 the banking companies (amendment) bill, 1959(as introduced in lok sabra on 23rd february, 1959)  the banking companies (amendment) bill, 1959 (as introduced in lok sabha)a bill further to amend the banking companies act, 1949 be it enacted by parliament in the tenth year of the republic of india as follows:-1 (1) this act may be called the banking companies (amend- short title ment) act, 1959 and com--mencemeot 5 (3) it shell come into force on such date as the central government may, by notification in the official gazette, appoint % in section 5 of the banking companies act, 1949, (hereinafter amendment referred to as the principal act), in sub-section (l) of section s· (i) after clause (c), the following clause shall be inserted, 10 namely:-'(cc) "branch" or "branch office", in relation to a banking company means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, ] s or where any of the forirls of business referred to in subsection (i) of section 6 is tmnsacted;'; (ii) for clause (d), the following clause shall be substituted, namely:-, (d) "company" means any company as defined in section 20 3 of the companies act, 1956, and includes a foreign company within the meaning of section 591 of that act;'; (iii) for clause (h), the following clause shall be substituted, numely:-'(h) "managing director", in relation to a banking company, means a director who, by virtue of an agreement with 2s ls-l the banking company or of a resolution passed by the banking company in general meeting or by its board of directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes 5 a director occupying the position of a managing director, by whatever name called;'; (iv) clauses (i), (k) and (m) shall be omitted; i of j9s6 (v) after clause (n), the following clause shall be inserted, namely:-10 " (0) all other words and expressions used herein but not defined and defined in the companies act, 1956, shall have the meanings respectively assigned to them in that act" insertion of 3 after section 5 of the principal act, the following section shall is ~ eection be inserted, namely:-"5a save as otherwise expressly provided in this act,-al:t to override memorandum articles, etc (a) the provisions of this act shall have effect notwithstanding anything to the contrary contained in the memorondum or articles of a banking company, or in any agree- 20 ment executed by it, or in any resolution passed by the banking company in general meeting or by its board of directors, whether the same be registered,executed or passed, as the case may be, before or after the commencement of the banking companies (amendment) act, 1959; and 2s (b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this act, becl)me or be void, as the case may be" amendment lcction 6 4 in section 6 of the principal act, in clause (b) of sub-section 30 (1), for the words "maooging agent", the words "managing agent or secretary and treasurer" shall be substituted e amen~ent 5 in section 7 of the principal act, for the proviso, the following of section 7· proviso shall be substituted, namely:-  i "provided that nothing in this section shall apply to-3~ (n) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19 whose oome indicates that it is a subsidiary of that banking company;  lof(b) any association of banks formed for the protection of their mutual interests and registered under section 25 of the companies act, 1956"  samendment of section 10 6 in section 10 of the principal act, in sub-section (1),-(i) in clause (b), for the proviso, the following proviso shall be substituted, namely:-"provided that nothing contained, in this clause shall 10 apply to the payment by a banking company of-(a) any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme j s framed by such banking company or in accordance with the usual practice prevailing in banking business; (b) any commission to any broker (including guarantee broker), cashier-contractor, clearing and forwarding agent, auctioneer or any other person, employed by the bunking company under a contract otherwise 20 than as a regular member of the staff of the company"; (ii) in clause (c), for sub-clause (i), the following subclause shall be substituted, namely:-"(i) who is a director of any other company not being-(a) a subsidiary of the banking company, or  j of 195625 (b) a company registered under section 25 of the companies act, 1956: provided that the prohi!jition in this sub-clause shall not apply in respect of any such director for a temporary period not exceeding three months or such further period not 30 exceeding six months as the reserve bank may allow" 7 in section 11 of the principal act,-amendmmt of section ii 3s (i) in sub-section (1), for the words, "unless it has paid-up capital and reserves of such aggregate value as is hereinafter required by the section", the words "unless it complies with such of the requirements of this section as are applicable to it" shall be substituted; (ii) for sub-section (2), the following sub-section shall be substituted, namely,-"(2) in the case of 'l banking company incorporated outside india-(a) the aggregate value of its paid-up capital and reserves shall not be less than fifteen lakhs of rupees and if it has a place or pluces of business in the city of bombay or calcutta or both, twenty lakhs of rupees; and (b) the banking company shall deposit and keep deposited with the reserve bank either in cash or in the ] 0 form of unencumbered approved securities or partly in wsh and partly in the form of such se<:urities an amount which shall not be less than the minimum required by clause (a): provided that any such banking company may at any 15 time replace-(i) any securities so deposited by cash or by any other unencumbered approved securities or partly by oosh and partly by other such securities, so however, that the total ~mount deposited is not affected; (ii) any cash so deposited by unencumbered approv- 20 ed securities of an equal value"; (iii) in sub-section (4), the words "the proviso to" shall be omitted~ (iv) for sub-section (5), the following sub-section shall be 25 substituted, namely:-'(5) for the purposes of this section,-(a) "place of business" means any office, sub-office, sub-poy office and any place of business at which deposits are received, cheques cashed or moneys lent; (b) "value" means the real or exchangeable value, 30 and not the nominal value which ffiily be shown in the books of the banking company concerned' amen4ment 8 in sect:on 12 of the principal act, in sub-section (2), after the of secuon 12 words "exercise voting rights", the words "on poll" shall be inserted insertion of 9 after section 14 of the principal act, the following section shall 35 ~j section be inserted, namely:-pro~on "14a (1) notwithstanding apything contained in section 6, " ~~~;~r: no banking company shall create a floating charge on the underassets taking or any property of the company or any part thereof, unless the creation of such floating charge is certified in writing by the 40 reserve bank as not being detrimental to the interests of the depositors of such company (2) any such charge created without obtaining the certincate of the reserve bank shall be invalid (3) any banking company aggrieved by the refusal of a certificate under sub-section (1) may, within ninety days from the s date on which such refusal is communicated to it, appeal to the central government (4) the decis!on of the central government, where an appeal has been preferred to it under sub-section (3) or of the reserve bank where no such appeal has been preferred, shall be final" 10 10 section 15 of the principal act shall be re-numbered as sub- ~=~ section (1) thereof, and after sub-section (1) as so re-numbered, the following sub-section shall be inserted, namely:-1 of 1956 , (2) notwithstanding anything to the contrary contained in sub-section (1) or in the companies act, 1956, a banking company is may pay dividends on its shares without writing off the depreciation, if any, in the value of its investments in approved securities in any case where such depreciation has not actually been capitalised or otherwise accounted for as a loss" 11 for sections 17 and 18 of the principal act, the following sec- ~f~~tion 20 tions shall be substituted, namely: _ s~ons for scctlons 17 and 18 "17 (1) every banking company incorporated in india shall reserve create a reserve fund and unless the amount in such fund together fund with the amount in the share premium account is not less than its paid-up capittal, shall, out of the balance of profit of each year 25 as disclosed in the profit and loss account prepared under section 29 and before any dividend is declared, transfer to the reserve fund a sum equivalent to not less than twenty per cent of such profit (2) where a banking company