10. Closure of accounts and disposal of profits.—(1) Every corresponding new bank shall cause its
books to be closed and balanced on the 31st day of December 1
[or such other date in each year as the
Central Government may, by notification in the Official Gazette, specify] and shall appoint, with the
previous approval of the Reserve Bank, auditors for the audit of its accounts.
2
[Provided that with a view to facilitating the transition from one period of accounting to another
period of accounting under this sub-section, the Central Government may, by order published in the
Official Gazette, make such provisions as it considers necessary or expedient for the closing and
balancing of, or for other matters relating to, the books in respect of the concerned years.]
(2) Every auditor of a corresponding new bank shall be a person who is qualified to act as an auditor
of a company under section 226 of the Companies Act, 1956 (1 of 1956) and shall receive such
remuneration as the Reserve Bank may fix in consultation with the Central Government.
(3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss
account and a list of all books kept by the corresponding new bank, and it shall be the duty of the auditor
to examine the balance-sheet and profit and loss account with the accounts and vouchers relating thereto,
and in the performance of his duties, the auditor—
(a) shall have, at all reasonable times, access to the books, accounts and other documents of the
corresponding new bank;
(b) may, at the expense of the corresponding new bank, employ accountants or other persons to
assist him in investigating such accounts; and
(c) may, in relation to such accounts, examine the Custodian or any officer or other employee of
the corresponding new bank.
(4) Every auditor of a corresponding new bank shall make a report to the Central Government upon
the annual balance-sheet and accounts and in every such report shall state—
(a) whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing all the
necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the
corresponding new bank, and in case he had called for any explanation or information, whether it has
been given and whether it is satisfactory;
(b) whether or not the transactions of the corresponding new bank, which have come to his notice,
have been within the powers of that bank;
(c) whether or not the returns received from the offices and branches of the corresponding new
bank have been found adequate for the purpose of his audit;
(d) whether the profit and loss account shows a true balance of profit or loss for the period
covered by such account; and
(e) any other matter which he considers should be brought to the notice of the Central
Government.
3
[Explanation I.—For the purposes of this Act,—
(a) the balance-sheet shall not be treated as not disclosing a true and fair view of the affairs of
the corresponding new bank, and
1. Subs. by Act 66 of 1988, s. 37, for “of each year” (w.e.f. 30-12-1988).
2. Ins. by s. 37, ibid. (w.e.f. 30-12-1988).
3. Ins. by Act 1 of 1984, s. 73 (w.e.f. 15-2-1984).
13
(b) the profit and loss account shall not be treated as not showing a true balance of profit or
loss for the period covered by such account,
merely by reason of the fact that the balance-sheet or, as the case may be, the profit and loss account, does
not disclose any matters which are by the provisions of the Banking Regulation Act, 1949 (10 of 1949),
read with the relevant provisions of this Act or any other Act, not required to be disclosed.
Explanation II.—For the purposes of this Act, the accounts of the corresponding new bank shall
not be deemed as having not been properly drawn up on the ground merely that they do not disclose
certain matters if—
(i) those matters are such as the corresponding new bank is, by virtue of any provision
contained in the Banking Regulation Act, 1949 (10 of 1949), read with the relevant provisions of
this Act, or any other Act, not required to disclose; and
(ii) the provisions referred to in clause (i) are specified in the balance-sheet and profit and
loss account of the corresponding new bank or in the auditor’s report.]
(5) The report of the auditor shall be verified, signed and transmitted to the Central Government.
(6) The auditor shall also forward a copy of the audit report to the corresponding new bank and to the
Reserve Bank.
(7) After making provision for bad and doubtful debts, depreciation in assets, contributions to staff
and superannuation funds and all other matters for which provision is necessary under any law, or which
are usually provided for by banking companies, a corresponding new bank 1
[may, out of its net profits,
declare a dividend and retain the surplus, if any].
2
[(7A) Every corresponding new bank shall furnish to the Central Government 3
[and to the Reserve
Bank] the annual balance-sheet, the profit and loss account, and the auditor’s report and a report by its
Board of directors on the working and activities of the bank during the period covered by the accounts.]
(8) The Central Government shall cause every auditor’s report and report on the working and
activities of each corresponding new bank to be laid 4
[as soon as may be after they are received before
each House of Parliament 5
***].
2
[(9) Without prejudice to the foregoing provisions, the Central Government may, at any time,
appoint such number of auditors as it thinks fit to examine and report on the accounts of a corresponding
new bank and the auditors so appointed shall have all the rights, privileges and authority in relation to the
audit of the accounts of the corresponding new bank which an auditor appointed by the corresponding
new bank has under this section.]
