1
[
2
[36B.] High Court defined.—In this Part and in Part IIIA, “High Court”, in relation to a banking
company, means the High Court exercising Jurisdiction in the place where the registered office of the
banking company is situated or, in the case of a banking company incorporated outside India, where its
principal place of business in India is situated.]
37. Suspension of business.—(1) The 3
[High Court] may on the application of a banking company
which is temporarily unable to meet its obligations make an order (a copy of which it shall cause to be
forwarded to the Reserve Bank) staying the commencement or continuance of all actions and
proceedings against the company for a fixed period of time on such terms and conditions as it shall
think fit and proper, and may from time to time extend the period so however that the total period of
moratorium shall not exceed six months.
1. Ins. by Act 52 of 1953, s. 3.
2. Section 36A renumbered as section 36B by Act 33 of 1959, s. 24 (w.e.f. 1-10-1959).
3. Subs. by Act 52 of 1953, s. 4, for “Court”.
49
(2) No such application shall be maintainable unless it is accompanied by a report of the Reserve
Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its
debts if the application is granted:
Provided that the 1
[High Court] may, for sufficient reasons, grant relief under this section even if
the application is not accompanied by such report, and where such relief is granted, the 1
[High Court]
shall call for a report from the Reserve Bank on the affairs of the banking company, on receipt of which
it may either rescind any order already passed or pass such further orders thereon as may be just and
proper in the circumstances.
2
[(3) When an application is made under sub-section (1), the High Court may appoint a special
officer who shall forthwith take into his custody or under his control all the assets, books, documents,
effects and actionable claims to which the banking company is or appears to be entitled and shall also
exercise such other powers as the High Court may deem fit to confer on him, having regard to the
interests of the depositors of the banking company.]
3
[(4) Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which
an order under sub-section (1) has been made, are being conducted in a manner detrimental to the
interests of the depositors, it may make an application to the High Court for the winding up of the
company, and where any such application is made, the High Court shall not make any order extending
the period for which the commencement or continuance of all actions and proceedings against the
company were stayed under that sub- section.]
4
[38. Winding up by High Court.—(1) Notwithstanding anything contained in section 391
section 392, section 433 and section 583 of the Companies Act, 1956 (1 of 1956), but without prejudice
to its powers under sub-section (1) of section 37 of this Act, the High Court shall order the winding up
of a banking company—
(a) if the banking company is unable to pay its debts; or
(b) if an application for its winding up has been made by the Reserve bank under section 37 or
this section.
(2) The Reserve Bank shall make an application under this section for the winding up of a banking
company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35.
(3) The Reserve Bank may make an application under this section for the winding up of a banking
company—
(a) if the banking company—
(i) has failed to comply with the requirements specified in section 11; or
(ii) has by reason of the provisions of section 22 become disentitled to carry on banking
business in India; or
(iii) has been prohibited from receiving fresh deposits by an order under clause (a) of
sub-section (4) of section 35 or under clause (b) of sub-section (3A) of section 42 of the
Reserve Bank of India Act, 1934 (2 of 1934.); or
(iv) having failed to comply with any requirement of this Act other than the requirements
laid down in section 11, has continued such failure, or, having contravened any provision of
this Act has continued such contravention beyond such period or periods as may be specified in
that behalf by the Reserve Bank from time to time, after notice in writing of such failure or
contravention has been conveyed to the banking company; or
1. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953).
2. Ins. by s. 5, ibid. (w.e.f. 30-12-1953).
3. Ins. by Act 33 of 1959, s. 25 (w.e.f. 1-10-1959).
4. Subs. by s. 26, ibid., for section 38 (w.e.f. 1- 10-1959).
50
(b) if in the opinion of the Reserve Bank—
(i) a compromise or arrangement sanctioned by a Court in respect of the banking company
cannot be worked satisfactorily with or without modifications; or
(ii) the returns, statements or information furnished to it under or in pursuance of the
provisions of this Act disclose that the banking company is unable to pay its debts; or
(iii) the continuance of the banking company is prejudicial to the interests of its depositors.
(4) Without prejudice to the provisions contained in section 434 of the Companies Act, 1956
(1 of 1956), a banking company shall be deemed to be unable to pay its debts if it has refused to meet
any lawful demand made at any of its offices or branches within two working days, if such demand is
made at a place where there is an office, branch or agency of the Reserve Bank, or within five working
days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking
company is unable to pay its debts.
