 the banking companies (amendment) bill, 1961(as introduced in lox sabra on 21st february, 1961)  the banking companies (amendment)' bill, 1961 (as introduced in lok saliba) a billfur1jher to amend the banking companies act, 1949 be it enacted by parliament in the twelfth year of the republic of india as follows:-1 this act may be called the banking companies (amendment) short tide act, 1961 10 of 1949 5 z in section 35a of the banking companies act, 1949 (herein- ~t after referred to as the principal act), in clause (a) of sub-section :~a eec:tiod (l), for the words "national interest", the words "public interest" shall be substituted 3 in section 44a of the principal act, in sub-section (7), the words ameadm~dt 10 "in national interest" shall be omittec:t ~ acctlod 4 in section 45 of the principal act,-- amendment of section 45 (a) in sub-section (1)-(i) for the wards "any agreement", the words "any agreement or other instrument" shall be substituted; is (ii) for the words "the banking company", the words "a banking company" shall be substituted; (b) for sub-sections (4) to (9), the following sub-sections shall be substituted, namely:-, (4) during the period of moratorium, if the reserve bank is satisfted that-20 - (a) m the public interest; or (b) in the interests of the depositors; or - (c) in order to secure the proper ma,nagement of  the banking company; or (d) in the interests of the banking system of the country as a whole,-it is necessary so to do, the reserve bank may prepare a 5 scheme-(i) for the reconstruction of the banking company, or (ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as "the transferee bank") 10 (5) the scheme aforesaid may contain provisions for all or any of the following matters, namely:-(a) the constitution, name and registered oftice, the capital, assets, powers, rights, interests, authorities and privileges, the liabilities, duties and obligations, of the 15 banking company on its reconstruction or, as the case may be, of the transferee bank; (b) in the case of amalgamation of the banking company, the transfer to the transferee bank of the business, properties, assets and liabilities of the banking 20 company on such terms and conditions as may be specified in the scheme; (c) any change in the board of directors, or the appointment of a new board of directors, of the banking company on its reconstruction or, as the case may oe,2s of the transferee bank and the authority by whom, the manner in which, and the other terms and conditions on wbich, such change or appointment shall be made and in the case of appointment of a new board of directors 9r of any director, the period for which such appointment ~o uall be made; (d) the alteration of the memorandum and articles of association of the banking company on its reconstruction w, as the case may be, of the transferee bank for the purpose of altering the capital thereof or for such 3s other purposes as may be necessary to give effect to the' reconstruction or amalgamatiod; 5 (e) subject to the provisions of the scheme, the continuation by or against the banking company on its reconstruction or as the case may be, the transferee bank, of any actions or proceedings pending against the banking company immediately before the date of the order of moratorium; 10 (f) the reduction of the interest or rights which the members, depositors and other creditors have in or against the banking company before its reconstruction or amalgamation to such extent as the reserve bank considers necessary in the public interest or in the interests of the members, depositors and other creditors or for the maintenance of the business of the banking company; 15 (g) the payment in cash or otherwise to depositors end other creditors in full satisfaction of their claimzo (i) in respect of their interest or rights in or against the banking company before its reconstruction or amalgamation; or (ii) where their interest or rights aforesaid in or against the banking company has or have been reduced under clause (f), in respect of such interest or rights as so reduced; - 30 (h) the allotment to the members of the banking company for shares held by them therein before its reconstruction or amalgamation [whether their interest in such shares has been reduced under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may be, in the transferee bank and where any members claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any members, the payment in cash to those members in full satisfaction of their c1aim-35 (i) in respect of their interest in shares in the banking company before its reconstruction c:r amalgamation; or (ii) where such interest has been reduced under clause <f), in respect of their interest in shares as so reduced; - (i) the continuance of the services of all the employees of the banking company (excepting such of them as not being workmen within the meaning of the industrial disputes act, 1947 are specifically men- 14 of 1947 tioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee bank at the same remuneration and on s the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date of the order of moratorium: provided that the scheme shall contain a provision 10 that-(i) the banking company shall payor grant dot later than the expiry of the period of three years from the date on which the scheme is sanctioned by the central government, to the said employees 15 the same remuneration and the same terms and conditions of service as are applicable to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the reserve bank (whose determination in this 20 respect shall as final); (ii) the transferee bank shall payor grant dot later than the expiry of the aforesaid period of three years, to the said employees the same remuneration and the same terms and conditions of service as are 2s applicable to the other employees of corresponding rank or status of the transferee bank subject to the qualifications and experience of the said employees being the same as ox equivalent to those of such other employees of the transferee bank: 30 provided further that if in any case under clause (ii) of the first proviso any doubt or difference arises as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of 35 corresponding rank or status of the transferee bank, the doubt or difference shall be referred to the reserve bank whose decisions thereon shall be