BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT 1980
EmailTHE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS)ACT, 1980
ACT No. 40 OF 1980
11th July, 1980.
An Act to provide for the acquisition and transfer of theundertakings of certain banking companies, having regard to their size,resources, coverage and organisation, in order further to control the heightsof the economy, to meet progressively, and serve better, the needs of thedevelopment of the economy and to promote the welfare of the people, in theconformity with the policy of the State towards securing the principles laiddown in clauses (b) and (c) of article 39 of the Constitution and for mattersconnected therewith or incidental thereto.
BE it enacted by Parliament inthe Thirty–fifth Year of the Republicof India as follows: –
CHAPTER I
PRELIMINARY
1.Short title and commencement: (1) This Act may be called theBanking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
(2) It shall be deemed to havecome into force on the 15th day of April, 1980.
2.Definitions: In this Act, unless thecontext, otherwise requires, –
(a) "banking company"does not include a foreign company within the meaning of section 591 of theCompanies Act, 1956(1 of 1956);
(b) "corresponding newbank", in relation to an existing bank, means the body corporate specifiedagainst such bank in column 2 of the First Schedule;
(c) "Custodian" meansthe person who becomes, or is appointed, a Custodian under section 7;
(d) "existing bank"means a banking company specified in column 1 of the First Schedule, being acompany the total of the demand and time liabilities in India of which, asshown in the return as on the 14th day of March, 1980, furnished to the ReserveBank under section 42 of the Reserve Bank of India Act, 1934(2 of 1934) amountsto not less than rupees two hundred crores;
1 [(da) "prescribed"means prescribed by regulations made under this Act;]
2 ["(f) Words andexpressions used herein and not defined either in this Act or in the BankingRegulation Act, 1949 but defined in the Companies Act, 1956 shall have themeanings respectively assigned to them in the Companies Act, 1956.]
(3) words and expressions usedherein and not defined but defined in the Banking Regulation Act, 1949(10 of1949), have the meanings respectively assigned to them in that Act.
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1. Clause (da) inserted by theBanking Companies (Acquisition and Transfer Undertakings) Amendment Act 1994(37 of 1994) Section 10 (i).
2. Clause (f) inserted by theBanking Companies (Acquisition and Transfer Undertakings) Amendment Act 1994(37 of 1994) Section 10 (i).
CHAPTER II
1 [TRANSFEROF THE UNDERTAKINGS OF EXISTING BANKS AND SHARE CAPITALS OF THE CORRESPONDINGNEW BANKS]
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1. The heading of Chapter wassubstituted for the old heading "TRANSFER OF THE UNDERTAKINGS OF EXISTINGBANKS" by the Banking Companies (Acquisition and Transfer Undertakings)Amendment Act 1994 (37 of 1994) Section 11.
3.Establishment ofcorresponding new banks and business thereof: (1) On the commencement of this Act, there shall beconstituted such corresponding new banks as are specified in column 2 of theFirst Schedule.
(2) The paid–up Capitalof every corresponding new bank constituted under sub–section (1) shall,until any provision is made in this behalf in any scheme made under section 9,be equal to the paid–up capital of the existing bank in relation towhich it is the corresponding new bank.
1 [(2A) subject to the provisions of this Act, the authorisedcapital of every corresponding new bank shall be one thousand five hundred ofrupees divvied into one hundred and fifty crones fully paid–up shares often rupees each:
Provided that the CentralGovernment may after consolation with the Reserve Bank and by notification inthe Official Gazette increase or reduce the authorised capital as it thinksfirst so however that transfer such increase or reduction the authorisedcapital; shall not exceed three thousand crores or be less than one thousandfive hundred cores of rupees.
(2B) Notwithstanding anythingcontained in sub–section (20 the paid–up capital of everycorresponding new bank constituted under sub–section 91) may from timeto time be increased by–
(a) such amounts as the Boardof Directors of the corresponding new bank may after consultation with ReserveBank and with the previous sanction of the Central Government transfer from thereserve fund established by such bank to such paid–up capital;
(b) such amounts as the CentralGovernment may after consultation with the Reserve Bank, contribute to suchpaid–up capital;
(c) such amounts as the Boardof Directors of the corresponding new bank may after consolation with theReserve Bank and with the previous sanction of the Central Government raise bypublic issue of shares in such manner as may be prescribed so however that theCentral Government shall at shall times hold not less than fifty–onepercent of the paid–up capital of each corresponding new bank.
2 [(2BB) Notwithstanding anything contained in sub–section(2), the paid–up capital of a corresponding new bank constituted undersub–section (1) may, from time to time and before any paid–upcapital is raised by public issue under clause (c) of sub–section (2B),be reduced by–
(a) the Central Government,after consultation with the Reserve Bank, by cancelling any paid–upcapital which is lost, or is unrepresented by available assets;
(b) the Board of Directors,after consultation with the Reserve Bank and with the previous sanctions of theCentral Government, by paying off any paid–up capital which is in excessof the wants of the corresponding new bank:
Provided that in a case wheresuch capital is lost, or is unrepresented by available assets because ofamalgamation of another corresponding new bank or a corresponding new bank asdefined in clause (d) of section 2 of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970 (5 of 1970) with the corresponding newbank, such reduction may be done, either prospectively or retrospectively, butnot from a date earlier than the date of such amalgamation.
(2BBA)(a) A corresponding newbank may, from time to time and after any paid–up capital has beenraised by public issue under clause (c) of sub–section (2B), byresolution passed at an annual general meeting of the shareholders entitled tovote, voting in person, or, where proxies are allowed, by proxy, and the votescast in favour of the resolution are not less than three times the number ofthe votes, if any, cast against the resolution by the shareholders so entitledand voting, reduce its paid–up capital in any way.
(b) Without prejudice to thegenerality of the foregoing power, the paid–up capital may be reduced by–
(i) extinguishing or reducingthe liability on any of its shares in respect of share capital not paid–up;
(ii) either with or withoutextinguishing or reducing liability on any of its paid–up shares,cancelling any paid–up capital which is lost, or is unrepresented byavailable assets; or
(iii) either with or withoutextinguishing or reducing liability on any of its paid–up shares, payingoff any paid–up share capital which is in excess of the wants of thecorresponding new bank.