(5) A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by
the Reserve Bank to the registrar.]
1
[38A. Court Liquidator.—(1) There shall be attached to every High Court a court liquidator to be
appointed by the Central Government for the purpose of conducting all proceedings for the winding up
of banking companies and performing such other duties in reference thereto as the High Court may
impose.
2* * * * *
(4) Where having regard to the number of banking companies wound up and other circumstances of
the case, the Central Government is of opinion that it is not necessary or expedient to attach for the time
being a court liquidator to a High Court, it may, from time to time, by notification in the Official
Gazette, direct that this section shall not have effect in relation to that High Court.]
3
[39. Reserve Bank to be official Liquidator.—4
[(1)] Notwithstanding anything contained in
section 38A of this Act or in section 448 or section 449 of the Companies Act, 1956 (1 of 1956), where
in any proceeding for the winding up by the High Court of a banking company, an application is made
by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or any other bank notified
by the Central Government in this behalf or any individual, as stated in such application shall be
appointed as the official liquidator of the banking company in such proceeding and the liquidator, if
any, functioning in such proceeding shall vacate office upon such appointment.]
5
[(2) Subject to such directions as may be made by the High Court, the remuneration of the official
liquidator appointed under this section, the cost and expenses of his establishment and the cost and
expenses of the winding up shall be met out of the assets of the banking company which is being wound
up, and notwithstanding anything to the contrary contained in any other law for the time being in force,
no fees shall be payable to the Central Government, out of the assets of the banking company.]
6
[39A. Application of Companies Act to liquidators.—(1) All the provisions of the Companies
Act, 1956 (1 of 1956), relating to a liquidator, in so far as they are not inconsistent with this Act, shall
apply to or in relation to a liquidator appointed under section 38A or section 39.
1. Ins. by Act 52 of 1953, s. 6 (w.e.f. 30-12-1953).
2. Omitted by Act 95 of 1956, s. 14 and Schedule (w.e.f. 14-1-1957).
3. Section 39 has been amended by Acts 52 of 1953, sections 4 and 7; Act 23 of 1955, s. 53 and the Fourth Schedule; Act 79
of 1956, s. 43 and the Second Schedule; Act 95 of 1956, s. 14 and the Schedule; Act 33 of 1959, s. 27 and Act 37 of 1960,
s. 2 to read as above.
4. Section 39 re-numbered as sub-section (1) thereof by Act 58 of 1968, s. 16 (retrospectively).
5. Ins. by s. 16, ibid. (with retrospective effect).
6. Ins. by Act 33 of 1959, s. 28 (w.e.f. 1-10-1959).
51
(2) Any reference to the “official liquidator” in this Part and Part IIIA shall be construed as
including a reference to any liquidator of a banking company.]
40. Stay of proceedings.— Notwithstanding anything to the contrary contained in 1
[section 466 of
the Companies Act, 1956 (1 of 1956)], the 2
[High Court] shall not make any order staying the
proceedings in relation to the winding up of a banking company, unless the 2
[High Court] is satisfied
that an arrangement has been made whereby the company can pay its depositors in full as their claims
accrue.
3
[41. Preliminary report by official liquidator.—Notwithstanding anything to the contrary
contained in section 455 of the Companies Act, 1956 (1 of 1956), where a winding up order has been
made in respect of a banking company whether before or after the commencement of the Banking
Companies (Second Amendment) Act, 1960 (37 of 1960), the official liquidator shall submit a
preliminary report to the High Court within two months from the date of the winding up order or where
the winding up order has been made before such commencement, within two months from such
commencement, giving the information required by that section so far as it is available to him and also
stating the amount of assets of the banking company in cash which are in his custody or under his
control on the date of the report and the amount of its assets which are likely to be collected in cash
before the expiry of that period of two months in order that such assets may be applied speedily towards
the making of preferential payments under section 530 of the Companies Act, 1956 and in the
discharge, as far as possible, of the liabilities and obligations of the banking company to its depositors
and other creditors in accordance with the provisions hereinafter contained; and the official liquidator
shall make for the purposes aforesaid every endeavour to collect in cash as much of the assets of the
banking company as practicable.
