 the deposit insurance corporation bill, 1961(to be introduced in lok sabha)  arrangement of clausesclauses  chapter i prein\mrally1 short title, extent and commencement 2 definitions  chapl'er ii establishment and management of the deposit insurance corporation3 establishment and incorporation of deposit insurance corporation 4 capital of corporation 5 management of corporation 6 board of directors 7 meetings of board 8 committees of corporation 9 fees and allowances of directors  chapter iii riigilftation of banking companies as insured banks and liabnity of corporation to deposl'l'ors10 registration of existing banking companies 11 registration of new banking companies 12 registration of defunct banking companies 13 cancellation of registration 14 intimation of registration 15 premium 16 liability of corporation in respect of insured deposits 17 manner of payment by corporation in case of winding up of insured banks  clauses18 manner of payment by corporationin case of scheme of compromise or arrangt!ment or of reconstruction or amalgamation in respect of an insured bank 19 discharge of the liability of corporation 20 provision for unpaid amounts 21 repayment of the amount to corporation  chapter iv funds, accounts and audit22 funds of corporation 23 deposit insurance fund 24 general fund 25 investment 26 advances by reserve bank 27 advance from general fund to deposit insurance fund 28 preparation of balance-sheet etc, by corporation 29 audit 30 income-tax and super-tax 31 reserve fund 32 annual accounts and reports  chapter v mucbllahbous33 staff of corporation 34 returns from insured banks 35 corporation to have access to records 36 inspection of insured banks by reserve bank 37 corporation to furnish infonnation to reserve bank 38 reserve bank to furnish information to corporation 39 declaration of fidelity and secrecy 40 indemnity of directors 41 defects in appointments not to invalidate aets, etc 42 protection of action taken under this act 43 companies act, 1956 and insurance act, 1938 not to apply 44 liquidation of corporation clausbs 45 power of central government to give directions 46 dispute as to amount of premium 47 penalties 48 offences by companies 49 cognizance of offences 50 regulations 51 amendment of certain enactments the first schedule-declaration of fidelity and secrecy the second schedule-amendment of certain enactmelftii  bill no 51 of 1"1 'j'he deposit insurance corporation bill, 1961 (to be introduced in lok sabra) \ a billto p1'ovide for the establishment of a corporation for the purpose of insurance of deposits and for other matters connected therewith or incidental thereto be it enacted by parliament in the twelfth year of the republic of india as follows:- chapter i preliminarys 1 (1) this act may be called the deposit insurance corpora- short title tion act, 1961  ~ mcot (2) it extends to the whole of india (3) it shall come into force on such date as the central government may, by notification in the ofticial gazette, appoint 10 z in this act, unless the context otherwise requires,-ddtdiuodi (a) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise; is (b) "baaking company" means any company which transacts the business of banking in india and includes the state bank, a subsidiary bank and any other banking institution 10 of 1949 notified under section 51 of the banking companies act, 1949, but does not include the madras industrial investment corpora-:w tion limited e%planation-any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking  within the s meaning of this clause; -(c) "board" means the board of directors constituted under section 6; (d) "company" means any company as defined in section 3 of the companies act, 1956, and includes a foreign company 10 i of 19s6 within the meaning of section 591 of that act; (e) "corporation" means the deposit insurance corporation established under section 3; (1) "defunct banking company" means a :~anking is company-(i) which has been prohibited from receiving fresh deposits; or (ii) which has been ordered to be wound up; or (iii) which has transferred all its deposit liabilities in india to any other institution; or 20 (tv) which has ceased to be a banking company within the meaning of sub-section (2) of section 36a of the banking companies act, 1949, or has converted itself into 10 of 1949 a non-banking company; or (v) in respect of which a uquidator has been appointed 25 in pursuance of a resolution for the voluntary winding up of its affairs; or (vi) in respect of which any scheme of compromise or arrangement or of reconstruction has been sanctioned by any competent authority and the said scheme does not 30 permit the acceptance of fresh deposits; or (vii) which has been granted a moratorium which is in operation; or (vho in respect of which an application for the winding up of its affairs is pending in a competent court 3s 5 (9) "deposit" means the aggregate of the unpaid balances due to a depositor (other than a foreign government, the central government a state government or a banking com  pany) in respect of all his accounts, by whatever name called, with a banking company and includes credit balances in any cash credit account but does not include,-jo is (i) where a banking company at the commencement of this act is working under a scheme of compromise or arrangement or of reconstruction sanctioned by any competent authority providing for the acceptance of fresh deposits, any amount due to the depositor in respect of his deposit before the date of the coming into force of the scheme to the extent it is not credited after ~ he said date under the provisions of that scheme; or (ii) any amount due on account of any deposit received outside india; 10 of 1949 20 (h) "existing banking company" means a banking com· pany carrying on the business of banking at the commencement of this act which either holds a licence at such" commencement under section 22 of the banking companies act, 1949 or having applied for such licence has not been informed by notice in writing by the reserve bank that a licence cannot be granted to it and includes the state bank and a subsidiary bank, but does not include a defunct banking company; (i) "insured bank" means a banking company for the time being registered under the provisions of this act and includes for the purposes of sections 16, 17, 18 and 21 a banking company referred to in clause (a) or clause (b) of sub-section (1) of section 13 the registration whereof has been cancelled under that sub-section; 30 u> "insured deposit" means the deposit or any portion thereof the repayment whereof is insured by the corporation under the provisions of this act: 3s 10 of 1949 (k) "new banking company" means a banking company which begins to transact the business of banking after the com· mencement of this act under a lk:ence granted to it under section 22 of the banking companies act, 1949 and includes any banking institution notified under section 51 of the said act after such commencement (1) "premium" means the sum payable by an insured bank under section 15 of this act; (m) "prescribed" means prescribed by regulations made under this act; (n) "reserve bank" means the reserve bank of india constituted under the reserve bank of india act, 1934; z of 1934· (0) "state bank" means the state bank of india constituted s under the state bank of india act, 1955; ~3 of 19s5· (q) "subsidiary bank" shall have the meaning assigned to it in section 2 of the state