Madras HC Denies Interim Relief to Cooperative Banks Against 2020 Ordinance Subjecting Them to RBI Supervision

The Madras High Court refused immediate interim relief to cooperative banks which have challenged the Centre’s ordinance bringing them under the purview of the RBI. The two petitioners before Chief Justice A. P. Shah and Justice Senthilkumar Ramamoorthy have pitched up a challenge to the constitutional validity of certain Sections of the Banking Regulation Amendment Ordinance, 2020 promulgated on 26 June 2020 as being ultra vires the Indian Constitution. It is alleged that, in addition to matters relating to “banking”, the Ordinance has given the RBI extensive jurisdiction over the Cooperative Banks even in those pertaining to “incorporation, regulation and winding up”, placing them at par with commercial banks: in aspects relating to share capital and access to funds, which is an essential facet of the very incorporation of the cooperative bank; in essential aspects of management of cooperative banks, which were previously governed by the concerned state legislations – voting rights, restrictions on persons who can be appointed as directors in the cooperative banks; audit obligations; etc.