A division bench of Justices Kumar Regmi and Bal Krishna Dhakal on March 29, 2026 issued a verdict to the bank's big investors or founders not to eye at the general shareholder’s quota.
The controversy started with the election of the board of directors of a private bank. Bishweshwar Prasad Sharma, the founder shareholder of the bank, had filed his candidacy for the post of director from the general public, claiming that he holds promoter shares as well as some ordinary shares. However, the election committee of the bank had rejected his candidacy on November 24, 2025, saying that he could not represent the general public as he was the promoter shareholder. After not being satisfied with the decision of the Election Committee, Sharma had filed a case at the Supreme Court, claiming that his rights had been compromised.
In the initial hearing of the case, the SC had issued an interim order in favor of Sharma, which put the election on hold. The bank held its AGM without holding an election. However, in the final verdict, the SC rejected Sharma's claim. The Court has upheld the earlier decision of the election committee to cancel the candidacy filed by Sharma.
"There is no evidence that the fundamental rights of the petitioner Sharma have been violated," the Court said in its verdict. The court's decision states that promoter shareholders of BFIs should contest from promoter directors’ category and leave the general public quota for ordinary shareholders.
The verdict puts an end to a long-standing practice in the banking sector. Many promoter shareholders of BFIs attempt to control BOD of banks by becoming director in general public quota by purchasing small number of shares in their own name or in the name of their family. The Bank and Financial Institutions Act (BAFIA) has a provision that there should be separate representation of promoters and the general public on the board of directors. The main purpose of this system is to protect the interests of the general depositors and small investors in the bank.
This new precedent of the Supreme Court has drawn a fine line between the promoters and the general shareholders. If a promoter shareholder become director from the quota of the public, the interest of small shareholders would be compromised. The decision by a division bench of Justices Regmi and Dhakal has paved the way for the right representation of small investors by reducing the influence of founders in banks.
With the dismissal of the writ petition filed by petitioner Bishweshwar Prasad Sharma, all banks and financial institutions will have to strictly follow this rule during the elections. It is believed that this decision will help in preventing 'insider' manipulation in the bank and will help keep the public's money safe. Put simply, the big owners who run the banks will no longer be able to tap into the quota of the public, which will make the banking system more transparent and reliable.