41A. Notice to preferential claimants and secured and unsecured creditors.—(1) Within fifteen
days from the date of the winding up order of a banking company or where the winding up order has
been made before the commencement of the Banking Companies (Second Amendment) Act, 1960 (37
of 1960), within one month from such commencement, the official liquidator shall, for the purpose of
making an estimate of the debts and liabilities of the banking company (other than its liabilities and
obligations to its depositors), by notice served in such manner as the Reserve Bank may direct, call
upon—
(a) every claimant entitled to preferential payment under section 530 of the Companies Act,
1956 (1 of 1956), and
(b) every secured and every unsecured creditor,
to send to the official liquidator within one month from the date of the service of the notice a statement
of the amount claimed by him.
(2) Every notice under sub-section (1) sent to a claimant having a claim under section 530 of the
Companies Act, 1956 (1 of 1956), shall state that if a statement of the claim is not sent to the official
liquidator before the expiry of the period of one month from the date of the service, the claim shall not
be treated as a claim entitled to be paid under section 530 of the Companies Act, 1956, in priority to all
other debts but shall be treated as an ordinary debt due by the banking company.
(3) Every notice under sub-section (1) sent to a secured creditor shall require him to value his
security before the expiry of the period of one month from the date of the service of the notice and shall
state that if a statement of the claim together with the valuation of the security is not sent to the official
liquidator before the expiry of the said period, then, the official liquidator shall himself value the
security and such valuation shall be binding on the creditor.
1. Subs. by Act 95 of 1956, s. 14 and Schedule, for “section 173 of the Indian Companies Act, 1913 (7 of 1913)”
(w.e.f. 14-1-1957).
2. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953).
3. Subs. by Act 37 of 1960, s. 3, for s. 41.
52
(4) If a claimant fails to comply with the notice sent to him under sub-section (1), his claim will not
be entitled to be paid under section 530 of the Companies Act, 1956 (1 of 1956), in priority to all other
debts but shall be treated as an ordinary debt due by the banking company; and if a secured creditor
fails to comply with the notice sent to him under sub-section (1), the official liquidator shall himself
value the security and such valuation shall be binding on the creditor.]
42. Power to dispense with meetings of creditors, etc.—Notwithstanding anything to the contrary
contained in 1
[
2
[section 460] of the Companies Act, 1956 (1 of 1956)], the 3
[High Court] may, in the
proceedings for winding up a banking company, dispense with any meetings of creditors or
contributories 4*** if it considers that no object will be secured thereby sufficient to justify the delay
and expense.
5
[43. Booked depositors' credits to be deemed proved.—In any proceeding for the winding up of
a banking company, every depositor of the banking company shall be deemed to have filed his claim for
the amount shown in the books of the banking company as standing to his credit and, notwithstanding
anything to the contrary contained in 6
[section 474 of the Companies Act, 1956 (1 of 1956)] the High
Court shall presume such claims to have been proved, unless the official liquidator shows that there is
reason for doubting its correctness.]
7
[43A. Preferential payments to depositors.—(1) In every proceeding for the winding-up of a
banking company where a winding up order has been made, whether before or after the commencement
of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), within three months from the
date of the winding up order or where the winding up order has been made before such commencement,
within three months therefrom, the preferential payments referred to in section 530 of the Companies
Act, 1956 (1 of 1956), in respect of which statements of claims have been sent within one month from
the date of the service of the notice referred to in section 41A, shall be made by the official liquidator or
adequate provision for such payments shall be made by him.
(2) After the preferential payments as aforesaid have been made or adequate provision has been
made in respect thereof, there shall be paid within the aforesaid period of three months—
(a) in the first place, to every depositor in the savings bank account of the banking company a
sum of two hundred and fifty rupees or the balance at his credit, whichever is less; and thereafter,
(b) in the next place, to every other depositor of the banking company a sum of two hundred
and fifty rupees or the balance at his credit, whichever is less,
in priority to all other debts from out of the remaining assets of the banking company available for
payment to general creditors:
Provided that the sum total of the amounts paid under clause (a) and clause (b) to any one person
who in his own name (and not jointly with any other person) is a depositor in the savings bank account
of the banking company and also a depositor in any other account, shall not exceed the sum of two
hundred and fifty rupees.
(3) Where within the aforesaid period of three months full payment cannot be made of the amounts
required to be paid under clause (a) or clause (b) of sub-section (2) with the assets in cash, the official
liquidator shall pay within that period to every depositor under that clause (a) or, as the case may be,
clause (b) of that sub-section on a pro rata basis so much of the amount due to the
1. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “sections 178A and 183 of the Indian Companies Act 1913 (7 of 1913)”
(w.e.f. 14-1-1957).
