RBI / Banking Regulation · F2J-C-2834

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

VALIDATED · ACTUAL COURT-COPY PDF

Court: Supreme Court of India
Case number: Civil Appeal Nos. 5351-5352 of 2025
Decision date: 2026-09-03
Bench: P. S. Narasimha and Alok Aradhe JJ.
Neutral citation: 2026 INSC 955
CNR: Not stated in retained copy
Disposition: Appeals dismissed; no costs.
Later history: Not verified — check the official court record for later history before reliance (as of 13 Sep 2026)

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Holding (ratio)

RBI's section 36AAA power over a multi-State cooperative bank survives the board's elected term and may continue within the statutory five-year ceiling.

Operative order (extract)

Operative result (reconciled to the final order): Appeals dismissed; no costs.

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Complete searchable judgment text

REPORTABLE

2026 INSC 955

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5351 – 5352 OF 2025

SANDEEP S. GHANDAT & ORS. … APPELLANTS

VERSUS

RESERVE BANK OF INDIA & ORS. … RESPONDENTS

JUDGMENT

ALOK ARADHE, J.

1. The present appeals concern the extent to which the

constitutional mandate of democratic governance of co-operative

societies limits the power of the Reserve Bank of India (RBI) to

supersede the Board of a multi-State co-operative bank and

continue such supersession under the Banking Regulation Act,

1949 (the ‘BR Act’).

2. The appeals assail the judgment and order dated 18.11.2024

rendered by the High Court1 in two Writ Petitions2 whereby the

order dated 24.11.2023 passed by the RBI superseding the

Board of Directors (‘BoD’) of Abhyudaya Co-operative Bank

Limited (the ‘Bank’) and appointing an Administrator in its place,

was upheld and the said writ petitions came to be dismissed.

High Court of Judicature at Bombay

Writ Petition (L) Nos. 34124-34125 of 2023

FACTS

3. At the outset, the material facts, shorn of unnecessary details,

may be noticed. The Bank was originally incorporated as a co-

operative society registered under the Maharashtra Co-operative

Societies Act, 1960 which later was converted into a bank in the

year 1965 with the permission of RBI and the Commissioner of

Co-operation. In the year 1988, the Bank was declared as a

Scheduled Bank by RBI under Section 42(6)(a) of the Reserve

Bank of India Act, 1934 (the ‘RBI Act’). Pursuant to a direction

issued by RBI under Section 45 of the Banking Regulation Act,

1949 (the ‘BR Act’), the Bank was amalgamated with two banks

in Gujarat and one bank in Karnataka, in consequence whereof

it became a multi-State co-operative society carrying on the

business of banking, and is thus a ‘Multi-State Co-operative

Bank’ within the meaning of the BR Act.

4. In May 2019, the appellants were elected as members of the BoD

by the shareholders of the Bank for a statutory term of five years.

By an order dated 24.11.2023, the RBI, in exercise of power

conferred by Section 36AAA (1) and (2) read with Section 56 of

BR Act, superseded the BoD of the Bank for a period of one year

(the ‘First Supersession Order’) and appointed Mr. Satya Prakash

Pathak as the Administrator. The First Supersession Order

proceeded on the following three grounds, namely, (i) the

financial health of the Bank had deteriorated to a dangerous

level; (ii) supersession was necessary to protect the interest of the

depositors and to save the Bank from collapse; and (iii) the affairs

of the Bank were required to be managed through expert

professionals so as to restore it to sound financial health.

5. Aggrieved, the appellants instituted writ petitions before the High

Court seeking to quash the First Supersession Order. During the

pendency of those proceedings, the appellants’ statutory term of

five years expired on 24.05.2024.

6. On 18.11.2024, the RBI extended the period of supersession for

a further period of one year with effect from 24.11.2024 (the

‘Second Supersession Order’). By the impugned judgment dated

18.11.2024, the High Court held, inter alia, that Section 36AAA

of BR Act continues to operate and is not rendered otiose by

Articles 243ZL and 243ZT of the Constitution of India (‘the

Constitution’); that the proviso to Section 36AAA of the BR Act

requiring consultation with the State Government has no

application to a multi-State co-operative bank; and that the

principles of natural justice cannot be read into Section 36AAA

of BR Act. The writ petitions were accordingly dismissed.