bank of india (subsidiary banks) act, 1959 38 of 19s9· 10  chapter ii establishment and management of the deposit insurance corporationbltabush-3 (l) the central government shall, by notification in the oftiment and cial gazette, establish a corporation by the name of the deposit =~ra-insurance corporation which shall be a body corporate having per- is deposit petual succession and a common seal with power, subject to the =~~on provisions of this act, to acquire, hold or dispose of property and to contract, and may, by the said name, sue or be sued (2) the head office of the corporation shall be at bombay, but it may, with the previous sanction of the reserve bank, establish:ao bl"anches or agencies in any other place in india capital of 4 the authorised capital of the corporation shall be one clore corporation of rupees, which shall be fully paid-up and shall stand allotted to the reserve bank madqe-5 the general superintendence, direction and the management 2s ~c:tion of the affairs and business of the corporation shall vest in a board of directors which may exercise all powers and do all acts and things which may be exercised or done by the corporation baud of 6 (1) the board of directors of the corporation shall consist directors of the following, namely: -30 (a) the governor for the time being of the reserve bank, who shall be the chainnan of the board; (b) a deputy governor of the reserve bank nominated by that bank; (c) an officer of the central government nominated by 3s that government; (d) two directors nominated by the central government in consultation with the reserve bank having special knowledge of commercial banking or of commerce, industry or finance, neither of whom shall be an officer of government or s of the reserve bank or an officer or other employee of the corporation or a director, an officer or other employee of a banking company or otherwise actively connected with a banking company (2) a director nominated under clause (b) or clause (c) of sub-10 section (1) shall hold office during the pleasure of the authority nominating him and a director nominated under clause (d) of subsection (1) shall hold office for such period not exceeding four years as may be specified by the central government (3) a person shall not be capable of being nominated as a is director under clause (d) of sub-section (1) if-(a) he has been removed or dismissed from the service of government or of a local authority or of a corporation or company in which not less than fifty-one per cent of the paid-up share capital is held by government; or 20 (b) he is or at any time has been adjudicated as insolvent or has suspended payment of his debts or has compounded with his creditors; or (c) he is of unso:md mind and stands so declared by a competent court; or 2s (d) he has been convicted of any offence which, in the opinion of the central government, involves moral turpitude (4) if a director nominated under clause (d) of sub-section (1)-(a) becomes subject to any of the disqualifications mentioned in clauses (a) to (d) of sub-section (3); (b) is absent without leave of the board for more than three consecutive meetings thereof; or (c) becomes a director or an officer or an employee of an insured bank; or 3s (d) becomes an officer or other employee of government or of the reserve bank or of the corporation; his seat shall thereupon become vacant j meetings of board 7 (1) the board shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed (2) the chairman or, if for any reason he is unable to attend, the director nomijlated under clause (b) of sub-sec~ion (1) of 5 ection 6 shall preside at meetings of the board and, in the event of equality of votes, shall have a second or casting vote committees 8 (1) the board may constitute an executive committee conof corpora- sisting of such number of directors as may be prescribed lion (2) the executive committee shall discharge such functions as 10 may be prescribed or may be delegated to it by the board (3) the board may constitute such other committees, whether consistinl wholly of directors or wholly of other persons or partly of directors and partly of other persons as it thinks fit for the purpose of discharging such of its functions as may be prescribed or 15 may be delegated to them by the board (4) a committee constituted under this section shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed 20 (5) the members of a committee (other than directors of the board) shall be paid by the corporation such fees and allowances for attending its meetings and for attending to any other work of the corporation as may be prescribed fees and allowances of directon 9 the directors of the board shall be paid by the corporation 25 such fees anci allowances for attending the meetings of the board or of any of its committees and for attending to any other work of the corporation as may be prescribed: provided that no fees shall be payable to the chairman or to tli) director nominated under clause (b) or clause (c) of sub-section (1) 30 of section 6  chapter iii regis1'ration of banking companies as insured banks and liability of corporation to depositorsrqiltration of existing bankil1l companies 10 the corporation shall register every existing banking com- 35 pany as an insured bank before the expiry of thirty days from the date of commencement of thil act 10 of 1949' 11 the corporation shall register every new banking company re,iltratiojl as an insured bank as soon as may be after it is granted a licence g~:i~' under section 22 of the banking companies act, 1949, or, as the case companies may be, after it is notified under section 51 of the said act; s 12 every bankirg company, being a defunct banking company :re~~~:~~oll at the commencement of this act, by reason of sub-clause (vii) or bankin, sub-clause (viii) of clause (f) of section 2 shall, unless it becomes companies a defunct banking company under any other sub-elause of that clause, be regisered by the corporation as an insured bank as soon 10 as may be after the termination of the order of moratorium or, as the case may be, the rejection of the application for its winding up 13 the registration of a banking company as an insured bank ~r:t=:!~1l shall stand cancelled on the occurrence of any of the ~ollowing events, tion 15 namely:-(a) if it has been prohibited from receiving fresh deposits; or 10 of 1949· 20 (b) if it has been informed by notice in writing by the reserve bank that its licence has been cancelled under secti!ln 22 of the banking companies act, 1949, or that a licence under that section cannot be granted to it; or (c) if it has been ordered to be wound up; or (d) if it has transferred all its deposit liabilities in india to any other institution; or 10 of 1949 (e) if it has ceased to be a banking company within the meaning of sub-section (2) of section 36a of the banking companies act, 1949, or has converted itself into a non-banking company; or (f) if a liquidator has been appointed in pursuance of a re-30 solution for the voluntary winding up of itsaifairs; or (g) if in respect of it any scheme of compromise or arrangement or of reconstruction has been sanctioned by any competent authority and the said scheme does not permit the acceptance of fresh deposits; or 3s (h) if it has been amalgamated with any other banking institution latimtion of reciltntioll 14 (1) where the corporation has registered any banking company as an insured bank, it shau, within