final; (;) notwithstanding anything contained in clause (i) where any of the employees of the banking company 40 not being workmen within the meaning of the industrilfl disputes act, 1947 are specifically mentioned in the 14 of 1947 5 10 i of 1941 scheme under clause (i), or where any employees of the banking company have by notice in writing given to the banking company or, as the case may be, the transferee bank at any time before the expiry of one month next' following the date on which the scheme is sanctioned by the central government, intimated their intention of not becoming employees of the banking company on its :reconstruction or, as the case may be, of the ttansferee bank, the payment to such employees of compensation, if any, to which they are entitled under the industrial disputes act, 1947, and such pension, gratuity, provident fund and other retirement benefits ordinarily admissible to them under the rules or authorisations of the banking company immediately before the date of the order of moratorium; 15 (k) any other terms and conditions for the :reconstruction or amalgamation of the banking company; 20 (i) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully bnd effectively carried out (6) (a) a copy of the scheme prepared by the reserve bank shall be sent in draft to the banking company and also 10 the transferee bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the reserve bank may specify fo:r this purpose; - 30 (b) the reserve bank may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank 35 - (7) the scheme shall thereafter be placed before the central government for its sanction and the central government may sanction the scheme without any modifications or with such modifications as it may consider necessary; and the scheme as sanctioned by the central government shall come into force on such date as' the central government may specify in this behalf: provided that different dates may be specified for different provisions of the scheme (8) on and from the date of the coming into operation of the scheme or any provision thereof, the scheme or such provision shall be binding on the banking company or, as 5 the case may be, on the transferee bank and any other banking company concerned in the amalgamation and also on all the members, depositors and other creditors and employees of each of those companies and of the transferee bank, and on any other person having any right or liability 10 in relation to any of those companies or the transferee bank (9) on and from such date as may be specified by the central government in this behalf, the properties and assets of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, 15 and the liabilities of the banking company shall, by virtue of and to the extent provided in the scheme, stend transferred to, and become the liabilities of, the transferee bank (10) if any diftlculty arises in giving effect to the provisions of the scheme, the central government may by order 20 do anything not inconsistent with such provisions which appears to it necessary or expedient for the purpose of removing the diftlculty (11) copies of the scheme or of any order made under sub-section (10) shall be laid before both houses of parlia- 25 ment, as soon as may be, after the scheme has been sanctioned by the central government, or, as the case may be, the order has been made (12) where the scheme is a scheme for amalgamation of the banking company, any business acquired by the trans- 30 feree bank under the scheme or under any provision thereof shall, after the coming into operation of the scheme or such provision, be carried on by the transferee bank in accordance with the law governing the transferee bank, subject to such modifications in that law or such exemptions 3s of the transferee bank from the operation of any provisions thereof as the central government on the recommendation of the reserve bank may, by notitication in the official gazette, make for the purpose of giving full effect to the - lcb~e: 40 provided that no such modification or exemption shall be made so as to have eftect for a period of more than seven years from the date of the acquisition of such business 5 (13) nothing in this section shall be deemed to prevent the amalgamation with a banking institution by a single scheme of several banking companies in respect of each of which an order of moratorium has been made under this section 10 (14) the provisions of this section and of any scheme made under it shall have effect notwithstanding anythin, to the contrary contained in any other provisions of this act or in any other law or any agreement, award or other instrument for the time-being in force is (15) in this section, "banking institution" means any banking company and includes the state bank of india or any other banking institution notified by the central government under section 51'  20 s in section 45l of the principal act,-ameddmalt of «(i) in 8u~ion (3), for the words "a scheme of recon- 4,l eection struction of a banking company or its amalgamation with another banking company", the words "a scheme of reconstruction or amalgamation of a banking company" shall be substituted; (b) in sub-section (4), for the words "a scheme of reconstruction of a banking company or its amalgamation with another banking company", the words "a scheme of reconstruction or amalgamation of a banking company" shall be substituted a of 1961 6 (1) the banking companies (amendment) ordinance, 1961, f"" add is hereby repealed vullo (2) notwithstanding such repeal, anything done or any action 30 taken under the said ordinance shall be deemed to have been done or taken under this act, as if this act had commenced on the 4th day of february, 1961  statement of objects and reasonsthe banking companies act, 1949, was amended in 1960 in order to facilitate the grant of expeditious relief in the case of banking companies which may be taken into liquidation and the reconstruction or amalgamation of other banking companies, wherever this may be considered necessary or desirable the question of transferring the assets and liabilities of certain banking companies to other institutions, which may be in a better position to serve the interests of the depositors, has since been under consideration, but certain practical difficulties have been encountered in bringing into force or implementing the schemes which have been formulated