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INDIAN BARE ACTS

THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT,1970

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BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT,1970

THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT,1970

ACT NO. 5 OF 1970

[31st March, 1970.] B

An Act to provide for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto. CHAP PRELIMINARY CHAPTER I PRELIMINARY

Short title and commencement.

1. Short title and commencement. (1) This Act may be called the Banking Companies (Acquisition and Transfer of Undertakings) Act,

(2) The provisions of this Act (except section 21, which shall come into force on the appointed day) shall be deemed to have come into force on the 19th day of July, 1969.

Definitions. 2. Definitions. In this Act, unless the context otherwise requires,– (a) “appointed day” means the 14th day of February, 1970, being the day on which the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970 (3 of 1970), was promulgated; (b) “banking company” does not include a foreign company within the meaning of section 591 of the Companies Act, 1956 (1 of 1956); (c) “commencement of this Act” means the 19th day of July, 1969; (d) “corresponding new bank”, in relation to an existing bank, means the body corporate specified against such bank in column 2 of the First Schedule; (e) “Custodian” means the person who becomes, or is appointed, a Custodian under section 7; (f) “existing bank” means a banking company specified in column 1 of the First Schedule, being a company the deposits of which, as 78 shown in the return as on the last Friday of June, 1969, furnished to the Reserve Bank under section 27 of the Banking Regulation Act, 1949 (10 of 1949), were not less than rupees fifty crores; 1*[(fa) “prescribed” means prescribed by regulations made under this Act;] (g) “Schedule” means a Schedule to this Act; (h) words and expressions used herein and not defined but defined in the Banking Regulation Act, 1949 (10 of 1949), have the meanings respectively assigned to them in that Act. 1*[(i) words and expressions used herein and not defined either in this Act or in the Banking regulation Act. 1949 (10 of 1949) in the Companies Act, 1956 (1 of 1956) shall have the meanings respectively assigned to them in the Companies Act, 1956.] CHAP TRANSFER OF THE UNDERTAKINGS OF EXISTING BANKS AND SHARE CAPITALS OFTHE CORRESPONDING NEW BANKS CHAPTER II 2*[TRANSFER OF THE UNDERTAKING OF EXISTING BANKS AND SHARE CAPITALS OF THE CORRESPONDING NEW BANKS]

Establishment of corresponding new banks and business thereof. 3. Establishment of corresponding new banks and business thereof.

(1) On the commencement of this Act, there shall be constituted such corresponding new banks as are specified in the First Schedule.

(2) The paid-up capital of 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 to which it is the corresponding new bank.

2*[(2A) Notwithstanding anything contained in subs-section (2), the paid-up capital of every corresponding new bank constituted under

sub-section (1) may from time to time be increased by– (a) such amounts as the Board of Directors of the corresponding new bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, transfer from the reserve fund established by such bank to such capital: (b) such amounts as the Central Government may, in consultation with the Reserve Bank, contribute to such paid-up capital; Provided that the paid-up capital of any such bank shall in no case be in excess of 3*[4*[rupees one thousand five hundred crores].

(3) The entire capital of each corresponding new bank shall stand vested in, and allotted to, the Central Government.

(4) Every corresponding new bank shall be a body corporate with perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, and to contract, and may sue and be sued in its name.

(5) Every corresponding new bank 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 may engage in 5*[one

or more of the other forms of business] specified in sub-section (1) of section 6 of that Act.

(6) Every corresponding new bank shall establish a reserve fund to which shall be transferred the share premiums and the balance, if any, standing to the credit of the reserve fund of the existing bank in relation to which it is the corresponding new bank, and such further sums, if any, as may be transferred in accordance with the provisions of section 17 of the Banking Regulation Act, 1949 (10 of 1949).

6*[(7) (i) The corresponding new bank shall, if so required by the Reserve Bank, act as agent of the Reserve Bank at all places in India where it has a branch, for– (a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any Government in India; and (b) undertaking and transacting any other business which the Reserve Bank may from time to time entrust to it. (ii) The terms and conditions on which any such agency business shall be carried on by the corresponding new bank on behalf of the Reserve Bank shall be such as may be agreed upon. (iii) If no agreement can be reached on any matter referred to in clause (ii), or if a dispute arises between the corresponding new bank and the Reserve Bank as to the interpretation of any agreement between them, the matter shall be referred to the Central Government and the decision of the Central Government thereon shall be final. (iv) The corresponding new bank may transact any business or perform any functions entrusted to it under clause (i), by itself or through any agent approved by the Reserve Bank.]