(2BBB) Notwithstanding anythingcontained in sub–section (2BB) or sub–section (2BBA), the paid–upcapital of a corresponding new bank shall not be reduced at any time so as torender it below twenty–five percent of the paid–up capitalof that bank as on the date of commencement of the Banking Companies(Acquisition and Transfer of Undertakings) Amendment Act, 1995.]
(2C) the entire paid–upcapital of a corresponding new bank except the paid–up capital raised bypublic issue under clause (c) of sub–section (2B) shall stand vents inand saluted to the Central Government.
(2D) the shares of every ofevery corresponding new bank not held by the Central Government shall be freelytransferable:
Provided that no individual orcompany resident outside India or any company incorporated under any law not inforce in India or any branch of such company whether resident outside India ornot shall at any time hold or acquire by transfer or otherwise shares of thecorresponding new bank so that such investment in aggregate exceeds the capitalas may be specified by the Central Government by notification in the OfficialGazette.
Explanation: For thepurpose of this clause "company" means any body corporate andincludes a firm or other association of individuals.
(2E) No shareholder of thecorresponding new bank other than the Central Government shall be entitled toexercise voting rights in respect of any shares held by him in excess of onepercent of the total voting rights of all the shareholders of the correspondingnew bank.
(2F) every corresponding newbank shall keep as it head office a register in one or more books of theshareholders (in this Act referred to as the register) and shall enter thereinthe following particulars:–
(i) the names addressers andoccupations if any of the shareholders and a statement of the shares heldbeneath shareholder distinguishing each share by its denoting number
(ii) the date on which eachperson is so entered as a shareholder;
(iii) the date on which anyperson ceases to be a shareholder and
(iv) such other particulars asmay be prescribed.
(2G) Notwithstanding anythingcontained in sub–section (23f) it shall be lawful for everycorresponding new bank to keep the register in computer floppies or diskettessubject o such safeguards as may be prescribed.
(3) Notwithstanding anythingcontained in the Indian Evidence Act 1872 (1 of 1872) a copy of extract fromthe register certified to be a true copy under the hand of an officer f 6hcorresponding new bank authorised in this behalf by it shall in all legalproceedings be admissible in evidence.]
(4) Every corresponding newbank shall be a body corporate with perpetual succession and a common seal witha power, subject to the provisions of this Act, to acquire, hold and dispose ofproperty, and to contract, and may sue and be sued in its name.
(5) Every corresponding newbank shall carry on and transact the business of banking as defined in clause(b) of section 5 of the Banking Regulation Act, 1949(10 of 1949), and mayengage in 3 [one or more of the other forms of business]specified in sub–section (1) of section 6 of that Act.
(6) Every corresponding newbank shall establish a reserve fund to which shall be transferred the sharepremiums and the balance, if any, standing to the credit of the reserve fund ofthe existing bank in relation to which it is the corresponding new bank, andsuch further sums, if any, as may be transferred in accordance with theprovisions of section 17 of the Banking Regulation Act, 1949(10 of 1949).
4 [(7) (i) The corresponding new bank shall, ifso required by the Reserve Bank, act as agent of the Reserve Bank at all placesin India where it has a branch, for–
(a) paying, receiving,collecting and remitting money, bullion and securities on behalf of anyGovernment in India;and
(b) undertaking and transactingany other business which the Reserve Bank may from time to time entrust to it.
(ii) The terms and conditionson which any such agency business shall be carried on by the corresponding newbank on behalf of the Reserve Bank shall be such as may be agreed upon.
(iii) If no agreement can bereached on any matter referred to in clause (ii), or if a dispute arisesbetween the corresponding new bank and the Reserve Bank as to theinterpretation of any agreement between them, the matter shall be referred tothe Central Government and the decision of the Central Government thereon shallbe final.
(iv) The corresponding new bankmay transact any business or perform any functions entrusted to it under clause(i), by itself or through any agent approved by the Reserve Bank.]
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1. Substituted for theSub-section (2A) and (3) by the Banking Companies (Acquisition and TransferUndertakings) Amendment Act 1994 (37 of 1994) Section 12.
The old Sub-section (2A)inserted by the Banking Laws (Amendment) Act, 1985 (81 of 1985), Section (13)and underwent following substitutions.The words "one thousand five hundredcrores" were substituted for the words "five hundred crores" bythe Banking Companies (Acquisition and Transfer of Undertakings) Amendment Act,1992 (36 of 1992) Section 2 (a). The words "five hundred crores" weressubstitutedfor the words "rupees one hundred crores" by the Banking, PublicFinancial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988(66 of 1988), Section 35. (w. e. f. 30-12-1988)
2.Sub-sections (2BB), (2BBA) and (2BBB) inserted by the Banking Companies(Acquisition Transfer of Undertakings) Amendment Act, 1995 (8 of 1995) Section3.
3.Substituted for the words "one or more forms of business" by theBanking Laws (Amendment) Act, 1983 (1 of 1984), Section 71 (i) (w. e. f.14-2-1984)
4. Sub-section(7) inserted by the Banking Laws (Amendment) Act, 1983 (1 of 1984), Section 71(ii) (w. e. f. 14-2-1984)
1 [3A.Trustnot to be entered on the register: Notwithstanding anything contained insub–section (2F) of section 3, no notice of any trust, express, impliedor constructive, shall be entered on the register, or be receivable, by thecorresponding new bank.]
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1.Section 3A inserted ) by the Banking Companies (Acquisition and TransferUndertakings) Amendment Act 1994 (37 of 1994) Section 13.
4.Undertakingsof existing banks to vest in corresponding new banks: On thecommencement of this Act, the undertaking of every existing bank shall betransferred to, and shall vest in, the corresponding new bank.
5.:(1) Theundertaking of each existing bank shall be deemed to include all assets,rights, powers, authorities and privileges and all property, movable andimmovable, cash balances, reserve funds, investments and all other rights andinterests in, or arising out of, such property as were immediately before thecommencement of this Act in the ownership, possession, power or control of theexisting bank in relation to the undertaking, whether within or without India,and all books of accounts, registers, records and all other documents ofwhatever nature relating thereto and shall also be deemed to include allborrowings, liabilities and obligations of whatever kind then subsisting of theexisting bank in relation to the undertaking.
