Special: Former Abhyudaya Cooperative Bank chairman files a lawsuit against board supersession

 Special: Former Abhyudaya Cooperative Bank chairman files a lawsuit against board supersession

Legal experts have stated that courts are hesitant to intervene in the judgments made by the banking regulator, despite the expectation that Ghandat would get redress.

Sandeep Ghandat, a former chairman of Abhyudaya Co-operative Bank, has contested the Reserve Bank of India's move to dissolve the board of the firm.

Ghandat informed Moneycontrol on December 13, the day after submitting his plea to the Bombay High Court, that the hearing had been set for January 4.

"We have filed a case against the RBI with the Honorable Bombay High Court. Regarding the RBI's decision to dissolve the bank's board, we have filed a writ petition. We have urgently asked the court to consider our case," Ghandat said. "

On November 24, the RBI disbanded the board of the Abhyudaya Co-operative Bank, which is situated in Mumbai, citing serious issues with inadequate corporate governance. In his writ petition, Ghandat said that the accusations made against the board that was removed are rather old.

He claimed, "We informed the court that we were implementing reforms, but the RBI removed us from the board."

Ghandat also said that the ejected board members met with RBI officials after the supersession and requested that they reevaluate the decision, but he never heard back.

At the time this report was filed, the RBI had not responded to an email requesting comment on the situation.

no disruption

Legal experts predicted that Ghandat would not likely get remedy from the courts.

"Normally, the high court would refuse to intervene in such cases because the authority of the RBI as a regulator and its power to supersede it is unquestionable," said Achyuth Ajitkumar, partner at Traya Law and advocate-on-record at the Supreme Court of India. Is not."

According to Ajitkumar, SREI Group filed a petition in the Bombay High Court in 2021 against the RBI's decision to dismiss its board, arguing that the regulator had acted "completely hastily, completely arbitrary, and without application of mind". has been effective.

He remarked, "The High Court dismissed the petition and declined to intervene." The explanations given for the record's vagueness might be a potential point of contention.

underneath the administrator

The RBI said that the move is effective for a full year. To oversee the bank's operations at this time, it named Satya Prakash Pathak, a former chief general manager of State Bank of India, as administrator. RBI made it clear that the bank is not subject to any business limitations and may go on with its regular operations while being guided by the Administrator.

On its website, Abhyudaya Sahakari Bank states that as of March 31, 2020, it has over 1.73 million depositors, deposits totaling Rs 10,838 crore, and loans totaling Rs 6,654 crore. At that point, the bank's capital adequacy ratio was at 12.6%. Data collected after 2020 is not publicly accessible.

Ghandat has previously claimed that Abhyudaya Co-operative Bank may be merged with another institution by the RBI.

Ghandat told Moneycontrol on November 27 that "our bank's due diligence has been going on throughout the last two months and everyone (RBI) are working to give this bank to some big players." are eager to seize control of the bank. However, I understand that the bank's assets are sound if they choose to sell it to someone else, buy out smaller financing institutions, or combine with another bank.

Recently, the RBI has begun taking tough measures against noncompliant cooperative banks. After discovering financial irregularities, as well as the concealment and misreporting of loans granted to real estate developer HDIL, the RBI disbanded the board of PMC Bank and imposed a number of other limitations in September 2019.

Subsequently, with effect from January 2022, PMC Bank merged with Unity Small Finance Bank.