thirty days of its registration, send an intimation in writing to the banking company that it has been registered as an insured bank (2) every such intimation shall indicate the manner in which 5 t~e premium payable by the bank under section 15 may be calculated premium 15 (1) every insured bank shall, so long as it continues to be registered, be liable to pay a premium to the corporation on its deposits at such rate or rates as may, with the previous approval of 10 the central government, be notified by the corporation in the oftlcial gazette from time to time: provided that the premium payable by any insured bank for any period shall not exceed fifteen naye paise per annum for every hundred rupees of the total amount of the deposits in that bank at is the end of that period or, where its registration has been cancelled during that period, on the date of its cancellation: provided further that where the registration of any insured bank is cancelled under section 13, such cancellation shall not affect the liability of that bank for payment of premium for the period 20 before such cancellation and of any interest due under the provision of this section (2) the premium shall be payable for such periods, at such times and in such manner as may be prescribed (3) if an insured bank makes any default in payment of any 2s amount of premium, it shall, for the period of such default, be liable to pay to the corporation interest on such amount at such rate not exceeding eight per cent per annum as may be prescribed liabi1i~f 16 (1) where an order for the winding up or liquidation of an ~::o~ 0'} insured bank is made, the corporation shall, subject to the other pro- 30 in1ure:cs visions of this act be liable to pay to every depositor of that bank depollta rd  h h   f t' 17 tit in acco ance wit t e provisions a sec ion an amoun equa a the amount due to him in respect of his deposit in that bank at the time when such order is made: provided that the liability of the corporation in respect of an 3s insured bank referred to in clause (a) or clause (b) of section 13 shall be limited to the deposits as on the date of the cancellation of the registration: provided further that the total amount payable by the corporation to anyone depositor in respect of his deposit in that bank in the same capacity and in the same right shall not exceed one thousand and five hundred rupees: 5 provided further that the corporation may, from time to time, having regard to its financial position and to the interests of the banking system of the country as a whole, raise, with the previous approval of the central government, the aforesaid limit of one thousand and five hundred rupees 10 (2) where in respect of an insured bank a scheme of compromise or arrangement or of reconstruction or amalgamation has been sanctioned by any competent authority and the said scheme provides for each depositor being paid or credited with, on the date on which the scheme comes into force, an amount which is less than the original 15 amount and also the specified amount, the corporation shall be liable to pay to every such depositor in accordance with the provisions of section 18 an amount equivalent to the difference between the amount so paid or credited and the original amount, or the difference between the amount so paid or credited and the specified amount, whichever is 20 less: provided that where any such scheme also provides that any payment made to a depositor before the coming into fo~ce of the scheme shall be reckoned towards the payment due to him under that scneme, then the scheme shall be deemed to have provided for that payment 25 being made on the date of its coming into force (3) for the purposes of this section, the amount of a deposit shall be determined after deducting therefrom any ascertained sum of money which the insured bank may be legally entitled to claim by way of set off against the depositor in the same capacity and in the 30 same right i (4) in this section,---" 3s (a) "original amount" in relation to a depositor means the total amount due by the insured bank immediately before the dete of coming into force of the 'scheme of compromise or arrangement or, as the case may be, of reconstruction or amalgamation to the depositor in respect of his deposit in the bank in the same capacity and in the same right:' ! provided that where under the proviso to sub-section (2), the scheme is deemed to have provided for any payment being made on the date of its coming into force, the amount of such payment shall be included in calculating the original amount; (b) "specified amount" means one thousand and five hundred rupees, or, as the case may be, the amount fixed by the board under the third proviso to sub-section (1) manner of payment by corporation in case of winding up of insured banks 17 (1) where an insured bank has been ordered to be wound up or to be taken into liquidation and a liquidator, by whatever name s called, has been appointed in respect thereof, the liquidator shell, with the least possible delay and in any case not later than three months from the date of his assuming charge of office, furnish to the corporation a list in such form and manner as may be specified by the corporation showing separately the deposits in respect of each 10 depositor and the amounts of set off referred to in sub-section (3) of section 16 (2) before the expiry of two months from the receipt of such list from the liquidator, the corporation shall pay to each depositor of the insured bank in respect of his deposit the amount payable is under section 16 either directly or through the liquidator or through any other agency as the corporation may determine manner of 18 (l) where a scheme of amalgamation of any insured bank ~;:~~~i~ with any other banking institution (hereinafter referred to as the in case of transferee bank) or a scheme of compromise or arrangement or of :w ::;:~~~se reconstruction in respect of such bank has been sanctioned and the or arrange-corporation has become liable to pay to depositors of the insured ~~~~t~-bank under sub-section (2) of section 16, the transferee bank where tion or amal- the scheme is of amalgamation and the insured bank in any other ::~o~/:n case shall, with the least possible delay and in any case not later than 2s insured three months from the date on which such scheme takes effect, b'lnk furnish to the corporation a list in such form and manner as may be specified by the corporation and certified to be correct by the chief executive officer of the transferee bank or, as the case may be, of the insured bank showing separately deposits in respect of each 30 depositor and the amounts of set off referred to in sub-'section (3) of section 16 and also the amounts paid or credited or deemed to have been paid under the scheme (2) before the expiry of two months from the receipt of such list, the corpol"3tion shall pay the amount payable under section 16 either 3s directly to the depositor or to the transferee bank or the insured bank for being credited in his account discharge of 19 any amount paid by the corporation under section 17 or  the liability section 18 in respect of a deposit shall, to the extent of the amount of corporation paid, discharge the corporation from its liability in respect of that 40 deposit zoo where any depositor to whom any payment is to be made in pl'ovi&ion accordance with the provisions of section 17 or section 18 cannot be for unpaid fowld or