In Sandeep S. Ghandat v. Reserve Bank of India, Civil Appeal Nos. 5351-5352 of 2025, decided on 3 September 2026 by a Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, the Supreme Court upheld the RBI's supersession of the board of directors of a multi-State co-operative bank and the successive extensions of that supersession. The elected directors argued that the constitutional scheme for co-operative societies capped any supersession at six months and that, in any event, their own term had expired, leaving nothing to supersede. The Court rejected both limbs, holding that the Banking Regulation Act's regime, incorporated into the constitutional scheme by the third proviso to Article 243ZL(1), governs banking co-operatives — with depositor protection at its centre.
The background: a stressed bank and a superseded board
The RBI superseded the board of a multi-State co-operative bank in November 2023, citing deterioration in its financial health and concerns for depositors, and appointed an administrator. The elected directors — whose five-year statutory term was to run until May 2024 — challenged the supersession and its successive extensions before the High Court, and, failing there, before the Supreme Court. Their case rested on a constitutional ceiling and a temporal argument: first, that Article 243ZL(1) of the Constitution permits supersession of a co-operative society's board for a maximum of six months; second, that once their own tenure expired in May 2024, the supersession had nothing left to operate upon and fresh elections were mandatory.
Two regimes, one hierarchy
The Ninety-Seventh Amendment introduced Part IXB of the Constitution to protect the democratic functioning of co-operative societies, and Article 243ZL(1) reflects that purpose by limiting how long an elected board can be kept superseded. But the same Article contains a third proviso dealing specifically with co-operative banks: for societies carrying on banking business, the provisions of the Banking Regulation Act, 1949 also apply. The Court read this proviso as incorporating the banking-law regime into the constitutional scheme itself. The result is not a conflict between the Constitution and the statute but a constitutionally sanctioned specialisation: ordinary co-operatives get the six-month protection; co-operatives that hold public deposits answer additionally to the banking regulator, whose supersession power carries its own, longer discipline.
Co-operative society (general)
Board supersession governed by Part IXB and state or multi-State co-operative legislation; Article 243ZL caps supersession, ordinarily at six months.
Co-operative bank
Banking Regulation Act provisions apply by virtue of the third proviso; the RBI may supersede the board and extend supersession within the statutory aggregate ceiling of five years, with depositor protection as the guiding purpose.
The tenure argument and why it failed
The directors' second argument had an appealing simplicity: their term ended in May 2024, so by mid-2024 there was no board left to supersede, and democracy required immediate elections. The Court disagreed. Supersession operates on the office and management of the bank, not merely on the individuals displaced. Once a board is validly superseded, the administrator manages the bank until the supersession — including lawful extensions — runs its course; the obligation to hold elections is triggered by the end of the supersession, not by the calendar of the displaced board's original term. Any other reading would let a failing board's term expiry defeat the very regulatory intervention its failures invited.
What the decision signals
Depositor primacy
Where co-operative governance values and depositor protection pull apart, the constitutional scheme itself resolves the tension in favour of the banking regulator.
Regulatory latitude
Successive extensions of supersession are not inherently suspect; they must be reasoned and remain within the aggregate statutory ceiling.
Limited judicial second-guessing
Courts test legality and grounds, but the RBI's expert evaluation of a bank's financial condition commands deference.
Post-2020 architecture
The judgment consolidates the position of co-operative banks brought firmly within RBI oversight by the Banking Regulation (Amendment) Act, 2020.
Practical notes for stakeholders
For depositors, the decision is reassuring: regulatory intervention in a stressed co-operative bank is not hostage to the six-month clock that governs ordinary societies. For directors and office-bearers of co-operative banks, it is a caution — governance lapses invite displacement that can outlast the board's own mandate, and the path back runs through the end of supersession, not through its expiry by efflux of the board's term. For practitioners advising on challenges to supersession, the viable targets are narrow: absence of statutory grounds, absence of reasons for an extension, or breach of the aggregate ceiling — not the abstract invocation of co-operative democracy.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
What does supersession of a bank's board mean?
It is the removal of the elected board of directors and the appointment of an administrator to manage the bank in the interim. For banking companies and co-operative banks within the RBI's regulatory net, the power exists to protect depositors and the integrity of the banking system when the board's functioning threatens the bank's financial health.
Does the Constitution not limit supersession of co-operative boards to six months?
Article 243ZL(1) does impose a six-month ceiling for co-operative societies generally. But its third proviso carves out banking co-operatives by incorporating the Banking Regulation Act's provisions. For a multi-State co-operative bank, the RBI's supersession power under the banking law therefore operates on its own terms, subject to the aggregate ceiling in that statute.
What happens when the superseded board's own tenure expires?
The supersession does not lapse with the board's term. The Court held the administrator's duty is to conduct elections when the supersession itself comes to an end — not on the date the old board's five-year term would have expired. Extensions within the statutory aggregate ceiling remain permissible.
What remedies do displaced directors have?
Judicial review remains available: supersession and each extension must be supported by reasons referable to the statutory grounds, such as protection of depositors or mismanagement. But courts accord considerable weight to the RBI's expert assessment of a bank's financial position, as this judgment illustrates.