2. Subs. by Act 1 of 1984, s. 33, for “sections 460, 464, and 465” (w.e.f. 15-2-1984).
3. Subs. by Act 52 of 1953, s. 4, for “Court” (w.e.f. 30-12-1953).
4. The words “or with the appointment of a committee of inspection” omitted by Act 1 of 1984, s. 33 (w.e.f. 15-2-1984).
5. Subs. by Act 52 of 1953, s. 8, for section 43 (w.e.f. 30-12-1953).
6. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “section 191 of the Indian Companies Act 1913 (7 of 1913)”
(w.e.f. 14-1-1957).
7. Subs. by Act 37 of 1960, s. 4, for section 43A (w.e.f. 19-9-1960).
53
depositor under that clause as the official liquidator is able to pay with those assets; and shall pay the
rest of that amount to every such depositor as and when sufficient assets are collected by the official
liquidator in cash.
(4) After payments have been made first to depositors in the savings bank account and then to the
other depositors in accordance with the foregoing provisions, the remaining assets of the banking
company available for payment to general creditors shall be utilised for payment on a pro rata basis of
the debts of the general creditors and of the further sums, if any, due to the depositors; and after making
adequate provision for payment on a pro rata basis as aforesaid of the debts of the general creditors, the
official liquidator shall, as and when the assets of the company are collected in cash, make payment on
a pro rata basis as aforesaid, of the further sums, if any, which may remain due to the depositors
referred to in clause (a) and clause (b) of sub-section (2).
(5) In order to enable the official liquidator to have in his custody or under his control in cash as
much of the assets of the banking company as possible, the securities given to every secured creditor
may be redeemed by the official liquidator—
(a) where the amount due to the creditor is more than the value of the securities as assessed by
him or, as the case may be, as assessed by the official liquidator, on payment of such value; and
(b) where the amount due to the creditor is equal to or less than the value of the securities as so
assessed, on payment of the amount due:
Provided that where the official liquidator is not satisfied with the valuation made by the creditor,
he may apply to the High Court for making a valuation.
(6) When any claimant, creditor or depositor to whom any payment is to be made in accordance
with 1
[the provisions of this section], cannot be found or is not readily traceable, adequate provision
shall be made by the official liquidator for such payment.
(7) For the purposes of this section, the payments specified in each of the following clauses shall be
treated as payments of a different class, namely:—
(a) payments to preferential claimants under section 530 of the Companies Act, 1956
(1 of 1956);
(b) payments under clause (a) of sub-section (2) to the depositors in the savings bank account;
(c) payments under clause (b) of sub-section (2) to the other depositors;
(d) payments to the general creditors and payments to the depositors in addition to those
specified in clause (a) and clause (b) of sub-section (2).
(8) The payments of each different class specified in sub-section (7) shall rank equally among
themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall
abate in equal proportion.]]
2
[(9) Nothing contained in sub-sections (2), (3), (4), (7) and (8) shall apply to a banking company in
respect of the depositors of which the Deposit Insurance Corporation is liable under section 16 of the
Deposit Insurance Corporation Act, 1961 (47 of 1961).
(10) After preferential payments referred to in sub-section (1) have been made or adequate
provision has been made in respect thereof, the remaining assets of the banking company referred to in
sub-section (9) available for payment to general creditors shall be utilised for payment on pro rata
basis of the debts of the general creditors and of the sums due to the depositors:
Provided that where any amount in respect of any deposit is to be paid by the liquidator to the
Deposit Insurance Corporation under section 21 of the Deposit Insurance Corporation Act,
1961 (47 of 1961), only the balance, if any, left after making the said payment shall be payable to the
depositor.]
1. Subs. by Act 47 of 1961, s. 51 and Second Schedule, for “the foregoing provisions” (w.e.f. 1-1-1962).
2. Ins. by s. 51 and the Second Schedule, ibid. (w.e.f. 1-1-1962).
54
1
[44. Powers of High Court in voluntary winding up.—(1) Notwithstanding anything to the
contrary contained in section 484 of the Companies Act, 1956 (1 of 1956), no banking company may be
voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full
all its debts to its creditors as they accrue.