7. Being aggrieved, the appellants approached this Court by way of

Special Leave Petitions, in which leave was granted. During the

pendency of these appeals, on 07.11.2025, the RBI passed

another order extending supersession with effect from

24.11.2025 (‘the Third Supersession Order’).

SUBMISSIONS

8. Mr. Devadatt Kamat, learned senior counsel for the appellants,

submitted that supersession contemplated under Section

36AAA(1) of BR Act cannot extend beyond the tenure of the BoD

and that the Second and Third Supersession Orders, having been

passed after expiry of the appellants’ term, when in effect, no

Board remained in existence to be superseded, are

unsustainable in law. It was contended that successive orders of

supersession are ultra vires the constitutional mandate

embodied in Articles 243ZL and 243ZT. It was urged that the

proviso to Section 36AAA(1) of the BR Act is plain and

unambiguous and must be read to mean consultation with the

Central Government. It was pointed out that aforesaid

mandatory requirement of consultation was admittedly not

undertaken in the present case.

9. It was urged that the third proviso to Article 243ZL(1) merely

imports BR Act into the constitutional scheme, without

displacing the six-month ceiling on supersession prescribed by

the substantive part of Article 243ZL(1). It was contended that

the third proviso cannot be read as ousting the application of

Part IXB of the Constitution to co-operative societies carrying on

the business of banking. It was contended that in view of Article

243ZL(2), elections were to be held immediately after the

statutory term of the appellants came to an end. In support of

the aforesaid submissions, reliance has been placed on the

decisions of this Court3. It was also contended that reliance

placed on the judgment of the Constitution Bench of this Court4

is misplaced, as the said decision was concerned with the

applicability of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002

(‘SARFAESI Act’) to co-operative societies, and not the question

presently in issue.

10. On the other hand, Mr. Jaideep Gupta, learned senior counsel

for RBI, submitted that Section 36AAA(7) of BR Act contemplates

the calling of a general meeting by the Administrator only ‘on and

before expiration’ of the period of supersession of BoD as

3 Kishansing Tomar v. Municipal Corporation of the City of Ahmedabad & Ors., (2006)

8 SCC 352; Union of India v. Rajendra N. Shah and Anr., (2022) 19 SCC 520 and

Durgabai Deshmukh Memorial Senior Secondary School and Anr. v. J.A.J. Vasu Sena

& Anr., (2019) 17 SCC 157

4 Pandurang Ganapati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd.,

(2020) 9 SCC 215

specified in the order of RBI, thereby making it evident that the

tenure of the erstwhile BoD has no bearing whatsoever upon

RBI’s power of supersession. It was submitted that RBI may, for

reasons to be recorded in writing, supersede the BoD for a period

not exceeding five years in the aggregate.

11. It was further submitted that the third proviso to Article 243ZL(1)

carves out, from the operation of the substantive clause, an

entire class of co-operative societies, namely those carrying on

the business of banking, to which the substantive clause does

not apply at all. Article 243ZT of the Constitution, it was

submitted, governs only “any provision of any law relating to co-

operative societies in force in a State”, and the BR Act, being a

Central enactment traceable to Entry 45 List I of the Seventh

Schedule of the Constitution and having nothing to do with co-

operative societies as such, falls wholly outside its purview. It

was, therefore, contended that Article 243ZT has no application

vis-à-vis Section 36AAA of BR Act.

12. It was contended that the Bank, being a multi-State co-operative

bank, is governed by provisions of BR Act. It was contended that

Section 123 of the Multi-State Co-operative Societies Act, 2002

(‘MSCS Act’) has no bearing on supersession of the BoD of multi-

State co-operative bank, by RBI. It was argued that the

requirement of consultation under the proviso to Section

36AAA(1) is confined to uni-State co-operative banks and does

not extend to multi-State co-operative banks such as the Bank.

It was emphasised that RBI is the statutory regulator of the

banking system and that Courts ought to be circumspect in

interfering with matters of economic and regulatory policy. In

support of the aforesaid submissions, reliance has been placed

on the decisions of this Court5 as well as a decision of the High

Court of Bombay6.

