Supreme Court allows RBI to supersede multi-state co-op bank board beyond six months

The case concerns whether the Reserve Bank of India (RBI) can supersede the Board of Directors of a multi-State co-operative bank beyond the six-month limit prescribed in the Constitution and whether such supersession can be extended after the elected Board's term has expired.

Who it concerns: Appellants: Sandeep S. Ghandat & Ors.; Respondents: Reserve Bank of India & Ors.; Bench: Justice Alok Aradhe.

What the court decided

• The Court framed two issues: (i) whether RBI's power to supersede the Board under Section 36AAA(1) of the Banking Regulation Act, 1949 is limited by the six-month cap in Article 243ZL(1) of the Constitution, and (ii) whether supersession can be extended beyond the original term of the elected Board.
• The Court noted that Part IXB of the Constitution applies exclusively to multi-State co-operative societies.
• The Court analyzed the applicability of the Banking Regulation Act, 1949 and the Multi-State Co-operative Societies Act, 2002 to the Bank.
• The Court examined the submissions regarding the consultation requirement with the State Government and the impact of the third proviso to Article 243ZL(1).

Also in the document

• The judgment is marked as 'REPORTABLE'.
• The appeals challenge the High Court's dismissal of writ petitions that had upheld the RBI's First, Second, and Third Supersession Orders.
• The RBI had superseded the Board initially for one year, then extended it for further periods, citing financial deterioration and the need to protect depositors.