(2) If,according to the laws of any country outside of India, the provisions of thisAct by themselves are not effective to transfer or vest any asset or liabilitysituated in that country which forms part of the undertaking of an existingbank to, or in, the corresponding new bank, the affairs of the existing bank inrelation to such asset or liability shall, on and from the Commencement of thisAct, stand entrusted to the chief executive officer for the time being of thecorresponding new bank, and the chief executive officer may exercise all powersand do all such acts and things as any be exercised or done by the existingbank for the purpose of effectively transferring such assets and dischargingsuch liabilities.
(3) Thechief executive officer of the corresponding new bank shall, in exercise of thepowers conferred on him by sub–section (2), take all such steps as maybe required by the laws of any such country outside India for the purpose ofeffecting such transfer or vesting, and may either himself or through anyperson authorised by him in this behalf realise any asset and discharge anyliability of the existing bank.
(4)Unless otherwise expressly provided by this Act, all contracts, deeds, bondsagreements, powers of attorney, grants of legal representation and otherinstruments of whatever nature subsisting or having effect immediately beforethe commencement of this Act and to which the existing bank is a party or whichare in favour of the existing bank shall be of as full force and effect againstor in favour of the corresponding new bank, and may be enforced or acted uponas fully and effectually as if in the place of the existing bank thecorresponding new bank had been a party thereto or as if they had been issuedin favour of the corresponding new bank.
(5) If,immediately before the commencement of this Act, any suit, appeal or otherproceeding of whatever nature in relation to any business of the undertakingwhich has been transferred under section 4, is pending by or against theexisting bank, the same shall not abate, be discontinued or be in any way,prejudicially affected by reason of the transfer of the undertaking of theexisting bank or of anything contained in this Act but the suit, appeal orother proceeding may be continued, prosecuted and enforced by or against thecorresponding new bank.
(6)Nothing in this Act shall be construed as applying to the assets, rights,powers, authorities and privileges and property, movable and immovable, cashbalances and investment in any country outside India (and other rights andinterests in, or arising out of, such property) and borrowings, liabilities andobligations of whatever kind subsisting immediately before the commencement ofthis Act, of any existing bank operating in that country if, under the laws inforce in that country, it is not permissible for a banking company, owned orcontrolled by Government, to carry on the business of banking there.
CHAPTER III
6.Paymentof amount: (1)Every existing bank shall be given by the Central Government such amount inrespect of the transfer, under section 4, to the corresponding new bank of theundertaking of the existing bank as is specified against each such bank in theSecond Schedule.
(2) Theamount referred to in sub–section (1) shall be given to every existingbank, at its option, –
(a) incash (to be paid by cheque drawn on the Reserve Bank) in three equal annualinstalments, the amount of each instalment carrying interest at the rate offive and a half percent per annum from the commencement of this Act; or
(b) insaleable or otherwise transferable promissory notes or stock certificates ofthe Central Government issued and repayable at par, and maturing at the end of–s
(i) tenyears from the commencement of this Act and carrying interest from suchcommencement at the rate of six percent per annum, or
(ii)thirty years from the commencement of this Act and carrying interest from suchcommencement at the rate of seven percent per annum; or
(c)partly in cash (to be paid by cheque drawn on the Reserve Bank) and partly insuch number of securities specified in sub–clause (I) or sub–clause(ii), or both, of clause (b), as may be required by the existing bank; or
(d)partly in such number of securities specified in sub–clause (i) ofclause (b) and partly in such number of securities specified in sub–clause(ii ) of that clause, as may be required by the existing bank.
(3) Thefirst of the three equal annual instalments referred to in clause (a) of sub–section(2) shall be paid, and the securities referred to in clause (b) of that sub–sectionshall be issued, within sixty days from the date of receipt by the CentralGovernment of the option referred to in that sub–section, or where nosuch option has been exercised, from the latest date before which such optionought to have been exercised.
(4) Theoption referred to in sub–section (2) shall be exercised by everyexisting bank before the expiry of a period of three months from thecommencement of this Act (or within such further time, not exceeding threemonths, as the Central Government may, on the application of the existing bank,allow) and the option so exercised shall be final and shall not be altered orrescinded after it has been exercised.
(5) Anyexisting bank which omits or fails to exercise the option referred to in sub–section(2), within the time specified in sub–section (4), shall be deemed tohave opted for payment in securities specified in sub–clause (I) ofclause (b) of sub–section (2).
(6)Notwithstanding anything contained in this section, any existing bank may,before the expiry of three months from the commencement of this Act (or withinsuch further time, not exceeding three months as the Central Government may, onthe application of the existing bank, allows) make an application in writing tothe Central Government for an interim payment of an amount equal to seventy–fivepercent of the amount of the paid–up capital of such bank, immediatelybefore such commencement, indicating therein whether the payment is desired incash or in securities specified in sub–section (2), or in both.
(7) TheCentral Government shall, within sixty days from the receipt of the applicationreferred to in sub–section (6), make the interim payment to the existingbank in accordance with the option indicated in such application.
(8) Theinterim payment made to an existing bank under sub–section (7) shall beset off against the total amount payable to such existing bank under this Actand the balance of the amount remaining outstanding after such payment shall begiven to the existing bank in accordance with the option exercised, or deemedto have been exercised, under sub–section (4) or sub–section (5),as the case may be:
Providedthat where any part of the interim payment is obtained by an existing bank incash, the payment so obtained shall be set off, in the first instance, againstthe first instalment of the cash payment referred to in sub–section(2),and in case the payment so obtained exceeds the amount of the first instalment,the excess amount shall be adjusted against the second instalment and thebalance of such excess amount, if any, against the third instalment of the cashpayment.
CHAPTER IV
MANAGEMENT OF CORRESPONDING NEW BANKS
7.(1) Thehead office of each corresponding new bank shall be at such place as theCentral Government may, by notification in the Official Gazette, specify inthis behalf, and, until any such place is so specified, shall be at such placeat which the head office of the existing bank, in relation to which it is thecorresponding new bank, is on the commencement of this Act, located.