13. Mr. Ninad Laud, learned counsel for respondent no. 5, submitted

that the plain language of the third proviso to Article 243ZL(1)

makes BR Act applicable to all co-operative banks, and that the

Constitution (Ninety-Seventh Amendment) Act, 2011, even while

conferring constitutional status upon co-operative societies,

itself expressly preserved the application of the BR Act to those

societies engaged in the business of banking.

5 Rajendra N. Shah & Anr. (supra); Pandurang Ganpati Chaugule (supra);

Commissioner of Commercial Taxes & Ors. v. Ramkishan Shrikishan Jhaver & Ors.,

1967 SCC OnLine SC 31; State of M.P. v. Kedia Leather & Liquor Ltd. & Ors., (2003)

7 SCC 389; Union of India v. Col. J.N. Sinha & Anr., (1970) 2 SCC 458; Joseph

Kuruvilla Vellukunnel v. The Reserve Bank of India & Ors., 1962 SCC OnLine SC 3;

Peerless General Finance and Investment Co. Ltd. & Anr. v. Reserve Bank of India,

(1992) 2 SCC 343; Bhavesh D. Parish & Ors. v. Union of India & Anr., (2000) 5 SCC

471 and Internet and Mobile Association of India v. Reserve Bank of India, (2020) 10

SCC 274

6 Adisri Commercial P. Ltd. & Anr. v. Reserve Bank of India & Ors., (2021) SCC OnLine

Bombay 12438

14. It was pointed out that Section 120B, inserted in the MSCS Act

with effect from 03.08.2023, likewise provides that BR Act shall

apply to a society carrying on the business of banking, and that

the question of construction of the third proviso to Article

243ZL(1), stands concluded by the decision of the Constitution

Bench of this Court7. It was argued that Section 123 of the MSCS

Act is limited in its application to “specified” multi-State co-

operative societies where the Government has economic interest

just as the second proviso to Article 243ZL(1) restricts its

application to societies with “Government shareholding, or loan

or financial assistance or any guarantee by the Government”. In

support of the aforesaid submissions, reliance was placed on the

decisions of this Court8. It was accordingly prayed that the

appeals be dismissed.

ISSUES

15. The following issues arise for consideration in these appeals:

(i) Whether the power of the RBI to supersede the BoD of

a multi-State co-operative bank under Section

36AAA(1) of BR Act is circumscribed by the 6 month-

Pandurang Ganpati Chaugule (supra)

Dwarka Prasad v. Dwarka Das Saraf, (1976) 1 SCC 128; and Rajendra N. Shah & Anr. (supra)

limit prescribed under Article 243ZL(1) of the

Constitution?

(ii) Whether an order of supersession passed under

Section 36AAA(1) of BR Act can be extended beyond

the term of office for which the BoD of a multi-State

co-operative bank had originally been elected?

ANALYSIS

16. Having heard learned counsel for the respective parties at length

and upon a perusal of the record, we proceed to answer the

issues.

17. The BR Act is a parliamentary enactment traceable to Entry 45

of List-I of Seventh Schedule of the Constitution, enacted to

consolidate and amend the law relating to banking. The MSCS

Act, also a parliamentary legislation, is traceable to Entry 44 of

List-I of Seventh Schedule of the Constitution, and was enacted

to remedy the deficiencies of the erstwhile legislation that is the

Multi-State Co-Operative Societies Act, 1984 and to strengthen

the governance of the multi-State co-operative societies,

consistently with the recognized co-operative principles, which

are, (i) voluntary and open membership, (ii) democratic member

control, (iii) member’s economic participation, (iv) autonomy and

independence, (v) education, training and information, (vi) co-

operation among co-operatives, and (vii) concern for community.

The MSCS Act was also intended to address specific instances of

mismanagement that had come to light in certain multi-State co-

operative societies.

18. By the Constitution (Ninety-Seventh Amendment) Act, 2011 Part

IXB, comprising Articles 243ZH to 243ZT, was inserted into the

Constitution, conferring constitutional status upon co-operative

societies with the object of ensuring that such societies function

in a democratic, professional, autonomous and economically

sound manner. This Court9 upheld the constitutional validity of

Part IXB of the Constitution only in relation to multi-State co-

operative societies. It follows that Part IXB applies exclusively to

multi-State co-operative societies.