is not readily traceable, adequate provision shall be made amounts by the corporation for such payment and the amount of such provi-5 sion shall be eccounted for separately in its books 21 (1) where any amount has been paid under section 17 or r~paym~nt section 18 or any provision therefor has been made under section 20, ~~~nt to the corporation shall furnish to the liquidator or to the insured bank corporation or to the transferee bank, as the case may be, information as regards 10 the amount so paid or provided for (2) on receipt of the information under sub-section (1), notwithstanding anything to the contrary contained in any other law for the time being in force,- (a) the liquidator shall, within such time and in such manner as may be prescribed, repay to the corporation out of the amount, i~ any, payable by him in respect of any deposit such sum or sums as make up the amount paid or provided for by the corporation in respect of that deposit; 20 (b) the insured bank or, as the case may be, the transferee bank shall, within such time and in such manner as may be prescribed, repay to the corporation qut of the amount, if any, to be paid or credited in respect of any deposit after the date of the coming into force of the scheme referred to in section 18, such sum or sums as make up the amount paid or provided for by the corporation in respect of that deposit  chapter iv funds, accounts and audit22 the corporation shall maintain two funds to be called res· funds of pectively the deposit insurance fund and the general fund corporation 23 (1) to the deposit insurance fund shall be credited,-d~posit (a) all amounts received by the corporation as premium; ~~d~nce (b) all amounts received by the corporation under section 21; (c) the amount advanced by the reserve bank under section 26; 35 (d) all amounts transferred to that fund from the general fund under section 27; and (e) all income arising from the investments made out of that fund,: i (2) the said fund shall be applied-(a) to make jlgyments in resp::!ct of insured deposits; (b) to meet liability in respect of an advance taken under section 26; and (c) to meet liability in respect of the amounts referred to s in clause (d) of sub-section (1) general fund 24 all receipts of the corporation other than those referred to in sub-section (1) of section 23 shall be credited to the general fund and ell payments by the corporation other than those referred to in sub-section (2) of that section shall be made out of that fund ]0 investment 25 all moneys belonging to the deposit insurance fund or the general fund which may not for the time being be required by the corporation shall be invested in promissory notes, stock or securities of the central government and all other moneys shall be deposited with the reserve bank  is advances by 26 (1) the reserve bank shall, from time to time, advance to reserve the corporation on a request by it such sum or sums as may be bank required by the corporation for the purposes of the deposit insurance fund: provided that the total amount outstanding at anyone time on 20 account of such advances shall not exceed five crores of rupees (2) the terms and conditions of any advance under this section shall be such as may be determined by the reserve bank with the approval of the central government advan('e from general fund to deposit insurance fund 27 if ·at any time the amount awilable in the deposit insurance 2s fund in insufficient to meet the requirements of that fund, the corporation may transfer from the general fund such amount as may be necessary to meet the requirements of the deposit insurance fund on such terms and for such period as may be determined by the board with the approval of the reserve bank 30 28 (1) the balance-sheet and accounts of the corporation shall be prepared and maintained in such form and manner as may be prescribed i preparation of balance sheet, etc,· by corporation (2) the board shall cause the books and accounts of the corporation to be balanced and closed as on the 31st day of december, each 35 year i 1011956 zi (1) the affairs of the corporation shall be audited by an audit auditor duly qualified to act as an auditor under sub-section (1) of section 226 of the companies act, 1956, who shall be appointed by the board with the previous approval of the reserve bank and shall s receive such remuneration from the corporation as the reserve bank may fix (2) the auditor shall be supplied with a copy of the· annual balance sheet of the corporation and it shall be his duty to examine it together with the accounts and vouchers relating 10 thereto and he shall have a list delivered to him of all books kept by the corporation and shall at all reasonable times have access to the books, accounts and other documents of the corporation and may, in relation to such accounts, examine any director of the board or any officer or employee of the corporation is (3) the auditor shall make a report to the corporation upon the annual balance sheet and accounts and in every s'uch report he shall state whether in his opinion the balance-sheet is a full and fair balance-sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the state of zo affairs of the corporation and in case he had called for any explanation or information from the board, whether it has been given and whether it is satisfactory (4) without prejudice to anything contained in the preceding sub-sections, the central government may at any time appoint the zs comptroller and auditor-general of india to examine and report upon the accounts of the corporation, and any expenditure incurred by him in connection with such examination and report shall be payable by the corporation to the comptroller and auditor-general of india 30 30 notwithstanding anything contained in the indian income- income-tax tax act, 1922 or any other enactment for the time being in force add 11qjcrrelating to income-tax or super-tax, the corporation shall not be ta: jjj liable to pay income-tax or super-tax on any of its income, profits or gains for the accountlnb year during which the' corporation is 3s established and for four accounting years following that year 31 after making provision for all its liabilities and for all other reacrve matters for which provision is necessary or expedient, including fudd any contribution to the stat! and superannuation funds, the corporation shall transfer the balance, if any, of its income in its general 40 fund to one or more reserve funds to be utilised in such manner bnd for such purposes as the corporation may deem fit annual 32 (1) the corporation shall furnish to the reserve bank with-;:=~~~!