RBI Board Supersession Upheld Despite Invalid State Consultation: Kerala HC

M P Jackson Vs Reserve Bank of India (Kerala High Court)

The Kerala High Court considered a writ petition challenging the Reserve Bank of India’s order issued under Section 36AAA read with Section 56 of the Banking Regulation Act, 1949, superseding the Board of Directors of an Urban Co-operative Bank and appointing an Administrator. The petitioner, the former President of the Bank, sought restoration of the elected Managing Committee, contending that the supersession order violated the principles of natural justice, lacked mandatory consultation with the State Government, and unlawfully displaced a democratically elected Board.

The RBI had conducted an inspection of the Bank, identified several irregularities, and issued All-Inclusive Directions (AID) imposing regulatory restrictions on its operations. Although the Bank sought permission to sell non-banking assets to improve its financial position, the RBI subsequently superseded the Board of Directors and appointed an Administrator for one year from 07.10.2025 to 06.10.2026.

The petitioner argued that the supersession order resulted in civil consequences and therefore could not be passed without affording an opportunity of hearing. It was further contended that Section 36AAA mandates consultation with the State Government, whereas the RBI had consulted only the Registrar of Co-operative Societies. The petitioner also argued that the elected Managing Committee, having a statutory five-year tenure under the Kerala Co-operative Societies Act, could not be replaced by an Administrator appointed under the Banking Regulation Act.

The RBI opposed the petition, contending that Section 36AAA deliberately omits any requirement of personal hearing unlike Section 36AA of the Banking Regulation Act. It relied upon the Bombay High Court decision in Sandeep S. Ghandat, which held that principles of natural justice cannot be read into Section 36AAA. The RBI also maintained that consultation with the Registrar of Co-operative Societies satisfied the statutory requirement of consultation with the State Government and asserted that Section 36AAA empowered it to supersede the Board where necessary to protect depositors and ensure proper management of the Bank.

On the first issue, the High Court held that Section 36AAA does not require a personal hearing before passing an order of supersession. Comparing Sections 36AA and 36AAA, the Court observed that the Legislature had expressly incorporated an opportunity of hearing in Section 36AA but intentionally omitted such a requirement in Section 36AAA. Agreeing with the Bombay High Court in Sandeep S. Ghandat, the Court held that reading principles of natural justice into Section 36AAA would be contrary to the statutory scheme and could frustrate the purpose of enabling prompt regulatory intervention in the public interest and for protecting depositors. The Court therefore answered this issue in favour of the RBI.

On the second issue, however, the Court held that consultation with the Registrar of Co-operative Societies did not amount to consultation with the State Government as required by the proviso to Section 36AAA(1). While recognising the Registrar’s expertise, the Court held that the statute specifically required consultation with the State Government, represented by the Secretary of the Co-operation Department, and that statutory requirements must be followed in the prescribed manner. It also held that the absence of any objection by the State Government did not cure the defect. Accordingly, the Court concluded that the supersession order had been passed without the mandatory consultation required by Section 36AAA(1).

On the third issue, the Court held that the RBI possesses statutory authority under Section 36AAA to supersede the Board of Directors of a Co-operative Bank notwithstanding the democratic framework under the Kerala Co-operative Societies Act. It observed that the Banking Regulation Act specifically applies to Co-operative Banks and that the RBI, owing to its expertise in banking regulation and financial administration, is competent to exercise such powers independently of proceedings under the Kerala Co-operative Societies Act.

Although the Court found that the mandatory consultation requirement had not been complied with, it declined to exercise its discretionary jurisdiction under Article 226 of the Constitution. The Court noted that the supersession order had already been implemented, the Administrator had managed the Bank for nearly nine months, no interim relief had been granted, and the Administrator’s tenure was due to expire on 06.10.2026. Considering the public interest, the interests of depositors and the Bank, the Court held that it would not be appropriate to restore the Managing Committee at that stage. Consequently, the writ petition was dismissed. However, the Court directed that if the RBI intended to continue the supersession order beyond 06.10.2026, it must do so only after consultation with the State Government.