ISSUE NO. (i)

19. Before entering upon this issue, it would be apposite to extract

Article 243ZL of the Constitution, which reads thus:

“243ZL. Supersession and suspension of

board and interim management.—

(1) Notwithstanding anything contained in

any law for the time being in force, no board

shall be superseded or kept under

suspension for a period exceeding six

months:

Provided that the board may be superseded

or kept under suspension in a case—

Rajendra N. Shah & Anr. (supra)

(i) of its persistent default; or

(ii) of negligence in the performance of its

duties; or

(iii) the board has committed any act

prejudicial to the interests of the co-

operative society or its members; or

(iv) there is stalemate in the constitution

or functions of the board; or

(v) the authority or body as provided by the

Legislature of a State, by law, under clause

(2) of article 243ZK, has failed to conduct

elections in accordance with the provisions

of the State Act:

Provided further that the board of any such

co-operative society shall not be superseded

or kept under suspension where there is no

Government shareholding or loan or

financial assistance or any guarantee by the

Government:

Provided also that in case of a co-operative

society carrying on the business of banking,

the provisions of the Banking Regulation Act,

1949 (10 of 1949) shall also apply;

Provided also that in case of a co-operative

society, other than a multi-State co-operative

society, carrying on the business of banking,

the provisions of this clause shall have the

effect as if for the words “six months”, the

words “one year” had been substituted.

(2) In case of supersession of a board, the

administrator appointed to manage the

affairs of such co-operative society shall

arrange for conduct of elections within the

period specified in clause (1) and handover

the management to the elected board.

(3) The Legislature of a State may, by law,

make provisions for the conditions of service

of the administrator.”

20. The provision opens with a non obstante clause and enacts, as a

general rule, that no BoD of a co-operative society shall be

superseded or kept under suspension for a period exceeding six

months. The said general rule stands qualified by four provisos.

The first proviso specifies the grounds on which supersession

may be ordered. The second withdraws the power of

supersession altogether where the co-operative society

concerned carries no element of Government shareholding or

loan or financial assistance or any guarantee by the Government.

The third proviso stipulates that, in the case of a co-operative

society carrying on the business of banking, the provisions of BR

Act “shall also apply”. The fourth proviso extends the period of

supersession from six months to one year for a co-operative

society, but, significantly, in terms, expressly excludes from that

extension a co-operative society other than a multi-State co-

operative society carrying on the business of banking.

21. The relevant extract of Section 36AAA of the BR Act reads as

under:

“36AAA.—Supersession of Board of directors

of a [co-operative bank]. —

(1) Where the Reserve Bank 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 so to do, the

Reserve Bank may, for reasons to be recorded in

writing, by order, supersede the Board of

directors of such [co-operative bank] for a period

not exceeding five years as may be specified in

the order, which may be extended from time to

time, so, however, that total period shall not

exceed five years;

[Provided 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 such order in consultation with the

concerned State Government seeking its

comments, if any, within such period as the

Reserve Bank may specify.]

(2) The Reserve Bank may, on supersession of

the Board of directors of the [co-operative bank]

under sub-section (1) appoint an Administrator

for such period as it may determine.

(3) The Reserve Bank may issue such directions

to the Administrator as it may deem appropriate

and the Administrator shall be bound to follow

such directions.

(4) Upon making the order of supersession of the

Board of directors of a [co-operative bank],—

(a) the chairman, managing director and

other directors as from the date of

supersession of the Board shall vacate

their offices as such;

(b) all the powers, functions and duties

which may, by or under the provisions of

the Multi-State Co-operative Societies Act,

2002 (39 of 2002) or this Act or any other

law for the time being in force, be exercised

and discharged by or on behalf of the

Board of directors of such a [co-operative

bank] or by a resolution passed in general

meeting of such co-operative bank, shall,

until the Board of directors of such co-

operative bank is reconstituted, be

exercised and discharged by the

Administrator appointed by the Reserve

Bank under sub-section (2):

Provided that the power exercised by the

Administrator shall be valid notwithstanding

that such power is exercisable by a resolution

passed in the general meeting of such multi-

State co-operative bank.