~ and in three months from the date on which its accounts are balanced and closed the balance-sheet and accounts together with the auditor's report and a report of the working of the corporatlon during the year and copies of the said balance-sheet and accounts 5 and reports shall be fu·rnished by the corporation to the central government (2) the central government shall cause every auditor's report and report of the working of the corporation to be laid for not less than thirty days before each house cf parliament as soon 10 as may be after each such report is received by the central governm~ i ,  chapter v miscellaneousstafl'of  33 (1) the corporation may appoint such number of officers and 15 corporation employees as it considers necessary or desirable for the efficient performance of its functions and determine the terms and conditions of their appointm~nt and service (2) without prejudice to the provisions of sub-section (1), it shall be lawful for the corporation to utilise, and for the reserve 20 bank to make available, the services of such staff of the reserve bank on such terms and conditions as may be agreed upon between the corporation and the reserve bank ~ from 34 (1) notwithstanding anything contained in the banking banks companies act, 1949, or any other law for the time being in force 2s 10 of 1949· the corporation may at any time direct an insured bank to furnish to it, within such time as may be specified ·by the corporation, such statements and information relating to the deposits in that bank as the corporation may consider necessary or expedient to obtain for the purposes of this act 30 (2) the corporation may, if it considers it expedient and after consulting the reserve bank, publish any information obtained by it under this section in such consolidated form as it may think ftt 35 (1) the corporation shall have free access to all such records of an insured bank perusal whereof may appear to the corporation 35 to be necessary for the discharge of its functions under this act corporation to have acc:ns to records (2) the corporation may require any insured bank to furnish to it copies of any of the records referred to in sub-section (1) and the bank shall be bound to comply with the requisition 36 (1) the corporation may for any of the purposes of this act tn~pection t t l- r b k  ~ of lflsured reques lilt: eserve an to cause an inspection of the books and banks by accowlts or an investigation of the affairs of an insured bank to reserve b d d h bank e rna e an on suc request the reserve bank shall cause such 5 inspection or investigation to be made by one or more of its officers (2) the provision of sub-section (2) and sub-section (3) of sec-10 or 1949· tion 35 of the banking companies aet, 1949 shall apply to an inspection or investigation under sub-section (1) as they apply to &n inspection under that section 10 (3) when an inspection or investigation has been made under this section, the reserve bank shall furnish a eopy of its report to the corporation and neither the bank inspected or investigated nor any other bank shall be entitled to be furnished with a copy of such report is (4) notwithstanding anything contained in any law for the time being in force, no court, tribunal or other authority shall compel the production or disclosure of a report under this section or of information or material gathered during the course cf an inspection or investigation under this section 20 37 the corporation shall, on a request in writing from the corpor!1tion r bank, f  h t' 'thi h t' b 'fied to furnish eserve umls 0 it wi n suc lme as may e specl information by the reserve bank, such statements and information relating to to reserve the business or affairs of the corporation or of an insured bank as bank the reserve bank may consider necessary or expedient 2<; 38 the reserve bank shall, on a request in writing from the reserve - corporation furnish to it any report or information relating to an ~~~~s~ ininsured hank made or obtained by it under or in pursuance of the fonnatio~ to reserve bank of india act, 1934 or the banking companies act, corporation 1949 z of 1934 : 0 of 1949 30 39 every director, auditor, officer or other employee of the cor- decffid'aral,tion - 0 e ity poration or an employee of the reserve bank whose services are and secrecy utilised by the corporation under sub-section (2) of section 33 shall, bebore entering upon his duties, make a declaration of fidelity and ' secrecy in the form set out in the first schedule to this act 35 ·40 (1) every director of the board shall be indemnified by the i'ldemnityof   t 11 i d  d b him' directors corporation agams a osses an expenses incurre y in, or in relation to, the discharge of his duties except such as are caused by his own wilful act or default (2) a director of the board shall not be responsible for any other 40 director or for any other officer or other employee of the corporation, or for any loss or expenses resulting to the corporaticn from the insuftlciency or deficiency of value of or title to any property or security acquired or taken on behalf of the corporation or the insolvency or wrongful act· of any debtor or any person under obligation to the corporation or anything done in good faith in the execution of the duties of his office or in relation thereto 5 ~s in 41 (1) no act or proceeding of the board or of any committee ~on:~ of the corporation shall be questioned on the ground merely of the date acta, existence of any vacancy or defect in the constitution of the board etc or committee (2) no act done by any person aciing in good faith as a director 10 of the board shall be· deemed to be invalid merely on the ground that he was disqualified to be a director or that there was any other defect in his appointment plt!tectiod of 42 n 6 suit or other legal proceeding shall lie against the cor-::de: :~ poration or the reserve bank or any director of the board or llny is act officer of the 'corporation or the reserve bank or any other person authorised by the corporation to discharge any functions under this act for any damage caused or likely to be caused  by anything which is in good faith done or intended to be done in pursuance of this act 20 43 nothing in the companies act, 1956 or the insurance act, 1 of j9s6 1938, shall apply to the corporation 4 of 1938 companies act 19s6 and insuraneeact, 19:18 not to apply liquidation or coljloradod 44 (1) the corporation shall not be placed in liquidation save by order of the central government and in such manner as that government may direct 2s (2) on the liquidation of the corporation-(a) the outstanding assets of the corporation in so far as they relate to the deposit insurance fund shall be distributed among the insured banks in such manner and in such proportion as may be determined by the central government having 30 regard to the amounts of premium paid by them during any prescribed period or the deposits of the said banks as on the date of liquidation of the corporation or other relevant circumstances; (b) the remaining outstanding assets of the corporation j' shall be transferred to the reserve bank power of central gogernmedt to live directions 45 in the discharge of its functions under this act, the corporation shall be guided by such directions in matters of policy involving public interest as the central government may after consulting the reserve bank give to it in writing, and if any question arises 40 whether the direction relates to a matter of policy involving public interest, the decision of the central government thereon shall be final 46 any dispute as to the amount of premium due from any in-= ~; to 5 sured bank shall be decided by the central government and the premium decision of that government shall be final 47 (1) whoever in any return, balance-sheet, or other document pcnaitic8 or in any information required or furnished by or under or for the purposes of any provision of this act, wilfully makes a statement 10 which is false in any material particular, knowing it to be false, or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine (2) if any person fails to produce any book, account or other 15 document, or to furnish any statement or information which, under the provisions of this act, it is his duty to