CLAT PG Current Affairs — 5 July 2026

The Kerala High Court on July 3, 2025, ruled that RBI is not required to provide a prior hearing before superseding a co-operative bank's board under Section 36AAA of the Banking Regulation Act, 1949. The case arose from RBI's supersession of Irinjalakuda Town Co-operative Bank's elected board. The court clarified that while natural justice is absent in Section 36AAA, consultation with the State Government — not merely the Registrar of Co-operative Societies — is mandatory before issuing a supersession order.

This judgment is significant for understanding how RBI's regulatory powers interact with principles of natural justice and federal consultation requirements. Section 36AAA of the Banking Regulation Act gives RBI power to supersede a co-operative bank's board and appoint an Administrator for up to five years when the bank's functioning is detrimental to depositors' interests. The key legal distinction the Kerala HC drew is between Section 36AA and Section 36AAA: Section 36AA (removal of individual managerial persons) expressly requires a hearing, while Section 36AAA (full board supersession) deliberately omits it. The court applied the principle of 'expressio unius est exclusio alterius' — where the legislature explicitly grants a right in one provision but omits it in a parallel one, that omission is intentional, not accidental. This means natural justice cannot be 'read into' Section 36AAA by courts. However, the court drew a hard line on consultation: the statute requires consultation with the State Government, not just the Registrar of Co-operative Societies. This is constitutionally significant because co-operative banks sit at the intersection of Union banking regulation (RBI/BR Act) and State subject (co-operative societies). Despite finding the consultation deficient, the court refused to restore the board, balancing depositor interests against procedural correctness — a classic demonstration of equitable discretion in constitutional courts. For CLAT PG, this case exemplifies statutory interpretation, natural justice exclusion, and centre-state regulatory overlap.

Regulatory compliance in Indian share markets and banking refers to adherence to rules set by SEBI, RBI, and other statutory bodies. SEBI, established under SEBI Act 1992, oversees capital markets. RBI, constituted under RBI Act 1934, governs banking. Key frameworks include SEBI (LODR) Regulations 2015, PML Act 2002, Basel III norms, and Companies Act 2013. Non-compliance invites penalties, suspension, or criminal liability under respective statutes.

Regulatory compliance in Indian financial markets operates through a layered architecture. SEBI governs listed companies, intermediaries, and market infrastructure institutions (MIIs) like stock exchanges and depositories. Its LODR (Listing Obligations and Disclosure Requirements) Regulations 2015 mandate quarterly financial disclosures, related-party transaction approvals, and board composition norms. The SEBI (Intermediaries) Regulations 2008 govern registration and conduct of brokers, portfolio managers, and investment advisers.

RBI's compliance framework for banks covers capital adequacy under Basel III (minimum CAR of 11.5% for Indian banks including capital conservation buffer), KYC/AML obligations under the Prevention of Money Laundering Act 2002, and fair practices codes for lending. The FEMA 1999 governs cross-border transactions, replacing the older FERA regime.

For SEBI Grade A aspirants, the critical angle is understanding how violations trigger Section 11B (cease and desist), Section 15A-15HB (monetary penalties), and Section 24 (criminal prosecution) of the SEBI Act. The Securities Appellate Tribunal (SAT) hears appeals against SEBI orders.

For CLAT PG, regulatory compliance becomes a legal question: how do quasi-judicial bodies like SEBI exercise adjudicatory powers, what procedural safeguards apply (natural justice under Adjudicating Officers), and how does judicial review interact with SAT jurisdiction. Recent Supreme Court precedents on SEBI's investigative powers are increasingly tested through passage-based questions.