Cases Discussed:

• State Bank of India and Others v. Rajesh Agarwal and Others, (2023) 6 SCC 1.
• Brigadier Nalin Kumar Bhatia v. Union of India and Others, (2020) 4 SCC 78.
• OPTO Circuit India Limited v. Axis Bank and Others, (2021) 6 SCC 707.
• Rohitash Kumar and Others v. Om Prakash Sharma and Others, (2013) 11 SCC 451.
• State of Madhya Pradesh and Others v. Sanjay Nagayach and Others, (2013) 7 SCC 25.
• Reserve Bank of India v. M. Hanumaiah and Others, (2008) 1 SCC 770.
• Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Central-I and Another, (2008) 14 SCC 151.
• Babu Verghese and Others v. Bar Council of Kerala and Others, (1999) 3 SCC 422.
• Sandeep S. Ghandat and Others v. Reserve Bank of India and Others, 2024 SCC OnLine Bom 3584.
• Manoharan K. v. District Collector, Kannur, 2024 (4) KHC 606.
• B. Sajeevan and Others v. The Joint Registrar of Co-Operative Societies and Others, 2015 SCC OnLine Ker 26475.
• Chaithanya Krishnan and Others v. The Joint Registrar of Co-Operative Societies and Others, 2022:KER:74409.
• Sabu K.V. v. Registrar of Co-operative Societies and Others, ILR 2026 Kerala OnLine 52.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

1. The Petitioner is the former President of Respondent No.4 – Urban Co-operative Bank. The Petitioner has filed this Petition challenging Ext.P5 order of the Respondent No.1/Reserve Bank of India issued under Section 36AAA r/w Section 56 of the Banking Regulation Act, 1949, superseding the Board of Directors of Respondent No.4. Other reliefs sought for in the Writ Petition are to declare that the principles of natural justice are to be read into the provisions of Section 36AAA r/w Section 56 of the Banking Regulation Act, 1949, and to direct the Respondent No.1 to restore the elected Managing Committee of Respondent No.4, forthwith.

2. The Respondent No.1 conducted an inspection on the operation of the Respondent No.4/Bank and prepared Ext.P1 Inspection Report considering the financial position as on 31.03.2022. Several irregularities in the operation of the Respondent No.4 were found in Ext.P1. The Respondent No.1, invoking its powers under Section 35A of the Banking Regulation Act, issued Ext.P3 All-Inclusive-Directions (AID) dated 29.07.2025 imposing certain regulatory restrictions in the operations of the Respondent No.4 for a period of six months with effect from 30.07.2025. The Respondent No.4 submitted a Request dated 08.09.2025 to the Respondent No.1 seeking permission to sell Non-Banking Assets (NBAs) of the Respondent No.4 to come out of AID restrictions, which was replied to by the Respondent No.1 as per Ext.P4 dated 24.09.2025 that AID restrictions do not prohibit the sale of NBAs. The contention of the Petitioner is that while the Respondent No.4 initiated action to sell the NBAs to improve its financial position, the Respondent No.1 issued Ext.P5 order of supersession removing the Board of Directors of Respondent No.4 and appointing an Administrator for the Respondent No.4 for a period of one year from 07.10.2025 to 06.10.2026.

3. The Respondent No.1 filed Counter Affidavit dated 27.02.2026 opposing the prayers in the Writ Petition. Petitioner filed Reply Affidavit dated 10.03.2026 answering the contentions raised in the Counter Affidavit. The Respondent No.1 filed Additional Counter Affidavit dated 29.05.2026 clarifying certain facts in answer to the contentions raised in the Reply Affidavit.

4. I heard the learned Counsel for the Petitioner, Sri. Arjun Raghavan, the learned Senior Counsel for the Respondent No.1, Smt. Sumathy Dandapani, instructed by Adv. Sri. Millu Dandapani, and the learned Government Pleader for the Respondent Nos.2 & 3.

