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Banking & Debt Recovery LawSupreme Court of India

Sandeep S. Ghandat & Ors. v. Reserve Bank of India & Ors.

Civil Appeal · 2026 INSC 955Decided 3 Sept 2026
C.A. No.-005351-005352 - 2025
Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

Background

The appellants were elected in May 2019 as members of the Board of Directors of Abhyudaya Co-operative Bank Limited, a multi-State co-operative bank, for a statutory five-year term. In November 2023, the RBI superseded the Board for one year citing deteriorating financial health and depositor protection, and appointed an Administrator. While the appellants' writ petition against that order was pending in the Bombay High Court, their five-year term expired (May 2024), and the RBI then extended the supersession twice more (in November 2024 and November 2025). The High Court upheld the RBI's power, and the appellants challenged this before the Supreme Court, arguing that supersession cannot outlast the Board's own term and that the Banking Regulation Act's provision conflicts with the six-month cap on such supersessions under Article 243ZL of the Constitution.

Decision Breakdown

The Supreme Court held that the third proviso to Article 243ZL(1), which says the Banking Regulation Act "shall also apply" to co-operative societies carrying on banking business, is not a mere restrictive proviso but an independent, additive provision that preserves the RBI's full regulatory powers (including the five-year supersession ceiling under Section 36AAA of the BR Act) over multi-State co-operative banks, rather than confining RBI to the Constitution's general six-month limit. The Court reasoned this reading was necessary to protect depositors and maintain banking discipline, and was reinforced by the fact that the Constitution's fourth proviso expressly carves multi-State co-operative banks out of the one-year extension available to other co-operative banks, implying they were always meant to be covered by the special banking regime. On the second issue, the Court held that once RBI validly supersedes a Board during its subsisting term, the supersession's extensions are not tied to or terminated by the expiry of the original Board's tenure: the Administrator only needs to call fresh elections when the RBI-specified supersession period itself ends, subject to an overall five-year cap. The consultation requirement with a State Government was held inapplicable since it applies only to single-State (not multi-State) co-operative banks. The appeals were dismissed.

Lesson Learnt

Once the RBI validly takes over a multi-State co-operative bank's management to protect depositors, that oversight is governed by the Banking Regulation Act's own five-year framework rather than the general six-month constitutional limit on co-operative board supersession, and the ousted board cannot demand reinstatement merely because its own original term has since expired.

Sandeep S. Ghandat & Ors. v. Reserve Bank of India & Ors. – Legal Case Shots | LegalAware