6
[10A. Annual general meeting.—(1) A general meeting (in this Act referred to as an annual general
meeting) of every corresponding new bank which has issued capital under clause (c) of subsection (2B) of section 3 shall be held at the place of the head office of the bank in each year at such time
as shall from time to time be specified by the Board of Directors:
Provided that such annual general meeting shall be held before the expiry of six weeks from the date
on which the balance-sheet, together with the profit and loss account and auditor’s report is, under
sub-section (7A) of section 10, forwarded to the Central Government or to the Reserve Bank, whichever
date is earlier.
(2) The shareholders present at an annual general meeting 7
[shall be entitled to discuss, approve and
adopt] the balance-sheet and the profit and loss account of the corresponding new bank made up to the
previous 31st day of March, the report of the Board of Directors on the working and activities of the
1. Subs. by Act 37 of 1994, s. 15, for “shall transfer the balance of profits to the Central Government” (w.e.f. 15-7-1994).
2. Ins. by 1 of 1984, s. 73 (w.e.f 15-2-1984).
3. Ins. by Act 37 of 1994, s. 15 (w.e.f. 15-7-1994).
4. Subs. by Act 1 of 1984, s. 73, for certain words (w.e.f. 15-2-1984).
5. The words “, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more
successive sessions” omitted by Act 81 of 1985, s. 15 (w.e.f. 01-05-1986).
6. Ins. by Act 37 of 1994, s. 16 (w.e.f. 15-7-1994).
7. Subs. by Act 45 of 2006, s. 11, for “shall be entitled to discuss” (w.e.f. 16-10-2006).
14
corresponding new bank for the period covered by the accounts and the auditor's report on the balancesheet and accounts.]
1
[(3) Nothing contained in this section shall apply during the period for which the Board of Directors
of a corresponding new bank had been superseded under sub-section (1) of section 18A:
Provided that the Administrator may, if he considers it appropriate in the interest of the corresponding
new bank whose Board of Directors had been superseded, call annual general meeting in accordance with
the provisions of this section.]
2
[10B. Transfer of unpaid or unclaimed dividend to Unpaid Dividend Account.—(1) Where, after
the commencement of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial
Institutions Laws (Amendment) Act, 2006 (45 of 2006), a dividend has been declared by a corresponding
new bank but has not been paid or claimed within thirty days from the date of declaration, to, or by, any
shareholder entitled to the payment of the dividend, the corresponding new bank shall, within seven days
from the date of the expiry of such period of thirty days, transfer the total amount of dividend which
remains unpaid or unclaimed within the said period of thirty days, to a special account to be called
“Unpaid Dividend Account of ... (the name of the corresponding new bank).
Explanation.—In this sub-section, the expression “dividend which remains unpaid” means any
dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or
claimed.
(2) Where the whole or any part of any dividend, declared by a corresponding new bank before the
commencement of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial
Institutions Laws (Amendment) Act, 2006 (45 of 2006), remains unpaid at such commencement, the
corresponding new bank shall, within a period of six months from such commencement, transfer such
unpaid amount to the account referred to in sub-section (1).
(3) Any money transferred to the Unpaid Dividend Account of a corresponding new bank in
pursuance of this section which remains Unpaid or unclaimed for a period of seven years from the date of
such transfer, shall be transferred by the corresponding new bank to the Investor Education and Protection
Fund established under sub-section (1) of section 205C of the Companies Act, 1956 (1 of 1956).
(4) The money transferred under sub-section (3) to the Investor Education and Protection Fund shall
be utilised for the purposes and in the manner specified in section 205C of the Companies Act,1956
(1 of 1956).]
11. Corresponding new bank deemed to be an Indian company.—For the purposes of the
Income-tax Act, 1961 (43 of 1961), every corresponding new bank shall be deemed to be an Indian
company and a company in which the public are substantially interested.
12. Vacation of office of Chairman, etc.—(1) Every person holding office, immediately before the
commencement of this Act, as Chairman of an existing bank shall, if he becomes Custodian of the
corresponding new bank, be deemed, on such commencement, to have vacated office as such Chairman.
(2) Save as otherwise provided in sub-section (1), every officer or other employee of an existing bank
shall become, on the commencement of this Act, an officer or other employee, as the case may be, of the
corresponding new bank and shall hold his office or service in that bank on the same terms and conditions
and with the same rights to pension, gratuity and other matters as would have been admissible to him if
the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank
and continue to do so unless and until his employment in the corresponding new bank is terminated or
until his remuneration, terms or conditions are duly altered by the corresponding new bank.