5. The learned Counsel for the Petitioner contended that Ext.P5 Order was totally unwarranted in the facts and circumstances of the case. The Respondent No.4 had been conducting its operation strictly in accordance with Ext.P3 AID. The financial condition of the Respondent No.4 could have been improved by the sale of NBAs, if a reasonable time was granted to the Respondent No.4. Learned Counsel challenged Ext.P5 on three specific grounds: (1) Ext.P5 Order was issued in violation of the principles of natural justice, (2) Ext.P5 Order was passed without consultation with the State Government as mandatorily required under Section 36AAA of the Banking Regulation Act, and (3) Respondent No.1 has no authority to appoint Administrator to replace the democratically elected Board of Directors of the Respondent No.4 on 23.01.2024 for a period of five years, which is answerable to the General Body of the Respondent No.4.

6. First contention of the Learned Counsel for the Petitioner is that even though Section 36AAA of the Banking Regulation Act does not expressly provide an opportunity of hearing, an order of supersession is having consequence of loss of office and also loss of reputation, and the same has to be termed as civil consequence. It is well settled by the decisions of the Hon’ble Supreme Court that once it is found that there is civil consequence arising out of a transaction, the order therein can only be issued after hearing the affected party. The learned Counsel for the Petitioner relied on the decisions of the Hon’ble Supreme Court in Reserve Bank of India v. M. Hanumaiah and Others 1(2008) 1 SCC 770], Sahara India (Firm), Lucknow v. Commissioner of Income Tax, Central-I and Another 1(2008) 14 SCC 151], Brigadier Nalin Kumar Bhatia v. Union of India and Others 1(2020) 4 SCC 78], State Bank of India and Others v. Rajesh Agarwal and Others 1(2023) 6 SCC 1] and the decision of this Court in Manoharan K. v. District Collector, Kannur 12024 (4) KHC 606] in support of his contentions regarding the violation of principles of natural justice.

7. Second contention of the learned Counsel for the Petitioner is that the Proviso to Section 36AAA(1) of the Banking Regulation Act mandates consultation with the State Government concerned, seeking its comments before passing an order under Section 36AAA. The non-consultation of the State Government vitiates Ext.P5 order passed by the Respondent No.1. The consultation made by the Respondent No.1 with the Respondent No.3/Registrar of Co-operative Societies could not be equivalent to the consultation with the State Government. Under the Kerala Co-operative Societies Act, 1969, the State Government is at a higher level than the Registrar of the Co­operative Societies. Under Section 87 of the Kerala Co­operative Societies Act, a power of revision is provided against the orders of the Registrar of Co-operative Societies. It is a settled law that when the Statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner. Learned Counsel cited the decisions of the Hon’ble Supreme Court in Babu Verghese and Others v. Bar Council of Kerala and Others 1(1999) 3 SCC 422], Rohitash Kumar and Others v. Om Prakash Sharma and Others 1(2013) 11 SCC 451] and OPTO Circuit India Limited v. Axis Bank and Others 1(2021) 6 SCC 707] in support of this Contention. Learned Counsel further cited the decisions of this Court in B. Sajeevan and Others v. The Joint Registrar of Co-Operative Societies and Others 12015 SCC OnLine Ker 26475], Chaithanya Krishnan and Others v. The Joint Registrar of Co-Operative Societies and Others 12022:KER:74409] and Sabu K.V. v. Registrar of Co-operative Societies and Others fILR 2026 Kerala OnLine 52] dealing with the supersession of the Managing Committee under Section 32 of the Kerala Co-operative Societies Act, 1969. In B. Sajeevan (supra) and Sabu K.V. (supra), this Court held that the Order passed by the Registrar under Section 32(1) of the Kerala Co-operative Societies Act to supersede the Managing Committee without consultation of the Circle Co­operative Union or the State Co-operative Union, as the case may be, is unsustainable and ordered to restore the Managing Committee forthwith.

