Sandeep S. Ghandat & Ors. v. Reserve Bank of India & Ors., 2026 INSC 955 (3 September 2026)
What the case was about
This case pitted the elected leadership of a multi-State co-operative bank against the Reserve Bank of India (RBI) over how long a regulator may keep a failing bank’s board out of office. The appellants—former directors of Abhyudaya Co-operative Bank Limited—challenged successive RBI orders that superseded the Board and appointed an Administrator. They argued that Article 243ZL(1) of the Constitution, which generally limits the supersession of co-operative society boards to six months, prevented the RBI from acting beyond that window. They also contended that once their five-year electoral term expired in May 2024, there was no Board left to supersede, making later extensions illegal. The Supreme Court was asked to settle whether the RBI’s powers under the Banking Regulation Act, 1949 override these constitutional and electoral constraints (para 15).
The key facts
The appellants were elected to the Board of Directors of Abhyudaya Co-operative Bank Limited in May 2019 for a statutory term of five years. The bank began as a society registered under the Maharashtra Co-operative Societies Act, 1960, and later became a multi-State co-operative bank.
On 24 November 2023, the RBI invoked Section 36AAA of the Banking Regulation Act and superseded the Board, citing dangerous deterioration of the bank’s financial health and the need to protect depositors. The appellants’ five-year term ended on 24 May 2024. Undeterred, the RBI issued successive extension orders on 18 November 2024 and 7 November 2025.
The appellants first challenged the initial supersession order by filing writ petitions before the Bombay High Court. By judgment dated 18 November 2024, the High Court dismissed the petitions and upheld the RBI’s action. The appellants then approached the Supreme Court through Special Leave Petitions, in which leave was granted.
The questions before the Court
A two-judge bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe framed the dispute around two legal questions (para 15):
- Whether the RBI’s power to supersede the Board of a multi-State co-operative bank under Section 36AAA(1) of the Banking Regulation Act is limited by the six-month cap on board supersession prescribed in Article 243ZL(1) of the Constitution.
- Whether an order of supersession can be extended beyond the original five-year term for which the directors had been elected.
What the Court decided and why
The Court answered both questions in the RBI’s favour, dismissing the appeals with no order as to costs (para 40).
The six-month constitutional cap does not apply. Article 243ZL(1) lays down a default rule that no board shall be superseded for more than six months. Its third proviso, however, states that for co-operative societies carrying on banking business, the Banking Regulation Act “shall also apply.” The Court held that this wording is used in an “additive and non-restrictive sense,” incorporating the entire banking statute into the constitutional framework and allowing it to operate on its own force (para 24). Consequently, the RBI’s five-year supersession window under Section 36AAA is not truncated down to six months.
The judges found decisive confirmation in the provision’s internal structure. The fourth proviso to Article 243ZL(1) extends the six-month limit to one year for non-multi-State co-operative banks, but expressly excludes multi-State banks from that extension. The Court reasoned that “an exclusion, by its very nature, presupposes a prior inclusion,” concluding that Parliament always intended multi-State co-operative banks to remain subject to the full regulatory regime of the Banking Regulation Act (para 29). For such banks, the RBI’s five-year limit under Section 36AAA therefore prevails over the six-month constitutional ceiling (para 34).
Supersession can survive the board’s electoral term. On the second issue, the Court held that once a Board is lawfully superseded, it ceases to exist and its powers vest in the Administrator. The tenure of the erstwhile elected Board therefore becomes irrelevant to the RBI’s power (para 37). Section 36AAA(7) requires the Administrator to call fresh elections only “on and before expiration” of the RBI’s specified supersession period, not automatically when the old Board’s term would have ended. Because the statute sets an outer aggregate limit of five years, elections cannot be deferred indefinitely, but within that period the regulator may extend control even after the original directors’ mandate has expired (para 38).
The Court also held that the consultation requirement in the proviso to Section 36AAA(1) applies only to co-operative banks registered with a State Registrar, and not to multi-State banks such as Abhyudaya Co-operative Bank.
Why it matters
The ruling preserves a critical tool for banking regulators. Co-operative banks hold the savings of millions of ordinary depositors, and their elected boards can sometimes be at odds with the urgent need for professional, stability-focused management. By holding that the RBI’s five-year supersession power under the Banking Regulation Act is not swallowed by the Constitution’s six-month co-operative ceiling, the Court has ensured that distressed multi-State co-operative banks can be nursed back to health without forcing the regulator to rush an election simply to meet an arbitrary constitutional deadline (para 34).
The judgment also clarifies that once a board is superseded, it vanishes as a legal entity for the duration of the RBI’s orderly recovery plan. The five-year ceiling acts as a democratic safeguard, but within that window the statute gives the banking regulator primacy over the co-operative society’s internal election calendar. This protects depositors from the instability that could follow if a distressed bank were returned to an elected board prematurely merely because the constitutional clock ran out (para 37). For account-holders in multi-State co-operative banks, the ruling reinforces that the RBI’s statutory mandate to maintain financial stability and protect depositor interests will not be undercut by rigid procedural timelines designed for ordinary co-operative societies.