for this purpose in order to eliminate these difficulties and to clarify the legal position beyond any doubt, the banking companies' (amendment) ordinance was issued early in february, 1961, substantially amplifying the provisions of section 45 of the banking companies act the present bill is intended to replace the ordinance morarji desai j nmw dblri; the 11th febnu&ry, 1961 -  annexure extracts i'rom the banking companlbs act, 1949 10 or 1949 - • - • •power oftbe reserve blot to jive direction •• 35a (1) where the reserve bank is satisfied that-(4) in the national interest; or - 44a - - • - • - • - • (7) nothing in the foregoing provisions of this section shall procedure aftect the power of the central government to provide for the for~­amalgamation of two or more banking companies in national :'~~ina interest under section 396 of the companies act, 1956: companiee lof 1956' provided that no such power shall be exercised by the central government except after consultation with the reserve bank - - - - - 45 (1) notwithstanding anything contained in the foregoing apply to power of reserve bank to provisions of this part or in any other law =t't:-or any agreement, for the time being in force, where it appears to 1u1p~0d the reserve bank that there is good reason so to do, the reserve &; i::: bank may apply to the central government for an order of company add moratorium in respect of the banking company :h~ - - - - - reconstitution or amal-(4) during the period of moratorium, if the reserve bank is ,amadon ibtisfted that-(4) in the national interest; or (b) in the interests of the depositors; or (c) in order to secure the proper management of the banking company; or (d) in the tdterests of the banking system of the country as a whole, it is necessary so to do, then, notwithstanding anything contained in this act or in any other law or any agreement or instrument for the time being in force, the reserve bank may prepare a scheme-- (i) for the reconstruction of the banking company, or 1885(b) ls4 (ii) for its amalgamation with another banking company, with such constitution, with such capital, assets, powers, rights, interests, authorities and privileges, with such liabilities, duties and obligations and on such terms and conditions as may be specified in the scheme (5) the scheme may provide for the appointment of a new board of directors-(a) of the banking company on its reconstruction, or (b) of the other banking company with which it is amalgamated in accordance with the scheme, and the authority by whom, the manner in which, the period for which, and the other terms and conditions on which, such appointment shall be made, shall be as provided in the scheme (6) the scheme aforesaid may contain such conjequential, incidental and supplemental provisions as may, in the opinion of the reserve bank, be necessary to give effect to the reconstruction, or, as the case may be, the ama1gamation, and may also provide for the reduction of the interest or rights which the members or creditors have in or against the banking company before its reconstruction or its amalgamation with the other banking company, to such extent as the reserve bank considers necessary in the public interest or in the interests of the members and creditors or for the maintenance of the business of the banking company (7) (a) a copy of the scheme prepared by the reserve bank shall be sent in draft to the banking company and in the case of amalgamation, also to the other banking company with which it is proposed to be amalgamated for suggestions and objections, if any, within such period as the reserve bank may specify for this purpose; and " (b) the reserve bank may make such modifteations, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company or in the case of amalgamation, from both the banking companies or from any members or creditors thereof (8) the scheme shall thereafter be placed before the central government for its sanction and the central government may sanction the scheme without any modifteations or with such modifications as it may think necessary; and the scheme as sanctioned by the central government shan come into force on such date ,as the central government may specify in this behalf and shall, as from that date, be binding on the banking company or companies concerned and also on all the members and creditors thereof (9) copies of every scheme made under this section shall be laid before both houses of parliament as soon as may be after the scheme has come into force 45l - - - - - - - - - - publiceuminatiod of directors and auditorsetc:1 (3) where a scheme of reconstruction of a banking company in rc: of or its amalgamation with another banking company has been ~!~)' sanctioned by the central government under section 45 and the:e f central government is of opinion that any person who has taken ~t part in the promotion or formation of the banking company or has been a director or auditor of the banking company should be publicly examined, that government may apply to the high court for the examination of such person and if on such examination the high court finds (whether a fraud has been committed or not) that that person is not fit to be a directol\ of a company or to act as an auditor of a company or to be a partner of a firm acting as such auditors, the central government shall make an order that that person shall not, without the leave of the central government, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of any company or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors of, any company for such period not exceeding five years as may be specified in the order (4) where a scheme of reconstruction of a banking company or its amalgamation with another banking company has been sanctioned by the central government under section 45, the provisions 1 of 19s6 of liection 543 of the companies act, 1956, and of section 45h of this act shall, as far as may be, supply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the scheme of reconstruction or amalgamation, as the case may be, were an order for the winding-up of the banking campanyi and any reference in the said section 543 to the application of the official liquidator shall be construed as a reference to the applicatichl of the central government  - - - - - - - bill further to amend the banking companies act, 1949 (shri morarji desai, minister of finance) 