(2) Thegeneral superintendence, direction and management of the affairs and businessof a corresponding new bank shall vest in a Board of Directors which shall beentitled to exercise all such powers and do all such acts and things as thecorresponding new bank is authorised to exercise and to exercise and do.
(3) (a)As soon as may be after the commencement of this Act, the Central Governmentshall, in consultation with the Reserve Bank, constitute the first Board ofDirectors of a corresponding new bank, consisting of not more than sevenpersons, to be appointed by the Central Government, and every director soappointed shall hold office until the Board of Directors of such correspondingnew bank is constituted in accordance with the scheme made under section 9:
Providedthat the Central Government may, if it is of opinion that it is necessary inthe interests of the corresponding new bank so to do, remove a person from themembership of the first Board of Directors and appoint any other person in hisplace.
(b)Every member of the first Board of Directors (not being an officer of theCentral Government or of the Reserve Bank) shall receive such remuneration asis equal to the remuneration which a member of the Board of Directors of theexisting bank was entitled to receive immediately before the commencement ofthis Act.
(4)Until the first Board of Directors is appointed by the Central Government undersub–section (3), the general superintendence, direction and managementof the affairs and business of a corresponding new bank shall vest in aCustodian, who shall be the chief executive officer of that bank and mayexercise all powers and do all acts and things as may be exercised or done bythat bank.
(5) TheChairman of an existing bank holding office as such immediately before thecommencement of this Act, shall be the Custodian of the corresponding new bankand shall receive the same emoluments as he was receiving immediately beforesuch commencement:
Providedthat the Central Government may, if the Chairman of an existing bank declinesto become, or to continue to function as, a Custodian of the corresponding newbank, or, if it is of opinion that it is necessary in the interests of thecorresponding new bank so to do, appoint any other person as the Custodian of acorresponding new bank and the Custodian so appointed shall receive suchemoluments as the Central Government may specify in this behalf.
Explanation:In this sub–section and in sub–section (1) of section 12, theexpression "Chairman", in relation to any existing bank, includes theperson carrying out the duties of the Chairman or otherwise functioning as theChief executive officer of that bank.
(6) TheCustodian shall hold officer during the pleasure of the Central Government.
8.Correspondingnew banks to be guided by the directions of the Central Government: Everycorresponding new bank shall, in the discharge of its functions, be guided bysuch directions in regard to matters of policy involving public interest as theCentral Government may, after consultation with the Governor of the ReserveBank, give.
9.Powerof Central Government to make scheme: (1) The Central Governmentmay, after consultation with the Reserve Bank, make a scheme for carrying out theprovisions of this Act.
(2) Inparticular, and without prejudice to the generality of the foregoing power, thesaid scheme may provide for all or any of the following matters, namely: –
(a) thecapital structure of the corresponding new bank, 1 [*]
(b) theconstitution of the Board of Directors, by whatever name called, of thecorresponding new bank and all such matter in connection therewith orincidental thereto as the Central Government may consider to be necessary orexpedient;
(c) thereconstitution of any corresponding new bank into two or more corporations, theamalgamation of any corresponding new bank with any other corresponding newbank or with another banking institution, the transfer of the whole or any partof the undertaking of a 2 [corresponding new bank toany other corresponding new bank or banking institution] or the transfer of thewhole or any part of the undertaking of any other banking institution to acorresponding new bank;
(d)such incidental, consequential and supplemental matters as may be necessary tocarry out the provisions of this Act.
3 [(3)Every Board of Directors of a corresponding new bank, constituted under anyscheme made under sub–section (1), shall include –
(a) notmore than two whole–time directors to be appointed by the CentralGovernment after consultation with the Reserve Bank;
(b) onedirector who is an official of the Central Government to be nominated by theCentral Government:
Providedthat no such director shall be a director of any other corresponding new bank.
Explanation:For the purposes of this clause, the expression "corresponding newbank" shall include a corresponding new bank within the meaning of theBanking companies (Acquisition and Transfer of Undertakings) Act, 1970;
(c) onedirector who is an officer of the Reserve Bank to be nominated by the CentralGovernment on the recommendation of the Reserve Bank.
Explanation:For the purpose of this clause, "an officer of the Reserve Bank"includes an office of the Reserve Bank who is deputed by that Bank undersection 54AA of the Reserve Bank of India Act, 1934 to any institution referredto therein;
(d) nomore than two directors to be nominated by the Central government from amongstthe Securities Exchange Board of India established under section 3 of theSecurities and Exchange Board of India Act, 1992, the National Bank forAgriculture and Rural Development established under section 3 of the NationalBank for Agriculture and Rural Development Act, 1981, public financialinstitutions as specified in sub–section (1), or notified from time totime under sub–section (2), of section 4A of the Companies Act, 1956 andother institutions established or constituted by or under any Central Act orincorporated under the Companies Act, 1956 and having not less than fifty–onepercent of the paid–up share capital held or controlled by the CentralGovernment:
(e) onedirector, from among such of the employees of the corresponding new bank whoare workmen under clause (s) of section 2 of the Industrial Disputes Act, 1947,to be nominated by the Central Government in such manner as may be specified ina scheme made under this section;
(f) onedirector, from among the employees of the corresponding new bank who are notworkmen under clause (s) of section 2 of the Industrial Disputes Act, 1947, tobe nominated by the Central Government after consultation with the ReserveBank;
(g) onedirector who has been a Chartered Accountant for not less than fifteen years tobe nominated by the Central Government after consultation with the ReserveBank;
(h)subject to the provisions of clause (I) not more than six directors to benominated by the Central Government;
(i)where the capital issued under clause (c) of sub–section (2B) of section3 is –
(i) notmore than twenty percent of the total paid–up capital, not more than twodirectors,
(ii)more than twenty percent, but not more than forty percent of the total paid–upcapital, not more than four directors,
(iii)more than forty percent of the total paid–up capital, not more than sixdirectors,
to beelected by the shareholders, other than the Central Government, from amongstthemselves:
Providedthat on the assumption of charge after election of any such directors underthis clause, equal number of directors nominated under clause (h) shall retirein such manner as may be specified in the scheme.
(3A)The directors to be nominated under clause (h) or to be elected under clause(I) of sub–section (3A) shall –
(A)have special knowledge or practical experience in respect of one more of thefollowing matters, namely: –
(i)agricultural and rural economy.