8. The third contention of the Counsel for the Petitioner is that the Managing Committee is elected democratically by the General Body and it has to remain in power for a period of five years, expiring on 24.01.2029, as provided under Section 28 of the Kerala Co-operative Societies Act. The said democratic body could not be replaced by an Administrator appointed under Section 36AAA of the Banking Regulation Act. It is the Managing Committee alone which takes policy decisions pertaining to the functioning of the Co-operative Society. The Managing Committee is answerable to the General Body. If Ext.P5 order passed by Respondent No.1 is allowed to stand, it would be detrimental to the democratic principles embodied in the Kerala Co-operative Societies Act. Section 32 of the Kerala Co-operative Societies Act provides for the supersession of the Managing Committee on the Registrar being satisfied that the Managing Committee has indulged in any of the illegal actions mentioned in Section 32 (1) of the Kerala Co-operative Societies Act. It is well settled that the power of supersession is to be used sparingly by the authorities. There are enough safeguards in the Kerala Co-operative Societies Act to correct an erring Society. None of the authorities under the Kerala Co­operative Societies Act has initiated any action against the Respondent No.4. Learned Counsel concluded his arguments praying to set aside Ext.P5 order and to restore the elected Managing Committee of the Respondent No.4 forthwith.

9. Per contra, the learned Senior Counsel for the Respondent No.1 contended that Section 36AAA of the Banking Regulation Act does not contemplate any personal hearing before passing an Order under the said Section. The learned Senior Counsel invited my attention to Section 36AA of the Banking Regulation Act which provides for the removal of managerial or other persons from the office of a banking company. It provides for granting a reasonable opportunity of making representation against the proposed order. The Legislature, in its wisdom, has purposefully omitted the opportunity of hearing in Section 36AAA and hence the opportunity of hearing could not be read into Section 36AAA. The Bombay High Court considered the question in Sandeep S. Ghandat and Others v. Reserve Bank of India and Others [2024 SCC OnLine Born 3584] and it is held that the principles of natural justice cannot be read into Section 36AAA. The decision cited by the learned Counsel for the Petitioner are clearly distinguishable. Learned Senior Counsel further contended that the Respondent No.1 passed Ext.P5 Order after consultation with the State Government which is mandated under the Proviso to Section 36AAA(1). The Respondent No.1 sought comments from the Respondent No.3/Registrar of Co­operative Societies in the matter of the Respondent No.4 as per Ext.R1(b) and the Respondent No.3 submitted Ext.R1(c) comments to the Respondent No.1. The Registrar of Co­operative Societies is the Principal Officer heading the Department of Co-operation who supervises the functioning of the Co-operative Societies throughout the State. He is the most competent officer of the State Government for consultation with respect to matters affecting the functioning of the Co-operative Societies. The State Government has not raised any objection against Ext.P5 order on the ground that the State Government was not consulted before passing the Ext.P5 order. It is clear from the First Proviso to Section 32(1) of the Kerala Co­operative Societies Act that in the case of Co-operative Society carrying on the business of banking, the provisions of the Banking Regulation Act, 1949, shall also apply. Respondent No.1 derives the power of supersession under the provisions of the Banking Regulation Act. Hence, the Respondent No.1 is competent to supersede the Managing Committee of the Respondent No.4. The Respondent No.1 passed Ext.P5 Order when it was found that Ext.P3 AID is insufficient to improve the financial condition of the Respondent No.4/Bank. The democratic setup of the Society is not a hurdle when sufficient reasons are available to the Respondent No.1 to invoke its power under Section 36AAA of the Banking Regulation Act. Ext.P5 order is already implemented and the Administrator appointed by the Respondent No.1 has taken charge long back. Ext.P5 order is dated 07.10.2025 and the Administrator appointed by Respondent No.1 took charge of the Respondent No.4 immediately and has been managing the Respondent No.4 for the last several months. The Petitioner has filed this Writ Petition only on 27.01.2026. This Court was not inclined to grant any interim order in favour of the Petitioner and hence the Administrator has continued his management of the Respondent No.4. The present administration is due to expire on completion of one year on 06.10.2026. The reasons for passing the Ext.P5 order of supersession are clearly stated in the Ext.P5 order. There are well-supported reasons in Ext.P5 order. The learned Senior Counsel concluded his arguments praying to dismiss the Writ Petition.