(5) (a) The Reserve Bank may constitute a

committee of three or more persons who have

experience in law, finance, banking,

administration or accountancy to assist the

Administrator in discharge of his duties.

(b) The committee shall meet at such times and

places and observe such rules of procedure as

may be specified by the Reserve Bank…”

“..(9) The Administrator appointed under sub-

section (2) shall vacate office immediately after

the Board of directors of the multi-State co-

operative society has been constituted.

[(10) The provisions of section 36ACA shall not

apply to a co-operative bank.]”

22. Thus, for reasons to be recorded, the power of supersession of a

multi-State co-operative bank, can be exercised by RBI, in 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 such bank, from time to time, for a period not

exceeding five years.

23. Justice G.P. Singh in Principles of Statutory Interpretation (15th

Edition, page no. 248) has explained the doctrine of incorporation

of an earlier Act into later one in the following terms:

“Incorporation of an earlier Act into a later Act is

a legislative device adopted for the sake of

convenience in order to avoid verbatim

reproduction of the provisions of the earlier Act

into the later10. When an earlier Act or certain of

its provisions or certain of its provisions are

incorporated by reference into a later Act, the

provisions so incorporated become part and parcel

of the later Act as if they had been ‘bodily

transposed into it’11. The effect of incorporation is

admirably stated by Lord Esher MR:

“If a subsequent Act brings into itself by reference

some of the clauses of a former Act, the legal effect

of that, as has often been held, is to write those

sections into the new Act as if they had been

actually written in it with the pen, or printed in

it.”12

24. Thus, in case of incorporation, the provisions to which reference

is made are bodily lifted in the enactment in which they are

referred to and become part of it. The incorporated provisions

operate on their own force. Tested on the analogy of the aforesaid

well-settled legal principles, it is evident that the third proviso to

Article 243ZL(1) employs the expression “shall also apply”. The

said expression has been used in an additive and non-restrictive

sense. Therefore, it is evident that the same incorporates BR Act

into Part IXB of the Constitution insofar as it pertains to multi-

State co-operative bank.

25. It is well-settled that, ordinarily, a proviso restricts rather than

enlarges the meaning of the provision to which it is appended.

However, at times, the legislature embodies a substantive

Mary Roy v. State of Kerala, AIR 1986 SC 1011

Ram Sarup v. Munshi, AIR 1963 SC 553

Re, Wood’s Estate, Ex parte, Works and Buildings Commrs, (1886) 31 Ch D 607, p 615.

provision in a proviso. The question whether a proviso is by way

of an exception or a condition to the substantive provision, or

whether it is in itself a substantive provision, must be

determined on the substance of the proviso and not its form13. A

proviso can also be an independent legislative provision14. A

Constitution Bench of this Court has also held that generally

speaking, it is true that the proviso is an exception to the main

part of the section; but it is recognised that in exceptional cases

a proviso may be the substantive provision itself15. A two-Judge

Bench of this Court16 took note of previous decisions17, summed

up the purposes which a proviso may seek to serve, (i) qualifying

or excepting certain provisions from the main enactment; (ii) it

may entirely change the very concept of the intendment of the

enactment by insisting on certain mandatory conditions to be

fulfilled in order to make the enactment workable; (iii) it may be

so embedded in the Act itself as to become an integral part of the

enactment and thus acquire the tenor and colour of the

substantive enactment itself; and (iv) it may be used merely to

Rhondda Urban District Council v. Taff Vale Railway Co., [1909] A.C. 253, 258.

State of Rajasthan v. Leela Jain & Ors.. 1964 SCC OnLine SC 15

Commissioner of Commercial Taxes and Ors. (supra)

DMRC v. Tarun Pal Singh, (2018) 14 SCC 161

S. Sundaram Pillai v. V.R. Pattabiraman, (1985) 1 SCC 591; and Hiralal Rattanlal v. State of U.P.,

(1973) 1 SCC 216.

act as an optional addenda to the enactment with the sole object

of explaining the real intendment of the statutory provision.