(ii)banking,
(iii)co–operation,
(iv)economics,
(v)finance
(vi)law.
(vii)small–scale industry,
(viii)any other matter the special knowledge of, and practical experience in, whichwould, in the opinion of the Reserve Bank, be useful to the corresponding newbank;
(B)represent the interest of depositors; or
(C)represent the interest of farmers, workers and artisans.
(3B)Where the Reserve Bank is of the opinion that any director of a correspondingnew bank elected under clause (I) of sub–section (3) does not fulfil therequirements of sub–section (3A), it may, after giving to such directorand the bank a reasonable opportunity of being heard, by order, remove suchdirector and on such removal, the Board of Directors shall co–opt anyother person fulfilling the requirements of sub–section (3A) as adirector in place of the person so removed till a director is duly elected bythe shareholders of the corresponding new bank in the next annual generalmeeting and the person so co–opted shall be deemed to have been dulyelected by the shareholders of the corresponding new bank as a director.]
(4) TheCentral Government may, after consultation with the Reserve Bank, made a schemeto amend or vary any scheme made under sub–section (1).
4 [(5)On and from the date of coming into operation of a scheme made under thissection with respect to any of the matters referred to in clause (c) of sub–section(2) or any matters incidental, consequential and supplemental thereto, –
(a) thescheme shall be binding on the corresponding new bank or corporations orbanking institutions, and also on the members, if any, the depositors, andother creditors and employee of each of them and on any other persons havingany right or liability in relation to any of them including the trustees orother persons, managing or in any other manner connected with, any providentfund or other fund maintained by any of them;
(b) theproperties and assets of the corresponding new bank or, as the case may be, ofthe banking institution shall, by virtue of and to the extent provided in thescheme, stand transferred to, and vested in, and the liabilities of thecorresponding new bank or, as the case may be, of the banking institutionshall, by virtue of, and to the extent provided in the scheme, standtransferred to, and become the liabilities of , the corporation or corporationsbrought into existence by reconstitution of the banking institution or thecorresponding new bank, as the case may be.
Explanation5 [I]:In this section, "banking institution" means a banking company andincludes the State Bank of India or a subsidiary bank.]
5[Explanation II: For the purposes of this section, the expression"corresponding new bank" shall include a corresponding new bankwithin the meaning of the Banking Companies (Acquisition and Transfer ofUndertakings) Act, 1970.]
4 [(6)]Every scheme made by the Central Government under this Act shall be laid, assoon as may be after it is made, before each House of Parliament, while it isin session, for a total period of thirty days which may be comprised in onesession or in two or more successive sessions, and if, before the expiry of thesession immediately following the session or the successive sessions aforesaid,both Houses agree in making any modification in the Scheme or both Houses agreethat the Scheme should not be made, the scheme shall thereafter have effectonly 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 thevalidity of anything previously done under that scheme.
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1. Thewords "so however that the paid–up Capital of any such bank shallnot be in excess of Rupees one thousand five hundred crores" omitted ) bythe Banking Companies (Acquisition and Transfer Undertakings) Amendment Act1994 (37 of 1994) Section 14 (i).
Thetail of the omitted portion underwent the following changes. The words"one thousand five hundred crores" were substituted for the words"five hundred crores" by the Banking Companies (Acquisition and Transfer of Undertakings)Amendment Act, 1992 (36 of 1992) Section 2 (b). The words "five hundredcrores were substitutedfor the words "rupees one hundred crores" by the Banking, PublicFinancial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988(66 of 1988), Section 35 (a) (i) (w. e. f. 30-12-1988) which in turn weresubstituted for the words "rupees fifteen crores" by the Banking Laws(Amendment) Act, 1985 (81 of 1985), Section 14.
2.Substituted for the words "corresponding new bank to any other bankinginstitution" by the Banking, Public Financial Institutions and NegotiableInstruments Laws (Amendment) Act, 1988 (66 of 1988), Section 35 (a) (ii) (w. e.f. 30-12-1988).
3.Sub-section (3), (3A) and (3B) substituted for the original sub-section (3) bythe Banking Companies (Acquisition and Transfer Undertakings) Amendment Act1994 (37 of 1994) Section 14 (ii).
4.Original Sub-section (5) renumbered as (6) and new sub-section (5) inserted bythe Banking Laws (Amendment) Act, 1983 (1 of 1984), Section 72 (w. e. f.14-2-1984)
5.Existing Explanation numbered as Explanation I and Explanation II inserted bythe Banking, Public Financial Institutions and Negotiable Instruments Laws(Amendment) Act, 1988 (66 of 1988), Section 35 (b) (w. e. f. 30-12-1988).
CHAPTER V
MISCELLANEOUS
10.Closureof accounts and disposal of profits: (1) Every corresponding newbank shall cause its books to be closed and balanced on the 31st day ofDecember 1 [orsuch other date in each year as the Central Government may, by notification inthe Official Gazette, specify] and shall appoint, with the previous approval ofthe Reserve Bank, auditors, for the audit of its accounts.
2[Provided that with a view to facilitating the transition from one period ofaccounting to another period of accounting under this sub–section, theCentral Government may, be order published in the Official Gazette, make suchprovisions as it considers necessary or expedient for the closing and balancingof, or for other matters relating to, the books in respect of the concernedyears.]
(2)Every auditor of a corresponding new bank shall be a person who is qualified toact as an auditor of a company under section 226 of the Companies Act, 1956(1of 1956), and shall receive such remuneration as the Reserve Bank may fix inconsultation with the Central Government.
(3)Every auditor shall be supplied with a copy of the annual balance sheet andprofit and loss account and a list of all books kept by the corresponding newbank, and it shall be the duty of the auditor to examine the balance–sheetand 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 otherdocuments of the corresponding new bank;
(b)may, at the expense of the corresponding new bank, employ accountants or otherpersons to assist him in investigating such accounts; and
(c)may, in relation to such accounts, examine the Custodian or any officer orother employee of the corresponding new bank.