appropriates any sum or 30 sums from the reserve fund or the share premium account, it shall, within twenty-one days from the date of such appropriation, report the fact to the reserve bank, explaining the circumstances relating to such appropriation: provided that the reserve bank may, in any particular case, extend the said period of twenty-one days by such period as it thinks fit or condone any delay in the making of such report 18 every banking company not being a scheduled bank shall cash reserve maintain in india, by 'w'ly of cash reserve with itself or in current account opened with the reserve bank or the state bank of india or any other bank notified by the central government in this behalf or partly in cash with itself and partly in such account or accounts, a sum equivalent to at least two per cent of its time liabilities in india and five per cent of its demand liabilities in india, and shall submit to the reserve bank before the fifteenth 5 day of every month a return showing the amount so held on friday of each week of the preceding month with particulars of its time and demand liabilities in india on each such friday, or, if any such friday is a public holiday under the negotmble instruments act, 1881, at the close of business on the precednig work 10 ing day: explanation-in this section and in section 24, "liabilities in india" shall not include-(a) the paid-up capital or the reserves or any credit balance in the profit and loss account of the banking 15 company; (b) any advance taken from the reserve bank or from the state bank of india or from the refinance corporation for industry (private) limited, or from any bank notified by the central government under clause (c) of the explana- 20 tion to sub-section (1) of section 42 of the reserve bank of india act, 1934' ament!mellt 12 in section 19 of the principal act, in sub-section (1), after the of section 19· word "namely", the words "the carrying on of the business of banking exclusively outside india," shall be inserted amendment of!lection 22 13 in section 22 of the principal act,-(i) for sub-section (1), the following sub-secfon shall be substituted, namely:-"(1) save: as hereinafter provided, no company shall carryon banking business in india unless it holds a licence 30 issued in that behalf by the reserve bank and any such licence may be issued subject to such condit'ons as the reserve bank may think fit t9 impose"; (ii) in sub-section (2), in the first proviso for the words figure and brackets "sub-section (2) ", the words "this sect:on" 35 shall be substituted (iii) for sub-sections (4) and (5), the following sub-sections shall be substituted, namely:-" (4) the reserve bank may cancel a licence granted to a banking company under this section-s (i) if the company ceases to carryon banking bus'· ness in india or goes into liquidation; or (ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or 10 (iii) if at any time, any of the conditions referred to in sub-section (3) is not fulfilled: provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the reserve bank, unless it is of opinion that the delay will be prejudicial to the interests of the company's depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition 20 (5) any banking company aggrieved by the decision of the reserve bank cancelling a licence under this section may, within thirty days from the date on which such decision is communicated to it, appeal to the central government (6) the decision of the central government where an appeal has been preferred to it under sub-section (5) or of the reserve bank where no such appeal has been preferred shall be fina!" 14 for section 23 of the principal act, the following section shall substituti~n b b· of new sectlon e su stltuted, namely: -for section 23 3s '23 (1) without obtaining the prior permission of the restri~ona ! r onopenmgo eserve banknew, and transfer of (a) no banking company shall open a new place of busi- existing, ness in india or change otherwise than within the same city, ~!::~~~ town or village, the location of an existing place of business situated in india; and (b) no banking company incorporated in india shall open a new place of business outside india or change otherwise than within the same city, town or village in any country or area outside india, the location of an existing place of business situated in that country or area: provided that nothing in this sub-section shall apply to the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs 5 thereof within which the banking company already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion (2) before granting any permission under this section, the 10 reserve bank may require to be satisfied by an inspection under section 35 or otherwise as to the financial condition and history of the company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may ) 5 be change of location, of the place of business (3) the reserve bank may grant· permission under subsection (1) subject to such condtions as it may think fit to impose either generally or with reference to any particular case (4) where, in the opinion of the reserve bank, a banking 20 company has, at any time, failed to comply with any of the conditions imposed on it under this section, the reserve bank may, by order in writing and after affording reasonable opportunity to the banking company for showing cause against the action 25 proposed to be taken against it, revoke any permission granted under this section (5) for the purposes of this section "place of business" includes any sub-office, pay office, sub-pay office and any place of business at which deposits are received, cheques cashed or moneys lent or where any of the forms of business referred to 30 in sub-section (l) of section 6 is transacted' 15 in seetion 24 of the principal act,-ameddment of icdion 24 (i) in sub-section (1),-(4) after the words "shall maintain", the words "in 35 india" 'shall be inserted; (b) for the explanaticm the following explanation shall be substituted, namely:-'explanation-for the purposes of this section, "unencwnbered approved securities" of a banking company shall include its approved securities lodged with 40 another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of'; (ii) for sub~section (2), the following sub-section shall be substituted, namely:-5 10 3 r 1'34· is "(2) in computing the amount for the purposes of subsection (1), the deposit required under sub-section (2) of section 11 to be made with the reserve bank by a banking company incorporated outside india and any balances maintained in india by a banking company in current account with the reserve bank or the state bank of india or with any other bank which may be notified in this behalf by the central government, including in the case of a scheduled bank the balance required under section 42 of the reserve bank of india act, 1934, to be so maintained, shall be deemed to be cash maintained in india"; (iii) in sub-section (3), after the words "its time and demand liabilities", the words "in india" shall be inserted 1 in section 25 of the principal act,-ameadmellt ~o at) of 1111 2s (i) for sub-sections (1) and (2), the following lub-aectionl ahall be substituted, namely:-"(1) the assets in india of every banking company at the close of business on the last friday of every quarter or, if that friday is a public holiday under the negotiable instruments act, 1881, at the close of the business on the preceding working day, shall not be less than seventy-five per cent of its demand and time liab:1ities in india 30 (2) every banking company shall, within one month from the end of every quarter, submit to the reserve bank a return in the prescribed form and manner of the assets and liabilities referred to in sub-section (1) as at the close of business on the last friday of the previous quarter, or, if that friday is a public holiday under the negotiable instruments act, 1881, at the close of business on the preced~ ing working day"; 36 of 1111 3s (ii) in sub-sect;on (3), clause (b) shall be re-iettered as clause (c), and the following shall lde inserted as clause (b), namely:-'(b) "liabilities in india" shall not include the paid~up 40 capital or the reserves or any credit balance in the profit and 10il account of the banking company;'  117 (a) l • --1am~ent 17 in section 27 of the principal act, in sub-section (2), for the of section 27 words "the classification of advances and investments of banking companies in respect of industry, commerce and agriculture", the words ':the investments of a banking company and the classification of its advances in respect of industry, commerce and agriculture" 5 shall be substituted amendment 18 in section 28 of the principal act, for the words and figures of eection 28 "under section 27", the