(2) The High Court may, in any case where a banking company is being wound up voluntarily,
make an order that the voluntary winding up shall continue, but subject to the supervision of the court.
(3) Without prejudice to the provisions contained in sections 441 and 521 of the Companies Act,
1956 (1 of 1956), the High Court may of its own motion and shall on the application of the Reserve
Bank, order the winding up of a banking company by the High Court in any of the following cases,
namely:—
(a) where the banking company is being wound up voluntarily and at any stage during the
voluntary winding up proceedings the company is not able to meet its debts as they accrue; or
(b) where the banking company is being wound up voluntarily or is being wound up subject to
the supervision of the court and the High Court is satisfied that the voluntary winding up or winding
up subject to the supervision of the court cannot be continued without detriment to the interests of
the depositors.]
2
[44A. Procedure for amalgamation of banking companies.—(1) Notwithstanding anything
contained in any law for the time being in force, no banking company shall be amalgamated with
another banking company, unless a scheme containing the terms of such amalgamation has been placed
in draft before the shareholders of each of the banking companies concerned separately, and approved
by a resolution passed by a majority in number representing two-thirds in value of the shareholders of
each of the said companies, present either in person or by proxy at a meeting called for the purpose.
(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every
shareholder of each of the banking companies concerned in accordance with the relevant articles of
association indicating the time, place and object of the meeting, and shall also be published at least once
a week for three consecutive weeks in not less than two newspapers which circulate in the locality or
localities where the registered offices of the banking companies concerned are situated, one of such
newspapers being in a language commonly understood in the locality or localities.
(3) Any shareholder, who has voted against the scheme of amalgamation at the meeting or has
given notice in writing at or prior to the meeting to the company concerned or to the presiding officer of
the meeting that he dissents from the scheme of amalgamation, shall be entitled, in the event of the
scheme being sanctioned by the Reserve Bank, to claim from the banking company concerned, in
respect of the shares held by him in that company, their value as determined by the Reserved Bank
when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares
to be paid to the dissenting share holder shall be final for all purposes.
(4) If the scheme of amalgamation is approved by the requisite majority of shareholders in
accordance with the provisions of this section it shall be submitted to the Reserve Bank for sanction and
shall, if sanctioned by the Reserve Bank by an order in writing passed in this behalf, be bindings on the
banking companies concerned and also on all the shareholders thereof.
3* * * * *
(6) On the sanctioning of a scheme of amalgamation by the Reserve Bank, the property of the
amalgamated banking company shall, by virtue of the order of sanction, be transferred to and vest in,
and the liabilities of the said company shall, by virtue of the said order be transferred to, and become
the liabilities of, the banking company which under the scheme of amalgamation is to acquire the
1. Subs. by Act 33 of 1959, s. 30, for section 44 (w.e.f. 1- 10-1959).
2. Ins. by Act 20 of 1950, s. 8.
3. Omitted by Act 55 of 1963, s. 19 (w.e.f. 1-2- 1964).
55
business of the amalgamated banking company, subject in all cases to 1
[the provisions of the scheme as
sanctioned].]
2
[(6A) Where a scheme of amalgamation is sanctioned by the Reserve Bank under the provisions of
this section, the Reserve Bank may, by a further order in writing, direct that on such date as may be
specified therein the banking company (hereinafter in this section referred to as the amalgamated
banking company) which by reason of the amalgamation will cease to function, shall stand dissolved
and any such direction shall take effect notwithstanding anything to the contrary contained in any other
law.
(6B) Where the Reserve Bank directs a dissolution of the amalgamated banking company, it shall
transmit a copy of the order directing such dissolution to the Registrar before whom the banking
company has been registered and on receipt of such order the Registrar shall strike off the name of the
company.
(6C) An order under sub-section (4) whether made before or after the commencement of section 19
of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence
that all the requirements of this section relating to amalgamation have been complied with, and a copy
of the said order certified in writing by an officer of the Reserve Bank to be true copy of such order and
a copy of the scheme certified in the like manner to be a true copy thereof shall, in all legal proceedings
(whether in appeal or otherwise and whether instituted before or after the commencement of the said
section 19), be admitted as evidence to the same extent as the original order and the original scheme.]
3
[(7) Nothing in the foregoing provisions of this section shall affect the power of the Central
Government to provide for the amalgamation of two or more banking companies 4*** under section
396 of the Companies Act, 1956 (1 of 1956);
Provided that no such power shall be exercised by the Central Government except after consultation
with the Reserve Bank.]