(4)Every auditor of a corresponding new bank shall make a report to the CentralGovernment upon the annual balance–sheet and accounts and in every suchreport shall state–
(a)Whether, in his opinion, the balance–sheet is a full and fair balance–sheetcontaining all the necessary particulars and is properly drawn up so as toexhibit a true and fair view of the affairs of the corresponding new bank, andin case he had called for any explanation or information, whether it has beengiven and whether it is satisfactory;
(b)whether or not the transactions of the corresponding new bank, which have cometo his notice, have been within the powers of that bank;
(c)whether or not the returns received from the offices and branches of thecorresponding new bank have been found adequate for the purposes of his audit;
(d)whether the profit and loss account shows a true balance of profit or loss forthe period covered by such account; and
(e) anyother matter which he considers should be brought to the notice of the CentralGovernment.
3[Explanation I: For the purposes of this Act, –
(a) thebalance–sheet shall not be treated as not disclosing a true and fairview of the affairs of the corresponding new bank, and
(b) theprofit and loss account shall not be treated as not showing a true balance ofprofit or loss for the period covered by such account,
merelyby reason of the fact that the balance–sheet or, as the case may be, theprofit and loss account, does not disclose any matters which are by theprovisions of the Banking Regulation Act, 1949, read with the relevantprovisions of this Act or any other Act, not required to be disclosed.
ExplanationII: For the purposes of this Act, the accounts of the corresponding newbank shall not be deemed as having not been property drawn up on the groundmerely that they do not disclose certain matters if –
(i)those matter are such as the corresponding new bank is, by virtue of anyprovision contained in the Banking Regulation Act, 1949, read with the relevantprovisions 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–sheetand profit and loss account of the corresponding new bank or in the auditor’sreport.]
(5) Thereport of the auditor shall be verified, signed and transmitted to the CentralGovernment.
(6) Theauditor shall also forward a copy of the audit report to the corresponding newbank and to the Reserve Bank.
(7)After making provisions for bad and doubtful debts, depreciation in assets,contributions to staff and superannuation funds and all other matters for whichprovisions is necessary under any law, or which are usually provided for bybanking companies, a corresponding new bank 4 [may,out of its net profits, declare and retain the surplus, if any]
5 [(7A)Every corresponding new bank shall furnish to the Central Government 6 [andto the Reserve Bank] the annual balance–sheet, the profit and lossaccount, and the auditor’s report and a report by its Board, of directors onthe working and activities of the bank during the period covered by theaccounts.]
(8) TheCentral Government shall cause very auditor’s report and report on the workingand activities of each corresponding new bank to be laid 7 [assoon as may be after they are received before each House of Parliament, 8[*]
9 [(9)Without prejudice to the foregoing provisions, the Central Government may, atany time, appoint such number of auditors as it thinks fit to examine andreport on the accounts of a corresponding new bank and the auditors so appointedshall have all the rights, privileges and authority in relation to the audit ofthe accounts of the corresponding new bank which an auditor appointed by thecorresponding new bank has under this section.]
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1.Substituted for the words "of each year" by the Banking, PublicFinancial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988(66 of 1988), Section 37 (a) (w. e. f. 30-12-1988).
2.Proviso inserted by the Banking, Public Financial Institutions and NegotiableInstruments Laws (Amendment) Act, 1988 (66 of 1988), Section 37 (b) (w. e. f.30-12-1988).
3.Inserted by the Banking Laws (Amendment) Act, 1983 (1 of 1984), Section 73 (i)(w. e. f. 14-2-1984).
4.Substituted for the words "shall transfer the balance of profits to theCentral Government" by the Banking Companies (Acquisition and TransferUndertakings) Amendment Act 1994 (37 of 1994) Section 15 (i).
5.Sub-section (7A) inserted by the Banking Laws (Amendment) Act, 1983 (1 of1984), Section 73 (ii) (w. e. f. 14-2-1984).
6.Inserted by the Banking Companies (Acquisition and Transfer Undertakings)Amendment Act 1994 (37 of 1994) Section 15 (ii).
7.Substituted for the words "for not less than thirty days before each Houseof Parliament as soon as may be after each such report is received by theCentral Government" by the Banking Laws (Amendment) Act, 1983 (1 of 1984),Section 73 (iii) (w. e. f. 14-2-1984).
8. Thewords "while it is in session, for a total period of thirty days which maybe comprised in one session or in one session or in two or more successivesessions" omitted by the Banking Laws (Amendment) Act, 1985 (81 of 1985),Section 15.
9.Sub-section (9) inserted by the Banking Laws (Amendment) Act, 1983 (1 of 1984),Section 73 (iv) (w. e. f. 14-2-1984).
1 [10A.Annualgeneral meeting: (1) A general meeting (in this Act referred to an annualgeneral meeting) of every corresponding new bank which has issued capital underclause (c) of sub–section (23 B) of section 3 shall be held at the placeof the head office of the bank in each year at such time as shall from time totime be specified by the Board of Directors:
Providedthat such annual general meeting shall he held before the expiry of six weeksfrom the date on which the balance–sheet, together with the profit andloss account and auditor’s report is, under sub–section (7A) of section10, forwarded to the Central Government or to the Reserve Bank, whichever dateis earlier.
(2) Theshareholders present at an annual general meeting shall be entitled to discussthe balance–sheet and the profit and loss account of the correspondingnew bank made up to the previous 31st day of March, the report of the Board ofDirectors on the working and activities of the corresponding new bank for theperiod covered by the accounts and the auditor’s report on the balance sheetand accounts.]
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1.Inserted by the Banking Companies (Acquisition and Transfer Undertakings)Amendment Act 1994 (37 of 1994) Section 16.
11.Correspondingnew bank deemed to be an Indian company: For the purposes of theIncome–tax Act, 1961, every corresponding new bank shall be deemed to bean Indian company and a corresponding in which the public are substantiallyinterested.
12.:(1)Every person holding office, immediately before the commencement of this Act,as Chairman of an existing bank shall, if he becomes Custodian of thecorresponding new bank, be deemed, on such commencement, to have vacated officeas such Chairman.
(2)Save as otherwise provided in sub–section (1), every officer or otheremployee of an existing bank shall become, on the commencement of this Act, anofficer or other employee, as the case, may be, of the corresponding new bankand shall hold his officer or service in that bank on the same terms andconditions and with the same rights to pension, gratuity and other matters aswould have been admissible to him if the undertaking of the existing bank hadnot been transferred to an vested in the corresponding new bank and continue todo so unless and until his employment in the corresponding new bank isterminated or until his remuneration, terms or conditions are duly altered bythe corresponding new bank.