produce or furnish, he shall be punishable with a fine which may extend to two thousand rupees in respect of each offence and in the case of a continuing failure, with an additional fine which may extend to one hundred 20 rupees for every day during which the failure continues after conviction for the first such failure 48 (1) where an offence has been committed by a company, oft'cnc:c! by every person who, at the time the offence was committed, was in compadieb charge of, and was responsible to the company for the conduct of 2s the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: provided that nothing contained in this sub-secti"n shall render any such person liable to any punishment provided in this act, 30 if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such oftence (2) notwithstanding anything contained in sub-section (1), where an oftence under this act has been committed by a company 35 and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any gross negligence on the part of, any director, manager, secretary or other omcer of the company, such director, manager, secretary or other oftlcer shall also be deemed to be guilty of that offence and shall be liable to be 40 proceeded against and punished accordingly expla:nation-for the purposes of this section,-(a) "company" means any body corporate and ipcludes, a firm or other association of individuals; and (b) "director" in relation to a firm, means a partner in the firm 5 cofizance of offences 49 no court shall take cognizance of any offence punishable under this act except upon a complaint in writing made by an officer of the corporation generally or specially authorised in writing in this behalf by the board and no court inferior to that of a presidency magistrate or a magistrate of the first class shall try any 10 such offence regulations so (1) the board may, with the previous approval of the reserve bank, make regulations not inconsistent with this act to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the pro~sions of this act is (2) in particular and without prejudice to the generality· of the foregoing power, such regulations may provide for-(a) the times and places of the meetings of the board or of any committee constituted under this act and the procedure to be followed at such meetings including the quonlm necessary 20 for the transaction of business; (b) the number of directors constituting an executive committee, and the functions that such committee shall discharge; (c) the functions which any other committee may discharge 2s under this act; (d) the fees and allowances that may be paid to the members of a committee other than directors of the board; (e) the fees and allowances that may be paid to the directors of the board; 30 (f) the periods for which, the times at which and the man· ner in which premium may be paid by an insured bank; (g) the interest which may be charged from an insured bank where it makes default in payment of premium; (h) the manner in which and the time within which the 3s amounts referred to in section 21 may be paid; (i) the form and the manner in which the balance-sheet and the accounts of the corporation shall be prepared or maintained; and (;) any other matter which is to be, or may be, prescribed 5 (3) any regulation which may be made by the board under this act may be made by the reserve bank within three months of the establishment of the corporation; and any regulation so made may be altered or rescinded by the board in the exercise of its powers under this act 10 51 the enactments specified in the second schedule to this act amendment of cc1'tiiin shall be amended in the manner provided therein enactments  the first schedule (see section 39) declaration of fidelity and secrecy15 i do hereby declare that i will faithfully, truly and to the best of my skill and ability execute and perfonn the duties requin!d of me as director, auditor, officer or other employee (as the case may be) of the deposit insurance corporation and which properly relate :to the office or position held by me in the said corporation 20 i further declare that i will not communicate or allow to be communicated to any person not legally entiiled thereto any information relating to the affairs of the deposit insurance corporation or to the affairs of any person having any dealing with the said corporation; nor will i allow any such person to inspect or have zs access to any books or documents belonging to or in the possession of the deposit insurance corporation and relating to the business of the said corporation or the business of any person having any dealing with the said corporation (signature) 30 signed before me  (see section 51) amendment of certain enactmenu part i amendments to the reserve bank of india ai:t, 1934 5 (2 of 1934) amendments1 in section 2, after clause· (bb), insert the following clause, namely:-'(bbb) "deposit insurance corporation" means the deposit 01 insurance corporation established under section 3 of the deposit insurance corporation act, 1961;' 2 in section 17,-(a) after clause (4c), insert the following clause, namely:-" (4d) the making to the deposit insurance corpora- is tion of loans and advances; and generally assisting the corporation in such manner and on such terms as may be determined by the central board"; (b) in clause (sa), after "the capital of", insert "the deposit insurance corporation"  part ii amfo:ndmfnts to the baking companies act, 1949 (10 of 1949) amendments1 in section 5, after clause (f), insert the following clause, s namely:-'(ff) "deposit insurance corporation" means the deposit insurance corporation established under section 3 of the deposit insurance corporation act, 1961;' 2 in secuon 43~-10 (i) in sub-section (6), for "the foregoing provisions", substitute "the provisions of this section"; (ii) after sub-section (8), insert the following sub-sections, namely:-"(9) nothing contained in sub-sections (2), (3), (4), is (7) and (8) shall apply to a banking company in respect of the depositors of which the deposit insurance corporation is liable under section 16 of the deposit insurance corporation act, 1961 (10) after preferential payments referred to in sub- 20 section (1) have been made or adequate provision has been made in respect thereof, the remaining assets of the banking company referred to in sub-section (9) available for payment to general creditors shall be utilised for payment on pro rata basis of the debts of the 2s general creditors and of the sums due to the depositors: provided that where any amount in respect of any deposit is to be paid by the liquidator to the deposit insurance corporation under section 21 of the deposit insurance corporation act, 1961, only the balance, if any, left after 30 making the said payment shall be payable to the depositor"  part iii aliundmknts to the industrial disputes act, 1947 (14 of 1947)in section 2, in sub-clause (i) of clause (a), after "to an industrial dispute concerning" insert "the deposit insurance corporation established under section 3 of the deposit insurance corporation act, 1961, s ~'  -  statement of objects and reasonsthe question of establishing a statutory corporation for insuring deposits in commercial banks has been under consideration for some time various suggestions or proposals in this connection, ineluding the recommendations made by the shroff committee on finance for the private sector which reported in 1954, have been examined in consultation