10. ln the light of the arguments advanced before me, the following questions arise for consideration in this case:

1. Whether an opportunity of hearing is to be given before passing an Order of supersession under Section 36AAA of the Banking Regulation Act?

2. Whether consultation with the Registrar of Co-operative Societies is sufficient compliance for consultation with the State Government as mandated under the Proviso to Section 36AAA(1) of the Banking Regulation Act?

3. Is it permissible for the Respondent No.1 to supersede the Managing Committee elected by the General Body of the Respondent No.4 without recourse to the provisions under the Kerala Co-operative Societies Act and the Rules made thereunder?

Question No.1:

11. There could not be any quarrel with respect to the proposition of law that when the proceedings result in civil consequences to the affected party, the principles natural justice have to be followed.

12. In Hanumaiah (supra), the question considered was whether the principles of natural justice have any application at the stage when the Registrar of Co-operative Societies, on being so required in writing by the Reserve Bank of India, passes an order removing the Committee of Management of a Co- operative Bank and appointing an Administrator to manage its affairs for such period, as may be specified by the Reserve Bank of India. The Hon’ble Supreme Court answered the question in the negative and held and found that on receipt of a requisition in writing from the Reserve Bank of India, the Registrar, Co­operative Societies, is statutorily bound to issue the order of supersession of the Committee of Management of the Co­operative Bank and that at that stage the affected Bank / its Managing Committee has no right of hearing or to raise any objections. In the decision in Brigadier Nalin Kumar Bhatia (supra) cited by the Counsel for the Petitioner, the Hon’ble Supreme Court held that there is no presumption that a decision taken by persons occupying high posts is valid; that all power vested in the authorities has to be discharged in accordance with the principles laid down by the Constitution and the other Statutes or Rules / Regulations governing the field; that the judicial  scrutiny of a decision does not depend on the rank or position held by the decision maker; and that the Court is concerned with the legality and validity of the decision and the rank of the decision maker does not make any difference. The decision in Rajesh Agarwal (supra) is cited to substantiate the point that administrative proceedings which entail significant civil consequences must be read consistent with the principles of natural justice to meet the requirement of Article 14; that where possible, the rule of audi alteram partem ought to be read into a statutory rule to render it compliant with the principles of equality and non-arbitrariness envisaged under Article 14. The decision in Sahara India (supra) is cited by the Counsel for the Petitioner to substantiate the point that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences for the party affected; and that the principle will hold good irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi-judicial. It is further held by the Hon’ble Supreme Court that no general rule of universal application can be laid down as to the applicability of the principle audi alteram partem, in addition to the language of the provision; that there can be exceptions to the said doctrine; that the question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power, the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power; and that it is only upon a consideration of all these matters that the question of application of the said principle can be properly determined. In Rohitash Kumar (supra), the Hon’ble Supreme Court held that the Court, while interpreting statutory provisions, cannot add words to a Statute, or read words into it which are not part of it, especially when a literal reading of the same produces an intelligible result; that the Statute is not to be construed in light of certain notions that the legislature might have had in mind, or what the legislature is expected to have said, or what the legislature might have done, or what the duty of the legislature to have said or done was; that the Courts have to administer the law as they find it, and it is not permissible for the Court to twist the clear language of the enactment in order to avoid any real or imaginary hardship which such literal interpretation may cause; and that under the garb of interpreting the provision, the Court does not have the power to add or subtract even a single word, as it would not amount to interpretation, but legislation.

13. Section 36AA of the Banking Regulation Act deals with the removal of managerial and other persons from the office of the banking company. Section 36AAA of the Banking Regulation Act deals with the supersession of Board of Directors of a Co­operative Bank. On a bare comparison of the provisions under Section 36AA and Section 36AAA of the Banking Regulation Act, it is clear that the Legislature in its wisdom has decided to avoid the application of the principle of natural justice to the proceedings under Section 36AAA. The Legislature has incorporated the principle of natural justice into the language of Section 36AA, whereas it has avoided the same in Section 36AAA. When the Legislature has decided to avoid the application of the principle of natural justice to the proceedings under Section 36AAA, it could not be read into the language of the said provision. Section 36AAA of the Banking Regulation Act does not contemplate an opportunity of hearing before passing an Order under the said Section.

