 the state bank of india (amendment) bill, 1959(as introduced in lok sabha on 23rd february, 1959)  the state bank of india (amendment) bill,1959  1 (aa  introduced in lok sabha)a bill further to amend the state bank of it'dia act, 1955 be it enacted by parliament in the tenth year of the republic of india as follows:-1 this act may be called the state bank of india (amendment) short tide act, 1959 5 z in section 22 of the state bank of india act, 1955 (hereinafter am~ent of i9!1!1· referred to as the principal act) ,_ oflcc:tlonaa (a) in clause (d) of sub-section (1), for the words "or managing director", the words "managing director, or legal or technical adviser" shall be substituted; 10 (b) after sub-section (3), the following sub-section shall be inserted, namely:-- (4) in this section-'of 1949 (a) "banking company" has the same meaning as in the banking companies act, 1949; 15 (b) "manager" means thp chief executive officer, by whatever name called, of a banking company; (e) "private company" has the same meaning as in the companies act, 1956' 3 in section 23 of the principal act, the proviso shall be omitted amendm~t of eec:tion ~3· 33· (a) in sub-clause (d) of clause (i), ~or the words "under any law for the time being in force in india", th~ words "by or under any law for the time being in force in india other than companies with limited liability" shall be substituted; 5 (b) for clause (xii), the following clauses shall be substituted, namely:-"(xii) the transacting of pecuniary agency buslneu on commission; (xiia) the entering into contracts of indemnity, 8m-ety- 10 ship or guarantee with specific security or otherwise;"; (c) after clause (xx), the following clause shall be inserted, namely: _  ,~~ 1 "(xxa) notwithstanding anything to the contrary contained in any other law for the time being in force, the 15 establishment and maintenance of superannuation pension, provident or other funds for the benefit of the employees of the state bank or dependents of such employees or for the purposes of the stare bank, and the granting of superannuation allowances, annuities and pensions payable out of 20 any such fund;" ~endm~nt 5 in section 34 of the principal act, for sub-sections (3) and (4), ~ iectlod the following sub-section shall be substituted, namely:-"(3) the state bank shall not discount or purchase or 'advance or lend or open cash credits on the security of,-2, (a) any negotiable instrument of any individual or firm payable at the place where it is presented which does not carry on it the several responsibilities of at least two persons or firms unconnected with each other in general partnership; 30 (b) any negotiable instrument or security (not being an instrument or security in which a truste'e may invest trult money under section 20 of the indian trusts act, 1882, or the corresponding provision of the law for the time being in force in any country where the state bank has a branch) 35 which does not mature within-(0 fifteen months from the date of such discount, purchase, loan, advance or opening of cash credits, if the instrument or security is drawn or issued for the purpose of financing seasonal agricultural operations; 40 and (ii) six months from the date aforesaid if the hi  strument or security is drawn or issued for any other purpose"  6 in section 35 of the principal act, for sub-sections (2), (3) amendm~nt 5 and (4), the following sub-sections shall be substituted, namely:- ~; section 10 - (2) the terms and conditions relating to such acquisition, if agreed pon by the central board of the state bank and the directorate or management of the banking institution concerned and approwd by the reserve bank, shall be submitted to the central government for its sanction and that government may by order in writing (hereafter in this section referred to as the order of sanction) accord its sanction thereto 20 (3) notwithstanding anything contained in this act or any other law for the time being in force or any instrument regulating the constitution of the banking institution concerned, the terms and conditions as sanctioned by the central government shall come into effect on the date specified by the central government in this behalf in the order of sanction and be binding upon the state bank and the banking institution concerned as well as upon the shareholders (or, as the case may be, proprietors) and creditors of that banking institution (4) if for any reason the terms and conditions cannot come into effect on the date specified in the order of sanction, the central government may fix another suitable date for that 25 purpose (5) on the date on which the terms and conditions as aforesaid come into effect the business and the assets and liabilities of the banking institution concerded as covered by the acquisition shall, by virtue, and in accordance with the provisions, of the 30 order of sanction stand transferred to, and become respectively the business and the assets and liabilities of, the state bank (6) the consideration for the acquisition of the business and the assets and liabilities of any banking institution under this section may, if so agreed upon, be paid either in cash or by 35 allotment of shares in the capital of the state bank or partly in cash and partly by allotment of shares, and the state bank