants that there has been a violation of proviso to Section 36AAA(1) of the BR Act on account of non-consultation prior to the order of supersession is concerned, it suffices to note that the requirement of consultation applies only to a co-operative bank registered with Registrar of Co-operative Societies of a State. The Bank, being admittedly a multi-State co-operative bank, does not fall within that category. Therefore, the aforesaid submission does not merit acceptance.”
Supreme Court Upholds RBI’s Power to Supersede Multi-State Co-op Bank Boards Beyond 6 Months