14. The Division Bench of the Bombay High Court had occasion to consider this question in Sandeep S. Ghandat (supra). It is apposite to quote Paragraphs Nos.86 and 87 of the said decision:

“86. Section 36-M, which immediately precedes Section 36-AAA, provides that an order removing any Chairman, Director, Chief Executive Officer or other officer or employee of a banking company under sub-section (1) of Section 36­A shall not be made unless the Chairman, Director or Chief Executive Officer or other officer or employee concerned has been given a reasonable opportunity of making a representation to the Reserve Bank of India against the proposed order. However, Section 36-AAA, which immediately follows Section 36-AA, does not provide for any such opportunity of hearing before any order is passed by the RBI. In our view, therefore, this clearly shows that the intention of the Parliament is not to include the principles of natural justice in Section 36-AAA. In other words, there is a clear mandate to the contrary in the statute. Looking at it in another way it can also be said that the statute excludes by necessary implication the principles of natural justice from Section 36-AAA. In our view, for this reason the principles of natural justice cannot be read into Section 36-AAA.

87. Further, the judgment in Rajesh Agarwal (supra) provides that principles of natural justice should not be read into a statute where importing them would have the effect of paralysing the entire process. It is important to note that RBI has to exercise the power under Section 36AAA when it is satisfied that in the public interest or for preventing the affairs of a Co-operative Bank being conducted in a manner detrimental to the interest of the depositors or of the Co-operative Bank or for securing the proper management of the Co-operative Bank it is necessary to do so. In our view, considering the circumstances in which the power under Section 36-AAA has to be exercised, if a show-cause notice or hearing is given, then it would lead to delay causing further deterioration in the affairs of the Bank and further mismanagement thereby further prejudicing the interests of the Bank and its depositors. This would have the effect of defeating the purposes for which the said power is conferred on the Reserve Bank in Section 36-AAA. In our view, for this reason also, the principles of natural justice cannot be read into Section 36-AAA.”

15.1 am in respectful agreement with the view taken by the Division Bench of the Bombay High Court in the above decision.

16.While passing a Supersession Order under Section 36AAA, the Respondent No.1 should be satisfied that in the public interest or for preventing the affairs of Co-operative Bank being conducted in a manner detrimental to the interest of depositors or of the Co-operative Bank or for securing the proper management of the Co-operative Bank, it is necessary to supersede the Board of Directors of such Co-operative Bank and the Order should contain reasons in writing. In the case on hand, the Respondent No.1 conducted an enquiry on the operation of the Respondent No.4 as per Ext.P1. The Respondent No.1 issued Ext.P3 Order as a first step, issuing certain regulatory restrictions to the operation of the Respondent No.4. It is thereafter that the Respondent No.1 passed Ext.P5 order appointing Administrator superseding the Board of Directors of the Respondent No.4 for a period of one year. Clear reasons are stated in Ext.P5 Order. Hence, I am of the view that the Managing Committee of the Respondent No.4 including the Petitioner are not entitled to get an opportunity of personal hearing before passing the Ext.P5 order. This question is answered in the negative and in favour of the Respondent No.1.

Question No.2

17. Proviso to Section 36AAA(1) of the Banking Regulation Act provides that in the case of a Co-operative Bank registered with the Registrar of Co-operative Societies of a State, the Reserve Bank shall issue order under Section 36AAA in consultation with the concerned State Government seeking its comments, if any, within such period as the Reserve Bank specifies. Of course, the Registrar of Co-operative Societies is a competent officer of the State Government for consultation in a matter affecting the functioning of a Co-operative Society. But when the statute specifically requires consultation with the State Government, the consultation with the Registrar of Co-operative Societies is not sufficient. In Babu Verghese (supra) and OPTO Circuit India Limited (supra), the Hon’ble Supreme Court reiterated that it is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner alone and in no other manner. The Registrar of Co-operative Societies cannot represent the State Government in such a consultation process. The State Government, represented by the Secretary of the Cooperation Department, is the competent authority to be consulted before passing Order under Section 36AAA of the Banking Regulation Act. As rightly contended by the learned Counsel for the Petitioner, the Registrar of Co-operative Societies is an officer subordinate to the State Government in the hierarchy of authorities provided in the Kerala Co-operative Societies Act.