with the reserve bank and the representatives of the commercial 'banks, and it is now considered desirable that the scheme should be implemented at a very early date 2 the deposit insurance corporation will be established as a wholly-owned subsidiary of the reserve bank with a paid-up eapital of a crore of rupees it will insure all deposits in commercial banks including the state bank and its subsidiaries, other than the deposits belonging to the central government or to a state or foreign government or to the insured banks the limit of the insurance cover will be rs 1,500 but this limit may be raised by the corporation with the previous approval of the central government the premium rate will l:-e determine by the corporation from time to time with the previous approval of the central government the maximum rate for which provision is being made in the bill is 15 naye paise per hundred rupees per annum 3 the corporation's liability will arise and be discharged in the event of the liquidation of a bank or the enforcement in relation to it of a scheme of compromise or arrangement or reconstruction or amalgamation the payments due to the depositors up to the limit of the insurance cover offered by the corporation will be made in the most convenient and expeditious manner which may be possible 4 the bill is intended to give effect to these proposals the notes on clauses explain in detail the various provisions contained in the bill nzw delhi; morarji desai the 21st august, 1961 czause 2-this clause defines the various expressions used in the bill a banking company for the purposes of this bill will include the state bank of india and its statutory subsidiaries, but will exclude the madras industrial investment corporation ltd, which although it is technically a banking company as defined in the banking companies act performs actually the functions of a state financial corporation a deposit for the purposes of the insurance scheme has -been defined as the aggregate amount of all the unpaid balances due to a depositor, but excludes deposits received outside india and amounts due to the central governrlent or to a state or foreign government or to an insured bank a definition ca a defunct banking company has been inserted in sub-clause <f) of this clause in order to exclude from the scheme of insurance banking companies which do not function normally "existing banking companies" as defined in clause 2 (h) will include all banking companies which may be functioning normally on the date on which the act comes into force and new banking companies will be any new banking companies which may be established thereafter attention is invited in this connection to the provisions of clauses 10 and 11, in accordance with which all existing banking companies and a1,0 all new banking companies will have to be registered by the c jrporation clause 3-this clause provides for the establishment of the corporation clause 4-this clause provides for the authorised and paid-up capital of the corporation the authorised capital will be rs 1 crore, the whole of which will be paid-up and will be fully allotted to the reserve bank clauses 5 and 6-these clauses provide for the constitution of a board of directors to direct and manage the affairs of the corporation the governor of the reserve bank will be the chairman of the board and the four other members will be a deputy governor nominated by the reserve bank, an oftlcer of the central government nominated by that government, and two non-officials with suitable qualifications and experience, who will also be nominated by the central government clause 6 also provides that the non-official directors nominated by the central government should not be actively connected with any insured bank clauses 7 to 9-these clauses provide for the manner in which meetings of the board may be held, the constitutions of an executive committee and of such other committees as may be necessary, and the payment of fees and allowances to the members of the board and the committees clauses 10 and h-these clauses provide that every banking company which may be functioning normally on the commencement of the act shall be registered as an insured bank within thirty days of such commencement and that every new banking company formed after such commencement shall be registered likewise within thirty days of the grant of a licence to it or its notification for the purposes of the banking companies act, as the case may be clause 12-this clause provides that any banking company which may not be functioning normally at the time of the commencement of the act shall be registered as an insured institution if it begins to function normally at any subsequent stage clause 13-this clause provides for the cancellation of the registration, if a bank ceases to function normally or independently at any time in future clause 14-this clause provides that intimation of the registration shall be sent to every insured bank clause 15-this clause provides for the payment of a premium by the insured banks the actual amount of the premium will be determined by the corporation with the previous approval of the central government from time to time, but the maximum rate is not to exceed 15 naye paise per hundred rupees per annum clause 16-this clause deals with the liability of the corporation in respect of the imured deposits the deposits will be insurable up to a sum of rs 1,500 in the case of each individual depositor, but this limit may, if necessary, be raised by the corporation at any later stage, after obtaining the previous approval of the central government the corporation's liability up to the limit of the insurance cover offered by it will arise and be discharged in the event of the liquidation of a bank or the enforcement in relation to it of a scheme of compromise or arrangement or reconstruction or amalgamation the liability in the event of the liquidation of an insured bank will be for the payment of the sums due to a depositor up to the limit of the insurance cover offered by the corporation, but in the event of the enforcement of a scheme in relation to any insured bank,' the liability will be limited to the difference between the amounts payable under the scheme and the amount up to which insurance cover is for the time being offered clauses 17 to 21-these clauses deal with the manner in which the corporation's liability is to be discharged and for the subsequent reimbursement to the corporation of any amounts paid by it provision has been made for payments directly to the depositors, in case this proves to be either necessary or desirable the liquidator in the event of a winding up or the reconstructed or transferee bank in case any scheme has been sanctioned and brought into force will be required to pay to the corporation, instead of to the depositors concerned, any sums which may become due for disbursement to such depositors individually after the corporation has discharged its liability to them these repayments to the corporation will be authorised, notwithstanding anything to the contrary in any other law, and will be made until the amounts disbursed by the corporation to, or on account of, the depositors have been repaid in full clauses 22 to 27-tbese clauses provide for the constitution and maintenance of a deposit insurance fund for meeting the liabilities of the corporation on account of insured deposits and of a general fund to account for the receipts and