Undertaking of existing banks to vest in corresponding new banks. 4. Undertaking of existing banks to vest in corresponding new banks. On the commencement of this Act, the undertaking of every existing bank shall be transferred to, and shall vest in, the corresponding new bank. ———————————————————————- 1 Subs. & ins. by Act 1 of 1984, s. 65 (w.e.f. 15-2-1984). 2 Ins. by Act 81 of 1985, s. 7 (w.e.f. 30-12-1985). 3 Subs. by Act 66 of 1988, s. 30 (w.e.f. 30-12-1988). 4 Subs. by Act 36 of 1992, s. 2 (w.e.f. 30-12-1988). 79

General effect of vesting.

5. General effect of vesting. (1) The undertaking of each existing bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, reserve funds, investments and all other rights and interests in, or arising out of, such property as were immediately before the commencement of this Act in the ownership, possession, power or control of the existing bank in relation to the undertaking, whether within or without India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the existing bank in relation to the undertaking.

(2) If, according to the laws of any country outside India, the provisions of this Act by themselves are not effective to transfer or vest any asset or liability situated in that country which forms part of the undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in relation to such asset or liability shall, on and from the commencement of this Act, stand entrusted to the chief executive officer for the time being of the corresponding new bank, and the chief executive officer may exercise all powers and do all such acts and things as may be exercised or done by the existing bank for the purpose of effectively transferring such assets and discharging such liabilities.

(3) The chief executive officer of the corresponding new bank

shall, in exercise of the powers conferred on him by sub-section (2), take all such steps as may be required by the laws of any such country outside India for the purpose of effecting such transfer or vesting, and may either himself or through any person authorised by him in this behalf realise any asset and discharge any liability of the existing bank.

(4) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the commencement of this Act and to which the existing bank is a party or which are in favour of the existing bank shall be of as full force and effect against or in favour of the corresponding new bank, and may be enforced or acted upon as fully and effectually as if in the place of the existing bank the corresponding new bank had been a party thereto or as if they had been issued in favour of the corresponding new bank.

(5) If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any business of the undertaking which has been transferred under section 4, is pending by or against the existing bank, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the existing bank or of anything contained in this Act but the suit, appeal or other 80 proceeding may be continued, prosecuted and enforced by or against the corresponding 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, cash balances and investments in any country outside India (and other rights and interests in, or arising out of, such property) and borrowings, liabilities and obligations of whatever kind subsisting at the commencement of this Act, of any existing bank operating in that country if, under the laws in force in that country, it is not permissible for a banking company, owned or controlled by Government, to carry on the business of banking there. CHAP PAYMENT OF COMPENSATION CHAPTER III PAYMENT OF COMPENSATION

Payment of compensation.

6. Payment of compensation. (1) Every existing bank shall be given by the Central Government such compensation in respect of the transfer, under section 4, to the corresponding new bank of the undertaking of the existing bank as is specified against each such bank in the Second Schedule.

(2) The amount of compensation referred to in sub-section (1) shall be given to every existing bank, at its option,– (a) in case (to be paid by cheque drawn on the Reserve Bank) in three equal annual instalments, the amount of each instalment carrying interest at the rate of four per cent. per annum from the commencement of this Act, or (b) in saleable or otherwise transferable promissory notes or stock certificates of the Central Government issued and repayable at par, and maturing at the end of– (i) ten years from the commencement of this Act and carrying interest from such commencement at the rate of four and a half per cent. per annum, or (ii) thirty years from the commencement of this Act and carrying interest from such commencement at the rate of five and a half per cent. per annum, or (c) partly in cash (to be paid by cheque drawn on the Reserve Bank) and partly in such 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 81 (d) partly in such number of securities specified in sub- clause (i) of clause (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) The first 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-section shall be issued, within sixty days from the date of receipt by the Central Government of the option referred to in that sub-section, or where no such option has been exercised, from the latest date before which such option ought to have been exercised.

(4) The option referred to in sub-section (2) shall be exercised by every existing bank before the expiry of a period of three months from the appointed day (or within such further time, not exceeding three months, 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 or rescinded after it has been exercised.

(5) Any existing 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 to have opted for payment in securities

specified in sub-clause (i) of clause (b) of sub-section (2).