26. The Parliament has enacted third proviso to the said Article

which is a special provision for Boards of Societies carrying on

the business of banking. In the instant case, the third proviso by

making the provisions of BR Act also applicable, in case of a

multi-State co-operative bank enlarges the scope of main Article

that is Article 243ZL(1), instead of restricting its scope, therefore,

the same is not a proviso but is an independent provision. The

words “shall also apply” employed in third proviso to the said

Article makes it abundantly clear that provisions of the BR Act

are applicable to the multi-State co-operative bank.

27. It is also of significance that the fourth proviso to Article

243ZL(1), while extending the period of supersession from six

months to one year for a co-operative society carrying on the

business of banking, expressly excludes a multi-State co-

operative society carrying on the business of banking from that

extension. Article 243ZL(1), which confers constitutional status

on co-operative societies, thus itself contemplates and preserved

the application of Section 36AAA of BR Act to a multi-State co-

operative bank. It bears mention that Section 56 of BR Act carries

a non-obstante clause and is given an overriding effect over all

other legislations. A Constitution Bench of this Court18 has

categorically held that, by virtue of the third proviso to Article

243ZL(1), the provisions of BR Act shall also apply to a multi-

State co-operative society carrying on the business of banking.

28. We may, in this regard, advert to a further textual indicator,

internal to Article 243ZL itself, which perhaps furnishes the most

conclusive proof of the construction we have adopted. The fourth

proviso applies in terms to “a co-operative society, other than a

multi-State co-operative society, carrying on the business of

banking”. By employing this qualifying phrase, Parliament has

proceeded upon the clear premise that the expression “co-

operative society carrying on the business of banking”, as it

occurs in Article 243ZL, would, but for such express exclusion,

take within its fold multi-State co-operative societies as well. Had

the definition of “co-operative society” in Article 243ZH(c) been

intended to remove multi-State co-operative societies from the

sweep of Article 243ZL altogether, there would have been no

occasion, and indeed no necessity, for Parliament to carve out

multi-State co-operative societies by name from the fourth

proviso.

Pandurang Ganpati Chaugule (supra)

29. An exclusion, by its very nature, presupposes a prior inclusion;

Parliament does not exclude from a proviso what could never

have fallen within it in the first place. This internal architecture

of Article 243ZL, read as an integral whole, therefore

corroborates, in the clearest possible terms, that the third

proviso, which extends BR Act to co-operative societies carrying

on the business of banking, was always intended to, and does,

comprehend multi-State co-operative banks such as the Bank in

the present case.

30. The textual conclusion is, in our view, rendered inevitable when

the provision is read in the light of the purpose it is designed to

serve. Banking, unlike ordinary commercial or co-operative

activity, is impressed with a public interest of a distinct order: it

is the medium through which the savings of depositors,

frequently persons of modest means, who repose in the banking

system both their trust and their life earnings, are held and

deployed. The BR Act was enacted precisely to arm RBI, as the

apex regulator of the banking system, with the tools necessary to

safeguard the interests of depositors and to maintain the

solvency, stability and discipline of banking institutions. Section

36AAA of BR Act is one such tool, enabling the RBI to supersede

an errant or failing board where this is necessary in the public

interest, or to prevent the affairs of a co-operative bank being

conducted in a manner detrimental to the interests of its

depositors, or to secure its proper management.

31. To read the third proviso to Article 243ZL(1) as excluding multi-

State co-operative banks from the reach of the BR Act and

thereby confining the RBI’s regulatory hand to a rigid six-month

period, ill-suited to the time genuinely required to nurse a

distressed bank back to health, would be to subordinate the

protection of depositors and the discipline of the banking system

to a truncated and overly technical reading of a constitutional

proviso. Such a construction would defeat the very object which

impelled the Parliament to enact a third proviso, namely, to

ensure that co-operative societies carrying on the business of

banking remain, notwithstanding their co-operative character,

subject to the specialised, continuous and expert regulatory

oversight of the RBI under the BR Act.

32. We are, therefore, of the considered view that the construction

which subserves the object of protecting depositors and

preserving financial discipline in the banking system must be

preferred over one which would fragment regulatory authority

and expose multi-State co-operative banks to a supervisory

vacuum upon the expiry of an artificially truncated period. It is

this need to preserve, rather than dilute, the RBI’s regulatory

reach over multi-State co-operative banks that lends both textual

and purposive coherence to the scheme of Article 243ZL.

