Authority: Supreme Court of India, Civil Appellate Jurisdiction

Order Date: 03 September 2026

Case Overview

  • Appellants: Sandeep S. Ghandat & Others; Respondents: Reserve Bank of India & Others.
  • The dispute concerned RBI's power under Section 36AAA of the Banking Regulation Act, 1949 (BR Act) to supersede the Board of Directors (BoD) of Abhyudaya Co‑operative Bank Limited, a multi‑State co‑operative bank.
  • Background: The Bank, incorporated under the Maharashtra Co‑operative Societies Act (1960) and converted to a bank in 1965, became a scheduled bank in 1988 and later a multi‑State co‑operative bank after amalgamations.
  • First Supersession Order: Dated 24‑Nov‑2023, RBI superseded the BoD for one year and appointed Mr. Satya Prakash Pathak as Administrator, citing deteriorating financial health, depositor protection, and need for expert management.
  • The appellants, whose five‑year BoD term expired on 24‑May‑2024, challenged the order in the Bombay High Court. The High Court upheld the order on 18‑Nov‑2024, interpreting Section 36AAA as not barred by Articles 243ZL/243ZT of the Constitution and finding the consultation proviso inapplicable to a multi‑State co‑operative bank.
  • While the appeals were pending, RBI issued a Second Supersession Order on 18‑Nov‑2024 extending supersession by another year, and a Third Supersession Order on 07‑Nov‑2025 extending it further.
  • Submissions: Appellants argued that supersession cannot exceed the BoD’s statutory term and that the six‑month constitutional ceiling applies; they also contended that RBI failed to consult the Central Government as required.
  • RBI contended that Section 36AAA(7) allows the Administrator to call a general meeting before the supersession period expires, that supersession may be extended up to five years in total, and that the consultation requirement applies only to banks registered with a State Registrar, not to multi‑State co‑operative banks.
  • The Court examined the constitutional provisions (Article 243ZL), the third and fourth provisos, and the language “shall also apply” which incorporates the BR Act into Part IXB for banks.
  • The Court held that the third proviso expands, not restricts, the scope of Article 243ZL, thereby making the BR Act applicable to multi‑State co‑operative banks.
  • It further held that the fourth proviso expressly excludes multi‑State co‑operative banks from the six‑month limitation, allowing RBI’s supersession power to operate for up to five years.
  • The requirement of consultation with the State Government is inapplicable to the Bank, as it is a multi‑State entity.

Final Outcome

  • The Supreme Court answered the first issue negatively, confirming that RBI’s supersession power is not limited by the six‑month constitutional ceiling.
  • It answered the second issue affirmatively, allowing supersession orders to be extended beyond the original BoD term, provided the aggregate period does not exceed five years.
  • The Court dismissed the appeals with no order as to costs.

Topics: Banking Regulation, Co‑operative Banking