(6) Notwithstanding anything contained in this section, any existing bank may, before the expiry of three months from the appointed day (or within such further time, not exceeding three months, as the Central Government may, on the application of the existing bank, allow) make an application in writing to the Central Government for an interim payment of an amount equal to seventy-five per cent. of the amount of the paid-up capital of such bank, as on the commencement of this Act, indicating therein whether the payment is

desired in cash or in securities specified in sub-section (2), or in both.

(7) The Central Government shall, within sixty days from the

receipt of the application referred to in sub-section (6), make the interim payment to the existing bank in accordance with the option indicated in such application.

(8) The interim payment made to an existing bank under sub-

section (7) shall be set off against the total amount of compensation payable to such existing bank under this Act and the balance of the compensation remaining outstanding after such payment shall be given to the existing bank in accordance with the option exercised, or

deemed to have been exercised, under sub-section (4) or sub-section

(5), as the case may be: Provided that where any part of the interim payment is obtained by an existing bank in cash, the payment so obtained shall be set off, in the first instance, against the first instalment of the cash payment referred 82

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 the balance of such excess amount, if any, against the third instalment of the cash payment.

(9) Any payment purported to have been made to an existing bank

under sub-section (3) of section 15 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 (22 of 1969), shall be deducted by the Central Government from the amount of

the interim payment made to such existing bank under sub-section (7), or where no such interim payment has been made, from the total amount of the compensation due to such existing bank, and the amount so deducted shall be paid by the Central Government to the corresponding new bank. CHAP MANAGEMENT OF CORRESPONDING NEW BANKS CHAPTER IV MANAGEMENT OF CORRESPONDING NEW BANKS

Head office and management.

7. Head office and management. (1) The head office of each corresponding new bank shall be at such place as the Central Government may, by notification in the Official Gazette, specify in this behalf, and, until any such place is so specified, shall be at such place at which the head office of the existing bank, in relation to which it is the corresponding new bank, is on the commencement of this Act, located.

(2) The general superintendence, direction and management of the affairs and business of a corresponding new bank shall vest in a Board of Directors which shall be entitled to exercise all such powers and do all such acts and things as the corresponding new bank is authorised to exercise and do.

(3) (a) As soon as may be after the appointed day, the Central Government shall, in consultation with the Reserve Bank, constitute the first Board of Directors of a corresponding new bank, consisting of not more than seven persons, to be appointed by the Central Government, and every director so appointed shall hold office until the Board of Directors of such corresponding new bank is constituted in accordance with the scheme made under section 9: Provided that the Central Government may, if it is of opinion that it is necessary in the interests of the corresponding new bank so to do, remove a person from the membership of the first Board of Directors and appoint any other person in his place. (b) Every member of the first Board of Directors (not being an officer of the Central Government or of the Reserve Bank) shall receive such remuneration as is equal to the remuneration which a member of the Board of Directors of the existing bank was entitled to receive immediately before the commencement of this Act. 83

(4) Until the first Board of Directors is appointed by the

Central Government under sub-section (3), the general superintendence, direction and management of the affairs and business of a corresponding new bank shall vest in a Custodian, who shall be the chief executive officer of that bank and may exercise all powers and do all acts and things as may be exercised or done by that bank.

(5) The Chairman of an existing bank holding office as such immediately before the commencement of this Act, shall be the Custodian of the corresponding new bank and shall receive the same emoluments as he was receiving immediately before such commencement: Provided that the Central Government may, if the Chairman of an existing bank declines to become, or to continue to function as, a Custodian of the corresponding new bank, or, if it is of opinion that it is necessary in the interests of the corresponding new bank so to do, appoint any other person as the Custodian of a corresponding new bank and the Custodian so appointed shall receive such emoluments as the Central Government may specify in this behalf.

(6) The Custodian shall hold office during the pleasure of the Central Government.

Corresponding new banks to be guided by the directions of the CentralGovernment. 8. Corresponding new banks to be guided by the directions of the Central Government. Every corresponding new bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Governor of the Reserve Bank, give.

Power of Central Government to make scheme.

9. Power of Central Government to make scheme. (1) The Central Government may, after consultation with the Reserve Bank, make a scheme for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme may provide for all or any of the following matters, namely:– (a) the capital structure of the corresponding new bank1***. (b) the constitution of the Board of Directors, by whatever name called, of the corresponding new bank and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient; (c) the reconstitution of any corresponding new bank into two or more corporations, the amalgamation of any corresponding new bank with any other corresponding new bank or with another banking institution, the transfer of the whole or any part of the ———————————————————————- 1 Omitted by Act 37 of 1994, s. 6 (w.e.f. 3-4-1995). 84 undertaking of a 1*[corresponding new bank to any other corresponding new bank or banking institution] or the transfer of the whole or any part of the undertaking of any other banking institution to a corresponding new bank; (d) such incidental, consequential and supplemental matters as may be necessary to carry out the provisions of this Act.