18. In State of Madhya Pradesh and Others v. Sanjay Nagayach and Others 1(2013) 7 SCC 25] cited by the learned Counsel for the Petitioner, the Hon’ble Supreme Court was concerned with the legality of an order passed by the Joint Registrar of the Co-operative Societies, superseding the Board of Directors of a Co-operative Bank without previous consultation with the Reserve Bank of India, as provided under the Second Proviso to Section 53(1) of the Madhya Pradesh Co-operative Societies Act, 1960. The Hon’ble Supreme Court upheld the judgment of the Division Bench of the High Court of Madhya Pradesh setting aside the order of supersession on the ground of non-compliance of the Second Proviso to Section 53(1) of the Madhya Pradesh Co­operative Societies Act, 1960, holding that the consultation with the Reserve Bank of India was not effective and meaningful.

19. When the statute provides for consultation with the State Government, the absence of any objection from the side of State Government on the ground of non-consultation is irrelevant.

20.When Proviso to Section 36AAA(1) provides for mandatory consultation with the State Government, any order passed without such consultation is to be held unsustainable. This question is answered in the negative and in favour of the Petitioner.

Question No.3

21. In the matter of supersession of the Managing Committee of a Co-operative Bank, it is the Respondent No.1 which has more expertise for its financial administration than the authorities under the Co-operative Societies Act. For efficient performance of the banking business of the Co-operative Banks, regular monitoring by the Respondent No.1 is absolutely essential. Section 32 of the Kerala Co-operative Societies Act provides for supersession of Committee of the Societies. The First Proviso to Section 32(1) provides that in the case of Co-operative Society carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 shall also apply. In such case, the Respondent No.1 has all the powers to initiate action under the Banking Regulation Act against a Co-operative Bank, as in the case of commercial Banks. Part V of the Banking Regulation Act provides for the application of the Act to Co-operative Banks. When there is a clear provision as Section 36AAA in the Banking Regulation Act providing for supersession of the Board of Directors of the Co-operative Banks, the Co-operative Bank cannot claim any immunity from the proceedings initiated under the Banking Regulation Act, on the ground that it has been working under a democratic setup provided by the Kerala Co- operative Societies Act. Hence, this question is answered in the affirmative and in favour of the Respondent No.1.

Conclusion

22. In view of the answer to Question No.2, in normal case, the Petitioner is entitled to succeed in this Writ Petition. But Ext.P5 order is dated 07.10.2025 and the same has been implemented by the Administrator taking charge of the management of the Respondent No.4 immediately. The Petitioner, who was the President of the Respondent No.4, has chosen to file this Writ Petition only on 27.01.2026. The Petitioner could not secure any interim order in his favour. Even after the filing of the Writ Petition, the Administrator appointed by the Respondent No.1 continued the management of the Respondent No.4. Now the Administrator appointed by Respondent No.1 has been conducting the management of the Respondent No.4 for the last nearly nine months. The Administrator is appointed for a period of one year which would expire on 06.10.2026. Hence, I am of the view that it is not in the public interest and in the interest of the Depositors and the Respondent No.4, to set aside Ext.P5 order at this distance of time. It is not desirable to restore the Managing Committee back to the management of Respondent No.4 at present. Hence, I am not inclined to exercise my discretion under Article 226 of the Constitution of India in favour of the Petitioner.

23. Accordingly, this Writ Petition is dismissed repelling the challenge against Ext.P5 order, and at the same time, directing that if the Respondent No.1 wants to continue Ext.P5 order after 06.10.2026, the same shall be done only with the consultation with Respondent No.2.