Banking & Debt Recovery LawSupreme Court of India
Sandeep S. Ghandat & Ors. v. Reserve Bank of India & Ors.
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.