(3) Every Board of Directors of a corresponding new bank,

constituted under any scheme made under sub-section (1), shall include– (a) representatives of the employees, and of depositors, of such bank, and (b) such other persons as may represent the interests of each of the following categories, namely, farmers, workers and artisans, to be elected or nominated in such manner as may be specified in the scheme.

(4) The Central Government may, after consultation with the Reserve Bank, make a scheme to amend or vary any scheme made under

sub-section (1).

3*[(5) On and from the date of coming into operation of a scheme made under this section 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) the scheme shall be binding on the corresponding new bank or corporations or banking institutions, and also on the members, if any, the depositors, and other creditors and employees of each of them and on any other persons having any right or liability in relation to any of them including the trustees or other persons, managing or in any other manner connected with, any provident fund or other fund maintained by any of them; (b) the properties and assets of the corresponding new bank, or as the case may be, of the banking institution shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vested in, and the liabilities of the corresponding new bank, or, as the case may be, of the banking institution shall, by virtue of, and to the extent provided in the scheme, stand transferred to, and become the liabilities of, the corporation or corporations brought into existence by reconstitution of the banking institution or the corresponding new bank, as the case may be. 4[Explanation I].–In this section, “banking institution” means a banking company and includes 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 bank within the meaning of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).]

6*[(6)] Every scheme made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days 7*[which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid], both Houses agree in making any modification in the scheme or both Houses agree that the scheme should not be made, the scheme shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that scheme. CHAP MISCELLANEOUS CHAPTER V MISCELLANEOUS

Closure of accounts and disposal of profits.

10. Closure of accounts and disposal of profits. (1) Every corresponding new bank shall cause its books to be closed and balanced on the 31st day of December 8*[or such other date in each year as the Central Government may, by notification in the Official Gazette, specify] and shall appoint, with the previous approval of the Reserve Bank, auditors for the audit of its accounts: 9*[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the closing and balancing of, or for other matters relating to, the books in respect of the concerned years.]

(2) Every auditor of a corresponding new bank shall be a person who is qualified to act as an auditor of a company under section 226 of theCompanies Act, 1956, (1 of 1956.) and shall receive such remuneration as the Reserve Bank may fix in consultation with the Central Government.

(3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss account and a list of all books kept by the corresponding new bank, and it shall be the duty of the auditor to examine the ———————————————————————- 1 Re-numbered, ins. & subs. by Act 1 of 1984, s. 66 (w.e.f. 15-2- 1984). 2 Subs., numbered and ins. by Act 66 of 1988, s. 31 (w.e.f. 30-12- 88). 3 Subs. & ins. by s. 32, ibid. (w.e.f. 30-12-1988). 85 balance-sheet and profit and loss account with the accounts and vouchers relating thereto, and in the performance of his duties, the auditor– (a) shall have, at all reasonable times, access to the books, accounts and other documents of the corresponding new bank, (b) may, at the expense of the corresponding new bank, employ accountants or other persons to assist him in investigating such accounts, and (c) may, in relation to such accounts, examine the Custodian or any officer or employee of the corresponding new bank.

(4) Every auditor of a corresponding new bank shall make a report to the Central Government upon the annual balance-sheet and accounts and in every such report shall state– (a) whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing all the necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the corresponding new bank, and in case he had called for any explanation or information, whether it has been given and whether it is satisfactory; (b) whether or not the transactions of the corresponding new bank, which have come to his notice, have been within the powers of that (c) whether or not the returns received from the offices and branches of the corresponding new bank have been found adequate for the purpose of his audit; (d) whether the profit and loss account shows a true balance of profit or loss for the period covered by such account; and (e) any other matter which he considers should be brought to the notice of the Central Government. 1*[“Explanation I.–For the purposes of this Act– (a) the balance-sheet shall not be treated as not disclosing a true and fair view of the affairs of the corresponding new bank, and (b) the profit and loss account shall not be treated as not showing a true balance of profit or loss for the period covered by such account, merely by reason of the fact that the balance-sheet or, as the case may be, the profit and loss account does not disclose any matters which are by the provisions of the Banking Regulation Act, 1949, read with the relevant provisions of this Act or any other Act, not required to be disclosed. Explanation II.–For the purposes of this Act the accounts of the corresponding new bank shall not be deemed as having not been properly drawn up on the ground merely that they do not disclose certain matters if– (i) those matters are such as the corresponding new bank is, by virtue of any provision contained in the Banking Regulation Act, 1949, read with the relevant provisions of this Act, or any other Act, not required to disclose; and (ii) the provisions referred to in clause (i) are specified in the balance-sheet and profit and loss account of the corresponding new bank or in the auditor’s report.”]