words "under this act" shall be substituted ~en~ent 19 in section 32 of the principal act, for sub-section (1), the o tecuon 32 following sub-section shall be substituted, namely:-to "(1) where a banking company in any year furnishes its accounts and balance sheet in accordance with the provisions of section 31, it shall at the same time send to the registrar three copies of such accounts and balance sheet and of the auditor's report, and where such copies are so sent, it shall not 15 be necessary to file with the registrar, in the case of a public company, copies of the accounts and balance sheet and of the auditor's report, and in the case of a private company copies of the balance sheet and of the auditor's report as required by subsection (l) of section 220 of the companies act, 1956; and the 20 i ~ 19" copies so sent shall be chargeable with the same fee and shall be dealt with in all respects as if they were filed in accordance with that section" amendment 20 to section 35 of the principal act, the following explanation oflection 3s· shall be added, namely:-%5 'explanation-for the purposes of this section, the expression "banking company" shall include-(i) in the case of a banking company incorporated outside india, all its branches in india; and (ii) in the case of 8 banking company incorporated in 30 il!dia, all its branches whether situate in india or outside india' 21 in section 35b of the principal act-amendment ofmction 3s b (i) in clause (a) of sub-section (1), for the words "managing or whole-time director or of a director not liable to retire by 35 rotation", the words "managing director or any other director, whole-time or otherwise" shall be substituted; (ii) to sub-section (1), the following explanation shall be it(ided, namely:-"explanation-for the purposes of this sub-section, any 40 provision conferring any benefit or providing any amenity 5 or perquisite, in whatever form, whether during or after the termination of the term of office of the manager or the chief executive officer by whatever name called or the managing director, or any other director, whole-time or otherwise, shall be deemed to be a provision relating to his remuneration"; 10 (iii) in sub-section (2), for the words, brackets and figures "apply to a banking company after the commencement of the banking companies (amendment) act, 1956", the following  shall be substituted, namely:-"apply to any matter in respect of which the approval of the reserve bank has to be obtained under sub-section (1)" 22 in section 36 of the principal act, in clause (b) of sub-section amen'!meot 15 (1), for the figures "45", the figures and letter "44a" shall be substi- ofaecnod36 tuted 23 in part ii of the principal act, after section 36, the following insertio~ of   new section section shall be inserted, namely: -36 a "36a (1) the provisions of sections 11, sub-section (1) of ~e~tain pthro--  - visions of· e 20 section 12 17, 18, 24 and 25 shall not apply to a banking com- act not to panya~ply to ~r­tam bankmg (a) which, whether before or after the commencement companies of the banking companies (amendment) act, 1959, has been refused a licence under section 22, or prohibited from 25 accepting fresh deposits by a compromise arrangement or scheme sanctioned by a court or by any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposists by virtue of any alteration made in its memorandum; or 30 (b) whose licence has been cancelled under section 22, whether before or after the commencement of the banking companies (amendment) act, 1959 (2) where the reserve bank is satisfi'ed that any such banking company as is referred to in sub-section (1) has repaid, 35 or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the reserve bank may, by notice published in the official gazette, notify that the banking company has ceased to be a banking company within the meaning of this act, and thereupon all the provisions of this act applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice 24 semon 38a of tht! principal act shall be re-numbered as section 36b ~t 25 in section 37 of the principal act, after sub-section (3), the eet10n 37 following sub-section shall be inserted, namely:-"(4) where the reserve bank is satisfied that the affairs 5 of a banking company in respect of which an order under subsection (1) has been made, are being conducted in a manner detrimental to the interests of the depos'tors, it may make an application to the high court for the winding up of the ,company, and where any such application is made, the high court 10 shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section 16 for section 38 of the principal act, the following section shall be substituted, namely:-15 subititubod 01 new secd on for leetion 38 ~up court "38 (1) notwithstanding anything contained in section 3!h, section 392, section 433 and section 583 of the companies act, 1956, but without prejudice to its powers under sub-section (1) i of it~' of section 37 of this act, the high court shall order the winding up of a banking company-20 (a) if the banking company is unable to pay its debts; or (b) if an application for its winding up has been made by the reserve bank under section 37 or this section (2) tht! reserve bank shall make an application under this 25 section for the winding up of a banking company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35 (3) the reserve bank may make an application under this section for the winding up of a banking company-30 (a) if the banking company-(i) has failed to comply with the requirements specified in section 11; or (ii) has by reason of the provislons of section 22 become disentitled to obrry on banking business in 35 india; or (iii) h~is been prohibited from receiving fresh deposits by an order under clause (a) of sub-section (4) of section 35 or under clause (b) of sub-section (3a) of section 42 of the reserve bank of india act, 1934; or  t 2 o( 19345 10 (iv) having failed to comply with any requirement of this act other than the requirements laid down in section 11, has continued such failure, or, having centravened any provision of this act, has continued such contravention, beyond such period or periods as may be specified in that behalf by the reserve bank from time to time, after notice in writing of such failure or contravention has been conveyed to the bank'ng company; or (b) if in the opinion of the reserve bank-(i) a compromise or arrangement sanctioned by a court in respect of the banking company cannot be worlred satisfactorily with or without modifications: or (ii) the returns, statements or information furnished to it under or in pursuance of the provisions of this act disdose that the banking company is unable to pay its debts; or (iii) the continuance of the banking compony is prejudicial to the interests of its depositors  20 j r 1956 30 (4) without prejudice to the provisions contained in section 434 of the companies act, 1956, a banking company shall be deemed to be unable to pay its debts if it has refused to meet any lawful demand made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the reserve bank or within five working days, if such demand is made elsewhere, and if the reserve bank certifies in writing that the banking company is unable to pay its debts (5) a copy of e~ry application made by the rpserve bank under sub-section (1) shall be sent by the reserve bank to the registrar" 27 in section 39 of the principal act, for the words and figures afmen~rnent -    4" 0 section 39· 35 "in sectlon 448", the words and figures "in secbon 448 or section 49 shall be substituted 28 after section 39 of the principal act, the followmg section insertion oc  new section shall be mserted, namely: -39a '39a (1) all the provisions of the companies act, 1956, af~cation i  i 'd  f th t  t t 0 mparues re atmg to a iqui ator, 10 so ar as ey are no mcons!s en act to with this act shall apply to or in relation to a liquidator liquidators appointed under section 38a or section 39, (2) any reference to the "official liquidator" in this part and part ilia shall be construed as including a reference to any liquidator of a banking company'  amendment of section 43 a29 in s!!ction 43a of the principal act, in sub-section (1) t after the words "have been made,", the words "or adequate provision to s the satisfaction of the high court for such payments has been made" shall be inserted 30 for section 44 of the principal act, the following s'8ction shall be substituted, namely:-substitution of new section for section 44 powers of high court in voluntary winding up "44 (1) notwithstanding anything to the contrary contained 10 in section 484 of the companies act, 1956 no banking company i" ,  " may be voluntarily wound up unless the reserve bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue (2) the high court may in any case where a banking 15 company is being wound up voluntarily, make an order that the voluntary winding up shall continue, but subject to the supervision of the court (3) without prejudice to the provislons contained in sections 441 and 521 of the companies act, 1956, the high court 20 r ef 1956 may' of its own -motion and shall on the application of the reserve bank, order the winding up of a banking company by the high court in any of the following cases, namely:-(a) where the banking company is being wound up voluntarily and at any stage during the voluntary winding 25 up proceedings the company is not able to meet its debts as they eccrue; or (b) where the banking company is being wound up voluntarily or is being wound up subject to the supervision of the court and the high court is satisfied that the volun- 30 tary winding up or winding up subject to the supervision of the court cannot be continued without detriment to the interests of the depositors" 31 section 45k of the principal act shall be omitted  omission of section 4sk32 in section 450 of the principal act, in sub-section (2), after 35 the words "accruel of such claims", the words "or five years frol'll the amendment of tection 450  date of the first appointment of the liquidator, whichever is longer" shall be inserted 33 in section 46 of the principal act,-amendment of aection 46 (i) for sub-section (4), the following sub-section shall be substituted, namely:-5 10  (4) if any other provision of this act is contravened or if any default is made in complying with any requirement of this act or of any order, rule or direction made or condition imposed thereunder, every director, liquidator and other officer of the company and any other person who is knowingly a party to the contravention or default shall be punishable with fine which may extend to five hundred rupees, and where a contravention or default is a continuing one, with a further fine which my extend to fifty rupees for every day during which such contravention or default continues"; (ii) sub-section (5) shall be omitted 34 in section 49 of the principal act, for the words, figures and amen~ent brackets "sections 90, 165 and 255, clauses (a) and (b) of sub-section ofaectlod 49· (1) of section 293 and sections 300 and 416 of the companies act, ~o 1956", the following shall be substituted, namely:-"sections 90, 165, 182, 204 and 255, clauses (a) and(b) of subsection (1) of section 293 and sections 300, 384 and 416 of the companies act, 1956" 35 after section 49 of the principal act, the following 25 shall be inserted, namely:-sections inlertion of new lectlon 49a,49b and 49c "49a no person other than a banking company, the state reatrictionon bank of india or any other banking institution notified by the accep~ of centnll government in this berait shall accept from the public =~iew1t; deposits of money withdrawable by cheque: cheque 30 provided that nothing contained in this section shall apply to any savings bank scheme run by the government 49b notwithstanding anything contained in section 21 of change of the companies act, 1956, the central government shall not =ng by - signify its approval to the change of name of any banking com- company 35 pany unless the reserve bank certifies in writing that it has no objection to such change 49c notwithstanding anything contained in the companies alters lion 0 act, 1~56, no application for the confirmation of the alteration of ~e~o= c»mpiiily the memorandum of e banking company shall be maintainable unless the reserve bank certifies that there is no objection to such alteration" amendment 36 in section 42 of the reserve bank of india act, 1934, in the 2 of 19,4 ;-th~~rfe explanation to sub-section (1), for clause (c), the following ciauae 5 bank of india shall be substituted, namely:-act, 1934 '(c) "liabilities" shall not include the paid-up capital or the reserves or any credit balance in the profit and loss account of the bank or the amount of any loan taken from the bank or from the refinance corporation for industry (privlllte) limited, 10 or from the state bank or from any other bank notified by the central government in this behalf'  statement of objects and reasonsthe banking companies act, 1949, came into force on the 16th march, 1949, and although it was amended in december, 1956, with'it view to extending the powers of supervision and control exercisable by the reserve bank, the question of further amending the act, in order to remove minor omissions or ambiguities in the meaning of certain sections was left over for consideration at a later stage it is now proposed, in the light of the experience gained in regard to the administration of the act, to introduce some amendments, mostly of a non-controversial nature, in order to facilitate the application and enforcement of the act opportunity has also been taken to clarify the position regarding the application of the act to banking companies which have been prohibited from accepting fresh deposits and are in consequence not functioning, normally morarji desai new delhi; the 2nd february, 1959 a brief aceount at the amendments which are now proposed to the banking companies act is given in the notes on clauses below ciau6e 2-some diftlculty has been experienced in the absence of a definition of the words "branch" or "branch offices" which oecur in some sections of the act and it is, therefore, proposed to lnaert a definition of these words, the criter'on for the deftnition being whether banking business, as generally understood, is tranacted at an office some other expressions, already deftned in the banking companies act, have since been defined in the companies act, 1956; and it is, therefore, proposed to make these later definitions in the companies act applicable wherever there is no mconsbtency a special definition of the words "managing director" has however been proposed, in order to exclude directors of banking companies, who are entrusted with supervisory functions in regard to some, but not all, of the activities of a bank some partnership or proprietary concerns, which have been carrying on the business of banking, but are not subject to the control exercised by the reserve bank of ind: a under the banking companies act, have been and are using names and styles which include words uke "bank", iibanker" or iibanking" it is not considered neeessary at this stage to extend to partnerships and individuals the prohibition in respect of the use of words like "bank", "banker", etc, which now applies to all ineorporated companies, or to brln~ such partnerships, etc, within the scope of the bankin~ companies act the deftnition of a company, in seetion s (1) (d) of the banking companies aet 11 propoeed to b" modifted suitably h' m'der to !i1ute tlua etear cl4u18 3-a new section, namely, sa il!! proposed to be added, on the lines of section 9 of the companies act, in order to clarify the position that the banking companies act will prevail, if necessary, against any other provision in the memorandum or articles of u80-dation of a banking company cla'iue -i-according to the existing scheme of the act, a banking company ii!! prevented from being a managing agent of any other company the amendment is intended to prohibit a banking company from being secretaries and treasurers also ii claue &-the amendment is in~ to clarify the position thai foubsidiaries of banking companies, formed in accordance with ·tba provisions of the law, are not prevented from using the nam~ - 'bank" , "banking", etc clause 6-section 10 of the banking companies act prohibit, the employment by a banking company of per sods remunerated on a enmmjssionbasis it is proposed to clarify the intention that this prohibition is applicable only in the case of regular members of :tm ,ataft it has also been considered necessary in the light of experience, to exempt from the scope of the restrictions in section 10 the officiating appointment, for a period which will not exceed nine months in any case, of managers or managing directors, who in respect of such temporary appointments may find it difficult to comply with the provisions of the section clause 7-the amendments are of a drafting nature, and provide for a prohibition, in a positive from, of any withdrawal by a foreign banking company of the cash or securities required under the act to be deposited with the reserve bank of india clause s-the amendment is clarificatory and is intended to brtng the provisions in section 12 of the banking companies act in regard to voting on a show of hands inb line wfth section 87 and para 56 of schedule i to the companies act, 1956 clause 9-section 14 of the bmking companies act, prohibita a banking company from creating a charge on its unpaid capital it is