may, for the purpose of any such allotment, increase, subject to the other provisions contained in this act relating to the increase of capital, the capital of the state bank by the issue  of such number of shares as may be determined by the state bank (1) a:t:ty business acquired under this section shan thet~ after be carried on by the state bank in accordance with the provisions of this act, subject to such exemptions or modifications as the central government may, by notification in the oftlcial gazette, make in this behalf in consultation with the s reserve bank: provided that no such exemption or modification shall be made so as to have effect for a period of more than seven years from the date of acquisition (8) notwithstanding anything contained in the industrial 10 disputes act, 1947, or in any other law or in any agreement for 14 of 1947 the time being in force, on the acquisition of the business and the assets and liabilities of any banking institution under this section, no officer or other employee of that banking institution shall be entitled to any compensation to which he may be entitled is under that act or that other law or that agreement and no claim in respect of such compensation shall be entertained by any court, tribunal or other authority, if on his having accepted in writing an offer of employment by the state bank on the terms and conditions proposed by it he has been employed in accordance 20 with such terms and conditions (9) the central government may, if it considers necessary or expedient in the case of any banking institution in relation to which an order of sanction has been made under this section, 'appoint, whether before or after the coming into effect of the 25 terms and cond tions relating to the acquisition of the business and the assets and liabilities of that banking institution, a suitable person to take over the management of that banking institution for the purposes of winding up its affairs and distributing its assets, and the expenditure incurred in connection with such 30 management (including the remuneration for the person so appointed and his staff, if any) shall be paid out of the assets of the banking institution or by the state bank as the central government may direct (10) simultaneously with the appointment of a suitable 35 person to take over the management of any banking institution under sub-section (9) or immediately thereafter, the central government shall issue directions to be followed by that person in the management of that banking institution for the purposes aforesaid and thereupon- 40 (a) the provisions of the companies act, 1956 or the bankilig companies act, 1949, or any other law for the time' i of 19,6 10 o! 1949 being in force or any instrument having effect by virtue of any such act or law, in so far as they are inconsistent with such directions, shall cease to apply to or in relation to that banking institution; s (b) all persons in charge of the management, including any person holding office as manager or director of the banking institution immediately before the issue of such· directions, shall be deemed to have vacated their offices as such; and 10 (c) the person appointed to take over the management of the banking institution shall in accordance with those directions take all such steps as may be necessary to facilitate the winding up of its affairs and distribution of its assets (11) the central government, when satisfied that nothing 15 further remains to be done in order to wind up the affairs of any such banking inst1tution, may by another order in writing direct that as from such date as may be 'specified therein the banking institution shall stand dissolved and thereupon any such direction shall have effect notwithstanding anything to the con-20 trary contained in any other law (12) no action under this section shall be questioned on the ground merely of any defect in the constitution of any banking institution in relation to which such action has been taken (13) in this semon "banking institution" includes any indivi-25 dual or any association of individuals (whether incorporated or not, or whether a department of government or a separate institution), carrying on the business of banking' 7 in section 36 of the principal act, after sub-section (3) the amendment , of ~on following sub-section shall be inserted, namely:-36 30 "(4) no amount applied for any of the purposes specified in sub-section (2) shall, for the purposes of the indian income-tax act, 1922, be treated as income, profits or gains of the state bank" 8 in section 41 of the principal act,-amendment at sectiod 41 3s (a) in sub-section (1), for the words, brackets and figures "sub-section (1) of section 144 of the indian companies act, 1913", the words and figures "section 226 of the companies act, 1956" shall be substituted; (b) in sub-section (5), for the word "flrat", the word "annual" shall be substituted; (c) in clause (d) of sub-section (7), for the words "profit s and loss" occurring for the second time, the words "profit or loss" shall be substituted amendment 9 in section 42 of the principal act, in sub-section (1) for the ~ aeaion word "hereinafter", the words "in this act", shall be substituted amendment 10 in section 50 of the principal act, for clause (0) of sub-section 10 ~ section (2), the following clause shall be substituted, namely:-"(0) the establishment and maintenance of superannuation pension, provident or other funds for the benefit of the employees of the state bank or of the dependants of such employees or for the purposes of the state bank, and the granting of superannua- is tion allowances, annuities and pensions payable out of any such fund;"  statement of objects and reasonscertain minor amendments in the state bank of india act, 1953, have been found necessary in the light of the experience gained since the bank was originally established in 1955 the amendments proposed are explained in detail in the notes on clauses attached to the bill new delhi; morarji desal the 3rd february, id5d clause 2-section 22 deals with the disqualifications for appointment as a director of the central board of the bank or local board or local committee the amendments proposed are intended to remove the prohibition in respect of a legal or technical adviser of the bank being appointed as a member of such boards or committees and to define some of the expressions used in the section  clause 3-the amendment is of a drafting natureclause 4-section 33 deals with the business which the bank is permitted to transact clause (i) (d) of the section as it stands is capable of being so interpreted as to permit the state bank to make loans on the primary security of the shares of ordinary joint stock companies this is not, however, the intension, and the object of the amendment is to clarify the position opportunity is also being taken to redmft clause (xii) so as to improve its language clause 5-the language of sub-sections (3) and (4) of section 34 of the principal act is somewhat obscure, and it is proposed to redraft these sub-sections, so as to make the meaning clear clause 6-section 35 of the state bank of india act provides for the acquisition by the state bank through negotiation of the business of any existing bank it has, however, been found from actual experience that the procedure for the acquisition which is now prescribed is elaborate and time-consuming, and it is proposed accordingly to redraft the section, so as to simplify the procedure the amendments provide,-(a) that if the scheme for the transfer of the assets p  " liabilities to the state bank is approved by the boards of directors of the two institutions, such a decision will prevail in spite of any statutory or other provision to the contrary; (b) that the formal transfer can be made effective through an order of the central government, without the necessity of executing elaborate legal documents; (c) that the residuary institution, after the transfer of its assets and liabilities to the state bank may, if necessary, be wound up, according to a simpler procedure than is now pre--scribed; (d) that the provisions of section 25f and 25ff of the industrial disputes act, 1947, in regard to retrenchment compensation, which are intended to be applicable in a case in which there is a substantial break in the continuity of employment or a reduction in emoluments 01' other benefits, will not be applied, in the case of employees whose services are transferred with their consent to the state bank, on the merger of the itlltitution in which they were previously employed claule 7-section 36 of the principal act provides for certaili payments being made to the state bank of india in reimburesment of the losses incurred by it on the establishment of new branches it is proposed to clarify the intention that such payments will not be treated as income chargeable to income-tax cza,j,ses 4 and 10-sub-section (1) of section 50 of the principal act confers on the central boarti of the state bank the power to make regulations for the conduct of the affairs of the bank after ~onsultation with the reserve bank and with the previous sanction of the central government among the powers thus specified is a power to establish a pension fund for the benefit of employees who have entered the service of the bank after july 1, 1955 there is some inconsistency between this provision and the provision made in section 30 of the life insurance corporation act, 1956, read with section 44 ibid and it is, therefore, proposed to introduce a new clause (xxa) in section 33 and to redraft section 50 (2) (0) so as to make it clear that the new pension fund for fresh entrants to its service can be established by the bank  ,sub-section (10) of section 35 of the state bank of india act, as  bow ,propesed, confers on the central government power to issue 'certain directions for facilitating the orderly winding up of banking inetitutiona,woose business is taken over by the state bank of india , under that section_ it is contemplated that the directions, if any, will be issued only in cases where the residuary company, after it has completely transferred its banking business, will have no further functions todtscharge the delegation of power to 'the ;central gov-, ernment in such a case to simplify the somewhat: elaborate '})l'ocedure for winding up which is otherwise prescribed by the law is'consldered to be reasonable the new clause (xxa) of section 33, read with sub-section (2) (0) "  of-section, 50 as row proposed, clarities the· position in' regard 10 the establishment of 'certain pension; and