disbursements other than those attributable to the deposit insurance fund the deposit insurance fund will be built up from the premium payments made by the insured banks under clause 15, but in the event of a deficiency in that fund for meeting the liabilities which may have to be met from it, a temporary transfer to the fund may be made from the general fund, or a sum not exceeding rs 5 ~rores may be obtained by the corporation for the purposes of the deposit insurance flmd from the reserve bank on such terms as may be approved by the central government· clauses 2b to 32-these clauses provide for the maintenance and audit of the accounts of the corporation and ,the preparation of a balance sheet and annual report in view of the exemption from taxation which is available to the deposit insurance corporation in the united states and on the analogy of the exemption of new industrial undertakings from income-tax under the provisions of section 15c of the income-tax act, the corporation has been exempted from income and super ta'xes in respect of its income profits or gains in the first five accounting years, but its entire disposable income in its general fund will during this period be credited to one or more reserve funds clause 33-this clause provides for the appointment of the corporation's staff and also for the services of the officers or other employees of the reserve bank to be made available to the corporation to the extent to which this may be necessary clauses 34 to 3b-these clauses provide for returns and information from the insured banks and for the exchange of information as between the corporation and the reserve bank provision has been made in clause 36 for a special inspection of any insured bank by the reserve bank at the instance of the corporation clauses 39 to 42-these clauses contain the usual provisions as regards the fidelity of the directors, indemnity and protection in respect of action taken under the act, the validation of such action and secrecy in respect of the information obtained by the corporation ' clause 44-this clause provides that the corporation shall not be taken in liquidation except under the orders of the central government the balance in the deposit insurance fund, in the event of the liquidation, is intended to be distributed among the insured banks clause 45-this clause provides for directions being issued to the corporation in case this becomes necessary or desirable clauses 46 to 49-these clauses contain provisions for the determination of any dispute as regards the payment of premium, penalties for the infringement of the provisions of the act and cognizance of offences clause so-this clause provides for regulations to be framed by the corporation with the approval of the reserve bank for carrytna out the provillonl of the act 'the first schedule-this schedule contains the form of the declaration as to fidelity and secrecy which is to be made by the directors and auditors and· employees of the corporation and is based on the corresponding provision in the state bank of india act, 1955 and the state bank of india (subsidiary banks) act, 1959 the seccmd schedule-this schedule contains the consequential amendments to the reserve bank of india act, 1934, the banking companies act, 1949 and the industrial disputes act, 1947 the amendments to the reserve bank of india act are for the purpose of enabling the reserve bank to invest in the share capital of the corporation and to grant loans to it the amendments to the banking companies act are for the purpose of modifying the procedure in liquidation so as to conform to the provisions of the present bill the amendments to the industrial disputes act are intended to clarify t~e position that the central government will be the appropriate governmr:!nt in relation to the deposit insurance corporation for the purposes of that act  memorandum regarding delegated legislationclause 50 empowers the board of directors to make regulations to carry out the purposes of the act that clause also empowers the reserve bank to make the first regulations the matters in respect of which regulations may be made have been specified in that clause they relate, intet azia, to the times and places of the meetings of the board or of any committee constituted under the act, the procedure to be followed at such meetings, the number of directors constituting an executive committee and the functions that committee or any other committee may discharge, the fees and allowances payable to directors and members of a committee, the periods for which, the times at which and the manner in which premium may be paid, and the form and the manner in which the balance-sheet and the accounts of the corporation may be prepared or maintained thua the matters in respect of which regulations may be made are matters of procedure or detail and the delegation is of a nonnal character 2 under clause 15 (1) power is conferred on the board to fix rate of premium payable by an insured bank, subject to a ceiling of fifteen naye paise per annum per hundred rupees it is not possible to specify the rate in the act, as the rate may vary from time to time depending upon certain factors such as the amount of premium collected and remaining unutilised 3 under clause 16(1) power is conferred on the corporation to raise the limit of insurance cover certain criteria for raising such limit are laid down in that section it is not possible to visualise at this stage to what extent this limit will be raised 4 having regard to the circumstances under which powers under clauses 15 (1) and 16 (1) will be exercisable by the board, the powers delegated to it are of a normal character  annexure extract nom the reserve bank 0  india act, 1934 (no2 of 1934)- -  - - business which the bank may transact 17 the bank shall be authorised to carry on and transact the several kinds of business hereinafter specified, namely:-- - - - - (8a) the purchase and sale of shares in, or the capital of, the state bank or any other bank or financial institution notified by the central government in this behalf; - - - - - extract from the banking companies act, 1949 (no 10 of 1949) - - - - -  gapreferential paymentl to depoeiton - - •• - - (6) when any claimant, creditor or depositor to whom any payment ,is to be made in accordance with the foregoing provisions, cannot be found or is not readily traceable, adequate provision shall be made by the official liquidator for such payment - - - - - extract mem the industrial disputi'b act, 1947 (no 14 of 1947) - - - - - l)eftnitiodl 2 in this act, unless there is anything repugnant in the subject or context,-(a) "appropriate government" means-(i) in relation to any industrial dispute coneeming any industry carried on by or under the authority of the central government or by a railway company or concerning any such controlled industry as may be specified in this· behalf by the central government or in relation to an industrial dispute concerning a banking or an insurance company, a mine, an oil-field or a major port, the central government, and    - -  a billto provide for the establishment of a corporation for the purpose of insurance of deposits and for pther matters connected therewith or incidental thereto the president has, in pursuance of clause (i) of article 117 and clause (i) of article 274 of the constitution of india, recommended to lok sabha the introduction of the bill (shri morarji desai, minister of finance) 