The RBI circular on the appointment of MD/CEOs of Primary (Urban) Co-operative Banks has been stayed by the Madhya Pradesh High Court. The Banking Regulation (Amendment) Act, 2020 was also challenged as being in violation of the Constitution. On Friday, the Madhya Pradesh High Court delayed the implementation of a Reserve Bank of India (RBI) circular instructing primary (urban) co-operative banks to hire Managing Directors/Chief Executive Officers who meet the RBI's eligibility requirements (Mahanagar Nagrik Sahakari Bank Maryadit v. Union of India). In a writ suit challenging the legality of the Banking Regulation (Amendment) Act, 2020, as well as the aforementioned RBI circular, a bench of Chief Justice Mohammad Rafiq and Justice Vijay Kumar Shukla issued notice.
The June 25, 2021 memo also instructed banks to remove/terminate all MDs and CEOs who were not fit and appropriate, according to the circular. The current petition claims that Section 4 of the Banking Regulation (Amendment) Act, 2020, amending Section 56 of the Banking Regulation Act, 1949 (banking rules for co-operative organisations), is unconstitutional. The RBI circular pertaining to the appointment of MDs/CEOs in main (urban) co-operative banks is also said to be in violation of the Constitution. Furthermore, when Part IX-B (Co-operative Organizations) was added to the Constitution, all of the requirements of the Banking Regulation Act of 1949 were extended to all such co-operative societies engaged in banking. In light of this, Parliament approved the Banking Regulation (Amendment) Act, 2020, which extended to co-operative banks all laws relating to "incorporation, regulation, and winding up." It was argued that Parliament lacked the authority to legislate on the topic since it was a state matter.
The lawyer also drew the Court's attention to the Supreme Court's decision in Union of India v. Rajendra N Shah, which invalidated Article 243ZL and Part IXB of the Constitution, as well as the foundation for enacting the Banking Regulation (Amendment) Act, 2020. The Court gave notice and delayed the effect and execution of the RBI's June 25 circular after hearing the arguments. Ajay Gupta is a lawyer. The petitioner was represented by Ravikant Patidar and Milind Sharma. The Central government and the Reserve Bank of India were represented by Assistant Solicitor General JK Jain. The State of Madhya Pradesh was represented by Additional Advocate General Pushpendra Yadav.
Tags : #RBI #Madhya Pradesh High Court #Co-operative Banks #Banking Regulation (Amendment) Act, 2020