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.