(3) For the persons who immediately before the commencement of this Act were the trustees for any
pension, provident, gratuity or other like fund constituted for the officers or other employees of an
existing bank, there shall be substituted as trustees such persons as the Central Government may, by
general or special order, specify.
1. Ins. by Act 45 of 2006, s. 11 (w.e.f. 16-10-2006).
2. Ins. by s. 12, ibid. (w.e.f. 16-10-2006).
15
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or in any
other law for the time being in force, the transfer of the services of any officer or other employee from an
existing bank to a corresponding new bank shall not entitle such officer or other employee to any
compensation under this Act or any other law for the time being in force and no such claim shall be
entertained by any court, tribunal or other authority.
1
[12A. Bonus.—(1) No officer or other employee [other than an employee within the meaning of
clause (13) of section 2 of the Payment of Bonus Act, 1965 (21 of 1965)] of a corresponding new bank
shall be entitled to be paid any bonus.
(2) No employee of a corresponding new bank, being an employee within the meaning of clause (13)
of section 2 of the Payment of Bonus Act, 1965 (21 of 1965), shall be entitled to be paid any bonus except
in accordance with the provisions of that Act.
(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of
any court, tribunal or other authority and notwithstanding anything contained in any other provision of
this Act or in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force
or any practice, usage or custom or any contract, agreement, settlement, award or other instrument.]
13. Obligations as to fidelity and secrecy.—(1) Every corresponding new bank shall observe, except
as otherwise required by law, the practices and usages customary among bankers, and, in particular, it
shall not divulge any information relating to or to the affairs of its constituents except in circumstances in
which it is, in accordance with law or practices and usages customary among bankers, necessary or
appropriate for the corresponding new bank to divulge such information.
(2) Every director, member of a local board or a committee, or auditor, adviser, officer or other
employee of a corresponding new bank shall, before entering upon his duties, make a declaration of
fidelity and secrecy in the form set out in the Third Schedule.
(3) Every Custodian of a corresponding new bank shall, as soon as possible, make a declaration of
fidelity and secrecy in the form set out in the Third Schedule.
2
[(4) Nothing contained in this section shall apply to the credit information disclosed under the Credit
Information Companies (Regulation) Act, 2005 (30 of 2005).]
14. Custodian to be public servant.—Every Custodian of a corresponding new bank shall be
deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).
15. Certain defects not to invalidate acts or proceedings.—(1) All acts done by the Custodian,
acting in good faith, shall, notwithstanding any defect in his appointment or in the procedure, be valid.
(2) No act or proceeding of any Board of Directors or a local board or committee of a corresponding
new bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the
constitution of, such board or committee, as the case may be.
(3) All acts done by a person acting in good faith as a director or member of a local board or
committee of a corresponding new bank shall be valid, notwithstanding that it may afterwards be
discovered that his appointment was invalid by reason of any defect or disqualification or had terminated
by virtue of any provision contained in any law for the time being in force:
Provided that nothing in this section shall be deemed to give validity to any act by a director or
member of a local board or committee of a corresponding new bank after his appointment has been shown
to the corresponding new bank to be invalid or to have terminated.
16. Indemnity.—(1) Every Custodian of a corresponding new bank and every officer of the Central
Government or of the Reserve Bank and every officer or other employee of a corresponding new bank,
shall be indemnified by such bank against all losses and expenses incurred by him in or in relation to the
discharge of his duties except such as have been caused by his own wilful act or default.
(2) A director or member of a local board or committee of a corresponding new bank shall not be
responsible for any loss or expense caused to such bank by the insufficiency or deficiency of the value of,
1. Ins. by Act 64 of 1984, s. 5 (w.e.f. 11-9-1984).
2. Ins. by Act 30 of 2005, s. 34 and Part IX of the Schedule (w.e.f. 14-12-2006).
16
or title to, any property or security acquired or taken on behalf of the corresponding new bank, or by the
insolvency or wrongful act of any customer or debtor, or by anything done in or in relation to the
execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any
wilful act or default on the part of such director or member.
