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Banking Regulation Act 1949 > Act > Banking Regulation Act > Summary

BRA 01 March 16, 1949

BANKING REGULATINS A!T 1949

T"e Banking Regulation Act #a$ %a$$e& a$ t"e Banking !om%anie$ Act 1949 an&came into 'orce #it" e(ect 'rom )arc" 1*+ 1949, Later it$ #a$ c"ange& to t"eBanking Regulation$ Act 1949 #it" e(ect 'rom )arc" 1+ 19**,

A $"ort note on $ome o' t"e more im%ortant $ection$ are gi-en .elo#, T"e%articular $ection to #"ic" t"e %oint re'ere$ i$ $tate& at t"e en& o' t"e %oint,

Banking mean$ acce%ting 'or t"e %ur%o$e o' len&ing or in-e$tment o'&e%o$it$o' money 'rom %u.lic re%aya.le on &eman& or ot"er#i$e an& #it"&ra#a.le .yc"e/ue+ &ra't$ or&er or ot"er#i$e 0 0i2 0.22,

Banking com%any mean$ any com%any #"ic" tran$act$ t"e .u$ine$$ o'.anking00i20c2

Tran$act .anking .u$ine$$ in In&ia 0 0i2 0e2,

3eman& lia.ilitie$ are t"e lia.ilitie$ #"ic" mu$t .e met on &eman&, Timelia.ilitie$ are lia.ilitie$ t"at are not &eman& lia.ilitie$ 00i20'2

Secure& loan or a&-ance$ mean$ a loan or a&-ance ma&e on t"e $ecurity o'a$$et t"e market -alue o' #"ic" i$ not at any time le$$ t"an t"e amount o' $uc"loan or a&-ance$ an& un$ecure& loan or a&-ance$ mean$ a loan or a&-ance not$ecure&,00i20"2,

artially $ecure& a&-ance i$ an a&-ance t"at i$ only %artially $ecure&,

Bu$ine$$ a .anking com%any may .e engage& in inclu&e .orro#ing+ kee%inglocker$+ i$$uing letter$ o' cre&it+ i$$uing an& collecting on tra-eller c"e/ue$ an&t"e like, 0*012,

No .anking com%any $"all engage in any 'orm o' .u$ine$$ ot"er t"an t"o$ere'erre& in Section *012 0*052,

Banking com%anie$ carrying on .anking .u$ine$$ in In&ia mu$t u$e at lea$tone #or& .ank+ .anking+ .anking com%any in it$ name 062,

T"i$ $ection &etail$ re$triction$ on .u$ine$$ o' certain kin&$ $uc" a$tra&ing o'goo&$ etc, 072


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T"i$ $ection %ro"i.it$ .ank$ 'rom "ol&ing any immo-a.le %ro%erty "o#$oe-erac/uire& e8ce%t a$ ac/uire& 'or it$ o#n u$e 'or a %erio& e8cee&ing 6 year$ 'romac/ui$ition o' t"e %ro%erty, RBI may e8ten& t"i$ %erio& .y -e year$ 092

T"ere are %ro"i.ition$ on certain em%loyment$ $uc" a$ t"e !"airman an&

3irector$ etc 01:2

ai& u% ca%ital+ re$er-e$ an& rule$ 11; 152

Bank$ are not to %ay any commi$$ion+ .rokerage+ &i$count etc, more t"an5,< o' %ai& u% -alue o' one $"are 01=2

A .anking com%any i$ %ro"i.ite& 'rom creating a c"arge u%on any un%ai&ca%ital o' t"e com%any, 0142, Section 140A2 %ro"i.it$ a .anking com%any 'romcreating a oating c"arge on t"e un&ertaking or any %ro%erty o' t"e com%any#it"out t"e RBI %ermi$$ion,

ayment o' &i-i&en& .y any .ank i$ %ro"i.ite& until all o' it$ ca%itali$e&e8%en$e$ "a-e .een com%letely #ritten o( 012

In or&er to create a re$er-e 'un&+ 5:< o' t"e %rot$ $"oul& .etran$'erre& tot"i$ 'un& .e'ore any &i-i&en& i$ &eclare& 016 0122

!a$" re$er-e ? Non?$c"e&ule& .ank$ to maintain =< o' t"e &eman& an& timelia.ilitie$ .y #ay o' ca$" re$er-e$ #it" it$el' or .y #ay o' .alance in a currentaccount #it" RBI 0172 T"i$ may c"ange 'rom time to time,

ermit$ .ank$ to 'orm $u.$i&iary com%any 'or certain %ur%o$e$ 0192

No .anking com%any $"all "ol& $"are$ in any com%any+ #"et"er a$ %le&gee+mortgagee or a.$olute o#ner$ o' any amount e8cee&ing =:< o' it$ o#n %ai& u%$"are ca%ital @ re$er-e$ or =:< o' t"e %ai& u% $"are ca%ital o' t"at com%any#"ic"e-er i$ le$$, 019052,

