In a significant development for the cooperative banking sector, the Maharashtra Urban Co-operative Banks Federation, along with several serving directors, has approached the Bombay High Court challenging the constitutional validity of recent amendments to banking laws.
The writ petition, filed on Wednesday under Article 226 of the Constitution, contests provisions introduced through the Banking Regulation (Amendment) Act, 2020 and the Banking Laws (Amendment) Act, 2025.
These amendments prescribe a maximum continuous tenure of 10 years for directors (excluding chairpersons and whole-time directors) and mandate a three-year cooling-off period before re-association with the same bank.
The petition contends that the amendments are unconstitutional, arguing that matters relating to the composition, qualifications, and governance of cooperative societies fall within the exclusive domain of states under Entry 32 of the State List. It submits that such provisions are not relatable in “pith and substance” to banking under Entries 43–44 of the Union List, thereby exceeding Parliament’s legislative competence.
Tracing legislative history, the plea highlights that since the 1964 amendment to the Banking Regulation Act, provisions relating to director qualifications were consciously kept inapplicable to cooperative societies due to constitutional limitations, a position reaffirmed in subsequent amendments in 1968 and 1984.
The petition argues that the 2020 amendment, by deleting this exclusion, and the 2025 amendment introducing the cooling-off rule, mark a significant departure from this settled framework.
Relying on Supreme Court rulings, including Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd. and Union of India v. Rajendra N. Shah, the petition asserts that cooperative societies operating within a single state fall under state jurisdiction, while Parliament’s powers are limited to multi-state entities.
Highlighting the potential impact, the petition warns that nearly 80–85% of directors in Maharashtra’s cooperative banks may have to step down, potentially destabilizing the sector. It also challenges the exclusion of chairpersons and whole-time directors from the cooling-off requirement as arbitrary and violative of Article 14.
Further, the plea argues that the amendments interfere with the democratic structure of cooperative institutions, infringing the fundamental right to form associations under Article 19(1)(c). It also contends that the provisions must be applied prospectively and not retrospectively.
The petition seeks quashing of the impugned provisions or, alternatively, a reading down to limit their applicability to multi-state cooperative banks. The matter is at a preliminary stage, with the High Court yet to issue notice or grant interim relief.