1
[16A. Arrangement with corresponding new bank on appointment of directors to
prevail.—(1) Where any arrangement entered into by a corresponding new bank with a company
provides for the appointment by the corresponding new bank of one or more directors of such company,
such provision and any appointment of directors made in pursuance thereof shall be valid and effective
notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any
other law for the time being in force or in the memorandum, articles of association or any other
instrument relating to the company, and any provision regarding share qualification, age limit, number of
directorships, removal from office of directors and such like conditions contained in any such law or
instrument aforesaid, shall not apply to any director appointed by the corresponding new bank in
pursuance of the arrangement as aforesaid.
(2) Any director appointed as aforesaid shall—
(a) hold office during the pleasure of the corresponding new bank and may be removed or
substituted by any person by order in writing of the corresponding new bank;
(b) not incur any obligation or liability by reason only of his being a director or for anything done
or omitted to be done in good faith in the discharge of his duties as a director or anthing in relation
thereto;
(c) not be liable to retirement by rotation and shall not be taken into account for computing the
number of directors liable to such retirement.]
17. Construction of references to existing banks.—Any reference to any existing bank in any law,
other than this Act, or in any contract or other instrument shall, in so far as it relates to the undertaking
which has been transferred by section 4, be construed as a reference to the corresponding new bank.
18. Dissolution.—No provision of law relating to winding up of corporations shall apply to a
corresponding new bank and no corresponding new bank shall be placed in liquidation save by order of
the Central Government and in such manner as it may direct.
2
[18A. Supersession of Board in certain cases.—(1) Where the Central Government, on the
recommendation of the Reserve Bank, is satisfied that in the public interest or for preventing the affairs of
any corresponding new bank being conducted in a manner detrimental to the interest of the depositors or
the corresponding new bank or for securing the proper management of any corresponding new bank, it is
necessary so to do, the Central Government may, for reasons to be recorded in writing, by order,
supersede the Board of Directors of such corresponding new bank for a period not exceeding six months
as may be specified in the order:
Provided that the period of supersession of the Board of Directors may be extended from time to time, so,
however, that the total period shall not exceed twelve months.
(2) The Central Government may, on supersession of the Board of Directors of the corresponding
new bank under sub-section (1), appoint, in consultation with the Reserve Bank, for such period as it may
determine, an Administrator (not being an officer of the Central Government or a State Government) who
has experience in law, finance, banking, economics or accountancy.
(3) The Central Government may issue such directions to the Administrator as it may deem
appropriate and the Administrator shall be bound to follow such directions.
(4) Upon making the order of supersession of the Board of Directors of the corresponding new bank,
notwithstanding anything contained in this Act,—
(a) the chairman, managing director and other directors shall, as from the date of supersession,
vacate their offices as such;
1. Ins. by Act 1 of 1984, s. 74 (w.e.f. 15-2-1984).
2. Ins. by Act 45 of 2006, s. 13 (w.e.f. 16-10-2006).
17
(b) all the powers, functions and duties which may, by or under the provisions of this Act or any
other law for the time being in force, be exercised and discharged by or on behalf of the Board of
Directors of such corresponding new bank, or by a resolution passed in general meeting of such
corresponding new bank, shall, until the Board of Directors of such corresponding new bank is
reconstituted, be exercised and discharged by the Administrator appointed by the Central Government
under sub-section (2):
Provided that the power exercised by the Administrator shall be valid notwithstanding that such
power is exercisable by a resolution passed in the general meeting of the corresponding new bank.
(5) The Central Government may constitute, in consultation with the Reserve Bank, a committee
of three or more persons who have experience in law, finance, banking, economics or accountancy to
assist the Administrator in the discharge of his duties.
(6) The committee shall meet at such times and places and observe such rules of procedure as
may be specified by the Central Government.
(7) The salary and allowances payable to the Administrator and the members of the committee
constituted under sub-section (5) by the Central Government shall be such as may be specified by the
Central Government and be payable by the concerned corresponding new bank.
(8) On and before the expiration of two months before expiry of the period of supersession of the
Board of Directors as specified in the order issued under sub-section (1), the Administrator of the
corresponding new bank, shall call the general meeting of the corresponding new bank to elect new
directors and reconstitute its Board of Directors.
(9) Notwithstanding anything contained in any other law or in any contract, the memorandum or
articles of association, no person shall be entitled to claim any compensation for the loss or termination of
his office.
(10) The Administrator appointed under sub-section (2) shall vacate office immediately after the
Board of Directors of the corresponding new bank has been reconstituted.]