(5) The report of the auditor shall be verified, signed and transmitted to the Central Government.

(6) The auditor shall also forward a copy of the audit report to the corresponding new bank and to the Reserve Bank.

(7) After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and all other matters for which provision is necessary under any law, or which are usually provided for by banking companies, a corresponding new bank shall transfer the balance of profits to the Central Government. 1*[“(7A) Every corresponding new bank shall furnish to the Central Government the annual balance-sheet, the profit and loss account, and the auditor’s report and a report by its Board of directors on the working and activities of the bank during the period covered by the accounts.”]

(8) The Central Government shall cause every auditor’s report and report on the working and activities of each corresponding new bank to be laid 1*[“as soon as may be after they are received before each House of Parliament 2*xxx) ———————————————————————- 1 Ins. & subs. by Act 1 of 1984. s. 67 (w.e.f. 15-2-1984). 2 Omitted by Act 81 of 1985, s. 9 (w.e.f. 1-5-1986). 86

1*[“(9) Without prejudice to the foregoing provisions, the Central Government may, at any time, appoint such number of auditors as it thinks fit to examine and report on the accounts of a corresponding new bank and the auditors so appointed shall have all the rights, privileges and authority in relation to the audit of the accounts of the corresponding new bank which an auditor appointed by the corresponding new bank has under this section.”]

Corresponding new bank deemed to be an Indian company. 11. Corresponding new bank deemed to be an Indian company. For the purposes of the Income-tax Act, 1961, (43 of 1961.) every corresponding new bank shall be deemed to be an Indian company and a company in which the public are substantially interested.

Removal of Chairman from office.

12. Removal of Chairman from office. (1) Every person holding office, immediately before the commencement of this Act, as Chairman of an existing bank shall, if he becomes Custodian of the corresponding new bank, be deemed, on such commencement, to have vacated office as such Chairman.

(2) Save as otherwise provided in sub-section (1), every officer or other employee of an existing bank shall become, on the commencement of this Act, an officer or other employee, as the case may be, of the corresponding new bank and shall hold his office or service in that bank on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and continue to do so unless and until his employment in the corresponding new bank is terminated or until his remuneration, terms or conditions are duly altered by the corresponding new bank.

(3) For the persons who immediately before the commencement of this Act were the trustees for any pension, provident, gratuity or other like fund constituted for the officers or other employees of an existing bank, there shall be substituted as trustees such persons as the Central Government may, by general or special order, specify.

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or in any other law for the time being in force, the transfer of the services of any officer or other employee from an existing bank to a corresponding new bank shall not entitle such officer or other employee to any compensation under this Act or any other law for the time being in force and no such claim shall be entertained by any court, tribunal or other authority. 12A. Bonus.

3*[“12A. Bonus. (1) No officer or other employee [other than an

employee within the meaning of clause (13) of section 2 of the Payment of Bonus Act, 1965 (21 of 1965)] of a corresponding new bank shall be entitled to be paid any bonus.]

(2) No employee of a corresponding new bank, being an employee

within the meaning of clause (13) of section 2 of the Payment of Bonus Act, 1965, shall be entitled to be paid any bonus except in accordance with the provisions of that Act.

(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of any court, tribunal or other authority and notwithstanding anything contained in any other provision of this Act or in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force or any practice, usage or custom or any contract, agreement, settlement, award or other instrument.]

Obligations as to fidelity and secrecy.

13. Obligations as to fidelity and secrecy. (1) Every corresponding new bank shall observe, except as otherwise required by law, the practices and usages customary among bankers, and, in particular, it shall not divulge any information relating to or to the affairs of its constituents except in circumstances in which it is, in accordance with law or practices and usages customary among bankers, necessary or appropriate for the corresponding new bank to divulge such information.