Therefore, the inevitable conclusion is that provisions of BR Act

apply to multi-State co-operative banks.

33. The decision of the Constitution Bench of this Court19 no doubt

deals with the issue of application of SARFAESI Act to co-

operative societies. However, in paragraph 94, in the aforesaid

decision, the Constitution Bench held in terms that the BR Act

is applicable to multi-State co-operative societies carrying on the

business of banking. Therefore, the submission that the reliance

placed by respondents on this decision is misplaced, does not,

therefore, merit acceptance. Similarly, the contention that the

third proviso to Article 243ZL(1) cannot be read as ousting the

applicability of provisions of Part IXB of the Constitution to

multi-State co-operative societies carrying on the business of

banking is misconceived.

34. For the aforementioned reasons, the first issue is answered in

the negative by stating that the power of RBI to supersede BoD

of a multi-State co-operative bank under Section 36AAA(1) of BR

Pandurang Ganpati Chaugule (supra)

Act is not circumscribed by the 6-month limit prescribed in

Article 243ZL(1) of the Constitution.

ISSUE NO. (ii)

35. We now turn to the second issue. The First Supersession Order

was passed on 24.11.2023, before the expiry of the statutory

term of the BoD, which expired on 24.05.2024. It was only

thereafter, on 18.11.2024, the Second Supersession Order

extending the period of supersession of BoD was passed and

thereafter still, on 07.11.2025, that the Third Supersession

Order further extended the period of supersession by one year.

36. Section 36AAA (1) of BR Act expressly contemplates that a period

of supersession, once ordered, may be extended from time to

time, subject to an outer limit of five years in the aggregate. Once

the BoD stands superseded, the Board ceases to exist and all its

powers vest in the Administrator. The object underlying Section

36AAA, which empowers the RBI, as the regulator of banking

system, to supersede the Board of a multi-State co-operative

bank, is to ensure that financial health of a co-operative bank

does not deteriorate to a dangerous level and interest of

depositors is duly protected. The power thereunder must

accordingly be exercised in the public interest to secure the

proper management of a multi-State co-operative bank. Section

36AAA (7) of the BR Act may usefully be extracted:

“(7) On and before expiration of period of

supersession of the Board of directors as

specified in the order issued under sub-section

(1), the Administrator of the [co-operative bank]

shall call the general meeting of the society to

elect new directors.”

37. The Administrator is thus obliged to convene a general meeting

for the election of new directors only upon expiration of the

period of supersession specified by the RBI. Bearing in mind the

object underlying the RBI’s power of supersession and the

mandate of Section 36AAA(7), we are of the view that the tenure

of the erstwhile BoD of a multi-State co-operative bank is of no

consequence to the exercise of that power. At the same time, the

provision safeguards the interests of the BoD of the multi-State

co-operative bank by fixing an outer limit of five years, so that

elections are not deferred indefinitely. In the instant case, the

power of supersession was exercised while the statutory term of

BoD subsisted, and the period of supersession has thereafter

only been extended, within the permissible outer limit of five

years.

38. For the aforementioned reasons, the second issue is answered in

the affirmative by stating that the order of supersession passed

under Section 36AAA(1) of BR Act can be extended beyond the

term of office for which the BoD of a multi-State co-operative

bank had originally been elected.

39. Insofar as the submission made on behalf of the appellants that

there has been a violation of proviso to Section 36AAA(1) of the

BR Act on account of non-consultation prior to the order of

supersession is concerned, it suffices to note that the

requirement of consultation applies only to a co-operative bank

registered with Registrar of Co-operative Societies of a State. The

Bank, being admittedly a multi-State co-operative bank, does not

fall within that category. Therefore, the aforesaid submission

does not merit acceptance.

CONCLUSION

40. For the foregoing reasons, we find no infirmity in the impugned

judgment warranting interference in these appeals. The appeals

are, accordingly, dismissed, with no order as to costs.

……………..……………………………….J.

[PAMIDIGHANTAM SRI NARASIMHA]

………………………………………………J.

[ALOK ARADHE]

NEW DELHI;

SEPTEMBER 03, 2026.

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