5
[
6
[44B.] Restriction on compromise or arrangement between banking company and
creditors.—7
[(1)] Notwithstanding anything contained in any law for the time being in force, no 8
[High
Court] shall sanction a compromise or arrangement between a banking company and its creditors or any
class of them or between such company and its members or any class of them 9
[or sanction any
modification in any such compromise or arrangement unless the compromise or arrangement or
modification, as the case may be,] is certified by the Reserve Bank 10[in writing as not being incapable
of being worked and as not being detrimental to the interests of the depositors of such banking
company].]
11[(2) Where an application under 12[section 391 of the Companies Act, 1956 (1 of 1956)] is made
in respect of a banking company, the High Court may direct the Reserve Bank to make an inquiry in
relation to the affairs of the banking company and the conduct of its directors and when such a direction
is given, the Reserve Bank shall make such inquiry and submit its report to the High Court.]
1. Subs. by Act 55 of 1963, s. 19, for “the terms of the order sanctioning the scheme” (w.e.f. 1-2-1964).
2. Ins. by s. 19, ibid. (w.e.f. 1-2-1964).
3. Ins. by Act 37 of 1960, s. 5 (w.e.f. 19-9-1960).
4. The words “in national interest” omitted by Act 7 of 1961, s. 3 (w.e.f. 24-3-1961).
5. Subs. by Act 20 of 1950, s. 9, for section 45 (w.e.f. 18-3-1950).
6. Section 45 renumbered as section 44B by Act 37 of 1960, s. 6 (w.e.f.19-9-1960).
7. Section 44B re-numbered as sub-section (1) thereof by Act 52 of 1953, s. 9 (w.e.f. 30-12-1953).
8. Subs. by s. 4, ibid., for “Court” (w.e.f. 30-12-1953).
9. Subs. by Act 55 of 1963, s. 20, for “unless the compromise or arrangement” (w.e.f. 1-2-1964).
10. Subs. by Act 52 of 1953, s. 9, for “as not being detrimental to the interests of the depositors of such company”
(w.e.f. 30-11-1953).
11. Ins. by s. 9, ibid. (w.e.f. 30-12-1953).
12. Subs. by Act 95 of 1956, s. 14 and the Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)”
(w.e.f. 14-1-1957).
56
1
[45. Power of Reserve Bank to apply to Central Government for suspension of business by a
banking company and to prepare scheme of 2
[reconstruction] or amalgamation.—(1)
Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or
3
[any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank
that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order
of moratorium in respect of 4
[a banking company].
(2) The Central Government, after considering the application made by the Reserve Bank under
sub-section (1), may make an order of moratorium staying the commencement or continuance of all
actions and proceedings against the company for a fixed period of time on such terms and conditions as
it thinks fit and proper and may from time to time extend the period so however that the total period of
moratorium shall not exceed six months.
(3) Except as otherwise provided by any directions given by the Central Government in the order
made by it under sub-section (2) or at any time thereafter, the banking company shall not during the
period of moratorium make any payment to any depositors or discharge any liabilities or obligations to
any other creditors 5
[or grant any loans or advances or make investments in any credit instruments].
6
[(4) During the period of moratorium 5
[or at any other time], if the Reserve Bank is satisfied that—
(a) in the public interest; or
(b) in the interests of the depositors; or
(c) in order to secure the proper management of the banking company; or
(d) in the interests of the banking system of the country as a whole,
it is necessary so to do, the Reserve Bank may prepare a scheme—
(i) for the reconstruction of the banking company, or
(ii) for the amalgamation of the banking company with any other banking institution (in
this section referred to as “the transferee bank”).]
(5) The scheme aforesaid may contain provisions for all or any of the following matters, namely:—
(a) the constitution, name and registered office, the capital, assets, powers, rights, interests,
authorities and privileges, the liabilities, duties and obligations of the banking company on its
reconstruction or, as the case may be, of the transferee bank;
(b) in the case of amalgamation of the banking company, the transfer to the transferee bank of
the business, properties, assets and liabilities of the banking company on such terms and conditions
as may be specified in the scheme;
(c) and change in the Board of directors, or the appointment of a new Board of directors, of the
banking company on its reconstruction or, as the case may be, of the transferee bank and the
authority by whom, the manner in which, and the other terms and conditions on which, such change
or appointment shall be made and in the case of appointment of a new Board of directors or of any
director, the period for which such appointment shall be made;
1. Ins. by Act 37 of 1960, s. 6 (w.e.f. 19-9-1960).
2. subs. by Act 39 of 2020, s. 3, for “reconstitution” (w.e.f. 26-6-2020).