considered desirable, in the interests of depositors, to ,prevent also the creation of a floating charge on the undertaking or' any property of the company, without the prior consent of the reserve bank of india clause 10-section 15 of the banking companies act contemplates that a banking company should maintain its capital intact, by making good from its profits any impairment thereof, before dividents are declared it is proposed to exempt banking compan1ee specifically from any requirement, direct or implied, that depreciation on approved securities should be written off fully, before other appropriations from profits are made, if the securities concerned , have not been sold and if a loss has not actually been incurred clause ll-the interpretation of section 17 of the banking, companies act, which deals with the reserve fund of a banking company baa ilven rise to lome difticu1ty, al it hu been held that the fund has to be maintained intact, and cannot, therefore, be drawn upon, even for the purposes for whch it was originally intended the amendments now proposed are intended to introduce some degree of flexibility in regard to the maintenance and use of the fund section 18 of the act provides for the maintenance of a minimum cash reserve by non-scheduled banks it is proposed to clarify the intention that the reserve should be held in india provision has also been made for the reserve being held in the form of a deposit with the state bank of india, or a notified bank, where this is convenient to a non-scheduled bank clause 12-the statutes of certain foreign countries require banks which propose to carry on business in those countries to incorporate themselves under the applicable local laws section 19 (1) of the principal act is, therefore, proposed to be amplified, so as to enable indian banks which are desirous of opening offices abroad to comply with the requirements of foreign laws clause 13-section 22 of the banking companies act deals with the licensing of banking companies, and has been redrafted so as to provide for conditional licences being granted opportunity has also been taken to indicate in somewhat greater detail, in compliance with the principles of natural justice, the circuiilstances in which a licence'may be cancelled clause 14-in section 23, which deals with the opening of branches, provision has been made, as in section 22, for the grant of conditional licences opportunity has also been taken to recast the section so as to avoid the doubts arising out of the punctuation in the existing section claute 15-section 24 of the principal act provides for the main· tenanre of a minimum percentage of liquid assets, including the cash reserve referred to already, under clause 11 above the amendments proposed are intended to clarify the position that the assets in question must be maintained in india for the purposes of this section, securities pledged to another bank in respect of a loan obtained from that bank will be treated as approved and unencumbered securities to the extent to which they are not drawn against but only the current account balances, if any, maintained with the state bank or other notified banks will be treated as assets for the purposes of the section certain minor draft'ng improvements have also been made clause 16-the object of the amendment is to provide that all the returns under the act will be as on a friday clauses 17 and 18-the amendments proposed are verbai, and are! intended to improve the language of section 27, and to extend the scope of the publication of information in relation to banks, which is contemplated in section 28 clause 19-the amendment is clarificatory, and is intended to harmonise the provisions of section 32 of the banking companies act with those contained in section 220 of the companies act clause 20-section 35 of the banking companies act provides for an inspection of banking companies by the reserve bank of india specific provision for the inspection of offices outside india of indian banks is proposed to be made in this section clause 21-section 55b of the banking companies act provides for the approval by the reserve bank of india of the appointment and remuneration of managing or whole-time directors and chief executive officers of banking companies it is proposed to provide for control being exercised over the remuneration of ordinary directors also, as under the companies act, and to ensure in addition that the effect of the provisions is not nullified in practice by the grant of post-retirement benefits without the approval of the reserve bank clause 22-the reference to section 45 in the existing section 36 is wrong and is being corrected clause 23-the existing position in regard to banking companies, which have been prohibited from carrying on the business of banking currently is not very satisfactory the provisions proposed are intended to clarify the position regarding the applicability of the banking companies act to institutions to which a licence has been refused or which have been otherwise prohibited from accepting fresh deposits, etc clause 25-lt is desirable to restrict the further extension of the period of moratorium if any, which is granted to a banking company after it has suspended payments, if the reserve bank is of the opinion that any such extension will not be in the interests of the depositors provision has been made accordingly clause 26-the drafting of section 38 has been criticised by a high court and a redraft has been proposed, in order to remove the existing difficulty in interpretation opportunity has also been taken to extend the reserve bank's powers to apply to the court for the winding up of banking companies, wherever this is cona!-dered necetlsary etauau 27 and 28-the existing position under the law is that in lieu of the omcial liquidator appointed under the companies act, 1956, non-ofticial liquidators, if any, already appointed before the 1st april, 1956, may continue in omce, and if it is considered necessary, either a court liquidator to be in charge of the banking companies generally, or a special liquidator for any particular banking company may also be appointed the amendments are intended to provide for the exercise by any liquidator appointed for a tanking company of all the powers and functions of the omcial liquidator under the companies act, 1956, and to clarify the position that fees may be realised, as under the companies act, from the companies which are in liquidation, towards the expenses of the liquidation organisation clause 29-section 43a of the banking companies act, which dews with preferential payments by a company in liquidation, provides for the depositors of the company being paid after the preferential payments have been made it is not considered desirable, where provision for any such preferential payments has beef' made, that payments to the depositors should be held up, merely because of any delay in the actual disbursement of any amount due towards preferential claims the existing wording in this section is, therefore, proposed to be suitably amended clause 30-section 44 of the principal act which imposes certain restrictions on the voluntary winding of banking companies is now applicable only to banking companies to which a licence has been granted it is proposed to provide for the restriction being applicable to all banking companies generally and to enhance the powers of the high court in relation to the control of winding up proceedings under this section  clause 3l-the amendment is of a drafting natureclause 32-the special period of limitation which has now been prescribed in relation to the claims by or on behalf of banking companies in liquidation does not cover the case of banks, the claiju of which are already time-barred on the date of the winding up order appropriate provision in relation to such banks is therefore, being made clause 33-it has been noticed that the returns flied by ~ ing companies in liquidation are in several cases incomplete and unsatisfactory the penalties leviable under the section are therefore, being extended, so 88 to ensure compuance with the ftlquirements of the statute by certain otbcers to whom it ddel dc» now speciftcally apply ejau" h-the amendment propoeed are intended te pre,' - private banking company from restricting the voting right of 118 nembers and also from" appointing firms or bodies corporate to an office of profit (the prohibition in regard to these mattera already applies to all public limited companies, including those engaged in banking) clause 35-a new section, namely, 49a is proposed to be inserted in the act in order to restrict the power to open ~r operate accounts on which cheques may be issued to:-(a) banking companies which are governed by the act; and (b) government, which has