(2) Every director, member of a local board or a committee, or auditor, adviser, officer or other employee of a corresponding new bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Third Schedule. ———————————————————————- 1 Ins. by Act 1 of 1984, s. 67 (w.e.f. 15-2-1984). 2 Ins. by Act 37 of 1994, s. 9 (w.e.f. 15-7-1994). 3 Ins. by Act 64 of 1984, s. 4. 87

(3) Every Custodian of a corresponding new bank shall, as soon as possible, make a declaration of fidelity and secrecy in the form set out in the Third Schedule.

Custodian to be public servant. 14. Custodian to be public servant. Every Custodian of a corresponding new bank shall be deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).

Certain defects not to invalidate acts or proceedings.

15. Certain defects not to invalidate acts or proceedings. (1) All acts done by the Custodian, acting in good faith, shall, notwithstanding any defect in his appointment or in the procedure, be valid.

(2) No act or proceeding of any Board of Directors or a local board or committee of a corresponding new bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the constitution of, such board or committee, as the case may be.

(3) All acts done by a person acting in good faith as a director or member of a local board or committee of a corresponding new bank shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in any law for the time being in force: Provided that nothing in this section shall be deemed to give validity to any act by a director or member of a local board or committee of a corresponding new bank after his appointment has been shown to the corresponding new bank to be invalid or to have terminated.

Indemnity.

16. Indemnity. (1) Every Custodian of a corresponding new bank and every officer of the Central Government or of the Reserve Bank and every officer or other employee of a corresponding new bank, shall be indemnified by such bank against all losses and expenses incurred by him in or in relation to the discharge of his duties except such as have been caused by his own wilful act or default.

(2) A director or member of a local board or committee of a corresponding new bank shall not be responsible for any loss or expense caused to such bank by the insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of the corresponding new bank, or by the insolvency or wrongful act of any customer or debtor, or by anything done in or in relation to the execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any wilful act or default on the part of such director or member. 16A. Arrangement with corresponding new bank on appointment of directors toprevail. 1*[16A. Arrangement with corresponding new bank on appointment

of directors to prevail. (1) Where any arrangement entered into by a corresponding new bank with a company provides for the appointment by the corresponding new bank of one or more directors of such company, such provision and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the Company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the corresponding new bank in pursuance of the arrangement as aforesaid.

(2) Any director appointed as aforesaid shall– (a) hold office during the pleasure of the corresponding new bank and may be removed or substituted by any person by order in writing of the corresponding new bank; (b) not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto; (c) not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement.]

References to existing banks on and from the commencement of this Act. 17. References to existing banks on and from the commencement of this Act. Any reference to any existing bank in any law, other than this Act, or in any contract or other instrument shall, in so far as it relates to the undertaking which has been transferred by section 4, be construed as a reference to the corresponding new bank.

Dissolution. 18. Dissolution. No provision of law relating to winding up of corporations shall apply to a corresponding new bank and no corresponding new bank shall ———————————————————————- 1 Ins. by Act 1 of 1984, s. 68 (w.e.f. 15-2-1984). 88 be placed in liquidation save by order of the Central Government and in such manner as it may direct.

Power to make regulations.

19. Power to make regulations. (1) The Board of Directors of a corresponding new bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, 1*[by notification in the Official Gazette,] make regulations, not inconsistent with the provisions of this Act or any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, the regulations may provide for all or any of the following matters, namely:– (a) the powers, functions and duties of local boards and restrictions, conditions or limitations, if any, subject to which they may be exercised or performed, the formation and constitution of local committees and committees of local board (including the number of members of any such committee), the powers, functions and duties of such committees, the holding of meetings of local committees and committees of local boards and the conduct of business thereat; (b) the manner in which the business of the local boards shall be transacted and the procedure in connection therewith; 2*[(ba) the nature of shares of the corresponding new bank, the manner in which and the conditions subject to which shnres may be held and transferred and generally all matters relating to the rights and duties of shareholders; (bb) the maintenance of register, and the particulars to be entered in the register in addition to those specified in sub section (2F) of section 3, the safeguards to be observed in the maintenance of register on computer floppieg or diskettes, inspection and closure of the register and all other matters connected there with: (bc) the manner in which general meetings shall be convered, the procedure to be followed thereat and the manner in which voting rights may be exercised; (bd) the holding of meetings of shareholders and the business to be transacted thereat; (be) the manner in which notices may be served on behalf of the corresponding new bank upon shareholders or other persons; (bf) the manner in which the directors nominated under