provident :iundafol' the employees of the bank the' necessary regulations for-this pup&se will be made' within the scope of ,the power which bas' already: <been conferred" on the central board of the state ,bank -uddef, 1iection 50 (1)' of ~ act the dfjegationof leg1slative power in both the cases is ot the nor-,mal ,tjpe - - - - - - 2z '(1) no person shall be qualified to be a medor of the i?isqualifica-central 'board or a member of b local board 'or of a local committee ~ ifof cedtrai board or (a) he holds the office of director, provisional director :-ef'!:rhip promoter, agent or manager of any banking company already borrd~ or established or advertised as about to be established; or commituel (b) 'hevis a salaried officer of government' not specially authorised by the central govemment to be a director or member; or ( c) -he' has been :removai' or dismissed·from 1ibe service of government on a charge of eorruption or bribery; or (d) he holds any office of profit under the state bank other than the office of chairman, vice-chairman or manaem directol'; or - - - - -  23 -if a director of the central- board or b member;of a local vacatioo of board or a local committee--office or dirccton, etc (a) becomes subject to any of the disqualifications mentioned in section' 22; or (b) resigns his office by giving notice in writidg under his hand, in the case of the chairman and vice-chairman, to the central government and in the case of other directors or members of local boards or committees, to the central board, and the res'gnation is accepted; or (c) is ahseat without,leave of the central board, the local board or the local committee of which he is a director or member, as the 'case may be, for more than three consecutive meetidga thereof; his leat shall thereupon' become weant: provided that nothing in claus& (c) shall··applytothechairmtm in relation to his membership of a local board or of a loeaicoin-' mittee  - - -  - ii 33 subject to the other provisions contained in this act, the stat bank jilqycarry on and transact any of the following kinds of business, namely:-other bulineti which the state bank may tj'aduet (i) the advancing and lending of money and the opening of cash credits upon the security of-(a) stocks, funds and s~urities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in india or in any other country in which the state bank has a branch; (b) debentures or other securities for money issued by or on behalf of a district board, municipal board, committee or other local authority under the authority of any central act, provincial act or state act or of any law for the time being in force in any;other country in which the state bank has a branch; (c) subject to such directions as may be issued by the central board, debentures of companies with limited liability registered either in india or in such other country as the central government may approve in this behalf; (d) subject to such directions as may be issued by the central board, shares and debentures of corporations established under any law for the time being in force in india;  (xii) the transacting of peculiary agency business on commission and the entering into of contracts of indemity, suryship or guarente with specific security or otherwise;    34 (1) [10] m cbuiiaeu wbic:b the state 8adt may not indiiid (3) the state bank shall not discount or buy, or advance or lend, or open cash credits, on the security of any negotiable instrwnent ttf any individual or firm payable at the place where it is presented for discount which does not carry on it the several responsibilities of at least two persons or firms unconnected with each other in general partnership  (4) the state bank shall not discount, lend or advance or open cash credits or the security of any negotiable security (not being a security in which a trustee may invest trust money under section 20 1 of tl82 of the indian trusts act, 1882, or the corresponding provision of iaw for the time being in force in any country where the state bank has a branch) which-(a) at the date of the proposed transaction has a longer period to run than fifteen months, if the security is a bill drawn for the purpose of financing seasonal agricultural operations and six months in other cases; or (b) if the security is a bill drawn after sight, it is drawn for a longer period than fifteen months in the case of a bill drawn for the purposes of financing seasonal agricultural operations end six months in other cases                '"                                         '"                                                                 '"                                                                                          '"                                                                                                                  '"                                                                                                                                           '" 35 (1)                -                                         '"                                                                 '"                                                                                          '"                                                                                                                  '"                                                                                                                                           -                                                                                               state                                                                                                       bank                                                                                               may acquire                                                                                               the busines8                                                                                               of                                                                                                      other (2) if the terms and conditions relating to the acquisition of any bank& 7 of 1913 10 011949 such banking institution are approved by the central board and the directomte of the banking institution concerned and are also approved by the reserve bank, they shall be submitted to the central govern-ment, and, if sanctioned by the central government by order in writing, shall, notwithstanding anything to the contrary contained in the indian companies act, 1913, or in the banking companies act, 1949, be binding on the state bank and the banking institution con-cerned as well as the shareholders and creditors     (3) the consideration for the acquisition of any banking institu-tion or of any assets or liabilities of a banking institution under this section may, if so agreed upon, be paid either in cash or by allotment of shares in the capital of the state bank or partly in cash and partly by way of such allotment, and the state bank may, for the purpose of flily such allotment of shares, increase, subject to the other provisiollj contained in this act relating to the increase of capital, the capital of the state bank by the issue of such number of shares as may be determined by the state bank     (4) any banking business acquired under this section shall there-after be carried on by the state bank in accordance with the provi-sions of this act subject to such exemptions or modifications as the central government may, by notification in the official gazette, make in this behalf in consultation with the reserve bank::   provided that no such exemption or modification shall be made so as· to have effect for a period of more than seven years from the dab- of acquisition                                                                          -                   -                             -                                      -                                                -                                                          - aucht a\ (l)'rm-'aftainoftbe stat bank shall be auditadr;-by two -auditors dulyqualified to act as auditors of companies under ubsection (1) of section 144 of the indian companies act, 1913, ,wbo-7,o( 1913· shall be- appointed by the reserve bank in consultation with the central government - - - - - - (5) the auqitor& shall severally be, and continue to act as, auditors un til the jirst general meeting ,iter their respective appointment, and if any vacancy ~es before the expiry of the term' of offtce of an auditor, the -vacancy may be filled by the reserve bank  - - - - (7) the auditors shall make a report to the central government upon the annual balance sheet and accounts, and in every such report they shall state-(a) whether, in their opinion, the balance sheet is a full and fair balance sheet containing all the necessary particulars and properly d,rawn up so as to exhibit a true and correct view of the affairs of the state bank, and in caae they have called for any explanation or information, whether it has been given and whether it is saiisfactoryj ('0) whether or not the transactions of the state bank which' have come to their' notice have been within the powers of the state bank; (c) whether or dot the returns received from the·oftiees'snd· branohesof  the state bank have been found adequate for the purpose' of their audit; (d) whether -the profit and loss account show  a true balance of profit and loss £or the period covered by such account; ·and - - - - - - bajaoce 42 (1) a general meeting (hereinafter referred to as an annual ~~eet s:~ general meeting) shall be held at such time end at such place where_ ~ank::lbe there is a local head offiee of the state bank, as shall from -time to _ =e at time be specified by the central board before the end of march in  meetina· each year, and a general meeting may be convened by the state bank at any other time: provided that the first annual general meetidg-ihall be held at  bombay  - - - - - - - - - - - - (2) in particular, and without prejudice to the generality of the iulatiom reforegoing power, such reguletions may provide for-- - - - - (0) the establishment and maintenance of pensions, provident or other funds for the benefit of employees of or for the purposes of the state bank; - - - - - -  a billfurther to amend the state bank of india act, 1955 the president has, in pursuance of clause (i) of article ii 7 and clause (i) of article 274 of the constitution of india, recommended to lok sabha the introduction of the bill m n kaul, sscr'tary' (shr, morarji dlsai, minister of financ) gmgjpnd-ls-i-1916(b)ls-19-a-59- 1650 