1. Extent to which constitutional mandate of democratic governance limits RBI's power to supersede board of multi-State co-operative bank under Banking Regulation Act, 1949. (Para 1 )
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SUPREME COURT OF INDIA
Pamidighantam Sri Narasimha, Alok Aradhe, JJ.
Sandeep S. Ghandat & Ors. – Appellants
Versus
Reserve Bank Of India & Ors. – Respondents
Civil Appeal Nos. 5351 – 5352 of 2025
Decided On : 03-09-2026
1. Extent to which constitutional mandate of democratic governance limits RBI's power to supersede board of multi-State co-operative bank under Banking Regulation Act, 1949. (Para 1 )
2. Dispute over whether RBI's supersession power under BR Act is limited by constitutional six-month ceiling and whether it can extend beyond original board term. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 )
3. Appeals dismissed; no order as to costs. (Para 40 )
No. The third proviso to Article 243ZL(1) incorporates the BR Act, making it applicable to multi-State co-operative banks. Section 36AAA allows supersession up to five years, overriding the six-month limit. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 )
Yes. Section 36AAA(1) permits extension from time to time up to five years. The tenure of the original board is irrelevant once superseded; elections are held only after the specified period. (Para 35 , 36 , 37 , 38 )
No. The proviso applies only to co-operative banks registered with a State Registrar; a multi-State co-operative bank does not fall within that category. (Para 39 )
JUDGMENT :
ALOK ARADHE, J.
1. The present appeals concern the extent to which the constitutional mandate of democratic governance of co-operative societies limits the power of the Reserve Bank of India (RBI) to supersede the Board of a multi-State co-operative bank and continue such supersession under the Banking Regulation Act, 1949 (the ‘BR Act’).
2. The appeals assail the judgment and order dated 18.11.2024 rendered by the High Court1[High Court of Judicature at Bombay] in two Writ Petitions2[Writ Petition (L) Nos. 34124-34125 of 2023] whereby the order dated 24.11.2023 passed by the RBI superseding the Board of Directors (‘BoD’) of Abhyudaya Co-operative Bank Limited (the ‘Bank’) and appointing an Administrator in its place, was upheld and the said writ petitions came to be dismissed.
FACTS
3. At the outset, the material facts, shorn of unnecessary details, may be noticed. The Bank was originally incorporated as a cooperative society registered under the Maharashtra Co-operative Societies Act, 1960 which later was converted into a bank in the year 1965 with the permission of RBI and the Commissioner of Co-operation. In the year 1988, the Bank was declared as a Scheduled Bank by RBI under Section 42(6)(a) of the Reserve Bank of India Act, 1934 (the ‘RBI Act’). Pursuant to a direction issued by RBI under Section 45 of the Banking Regulation Act, 1949 (the ‘BR Act’), the Bank was amalgamated with two banks in Gujarat and one bank in Karnataka, in consequence whereof it became a multi-State co-operative society carrying on the business of banking, and is thus a ‘Multi-State Co-operative Bank’ within the meaning of the BR Act.
4. In May 2019, the appellants were elected as members of the BoD by the shareholders of the Bank for a statutory term of five years. By an order dated 24.11.2023, the RBI, in exercise of power conferred by Section 36AAA (1) and (2) read with Section 56 of BR Act, superseded the BoD of the Bank for a period of one year (the ‘First Supersession Order’) and appointed Mr. Satya Prakash Pathak as the Administrator. The First Supersession Order proceeded on the following three grounds, namely, (i) the financial health of the Bank had deteriorated to a dangerous level; (ii) supersession was necessary to protect the interest of the depositors and to save the Bank from collapse; and (iii) the affairs of the Bank were required to be managed through expert professionals so as to restore it to sound financial health.
5. Aggrieved, the appellants instituted writ petitions before the High Court seeking to quash the First Supersession Order. During the pendency of those proceedings, the appellants’ statutory term of five years expired on 24.05.2024.
6. On 18.11.2024, the RBI extended the period of supersession for a further period of one year with effect from 24.11.2024 (the ‘Second Supersession Order’). By the impugned judgment dated 18.11.2024, the High Court held, inter alia, that Section 36AAA of BR Act continues to operate and is not rendered otiose by Articles 243ZL and 243ZT of the Constitution of India (‘the Constitution’); that the proviso to Section 36AAA of the BR Act requiring consultation with the State Government has no application to a multi-State co-operative bank; and that the principles of natural justice cannot be read into Section 36AAA of BR Act. The writ petitions were accordingly dismissed.
7. Being aggrieved, the appellants approached this Court by way of Special Leave Petitions, in which leave was granted. During the pendency of these appeals, on 07.11.2025, the RBI passed another order extending supersession with effect from 24.11.2025 (‘the Third Supersession Order’).
SUBMISSIONS
8. Mr. Devadatt Kamat, learned senior counsel for the appellants, submitted that supersession contemplated under Section 36AAA(1) of BR Act cannot extend beyond the tenure of the BoD and that the Second and Third Supersession Orders, having been passed after expiry of the appellants’ term, when in effect, no Board remained in
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