clause (h) of sub-section (3) of section 9 shall retire;] (c) the delegation of powers and functions of the board of directors of a corresponding new bank to the general manager, director, officer or other employee of that bank; (d) the conditions or limitations subject to which the corresponding new bank may appoint advisers, officers or other employees and fix their remuneration and other terms and conditions of service; (e) the duties and conduct of advisers, officers or other employees of the corresponding new bank; (f) the establishment and maintenance of superannuation, pension, provident or other funds for the benefit of officers or other employees of the corresponding new bank or of the dependants of such officers or other employees and the granting of superannuation allowances, annuities and pensions payable out of such funds; (g) the conduct and defence of legal proceedings by or against the corresponding new bank and the manner of signing pleadings; (h) the provision of a seal for the corresponding new bank and the manner and effect of its use; (i) the form and manner in which contracts binding on the corresponding new bank may be executed; ———————————————————————- 1 Ins. by Act 4 of 1986, s. 2 and Sch. (w.e.f. 15-5-1986). 2 ins. by Act 37 of 1994, s. 9 (w.e.f. 15-7-1994). 89 (j) the conditions and the requirements subject to which loans or advances may be made or bills may be discounted or purchased by the corresponding new bank; (k) the persons or authorities who shall administer any pension, provident or other fund constituted for the benefit of officers or other employees of the corresponding new bank or their dependants; (l) the preparation and submission of statements of programmes of activities and financial statements of the corresponding new bank and the period for which and the time within which such statements and estimates are to be prepared and submitted; and (m) generally for the efficient conduct of the affairs of the corresponding new bank.

(3) Until any regulation is made under sub-section (1), the articles of association of the existing bank and every regulation, rule, bye-law or order made by the existing bank shall, if in force at the commencement of this Act, be deemed to be the regulations made

under sub-section (1) and shall have effect accordingly and any reference therein to any authority of the existing bank shall be deemed to be a reference to the corresponding a thority of the corresponding new bank and until any such corresponding authority is constituted under this Act, shall be deemed to refer to the Custodian.

1*[or(4) Every regulation shall, as soon as may be after it is made under this Act by the Board of directors of a corresponding new bank, be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.]

Amendment of certain enactments.

20. Amendment of certain enactments. (1) In the Banking Regulation Act, 1949 (10 of 1949),–

(a) in section 34A, in sub-section (3), for the words “and any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and any subsidiary bank” shall be substituted;

(b) in section 36AD, in sub-section (3), for the words “and any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any subsidiary bank” shall be substituted; (c) in section 51, for the words “or any other banking institution notified by the Central Government in this behalf”, the words, figures and brackets “or any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or any other banking institution notified by the Central Government in this behalf” shall be substituted; (d) in the Fifth Schedule, in Part I of paragraph 1, in clause (e), the Explanations shall be deemed never to have been inserted. ———————————————————————- 1 Ins. by Act 1 of 1984, s. 69 (w.e.f. 15-2-1984). 90

(2) In the Industrial Disputes Act, 1947 (14 of 1947), in section 2, in clause (bb), for the words “and any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any subsidiary bank” shall be substituted.

(3) In the Banking Companies (Legal Practitioners, Clients, Accounts) Act, 1949 (46 of 1949), in section 2, in clause (a), for the words “and any subsidiary bank”, the words, figures and brackets “a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any subsidiary bank” shall be substituted.

(4) In the Deposit Insurance Corporation Act, 1961 (47 of 1961).– (a) in section 2,– (i) after clause (e), the following clause shall be inserted, namely:– ‘(ee) “corresponding new bank” means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970)’; (ii) in clause (g),– (a) for the words or a banking company”, the words “a corresponding new bank or a banking company”, and (b) for the words “with a banking company”, the words “with a corresponding new bank or with a banking company”, shall be substituted; (iii) in clause (i), after the words “banking company”, the words “or a corresponding new bank” shall be inserted;

(b) section 13 shall be re-numbered as sub-section (1)

thereof and after sub-section (1) as so re-numbered, the following sub-section shall be inserted, namely:–

“(2) The provisions of clauses (a), (b), (c), (d)

and (h) of sub-section (1) shall apply to a corresponding new bank as they apply to a banking company.”.