3. Subs. by Act 7 of 1961, s. 4, for “any agreement” (w.e.f. 24-3-1961).
4. Subs. by s. 4, ibid., for “the banking company”(w.e.f. 24-3-1961).
5. Ins. by Act 39 of 2020, s. 3 (w.e.f. 26-6-2020).
6. Subs. by Act 7 of 1961, s. 4, for sub-sections (4) to (9) (w.e.f. 24-3-1961).
57
(d) the alteration of the memorandum and articles of association of the banking company on its
reconstruction or, as the case may be, of the transferee bank for the purpose of altering the capital
thereof or for such other purposes as may be necessary to give effect to the reconstruction or
amalgamation;
(e) subject to the provisions of the scheme, the continuation by or against the banking company
on its reconstruction or, as the case may be, the transferee bank, of any actions or proceedings
pending against the banking company immediately before the 1
[reconstruction or amalgamation];
(f) the reduction of the interest or rights which the members depositors and other creditors have
in or against the banking company before its reconstruction or amalgamation to such extent as the
Reserve Bank considers necessary in the public interest or in the interests of the members,
depositors and other creditors or for the maintenance of the business of the banking company;
(g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of their
claim—
(i) in respect of their interest or rights in or against the banking company before its
reconstruction or amalgamation; or
(ii) where their interest or rights aforesaid in or against the banking company has or have
been reduced under clause (f), in respect of such interest or rights as so reduced;
(h) the allotment to the members of the banking company for shares held by them therein
before its reconstruction or amalgamation [whether their interest in such shares has been reduced
under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may
be, in the transferee bank and where any members claim payment in cash and not allotment of
shares, or where it is not possible to allot shares to any members, the payment in cash to those
members in full satisfaction of their claim—
(i) in respect of their interest in shares in the banking company before its reconstruction or
amalgamation; or
(ii) where such interest has been reduced under clause (f) in respect of their interest in
shares as so reduced;
(i) the continuance of the services of all the employees of the banking company (excepting such
of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947)
are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as
the case may be, in the transferee bank at the same remuneration and on the same terms and
conditions of service, which they were getting or, as the case may be, by which they were being
governed, immediately before the 1
[reconstruction or amalgamation]:
Provided that the scheme shall contain a provision that—
(i) the banking company shall pay or grant not later than the expiry of the period of three years
from the date on which the scheme is sanctioned by the Central Government, to the said employees
the same remuneration and the same terms and conditions of service 2
[as are, at the time of such
payment or grant, applicable] to employees of corresponding rank or status of a comparable
banking company to be determined for this purpose by the Reserve Bank (whose determination in
this respect shall be final);
(ii) the transferee bank shall pay or grant not later than the expiry of the aforesaid period of
three years, to the said employees the same remuneration and the same terms and conditions of
service 2
[as are, at the time of such payment or grant, applicable] to the other employees of
corresponding rank or status of the transferee bank subject to the qualifications and experience of
the said employees being the same as or equivalent to those of such other employees of the
transferee bank:
Provided further that if in any case under clause (ii) of the first proviso any doubt or difference
arises as to whether the qualification and experience of any of the said employees are the same as or
equivalent to the qualifications and experience of the other employees of corresponding rank or
status of the transferee bank, 1
[the doubt or difference shall be referred, before the expiry of a
period of three years from the date of the payment or grant mentioned in that clause,] to the Reserve
Bank whose decision thereon shall be final;
(j) notwithstanding anything contained in clause (i) where any of the employees of the banking
company not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947)
are specifically mentioned in the scheme under clause (i), or where any employees of the banking
company have by notice in writing given to the banking company or, as the case may be, the
transferee bank at any time before the expiry of the one month next following the date on which the
scheme is sanctioned by the Central Government, intimated their intention of not becoming
employees of the banking company on its reconstruction or, as the case may be, of the transferee
bank, the payment to such employees of compensation if any, to which they are entitled under the
Industrial Disputes Act, 1947 (14 of 1947), and such pension, gratuity, provident fund and other
retirement benefits ordinarily admissible to them under the rules or authorisations of the banking
company immediately before the 2
[reconstruction or amalgamation];
(k) any other terms and conditions for the reconstruction or amalgamation of the banking
company;
(l) such incidental, consequential and supplemental matters as are necessary to secure that the
reconstruction or amalgamation shall be fully and effectively carried out.