19. Power to make regulations.—(1) The Board of Directors of a corresponding new bank may,
after consultation with the Reserve Bank and with the previous sanction of the Central Government, 1
[by
notification in the Official Gazette], make regulations, not inconsistent with the provisions of this Act or
any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose
of giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, the regulations may
provide for all or any of the following matters, namely:—
(a) the powers, functions and duties of local boards and restrictions, conditions or limitations, if
any, subject to which they may be exercised or performed, the formation and constitution of local
committees and committees of local boards (including the number of members of any such
committee), the powers, functions and duties of such committees, the holding of meetings of local
committees and committees of local boards and the conduct of business thereat;
(b) the manner in which the business of the local boards shall be transacted and the procedure in
connection therewith;
2
[(ba) the nature of shares of the corresponding new bank, the manner in which and the
conditions subject to which shares may be held and transferred and generally all matters relating to
the rights and duties of Shareholders;
(bb) the maintenance of register, and the particulars to be entered in the register in addition to
those specified in sub-section (2F) of section 3, the safeguards to be observed in the maintenance of
register on computer floppies or diskettes, inspection and closure of the register and all other matters
connected therewith;
1. Ins. by Act 66 of 1988, s. 38 (w.e.f. 30-12-1988).
2. Ins. by Act 37 of 1994, s. 17 (we.f. 15-7-1994).
18
(bc) the manner in which general meetings shall be convened, the procedure to be followed
thereat and the manner in which voting rights may be exercised;
(bd) the holding of meetings of shareholders and the business to be transacted thereat;
(be) the manner in which notices may be served on the half of the corresponding new bank upon
shareholders or other persons;
(bf) the manner in which the directors nominated under clause (h) of sub-section (3) of section 9
shall retire;]
(c) the delegation of powers and functions of the Board of Directors of a corresponding new bank
to the general manager, director, officer or other employee of that bank;
(d) the conditions or limitations subject to which the corresponding new bank may appoint
advisers, officers or other employees and fix their remuneration and other terms and conditions of
service;
(e) the duties and conduct of advisers, officers or other employees of the corresponding new
bank;
(f) the establishment and maintenance of superannuation, pension, provident or other funds for
the benefit of officers or other employees of the corresponding new bank or of the dependents of such
officers or other employees and the granting of superannuation allowances, annuities and pensions
payable out of such funds;
(g) the conduct and defence of legal proceedings by or against the corresponding new bank and
the manner of signing pleadings;
(h) the provision of a seal for the corresponding new bank and the manner and effect of its use;
(i) the form and manner in which contracts binding on the corresponding new bank may be
executed;
(j) the conditions and the requirements subject to which loans or advances may be made or bills
may be discounted or purchased by the corresponding new bank;
(k) the persons or authorities who shall administer any pension, provident or other fund
constituted for the benefit of officers or other employees of the corresponding new bank or their
dependents;
(l) the preparation and submission of statements of programmes of activities and financial
statements of the corresponding new bank and the period for which and the time within which such
statements and estimates are to be prepared and submitted; and
(m) generally for the efficient conduct of the affairs of the corresponding new bank.
(3) Until any regulation is made under sub-section (1), the articles of association of the existing bank
and every regulation, rule, bye-law or order made by the existing bank in force immediately before the
commencement of this Act shall be deemed to be the regulations made under sub-section (1) and shall
have effect accordingly and any reference therein to any authority of the existing bank shall be deemed to
be a reference to the corresponding authority of the corresponding new bank and until any such
corresponding authority is constituted under this Act shall be deemed to refer to the Custodian.
1
[(4) Every regulation shall, as soon as may be after it is made under this Act by the Board of
directors of a corresponding new bank, be forwarded to the Central Government and that Government
shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total
period of thirty days which may be comprised in one session or in two or more succcessive sessions, and
if, before the expiry of the session immediately following the session or the successive sessions aforesaid,
both Houses agree in making any modification in the regulation or both Houses agree that the regulation
should not be made, the regulation shall thereafter have effect only in such modified form or be of no
effect, as the case may be; so, however, that any such modification or annulment shall be without
prejudice to the validity of anything previously done under that regulation.]
1. Ins. by Act 1 of 1984, s. 75 (w.e.f. 15-2-1984).
19
20. [Amendment of certain enactment.]—Rep. by the Repealing and Amending Act, 1988
(19 of 1988), s. 2 and the First Schedule (w.e.f. 31-3-1988).
21. Repeal and saving.—(1) The Banking Companies (Acquisition and Transfer of Undertakings)
Ordinance, 1980 (3 of 1980), is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken, including any order made,
notification issued or direction given, under the said Ordinance shall be deemed to have been done, taken,
made, issued or given, as the case may be, under the corresponding provisions of this Act.