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The Supreme Court on September 3, 2026, upheld the Reserve Bank of India’s power to supersede the Board of Directors of a multi-State co-operative bank beyond the six-month period mentioned in Article 243ZL of the Constitution.
A Bench of Justice P. Sri Narasimha and Justice Alok Aradhe dismissed the appeals challenging the Bombay High Court judgment that had upheld RBI’s action against Abhyudaya Co-operative Bank Ltd.
Background of the Case
The bank had become a multi-State co-operative bank after amalgamations involving banks in Gujarat and Karnataka. In May 2019, the appellants were elected to its Board for a five-year statutory term.
On November 24, 2023, RBI superseded the Board for one year and appointed an Administrator, citing deterioration in the bank’s financial condition, the need to protect depositors and the requirement for professional management.
The Board’s elected term ended on May 24, 2024. Meanwhile, RBI extended the supersession for another year and subsequently passed a further extension order in November 2025.
The appellants argued that the Constitution limited supersession to six months and that RBI could not continue the arrangement after the elected Board’s term had expired.
Supreme Court’s Observation
The Court examined Article 243ZL of the Constitution alongside Section 36AAA of the Banking Regulation Act, 1949.
It noted that Article 243ZL specifically provides that the Banking Regulation Act shall also apply to a co-operative society carrying on banking business. According to the Court, this provision incorporates the banking law into the constitutional framework governing multi-State co-operative banks.
The Bench held:
“Therefore, the inevitable conclusion is that provisions of BR Act apply to multi-State co-operative banks.”
The Court further explained that Section 36AAA permits RBI to supersede a co-operative bank’s Board for a period that may be extended from time to time, subject to an overall limit of five years.
It held that the expiry of the original Board’s elected tenure does not prevent continuation of a supersession order that was validly made while that tenure was still in force.
Decision
The Supreme Court answered the first issue in the negative, holding that RBI’s power under Section 36AAA is not restricted by the six-month ceiling in Article 243ZL for multi-State co-operative banks.
On the second issue, it held that a valid supersession order can be extended beyond the original elected term of the Board, provided the extensions remain within the statutory five-year outer limit.
The Court also rejected the argument that prior consultation with the State Government was mandatory, holding that the consultation requirement applies only to co-operative banks registered with a State Registrar and not to a multi-State co-operative bank.
Accordingly, the appeals were dismissed and the Bombay High Court judgment was left undisturbed, with no order as to costs.
Case Details
- Case Title: Sandeep S. Ghandat & Ors. v. Reserve Bank of India & Ors.
- Case Number: Civil Appeal Nos. 5351–5352 of 2025
- Judges: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe
- Decision Date: September 3, 2026
