Supersession of Board of Directors in certain cases
Section 36ACA of the Banking Regulation Act, 1949 deals with supersession of Board of Directors in certain cases. Where the Reserve Bank is satisfied, in consultation with the Central Government, that in the public interest or for preventing the affairs of any banking company being conducted in a manner detrimental to the interest of the depositors or any banking company or for securing the proper management of The Act came into force on 16 Mar 1949.
1[36ACA. Supersession of Board of Directors in certain cases.--(1) Where the Reserve Bank is satisfied, in consultation with the Central Government, that in the public interest or for preventing the affairs of any banking company being conducted in a manner detrimental to the interest of the depositors or any banking company or for securing the proper management of any banking company, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede the Board of Directors of such banking company for a period not exceeding six months as may be specified in the order:
Provided that the period of supersession of the Board of Directors may be extended from time to time, so, however, that the total period shall not exceed twelve months.
(2) The Reserve Bank may, on supersession of the Board of Directors of the banking company under sub-section (1) appoint in consultation with the Central Government for such period as it may determine, an Administrator (not being an officer of the Central Government or a State Government) who has experience in law, finance, banking, economics or accountancy.
(3) The Reserve Bank may issue such directions to the Administrator as it may deem appropriate and the Administrator shall be bound to follow such directions.
(4) Upon making the order of supersession of the Board of Directors of a banking company, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956),--
(a) the chairman, managing director and other directors shall, as from the date of supersession, vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of the Companies Act, 1956 (1 of 1956) or this Act, or any other law for the time being in force, be exercised and discharged by or on behalf of the Board of Directors of such banking company, or by a resolution passed in general meeting of such banking company, shall, until the Board of Directors of such banking company is reconstituted, be exercised and discharged by the Administrator appointed by the Reserve Bank under sub-section (2):
Provided that the power exercised by the Administrator shall be valid notwithstanding that such power is exercisable by a resolution passed in the general meeting of such banking company.
(5) The Reserve Bank may constitute, in consultation with the Central Government, a committee of three or more persons who have experience in law, finance, banking, economics or accountancy to assist the Administrator in the discharge of his duties.
(6) The committee shall meet at such times and places and observe such rules of procedure as may be specified by the Reserve Bank.
(7) The salary and allowances to the Administrator and the members of the committee constituted under sub-section (5) by the Reserve Bank shall be such as may be specified by the Reserve Bank and be payable by the concerned banking company.
(8) On and before the expiration of two months before the expiry of the period of supersession of the Board of Directors as specified in the order issued under sub-section (1), the Administrator of the banking company, shall call the general meeting of the company to elect new directors and reconstitute its Board of Directors.
(9) Notwithstanding anything contained in any other law or in any contract, the memorandum or articles of association, no person shall be entitled to claim any compensation for the loss or termination of his office.
(10) The Administrator appointed under sub-section (2) shall vacate office immediately after the Board of Directors of such banking company has been reconstituted.]
Section 36ACA, The Banking Regulation Act, 1949 (Act 10 of 1949).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
-
Essar Bulk Terminal (salaya) Limited vs Reserve Bank of India
Court's Decision & Legal Precedent
When a statute confers a specific power upon an authority and prescribes the method of its exercise, the authority can only exercise that power in the manner prescribed by the statute. If the statute specifies that directions may be issued regarding 'a default' (singular) only after Central Government authorization for specific cases, the authority cannot issue general directives applicable to all defaults above a particular amount without individual case-by-case consideration. Accordingly, the RBI Circular of February 12, 2018, which applies a blanket mandatory restructuring timeline followed by mandatory insolvency filing to all accounts above Rs 2000 crore, exceeds the scope of authorization granted under Section 35AA of the Banking Regulation Act, 1949, and is therefore ultra vires.
On this section: Cited as example showing that when Banking Regulation Act requires consultation with Central Government, it explicitly says so; this supports interpretation that Section 35AA's consultation requirement is specific and meaningful
-
Action Ispat and Power (p) LTD vs Reserve Bank of India
Court's Decision & Legal Precedent
The RBI circular dated 12.02.2018 mandating reference of all accounts with aggregate exposure of INR 20 billion and above that default for 180 days to insolvency proceedings is ultra vires Section 35AA of the Banking Regulation Act, 1949, as it issues general directions to a class of borrowers rather than specific directions regarding individual defaults as required by Section 35AA. Section 35AA requires prior Central Government authorization and applies only to specific defaults, not to debtors generally. The power to issue insolvency resolution directions under the Insolvency Code can only be exercised by the RBI under Section 35AA with such authorization - Sections 21 and 35A cannot serve as alternative sources without satisfying Section 35AA's conditions. When a statute prescribes a specific method and conditions for exercising power (requiring Central Government authorization and being specific to individual defaults), the statute by necessary implication prohibits exercise in any other manner (by issuing general circulars applicable to categories of defaults).
On this section: Supersession of board of directors in consultation with Central Government; cited as example of Central Government's role in major banking decisions
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 36ACA
What have the courts held on Section 36ACA of the Banking Regulation Act?
Essar Bulk Terminal (salaya) Limited vs Reserve Bank of India (02 Apr 2019) is the leading judgment on this section among those set out below: Cited as example showing that when Banking Regulation Act requires consultation with Central Government, it explicitly says so; this supports interpretation that Section 35AA's consultation requirement is specific and meaningful. Another 1 judgment on this section is set out below, all of them from the Supreme Court.
How do I find court cases under Section 36ACA of the Banking Regulation Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Banking Regulation Act 1949 36ACA, section 36ACA Banking Regulation Act 1949, section 36ACA of the Banking Regulation Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Essar Bulk Terminal (salaya) Limited vs Reserve Bank of India (02 Apr 2019).
What should I read with Section 36ACA of the Banking Regulation Act, and has it changed?
1 other provision in this corpus refers back to it.
When did Section 36ACA of the Banking Regulation Act come into force?
Section 36ACA of the Banking Regulation Act, cited as Banking Regulation Act 1949 36ACA, came into force on 16 Mar 1949, having been enacted on 10 Mar 1949. It is in force as at the date shown on this page.
Other sections of this Act
- 56. Act to apply to co-operative societies subject to modifications5544 words
- 45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation2310 words
- 10B. Banking company to be managed by whole time chairman1171 words
- 5. Interpretation1164 words
- 43A. Preferential payments to depositors1031 words
- 11. Requirement as to minimum paid-up capital and reserves988 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.