Bank$ may not grant loan to %er$on intere$te& in management o' t"e .ank05:2

Re$er-e Bank may i$$ue &irecti-e$ to .ank$ to &etermine %olicy 'ora&-ance$

0512

E-ery .ank to maintain a %ercentage o' it$ &eman& an& time lia.ilitie$ .y#ayo' ca$"+ gol&+ unencum.ere& $ecuritie$ #"ic" may .e 5


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Bank$ mu$t %u.li$" .alance $"eet an& au&itor$ re%ort #it"in = mont"$ 'romt"e en& o' %erio& to #"ic" t"ey re'er, RBI may e8ten& t"e %erio& .y 'urt"er t"reemont" 0=12

Bank$ are %ro"i.ite& 'rom %ro&ucing any con&ential in'ormation to any

aut"ority un&er In&u$trial 3i$%ute$ Act, 0=4A2

RBI aut"ori$e& to un&ertake in$%ection o' .ank$ 0=2,

Amen&ment carrie& in t"e Act &uring 197= em%o#er$ !entral Go-ernment to'rame rule$ $%eci'ying t"e %erio& 'or #"ic" a .ank $"all %re$er-e it$ .ook$ 04?y2+nomination 'acilitie$ 04A to 2 an& return a %ai& in$trument to a cu$tomer .ykee%ing a true co%y 042,

!ertain return$ are al$o re/uire& to .e $ent to RBI .y .ank$ $uc" a$mont"lyreturn o' li/ui& a$$et$ an& lia.ilitie$ 054?=2+ /uarterly return o' a$$et$ an&

lia.ilitie$ in In&ia 052+ return o' unclaime& &e%o$it$ i,e, 1: year$ an& a.o-e 05*2an& mont"ly return o' a$$et$ an& lia.ilitie$ 056?12,

Banking Regulation Act 1949 > Bare Act > art :1 > reliminary

BRA 01 March 10, 1949

TCE BANKING REGULATIN

A!T+ 1949

0D o' 194921

F1:t" )arc"+ 1949

AN A!T T !NSLI3ATE AN3 A)EN3 TCE LAH RELATING

T BANKING 5F


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H"erea$ it i$ e8%e&ient to con$oli&ate an& amen& t"e la# relating to .anking5F It i$ "ere.y enacte& a$ 'ollo#$J

ART I

RELI)INAR

1, S"ort title+ e8tent an& commencement,? 012 T"i$ Act may .e calle& t"eBanking = FRegulation Act+ 1949,

4 F052 It e8ten&$ to t"e #"ole o' In&ia F ,

0=2 It $"all come into 'orce on $uc" &ate * a$ t"e !entral Go-ernment may+ .ynotication in t"e cial GaMette+ a%%oint in t"i$ .e"al',

5, A%%lication o' ot"er la#$ not .arre&,? T"e %ro-i$ion$ o' t"i$ Act $"all .e ina&&ition to+ an& not+ $a-e a$ "ereina'ter e8%re$$ly %ro-i&e&+ in &erogation o' t"e6 F!om%anie$ Act+ 19* 01 o' 19*2 an& any ot"er la# 'or t"e time .eing in'orce,

!))ENTS

Sco%e o' Section,? Section 5 $tate$ t"at t"e %ro-i$ion$ o' t"e Act $"all .e ina&&ition to+ an& not+ e8ce%t a$ e8%re$$ly %ro-i&e& un&er t"e Act+ in &erogation o'any ot"er la# 'or t"e time .eing in 'orce,7

S"allO,? It i$ #ell?kno#n %rinci%le t"at in inter%retation o' $tatute$ #"ere t"e

$ituation an& t"e conte8t #arrant$ it+ t"e #or& $"allO u$e& in a $ection o' a$tatute "a$ to .e con$true& a$ mayO,9

Lia.ility in c"it 'un& tran$action? H"et"er $a-e& .y t"e %ro-i$ion$ o' Sec,=0"2 0B2o' Tamil Na&u In&e.te& er$on$0Tem%orary Relie'2 Act+196*,? T"e c"it 'un&tran$action i$+ in it$ e$$ence a tran$action o' a kin& #"ic" a .anking com%anycan legitmately un&ertake #it"in t"e go-erning %ro-i$ion$ o' t"e BankingRegulation Act+ 1949, In t"e in$tant ca$e+ t"e %etitioner+ cannot+ t"ere'ore+ $eekto take "i$ lia.ility in t"e c"it 'un& tran$action out o' t"e $a-ing %ro-i$ion o'