introduced the system of withdrawal by cheques at postal savings banks at several important towns, and proposes to extend the facility in due course certain safeguards preventing the conversion of banking companies into non-banking companies without the lmowledge or approval of the reserve bank are also being provided clause 36-the provisions contained in sections 18 and 24 of the banking companies act require a company to which the act is applicable to maintain certain minimum percentages of its liabilities in the fonn of cash or other approved forms generally the deposits maintained by scheduled banks with the reserve bank of india under section 42 of the reserve bank of india act are treated u eligible assets for the purposes of these provisions it il proposed to amend section 42 of the reserve bank of india act and also sections 18 and 24 of the banking companies act so as to provide that loans obtained by banking companies from the reftnanee corporation will not be treated as liabilities for tl:» purpohl of thetm mcttou - - -  - - intcrpma-5 (1) in this act, unless there 1s anything repugnant in the lion subject or context,-i - -    (d) "company" means any company which may be wound up under the companies act, 1956; i of 19,6 - - - - - (h) "managing agent" means a person, finn or company entitled to the management of the whole affairs of a banking company by virtue of an agreem~nt with the company or by virtue of the memorandum or articles of association relating thereto, and under the control and direction of the direeton except to the extent, if any, otherwise provided for in the agreement, memorandum or articles of association, and includes any person, firm or company occupying such position by whatever name called; explanatwn-1f a person occupying the position of managing agent calls himself manager or managing director, he shall nevertheless be deemed to be 48 managing agent for the purpoim!8 of this act; - - (i) "private company" has the same meaning m in the companies act, 1958; 1 of t9~ - - - - - - (k) "registrar" has the same meaning a! in the companiel act, 1958; i of 19,6 - - - - -  (m) "scheduled bank" metna a bank for the time hem included in the second schedule to the reserve bank of india act, 1934; and 2 or 19540 - - - - - part u busiluly oj' balfdwo companiu porms of 8 (1) in addition to the business of banking, a banking company business ir ' which bank- may engage in anyone or more of the following forms of busineu, ;n, compa'l- namely:-ie m,, en-- - -  - - attle - (b) acting as agents for any government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a managing agent of a company; - - - - - - 7 after the expiry of two years from the commencement of this use of act, no company, other than a banking company, shall use as part :-~rdk" of its name any of the words "bank", "banker" or "banking" and r<b:k~:":, no company shall carry on the business of banking in india, unless "bankin,  it uses as part of its name at least one of such words: provided that nothing in this s'ection shall apply to any association of banks formed for the protection of their mutual interests i of i~s6 and registered under section 25 of the companies act, 1956 - - - - - - - let (l) no banking company-(a) shall employ or be managed by a managing agent; or managing alents and (b) shall employ or continue the employment of any ~~s~:!i:s personforms of employment (i) who is, or at any time ras been, adjudicated insolvent, or has suspended payment or has compounded with his creditors, or who is, or has been, convicted by a criminal court of an offence involving moral turpitude; or (ii) whose remuneration or part of whose remuneration takes the form of commission or of a share in the profits of the company: provided that nothing contained in this clause shall apply to the payment of any bonus by any banking company in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual practice prevailing in banking business; or (iii) whose remuneration is, in the opinion of the reserve bank, excessive; or 1917 (b) ls-4 (e) shall be managed by any person-(i) who is a director of any other company not beinl a subsidiary company of the banking company; or (ii) who is engaged in any other business or vocation; or (iii) who has a contract with the company for 'its management for a period exceeding five years at anyone time: provided that any contract with the company for its management may be renewed or extended for a further period not exceeding five years at a time if and so often as the directara 80 decide: provided further that nothing in this clause shall apply to a director, other than the managing director, of a banking eompany by reason only of his being such director expianation-for the purpose of sub-clause (iii) of clause (b), the expression "remuneration", in relation to a person employed or continued in employment shall include salary, fees and perquisites but shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in respect of the expenses actually incurred by him in the perfon;nance of his duties - - - - - ltequirentedt 11 (1) notwithstanding anything contained in section 149 of is to ~ithe companies act, 1956, no banking company in existence on the i of 19s6• :ua:f:t~up commencement of this act shall after the expiry of three years ,etves from such commencement or of such further period not exceeding one year as the reserve bank, having regard to the interests of the depositors of the company, may think fit in any particular case to allow, carry on business in india and no other banking company shal1, afver the commencement of this act, commence or carryon business in india, unless it has paid-up capital and reserves of such aggregate value as is hereinafter required by this section (2) in the case of a banking company incorporated outside india, the aggregate value of its paid-up capital and reserves shall not be less than fifteen lakhs of rupees, and if it has a plaee or places of businesl in the city of bombay· or calc'ltta or both twenty laklu of rupees: provided that no such banking company shall be deemed to ha~ complied with the provision~ of this sub·section, unless it deposits and keeps deposited with th, reserve bank an mount not less than the minimum required by this sub-section, either in cash or in un encumbered approved securities or partly in cash and partly in such securities - - - -  (4) any amount ~posited and kept deposited with the reserve bank under the proviso to sub-section (2) by any banking company incorporated outside india shall, in the event of the company ceasing for any reason to carry on banking business in india, be an asset of the company on which the claims of all the creditors of the company in india shall be a first charge (5) for the purposes of this section "value" means the real or exchangeable value, and not the nominal value which may be shown in the books of the banking company concerned  - - - - - - 12 (1) - - - - - regulation of paid-up     cllpital, sub-(2) no person hold 109 shares 10 a banklog company shall, in scribed respect of any shares held by him, exercise voting rights in excess caphitalandd   aut orlle a five per cent of the total votmg nghts of all the share-holders of capital ana the banking company voting rights of shareholders  - - - - - 15 no banking company shall pay any dividend on its shares relt!ictions until all its capitalised expenses (including preliminary expenses," to pay-f   h ii'  b k ts mcnt 0 orgarusation expenses, s are-se 109 commission, ro erage, amoun dividend of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off - - -  '" 17 every banking company incorpomted in india shall maintain a reserve reserve fund, and shap, out of the net profits of each year and before fund any dividend is declared, transfer a sum equiwllent to not less than twenty per cent of such profits te· the reserve fund until the amount of the said fund is equal to the paid-up capital explanation-the provisions of section 349 of the companies act, i of 19~6 1956, shall apply for the purpose of computing net profits under this section as they apply for the purpose of computing net profits under section 348 of the s6id act 18 every banking company not being a scheduled bank shall main- eaah tain by way of cash reserve in cash with itself, or in an account opened re8erve with the reserve bank, or partly in cash with itself and partly in such \lccount, a sum equivalent to at least two per cent of its time liabilities and five per cent of its demand liabilities and shall file with the reserve bank before the fifteenth day of every month three copies of a statement of the amount so held on friday of each week of the preceding month with particulars d its time and demand liabilities on ooch friday relu'iction 19 (i) a banking company shall