(6) (a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking
company and also to the transferee bank and any other banking company concerned in the
3
[reconstruction or amalgamation], for suggestions and objections, if any, within such period as the
Reserve Bank may specify for this purpose.
(b) The Reserve Bank may make such modifications, if any, in the draft scheme as it may consider
necessary in the light of the suggestions and objections received from the banking company and also
from the transferee bank, and any other banking company concerned in the amalgamation and from any
members, depositors or other creditors of each of those companies and the transferee bank.
(7) The scheme shall thereafter be placed before the Central Government for its sanction and the
Central Government may sanction the scheme without any modifications or with such modifications as
it may consider necessary; and the scheme as sanctioned by the Central Government shall come into
force on such date as the Central Government may specify in this behalf:
Provided that different dates may be specified for different provisions of the scheme.
4
[(7A) The sanction accorded by the Central Government under sub-section (7), whether before or
after the commencement of section 21 of the Banking Laws (Miscellaneous Provisions) Act, 1963
(55 of 1963), shall be conclusive evidence that all the requirements of this section relating to
reconstruction, or, as the case may be, amalgamation have been complied with and a copy of the
sanctioned scheme certified in writing by an officer of the Central Government to be a true copy
thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or
after the commencement of the said section 21), be admitted as evidence to the same extent as the
original scheme.]
1. Subs. by Act 11 of 1984, s. 34, for “the doubt or difference shall be referred” (w.e.f. 15-2-1984).
2. Subs. by Act 39 of 2020, s. 3, for “date of the order of moratorium” (w.e.f. 26-6-2020).
3. Subs. by s. 3, ibid., for “amalgamation” (w.e.f. 26-6-2020).
4. Ins. by Act 55 of 1963, s. 21 (w.e.f. 1-2-1964).
59
(8) On and from the date of the coming into operation of the scheme or any provision thereof, the
scheme or such provision shall be binding on the banking company or, as the case may be, on the
transferee bank and any other banking company concerned in the amalgamation and also on all the
members, depositors and other creditors and employees of each of those companies and of the
transferee bank, and on any other person having any right or liability in relation to any of those
companies or the transferee bank 1
[including the trustees or other persons managing, or connected in
any other manner with, any provident fund or other fund maintained by any of those companies or the
transferee bank.]
(9) 2
[On and from the date of the coming into operation of, or as the case may be, the date specified
in this behalf in the scheme] the properties and assets of the banking company shall, by virtue of and to
the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the banking
company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become
the liabilities of the transferee bank.
(10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government
may by order do anything not inconsistent with such provisions which appears to it necessary or
expedient for the purpose of removing the difficulty.
(11) Copies of the scheme or of any order made under sub-section (10) shall be laid before both
Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the Central
Government, or, as the case may be, the order has been made.
(12) Where the scheme is a scheme for amalgamation of the banking company, any business
acquired by the transferee bank under the scheme or under any provision thereof shall, after the coming
into operation of the scheme or such provision, be carried on by the transferee bank in accordance with
the law governing the transferee bank, subject to such modifications in that law or such exemptions of
the transferee bank from the operation of any provisions thereof as the Central Government on the
recommendation of the Reserve Bank may, by notification in the Official Gazette, make for the purpose
of giving full effect to the scheme:
Provided that no such modification or exemption shall be made so as to have effect for a period of
more than seven years from the date of the acquisition of such business.
(13) Nothing in this section shall be deemed to prevent the amalgamation with a banking institution
by a single scheme of several banking companies in respect of each of which an order of moratorium
has been made under this section.
(14) The provisions of this section and of any scheme made under it shall have effect
notwithstanding anything to the contrary contained in any other provisions of this Act or in any other
law or any agreement, award or other instrument for the time being in force.
(15) In this section, “banking institution” means any banking company and includes the State Bank
of India 3*** 2
[or a corresponding new bank].
1
[Explanation.—References in this section to the terms and conditions of service of as applicable to
an employee shall not be construed as extending to the rank and status of such employee.]
4