Sec,= 0"2 0B2 o' t"e Tamil Na&u In&e.te& er$on$ 0Tem%orary Relie'2 Act+ 196*,1:


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ro-i$ion$ o' ot"er enactment an& t"eir a%%lication are not+ in any #aye8clu&e&,? In t"e in$tant ca$e+ t"e %oint 'or con$i&eration i$ #"et"er t"e rate o'intere$t claime& .y t"e re$%on&ent Bank can .e a $u.Pect?matter o' Pu&icial$crutiny un&er t"e %ro-i$ion$ o' t"e U$uriou$ Loan$ Act, T"i$ /ue$tion "a$ to .ean$#ere& armati-ely+ .ecau$e t"ere i$ no %ro"i.ition in t"e Banking RegulationAct+ 1949+ %reclu&ing t"e !ourt 'rom $crutini$ing t"e rate o' intere$t un&er t"e%ro-i$ion$ o' t"e U$uriou$ Loan$ Act+ $ince Sec,5 o' t"e Banking Regulation Actmake$ it clear t"at t"e %ro-i$ion$ o' any ot"er enactment an& t"eir a%%licationare not+ in any #ay+ e8clu&e& .y t"e %ro-i$ion$ o' t"e Banking Regulation Act+1949, 11

Em%loyment 'or t"e legal "eir$ o' an em%loyee #"o &ie& in "arne$$,? T"e

%ro-i$ion$ in t"e Banking Regulation Act+ 1949+ are not e8"au$ti-e, Section 5 o't"e $ai& Act rea&$ t"at t"e %ro-i$ion$ o' t"e Act $"all .e in a&&ition to an& not+ in&erogation o' t"e !om%anie$ Act+ an& anot"er la# 'or t"e time .eing in 'orce,

T"u$ t"e %ro-i$ion$ o' t"e Banking Regulation$ Act #ill .e in a&&ition to t"e%ro-i$ion$ o' t"e ot"er la#$ unle$$ it i$ e8%re$$ly %ro-i&e& ot"er#i$e in t"e Actit$el',

T"e %etitioner i$ entitle& to claim em%loyment on com%a$$ionate groun&$irre$%ecti-e o' t"e /ue$tion o' la# rai$e& .y t"e a%%ellant?Bank, Inci&entally+ it

may .e mentione& t"at t"e a%%ellant?Bank "a$ a $c"eme o' it$ o#n 'or makinga%%ointment on com%a$$ionate groun&$ o' legal "eir$ o' it$ em%loyee$, But t"e$ai& $c"eme i$ not a%%lica.le a$ $uc" to t"e #rit %etitioner a$ in !lau$e 1: o' t"eSc"eme t"e em%loyee$ o' t"e tran$'eror Bank #ill .e go-erne& .y t"e $ameterm$ an& con&ition$ o' $er-ice a$ are a%%lica.le to t"em on1t" Augu$t+ 1979'or a %erio& o' t"ree year$, T"e #rit %etitioner "a$ $tu&ie& u%to t" $tan&ar& an&$"e "a$ t#o minor &aug"ter$ an& one minor $on, S"e "a$ no ot"er $ource o'income, Cence $"e i$ entitle& to .e a%%ointe& on com%a$$ionate groun&$, E-en i'"er e&ucational /ualication i$ .elo# t"e minimum re/uire& .y t"e a%%ellant?Bank t"e latter $"all grant a rela8ation o' t"e con&ition$ in "er ca$e "a-ingregar& to t"e $%ecial 'act$ an& circum$tance$ o' t"e ca$e,15

1= F=,Act to a%%ly to !o?o%erati-e Societie$ in certain ca$e$,? Not"ing in t"i$ Act$"all a%%ly to Q

0a2 a %rimary agricultural cre&it $ociety

0.2 a co?o%erati-e lan& mortgage .ank an&


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0c2 any ot"er co?o%erati-e $ociety+ e8ce%t in t"e manner an& to t"e e8tent

$%ecie& in art ,

!))ENTS

A%%lica.ility to !o?o%erati-e Societie$,? Among$t t"e %ro-i$ion$ in t"e BankingRegulation Act #"ic" "a-e .een ma&e a%%lica.le to !o?o%erati-e Societie$ un&erart o' t"e $ai& Act t"ere i$ no $ection #"ic" &eal$ #it" any o' t"e 'ollo#ingmatter$+ namely 0a2 t"e cla$$ication o' $uc" in$titution$ on t"e .a$i$ o' t"eirnancial %o$ition+ 0.2 t"e $ta(?%attern .y t"e $ai& in$titution or 0c2 con&ition$ o'