not form any subsidiary company :b:::y of except a subsidiary company formed for one or more of the following companies purposes, namely, the undertaking and executing of trusts, the undertaking of the administration of estates as executor, trustee or otherwise, the providing of safe deposit vaults or, with the previous permission in writing of the reserve bank, such other purposes as are incidental to the business of banking  - - - - - - licens!ni of banking companies 22 (1) save as hereinafter provided, no company shall carry on banking business in india unless it holds a licence granted by the reserve bank in such behalf (2) every banking company in existence on the commencement of this act, before the expiry of six months from such commencement, and every other company before commencing banking business in l;ldia, shall apply in writing to the reserve bank for a licence under this section: provided that in the case of a banking company in existence on the commencement of this act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of sub-section (2) or is by notice in writing informed by the reserve bank that a licence cannot be granted to it: provided further that the reserve bank shell not give a notice as ~foresaid to a banking company in existence on the commencement of this act before the expiry of the three years referred to in subsection (1) of section 11 or of such further period as the reserve bank may under that sub-section think fit to allow  - - - - - - (4) the reserve bank may-(a) cancel any licence granted under this section where any of the conditions set out in sub-section (3), on the fulfilment of which it required to be satisfied when granting the licence, ceases to be fulfilled or if the c6mpany ceases to carry on banking business in india or goes into liquidation; (b) at any time after grnnting a licence under this section require that any of the said conditions, on the fulfilment of which it did not require to be satisfied when granting the licence, shall be fulfilled to its satisfaction within such time as it may specify, and if the condition is not so fulfilled, cancel the licence (5) any banking company aggrieved by the cancellation of its licence under sub-section (4) may appeal to the central government, and the decision of the central government on such appeal shall be final 23 no banking company shall open a new place of business in ny restriction, part of india or change, otherwise than within the same city, town or ~ :w~~d village, the location of an existing place of business situated in any transfer of part of india, and fto banking company incorporated in india shall ~=~f open a new place of business outside india or change, otherwise than business within the same city, town or village in any country or area outside india, the location of an existing place of business situated in that country or erea without first obtaining the prior permission in writing of the reserve bank; and before giving any such pennission the reserve bank may require to be satisfied by an inspection under section 35 or otherwise as to the financial condition and history of the company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location, of the piece of business: provided that nothing in this section shall apply to the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs thereof within which the banking company already has a place of business for the purpose of raffording banking facilities to the public on the occasion of an exhibition, conference or mela explanation-for the purposes of this section "place of business" includes any sub-office, pay office, sub-pay-office and any place of business at which deposits are received, cheques cashed or moneys lent 24 (1) after the expiry of two years from the commencement of maintenanee this act, every banking company shall maintain in cash, gold or of i percedtb ed ed 't' i ed t' eed aae of 1leta unencum er approv securi les, va u a a price not exc lng the current market price, an amount which shall not at the close of business on any day be less than 20 per cent of the total of its time and dernend liabilities in india, explanation-for the purposes of this section liabilities shall not include the paid-up capital or the reserves or any credit balance in the profit and loss account of the company or the amount of any loan ken from the reserve bank (2) in computing the amount for the purposes of sub-section (i), the deposit required under the proviso to sub-section (2) of section 11 to be made with the reserve bank by a banking company incorporated outside india and any balance maintained by a banking company with the reserve bank or its agent or both, including in the case of a scheduled bank the balance required under section 42 of the reserve bank of india act, 1934, to be so maintained, shall be z of 1934 deemed to be cash maintained (3) for the purpose of ensuring compliance with the provisions of this section, every banking company shell, not later than fifteen days after the end' of the month to which it relates, furnish to the reserve bank in the prescribed form and manner a monthly return showing particulars of its assets maintained in accordance with this section, and its time qnd demand liabilities at the close of business on each friday during the month, or if any friday is a public holiday under the negotiable instruments act, 1881, at the close of business 26 of 1881 on the preceding working day alleu in india 25 (1) the assets in india of every banking company at the close of the ilqst working day of every quarter shall not be less than seventy-five per cent of its demand and time liabilities therein (2) every banking company shall, within one month from the end of ev;ery quarter, submit to the reserve bank a return in the prescribed form and manner of the assets and liabilities referred to in sub-section (1) as et the close of the last working day of the previous quarter (3) for the purposes of this section,-(a) "assets in india" shall be deemed to include export bills drawn in, and import bills drawn on and payable in, india and expressed in such currencies as the reserve bank may from time to time approve in this behalf and also such securities as the reserve bank may approve in this behalf notwithstanding that all or any of the said bills or securities are held outside indie; (b) "quarter" means the period of three months ending on the last day of march, june, september or december        monthjy 27 (i)       return and power to cp11 for tion :~efn~~t~~ (2) the reserve bank may at any time direct a banking company to furn;sh it within such, time as may be specified by the reserve bank, with such statements and information relating to the business or affairs of the banking company (including any buliness or affairs with which such banking company is concerned) as the reserve b,ank ~y consider necessary or expedient to obtain for the purposes of this act, and without prejudice to the generality of the foregoing power may call for information every half-year regarding the classification of advances and investments of banking companies in respect of industry commerce and agriculture 28 the reserve bank, if it considers it in the public interest so to power te do, may publish any information obtained by it under section 27 in publi~ insuch consolidated form as it thinks fit  fofm&tlor  - - - - - - 32 (i) where a banking company in any year furnishes its copiea of ba balance-sheet and accounts in accordance with the provisions of iindce-'h~  31' h" hall h an iocou-section it may, or w en it is a private company 8 at t e same dts to be time send to the registrar three copies of such balance-sheet and i~nt to reaccounts and of the auditor's report, and where such copies are so i1ltrl r sent, it shall not be necessary for the company to file copies of the balance-sheet and accounts with the registrar es required by subsection (1) of section 220 of the companies act 1956 and such copies so sent shall be chargeable with the same fees and shall be dealt with in all respects as if they were filed in accordance with that section  - - - - - - 35b (1) in the case of a banking company-,t,mendmenu of provisions (a) no amendment of any provision relating to the appoint- =~ent ment or re-appointment or remuneration of a managing or whole- ~f managin,  di f d' l' bl  b i rectors, time rector or 0 a irector not la e to retire y rotation or etc, to be of a manager or a chief executive officer by whatever name subj~t to - " previous apcalled, whether that provision be con tamed m the company's prow of the memorandum or articles of association, or in an agreement rbesckrve entered into by it or in any resolution passed by the company an  in general meeting or by its board of directors shall have effect unless approved by the reserve bank; (b) no appointment or f:!