Sandeep S. Ghandat & Ors. Vs Reserve Bank of India & Ors. (Supreme Court)
Democratic Control Stops Where Depositors’ Safety Begins: Supreme Court Upholds RBI’s Five-Year Supersession Power u/s 36AAA Over Multi-State Co-operative Banks
Summary:
The Supreme Court has held that RBI’s power u/s 36AAA of the Banking Regulation Act, 1949 to supersede the Board of Directors of a multi-State co-operative bank is not restricted by the six-month ceiling prescribed under Article 243ZL(1) of the Constitution. RBI may extend the supersession from time to time for an aggregate period of up to five years, even beyond the original tenure of the elected Board, where such regulatory intervention is necessary to protect depositors, preserve financial stability & secure proper management of the bank.
Supersession of Abhyudaya Co-operative Bank’s Board
Abhyudaya Co-operative Bank Ltd. was originally registered under the Maharashtra Co-operative Societies Act, 1960. It commenced banking activities in 1965 & became a scheduled bank in 1988.
Following amalgamation with co-operative banks situated in Gujarat & Karnataka under directions issued by RBI, it acquired the status of a multi-State co-operative bank.
The appellants were elected to the Bank’s Board in May 2019 for a statutory term of five years. On 24.11.2023, RBI invoked section 36AAA(1) & (2) read with section 56 of the Banking Regulation Act and superseded the Board for one year. An Administrator was appointed in its place.