(3) Forthe persons who immediately before the commencement of this Act were thetrustees for any pension, provident, gratuity or other like fund constitutedfor the officers or other employees of an existing bank, there shall besubstituted as trustees such persons as the Central Government may, by generalor special order, specify.
(4)Notwithstanding anything contained in the Industrial Disputes Act, 1947(14 of1947), or in any other law for the time being in force, the transfer of theservices of any officer or other employee from an existing bank to acorresponding new bank shall not entitle such officer or other employee to anycompensation under this Act or any other law for the time being in force and nosuch claim shall be entertained by any court, tribunal or other authority.
1 [12A.:(1)No officer or other employee [ other than an employee within the meaning ofclause (13) of section 2 of the Payment of Bonus Act, 1965 ] of a correspondingnew bank shall be entitled to be paid any bonus.
(2) Noemployee of a corresponding new bank, being an employee within the meaning ofclause (13) of section 2 of the Payment of Bonus Act, 1965, shall be entitledto be paid any bonus except in accordance with the provisions of that Act.
(3) Theprovisions of this Section shall have effect notwithstanding any judgment,decree or order or any court, tribunal or other authority and notwithstandinganything contained in any other provisions of this Act or in the IndustrialDisputes Act, 1946, or any other law for the time being in force or anypractice, usage or custom or any contract, agreement, settlement, award orother instrument.
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1.Section 12A inserted by the Banking Laws (Amendment) Act, 1984 (1 of 1984),Section 5.
13.Obligationsas to fidelity and secrecy: (1) Every corresponding new bank shallobserve, except as otherwise required by law, the practices and usagescustomary among bankers, and, in particular, it shall not divulge anyinformation relating to or to the affairs of its constituents except incircumstances in which it is, in accordance with law or practices and usages customaryamong bankers, necessary or appropriate for the corresponding new bank todivulge 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 enteringupon his duties, make a declaration of fidelity and secrecy in the form set outin the Third Schedule.
(3)Every Custodian of a corresponding new bank shall, as soon as possible, make adeclaration of fidelity and secrecy in the form set out in the Third Schedule.
14.Custodianto be public servant: Every Custodian of a corresponding newbank shall be deemed to be a public servant for the purposes of Chapter IX ofthe Indian Penal Code (45 of 1860).
15.Certaindefects not to invalidate acts or proceedings: (1) All acts done by theCustodian, acting in good faith, shall, notwithstanding any defect in hisappointment or in the procedure, be valid.
(2) Noact or proceeding of any Board of Directors or a local board or committee of acorresponding new bank shall be invalid merely on the ground of the existenceof any vacancy in, or defect in the constitution of, such board or committee,as the case may be.
(3) Allacts done by a person acting in good faith as a director or member of a localboard or committee of a corresponding new bank shall be valid, notwithstandingthat it may afterwards be discovered that his appointment was invalid by reasonof any defect or disqualification or had terminated by virtue of any provisioncontained in any law for the time being in force:
Providedthat nothing in this section shall be deemed to give validity to any act by adirector or member of a local board or committee of a corresponding new bankafter his appointment has been shown to the corresponding new bank to beinvalid or to have terminated.
16.:(1)Every Custodian of a corresponding new bank and every officer of the CentralGovernment or of the Reserve Bank and every officer or other employee of acorresponding new bank, shall be indemnified by such bank against all lossesand expenses incurred by him in or in relation to the discharge of his dutiesexcept such as have been caused by his own wilful act or default.
(2) Adirector or member of a local board or committee of a corresponding new bankshall not be responsible for any loss or expense caused to such bank by theinsufficiency or deficiency of the value of, or title to, any property orsecurity acquired or taken on behalf of the corresponding new bank, or by theinsolvency or wrongful act of any customer or debtor, or by anything done in orin 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 onthe part of such director or member.
1 [16A.Arrangementwith corresponding new bank on appointment of directors to prevail: (1)Where any arrangement entered into by a corresponding new bank with a companyprovides for the appointment by the corresponding new bank of one or moredirectors of such company, such provision and any appointment of directors madein pursuance thereof shall be valid and effective notwithstanding anything tothe contrary contained in the Companies Act, 1956 or in any other law for thetime being in force or in the memorandum, articles of association or any otherinstrument relating to the company, and any provision regarding sharequalification, age limit, number of directorships, removal from office ofdirectors and such like conditions contained in any such law or instrumentaforesaid, shall not apply to any director appointed by the corresponding newbank in pursuance of the arrangement as aforesaid.
(2) Anydirector appointed as aforesaid shall –
(a)hold office during the pleasure of the corresponding new bank and may beremoved or substituted by any person by order in writing of the correspondingnew bank;
(b) notincur any obligation or liability by reason only of his being a director or foranything done or omitted to be done in good faith in the discharge of hisduties as a director or anything in relation thereto;
(c) notbe liable to retirement by rotation and shall not be taken into account forcomputing the number of directors liable to such retirement.]
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1.Section 16A inserted by the Banking Laws (Amendment) Act, 1983 (1 of 1984),Section 74 (w. e. f. 14-2-1984).
17.Constructionof references to existing banks: Any reference to any existing bank in anylaw, other than this Act, or in any contract or other instrument shall, in sofar 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: Noprovisions of law relating to winding up of corporations shall apply to acorresponding new bank and no corresponding new bank shall be placed inliquidation save by order of the Central Government and in such manner as itmay direct.
19.Powerto make regulations: (1) The Board of Directors of acorresponding new bank may, after consultation with the Reserve Bank and withthe previous sanction of the Central Government, 1 [bynotification in the Official Gazette] make regulations, not inconsistent withthe provisions of this Act or any scheme under thereunder, to provide for allmatters for which provision is expedient for the purposes of giving effect tothe provisions of this Act.