-appointment of a managing or whole-time director, maneger or chief executive officer by whatever name called, shall have effect unless such appointment or re-appointment is made with the previous approval of the reserve bank (2) nothing contained in sections 268, 269, 310, 311 and 388 in so far as section 388 makes the provisions of sections 310 and 311 apply in relation to the manager of a company) of the companies act, 1956, shall apply to a banking company after the commencement of the banking companies (amendment) act, 1856  - - - - 31 (1) the reserve bank may-(a) caution or prohibit banking companies generally or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company; (b) on a request by the companies concerned and subject to the provisions of section 45, assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies; - - - - i of 1956 up 38 (1) without prejud;ce to the provisions contained in section 433 or section 583 of the companies act, 1956 and without prejudice to its powers under section 37, the high court shall order the winding up of a banking company if it is unable to pay its debts and the high court shall also order the winding up of a banking company if the reserve bank applies in this behalf to the high court (2) the reserve bank may make an application under thil> section only if it is directed so to do by order under clause (b) of sub-section (4) of section 35 or if the banking company has failed to comply within due time with the demand contained in a notice under subsection (5) of section 46 (3) without prejudice to the provisions contained in section 434 of the companies act, 1956, a banking company shall be deemed to i of 1956 be unable to pay its debts if it has refused to meet any lawful demand for payment made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the reserve bank, or within five working days, if such demand is made elsewhere, and if the reserve bank certifies in writing that the banking company is unable to pay its debts (4) a copy of every application by the reserve bank under subsection (1) shall be sent by the reserve bank to the registrar - - - - ~ b~k 3t notwithstanding anyth;ng contained in section 38a of this i'fc~d:'ial act or in section 448 of the companies act, 1956, where in any i of 19s' proceeding for the winding up by the high court of a banking company, an application is made by the reserve bank in this behalf, the reserve bank, the state bank of- india or any other bank notified by the central government in this behalf, as stated in such application shall be appointed as the offic;ial liquidator of the banking company in such proceeding - - - - 43a (1) in every proceeding for the winding up of a banking preferential company, after the preferential payments referred to in section 530 ~:~ of the companies act, 1956, have been made, there shall be paid, siton to every depositor in the sav;ngs bank account of the banking company, a sum of one hundred rupees or the balance at his credit, whichever is less, in priority to all other debts from out of the remaining assets of the banking complny available for payment of general creditors - - - - 44 notwithstanding anything to the contrary contained in section restriction i of j956 484 of the companies act, 1956, no banking company which holds a ~in~~':: licence granted under section 22 may be voluntarily wound up unless i of 1956 the reserve bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue, end without prejudice to the provisions contained in sections 521 and 441 of that act, the high court shall, on the application of the reserve bank, order the winding up of the company by the high court if at any stage during the voluntary winding up proceedings the company is not able to meet such debts as they accrue  - - - - 45k (1) where a high court makes an order under sf'ction 391 i,?whercof f th c  a 1956   t -lig ourt o e omparues ct, sanctlonmg a comproffilse or arrangemen to enforce in respect of a banking company, it shall have power to supervise schemes of arrangethe carrying out of the compromise or arrangement and may at the menu etc time of making such order or at any time thereafter give such d;rections in regard to any matter or make such modifications: in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement i of 1956 (2) h the high court is satisfied that a compromise or nrrangement sanctioned under section 391 of the companies act, 1956 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the banking company, make an order winding up the banking company and such an order shall be deemed to be an order made under section 433 of the companies act, 1956 j of 1956 1 of 1956 52 of 19s3 (3) the provisions of this section shall so far as they may, also apply to a banking company in respect of which an order under section 391 of the companies act, 1956 sanctioning a compromise or arrangement has been made before the commencement of the banking companies (amendment) act, 1953 - - - - '50 (1) notwithstanding anything to the contrary contained in the indian limitation act, 1908 or in any other law for the time 9 of 1908 being in force, in computing the period of limitation prescribed for a su't or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded (2) notwithstanding anything to the contrary contained in the indian limitation act, 1908 or section 543 of the companies act, s of ]908 1956 or in any other law for the time being in force, there shall be no 1 of ]9s6 period of limitation for the recovery of arrears of calls from any director of a banking company which is being wound up or for the enforcement by the banking company against any of its directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its directors, the period of limitation shall be twelve years from the date of the eccrual of such claims (3) the provisions of this section, in so far as they relate" to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the banking companies (amendment) act, 1953 sa of 19s3 - - - - - part iv  miscellaneouspenaltiet faa (1) -  - - - - (4) if any other provision of this act is contravened, or if any default is made in complying with any requirement of this act, or of sny order or direction made thereunder, every director and other officer of the banking company who is knowingly a party to the contravention or default shall be punishable with a fine not exceeding five hundred rupees, and where the contravention or default is a continuing one, with a further fine not exceeding ruty rupees for every day during which it continues (5) without prejudice to the provisions of bub-section (4), if any banking company fails to comply with the provisions of section 24 or section 25, the reserve bank shall by notice in writing make 6 demand on the banking company to comply with the said provisions within thirty days from the receipt of the notice, and if the banking company fails so to do, the reserve bank may apply under section 38  i of ip$6~or the winding up of the banking company - - - - 49 the exemptions, whether express or implied, in favour of a s'p~cia1 f~ - vlslons lor private company in sections 90, 165 and 255, clauses (a) and (b) of private banksub-section (1) of section 293 and sections 300 and 416 of the com- 11111 coolpanpanies act, 1956, shall not operate in favour of a private company le8 which is a banking company - - - - extracts from the reserve bank of india act, 1934 (no2 of 1934) - - - - 42 (1) every bank included in the second schedule shall main- cash resene tain with the bank an average daily balance the amount of which b~s:~u~ shall not be less than five per cent of the demand liabilities and two kept with per cent of the time liabilities in india of such bank as shown in the the bank return referred to in sub-section (2): provided that the bank may, by notification in the gazette of india, increase the said rates to such higher rates as may be specified in the notification so however, that the rate shall not be more than twenty per cent, in the case of demand liabilities and more than eight per cent, in the case of time liabilities explanation-for the purposes of this section,-(a) "average daily balance" shall mean the average of the balances held at the close of business on each day of a week; (b) "week" shall mean the period from saturday to the following friday, both days inclusive; (c) "liabilities" shall not include the paid up oapital or the reserves, or any credit balanc~ in the profit and loss account of the bank or the amount of any loan taken from the bank, the state bank, or any other bank notified by the central government in this behalf - - - - - a bill further to amend the banking companies act, 1949 (shri morarji desai, minister of finance) gmg1pnd-ls 1-1917 (b) ls-i9-2-1959-i6so  