(5) In the State Agricultural Credit Corporations Act, 1968 (60 of 1968),– (a) in section 2, after clause (i), the following clause shall be inserted, namely:– ‘(ii) “corresponding new bank” means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970)’; (b) after the words “subsidiary banks” or “subsidiary bank”, as the case may be, occurring in clause (d)

of sub-section (3) of 91 section 5, in clause (b) of section 9 and in the proviso to section 18, the words “corresponding new banks” or “corresponding new bank”, as the case may be, shall be inserted.

Repeal and savings.

21. Repeal and savings. (1) The Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970 (3 of 1970), is hereby repealed.

(2) Notwithstanding such repeal and notwithstanding any judgment, decree or order of any court or tribunal,– (a) any action taken, or purported to have been taken, or anything done, or purported to have been done, between the 19th day of July, 1969, and the 10th day of February, 1970, by any corresponding new bank purported to have been constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 (8 of 1969), or the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 (22 of 1969), or by any person purporting to act on behalf of such bank and any right, obligation or liability acquired or incurred, between the said dates, by or on behalf of such corresponding new bank shall be deemed to have been taken, done, acquired or incurred under the provisions of this Act by or on behalf of the corresponding new bank constituted thereunder; (b) any action taken, or purported to have been taken, or anything done, or purported to have been done, between the 10th day of February, 1970, and the appointed day, by an existing Bank or by any person acting on behalf of such bank, and any right, obligation or liability acquired or incurred, between the said dates, by or on behalf of such existing bank shall be deemed to have been taken, done, acquired or incurred under the provisions of this Act by or on behalf of the corresponding new bank constituted thereunder; (c) anything done or any action taken, including any order made, notification issued or directions given under the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970 (3 of 1970), shall be deemed to have been done, taken, made, issued or given, as the case may be, under the corresponding provisions of this Act.

(3) Any suit, appeal or other proceeding of whatever nature instituted on or after the 19th day of July, 1969, by or against a corresponding new bank purported to have been constituted by the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969 (8 of 1969), or the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 (22 of 1969), shall not abate, be discontinued, or be, in any way, prejudicially affected by reason of the expiry of the said Ordinance or the invalidation of the said Act, as the case may be, but such suit, appeal or other proceeding may be 92 continued, prosecuted and enforced by or against the corresponding new bank as if such suit, appeal or other proceeding had been instituted by or against the corresponding new bank constituted under this Act. SCHE See sections 2, 3 and 4 THE FIRST SCHEDULE (See sections 2, 3 and 4) ———————————————————————- Existing bank Corresponding new bank ———————————————————————- Column 1 Column 2 ———————————————————————- The Central Bank of India Limited . . Central Bank of India. The Bank of India Limited . . . . Bank of India. The Punjab National Bank Limited . . Punjab National Bank. The Bank of Baroda Limited . . . Bank of Baorda. The United Commercial Bank Limited . . 1*[Uco Bank] Canara Bank Limited . . . . Canara Bank. United Bank of India Limited . . . United Bank of India. Dena Bank Limited . . . . Dena Bank. Syndicate Bank Limited . . . . Syndicate Bank. The Union Bank of India Limited . . Union Bank of India. Allahabad Bank Limited . . . . Allahabad Bank. The Indian Bank Limited . . . . Indian Bank. The Bank of Maharashtra Limited . . Bank of Maharashtra. The Indian Overseas Bank Limited . . Indian Overseas Bank. ———————————————————————- SCHE See section 6 THE SECOND SCHEDULE (See section 6) ———————————————————————- Name of existing bank Amount of compensation ———————————————————————- (in lakhs of rupees) The Central Bank of India Limited .. 1750 The Bank of India Limited .. 1470 The Punjab National Bank Limited .. 1020 The Bank of Baroda Limited .. 840 The United Commercial Bank Limited .. 830 Canara Bank Limited .. 360 United Bank of India Limited .. 420 Dena Bank Limited .. 360 Syndicate Bank Limited .. 360 The Union Bank of India Limited .. 310 Allahabad Bank Limited .. 310 The Indian Bank Limited .. 230 The Bank of Maharashtra Limited .. 230 The Indian Overseas Bank Limited .. 250 ———————————————————————- 1 Subs. by Act 81 of 1985, s. 10 (w.e.f. 30-12-1985). 93 SCHE DECLARATION OF FIDELITY AND SECRECY 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 skill and 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 properly relate to the office or position in the said* held by me. I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the * or to the affairs of any person having any dealing with the* ;nor will I allow any such person to inspect or have access to any books or documents belonging 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* * Name of corresponding new bank to be filled in.

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