(2) Inparticular, and without prejudice to the generality of the foregoing power, theregulations may provide for all or any of the following matters, namely: –
(a) thepowers, functions and duties of local boards and restrictions, conditions orlimitations, if any, subject to which they may be exercised or performed, theformation and constitution of local committees and committees of local boards(including the number of members of any such committee), the powers, functionsand duties of such committees, the holding of meetings of local committees andcommittees of local boards and the conduct of business thereat;
(b) themanner in which the business of the local boards shall be transacted and theprocedure in connection therewith;
2 [(ba) the nature of shares of thecorresponding new bank, the manner in which and the conditions subject to whichshares may be held and transferred and generally all matters relating to therights and duties of shareholders;
(bb)the maintenance of register, and the particulars to be entered in the registerin addition to those specified in sub–section (2F) of section 3, thesafeguards to be observed in the maintenance of register on computer floppiesor diskettes, inspection and closure of the register and all other mattersconnected therewith;
(bc)the manner in which general meetings shall be convened, the procedure to befollowed thereat and the manner in which voting rights may be exercised;
(bd)the holding of meetings of shareholders and the business to be transactedthereat;
(be)the manner in which notices may be served on behalf of the corresponding newbank 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) thedelegation of powers and functions of the Board of Directors of a correspondingnew bank to the general manager, director, officer or other employee of thatbank;
(d) theconditions or limitations subject to which the corresponding new bank mayappoint advisers, officers or other employees and fix their remuneration andother terms and conditions of service;
(e) theduties and conduct of advisers, officers or other employees of the correspondingnew bank;
(f) theestablishment and maintenance of superannuation, pension, provident or otherfunds for the benefit of officers or other employees of the corresponding newbank or of the dependants of such officers or other employees and the granting ofsuperannuation allowances, annuities and pensions payable out of such funds;
(g) theconduct and defence of legal proceedings by or against the corresponding newbank and the manner of signing pleadings;
(h) theprovision of a seal for the corresponding new bank and the manner and effect ofits use;
(i) theform and manner in which contracts binding on the corresponding new bank may beexecuted;
(j) theconditions and the requirements subject to which loans or advances may be madeor bills may be discounted or purchase by the corresponding new bank;
(k) thepersons or authorities who shall administer any pension, provident or otherfund constituted for the benefit or officers or other employees of thecorresponding new bank or their dependants;
(l) thepreparation and submission of statements of programmes of activities andfinancial statements of the corresponding new bank and the period for which andthe time within which such statements and estimates are to be prepared andsubmitted; and
(m)generally for the efficient conduct of the affairs of the corresponding newbank.
(3)Until any regulation is made under sub–section (1), the articles ofassociation of the existing bank and every regulation, rule, bye–law ororder made by the existing bank in force immediately before the commencement ofthis Act shall be deemed to be the regulations made under sub–section(1) and shall have effect accordingly and any reference therein to anyauthority of the existing bank shall be deemed to be a reference to thecorresponding authority of the corresponding new bank and until any suchcorresponding authority is constituted under this Act shall be deemed to referto the Custodian.
3 [(4)Every regulation shall, as soon as may be after it is made under this Act bythe Board of directors of a corresponding new bank, be forwarded to the CentralGovernment and that Government shall cause a copy of the same to be laid beforeeach House of Parliament, while it is in session, for a total period of thirtydays which may be comprised in one session or in two or more successivesessions, and if, before the expiry of the session immediately following thesession or the successive sessions aforesaid, both Houses agree in making anymodification in the regulation or both Houses agree in making any modificationin 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 ofno effect, as the case may be; so, however, that any such modification orannulment shall be without prejudice to the validity of anything previouslydone under that regulation.]
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1.Inserted by the Banking, Public Financial Institutions and NegotiableInstruments Laws (Amendment) Act, 1988 (66 of 1988), Section 38 (w. e. f.30-12-1988).
2.Clauses (ba), (bb), (bc), (bd), (be) and (bf) inserted by the Banking Companies(Acquisition and Transfer Undertakings) Amendment Act 1994 (37 of 1994) Section17.
2.Sub-section (4) inserted by the Banking Laws (Amendment) Act, 1983 (1 of 1984),Section 75 (w. e. f. 14-2-1984).
20. 1[*]
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1.Section 20 repealed by the Repealing and Amending Act, 1988 (19 of 1988)Section 2 and First Schedule.
21.Repealand saving:(1) The Banking Companies (Acquisition and Transfer ofUndertakings) Ordinance, 1980(3 of 1980), is hereby repealed.
(2)Notwithstanding such repeal, anything done or any action taken, including anyorder made, notification issued or direction given, under the said Ordinanceshall be deemed to have been done, taken, made, issued or given, as the casemay be, under the corresponding provisions of this Act.
THE FIRST SCHEDULE
(See sections 2, 3 and 4)
———————————————–
Existing Bank Correspondingnew bank
———————————————– Column1 Column 2
———————————————–TheAndhra Bank Limited AndhraBank
TheCorporation Bank Limited CorporationBank
The NewBank of India Limited NewBank of India
TheOriental Bank of Commerce Limited OrientalBank of Commerce
ThePunjab and Sind Bank Limited Punjaband Sind Bank
VijayaBank Limited VijayaBank
———————————————–
THE SECOND SCHEDULE
(See sections 6)
———————————————– Nameof existing Bank Amount
(inlakhs of rupees)
———————————————–TheAndhra Bank Limited 610
TheCorporation Bank Limited 180
The NewBank of India Limited 510
TheOriental Bank of Commerce Limited 100
ThePunjab and Sind Bank Limited 210
VijayaBank Limited 240
———————————————–
THE THIRD SCHEDULE
[See sub–sections (2) and (3) of section 13]
Declaration of Fidelity and Secrecy
I,.., do hereby declare that I will faithfully, truly and to the best of my skilland ability execute and perform the duties required of me as Custodian,Director, member of Local Board, member of Local Committee, auditor, adviser,officer or other employee (as the case may be) of the * and which properlyrelate to the office or position in the said * held by me.
Ifurther declare that I will not communicate or allow to be communicated to anyperson not legally entitled thereto any information relating to the affairs ofthe * or to the affairs of any person having any dealing with the *; nor will Iallow any such person to inspect or have access to any books or documentsbelonging to or in the possession of the * and relating to the business of the* or to the business of any person having any dealing with the *
* Nameof corresponding new bank to be filled in.
*
