BHALCHANDRA DINKAR GONDEKAR AND ORS v. RESERVE BANK OF INDIA THR. GOVERNOR AND ORS
Validity of PMC Bank Amalgamation Scheme Upheld; Staggered Repayments and Interest Reductions under Section 45 of Banking Regulation Act Deemed Constitutional and in Public Interest.
Court: Bombay High Court
Citation: 2026:BHC-AS:13184-DB
Decision Date: 09-03-2026
List of Laws
Banking Regulation Act, 1949; Constitution of India (Articles 14, 19, 21, and 300A); Deposit Insurance and Credit Guarantee Corporation Act, 1961; Multi-State Co-Operative Societies Act, 2002; Administrative Law - Scope of Judicial Review in Economic Policy
- Facts: The Punjab and Maharashtra Co-operative Bank Ltd. ("PMC Bank"), a Multi-State Scheduled Urban Co-operative Bank, faced a massive financial collapse in 2019 following the detection of a fraud involving the HDIL Group. Inspections by the Reserve Bank of India ("RBI") revealed that the bank’s net worth had turned significantly negative due to camouflaged Non-Performing Assets. To protect depositors and the banking system, the RBI initially imposed "All Inclusive Directions" and later formulated a scheme of amalgamation under Section 45 of the Banking Regulation Act, 1949. The Ministry of Finance notified the "Punjab and Maharashtra Co-Operative Bank Ltd. (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022". Petitioners, comprising retail and institutional depositors, challenged the scheme, primarily objecting to the staggered repayment schedule (extending up to 10 years for certain amounts), the reduction/cessation of interest, and the classification of depositors into "retail" and "institutional" categories for repayment purposes.
- Procedural Posture: Seven Writ Petitions were filed before the Bombay High Court under Article 226 of the Constitution of India, seeking to quash the 2022 Amalgamation Scheme as being unconstitutional and ultra vires the Banking Regulation Act.
- Issue: Whether the Amalgamation Scheme of 2022 is arbitrary, discriminatory, or violative of Articles 14, 19(1)(g), and 300A of the Constitution; and whether the RBI exceeded its statutory authority under Section 45 of the Banking Regulation Act, 1949, in formulating the repayment terms.
- Holding: No, the Scheme is not arbitrary or unconstitutional. The Writ Petitions were dismissed, and the validity of the Scheme was upheld.
- Reasoning: The Court reasoned that Section 45 of the Banking Regulation Act is a "complete code" and a non-obstante provision that empowers the RBI to reduce interest or rights of depositors in the public interest. The Court emphasized that judicial review in matters of economic policy is extremely limited, as the RBI is an expert body with a "Banker’s Bank" status. The classification between "retail" and "institutional" depositors was held to be a reasonable classification based on an intelligible differentia, aimed at protecting the largest number of individual depositors first to prevent social unrest. The Court noted that without this amalgamation, the bank would have faced liquidation, where depositors would likely only receive the DICGC insurance limit of Rs. 5 lakhs. The staggered payment and interest reduction were deemed necessary for the financial viability of the transferee bank ("Unity Bank") and to ensure the eventual 100% return of principal to all depositors. Finally, the Court found no procedural impropriety, noting that objections were invited and considered before the final notification.
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