$er-ice o' t"e em%loyee$ in $uc" in$titution$, Suc" .eing t"e %o$ition+ t"econtention t"at co?o%erati-e $ocietie$ carrying on t"e .u$ine$$ o' .anking arego-erne& in re$%ect o' $uc" matter$+ only .y t"e %ro-i$ion$ containe& in t"eBanking Regulation Act+ 1949+ i$ &e-oi& o' any $u.$tance,14

A%%lication to $ocietie$,? In t"e r$t %lace all %ro-i$ion$ o' t"e Banking RegulationAct &o not to !o?o%erati-e .ank$, Section = 0c2 o' T"e Banking Regulation Act+1949 $tate$ t"at not"ing in t"i$ Act $"all a%%ly to 0a2 a %rimary agriculture cre&it$ociety+ 0.2 a !o?o%erati-e Lan& )ortgage Bank+ an& 0c2 any ot"er !o?o%erati-e$ociety e8ce%t in t"e manner an& to t"e e8tent $%ecie&+ in %art , art make$$u.$tantial &e%arture 'rom t"e Banking Regulation Act a$ 'ar a$ !o?o%erati-e.ank$ are concerne&, Some o' t"e $ection$ o' t"e Act on #"ic" t"e learne& $ingle

Pu&ge "a$ relie&+ &o not a%%ly to co?o%erati-e Bank$, T"u$+ 'or e8am%le+ Sec, =?B un&er #"ic" amen&ment$ o' %ro-i$ion relating to a%%ointment$ o' managing&irector$+ etc, are $u.Pect to t"e %re-iou$ a%%ro-al o' t"e Re$er-e Bank+ &o nota%%ly to a !o?o%erati-e Bank,1

!"e/ue &ra#n in 'a-our o' ctitiou$ %er$on,? H"ene-er a c"e/ue i$ &ra#n in'a-our or a ctitiou$ %er$on+ a &uty i$ ca$t on t"e collecting .ank to %ro-e t"at it

"a& not acte& negligently an& t"at it "a& collecte& t"at amount in goo& 'ait",1*

o$t?&ate& c"e/ue,? o$t?&ate& c"e/ue i$ one containing a later &ate t"an t"at o't"e &eli-ery, T"ere'ore+ it "a$ an im%lie& notice t"at t"ere i$ no %re$ent &e%o$itto t"e cre&it o' t"e &ra#er an& an im%lie& guarantee t"at t"e 'un&$ #oul& e8i$t#"en it .ecome$ &ue, T"oug" t"e c"e/ue i$ %aya.le only on a 'uture &ate it may.e negotia.le, T"ere i$ no %ro"i.ition in t"e Act again$t %o$t?&ating a c"e/ue, I'a .anker %ay$ t"e amount .e'ore t"e &ue &ate o' a c"e/ue+ "e #ill lo$e t"e$tatutory %rotection ari$ing 'rom $uc" %ayment,16


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ro$ecution on &i$"onour o' c"e/ue,? T"e o(en&er a$ %er Sec,1=7+ Negotia.leIn$trument$ Act+ i$ t"e &ra#er o' t"e !"e/ue, ne o' t"e con&ition$ to con$titutet"e o(ence i$ t"at t"e c"e/ue $"oul& "a-e .een %re$ente& to t"e .ank #it"in $i8mont"$ o' it$ i$$ue, Anot"er con&ition i$ t"at t"e %ayee $"oul& "a-e ma&e a&eman& 'or %ayment .y regi$tere& notice a'ter t"e c"e/ue i$ returne& un%ai&,

T"ir& con&ition i$ t"at t"e &ra#er $"oul& "a-e 'aile& to %ay t"e amount #it"in 1&ay$ o' recei%t o' notice, Unle$$ t"e c"e/ue i$ returne& un%ai& &ue toin$uciency o' amount o' money $tan&ing to t"e cre&it o' t"e &ra#er or t"at ite8cee&$ t"e amount arrange& to .e %ai& 'rom t"e account .y an agreementma&e #it" t"e .ank, Section 1=7 o' t"e Act i$ not attracte&,17

4, o#er to $u$%en& o%eration o' Act,? 012 T"e !entral Go-ernment+ i' on a

re%re$entation ma& .y t"e Re$er-e Bank in t"i$ .e"al'+ i$ $ati$e& t"at it i$e8%e&ient $o to &o+ may .y notication in t"e cial GaMette $u$%en& 'or $uc"%erio&+ not e8cee&ing $i8ty &ay$+ a$ may .e $%ecie& in t"e notication+ t"eo%eration o' all or any o' t"e %ro-i$ion$ o' t"i$ Act+ eit"er generally or in relationto any $%ecie& .anking com%any,

052 In a ca$e o' $%ecial emergency+ t"e Go-ernor o' t"e Re$er-e Bank+ or in "i$a.$ence a 3e%uty Go-ernor o' t"e Re$er-e Bank nominate& .y "im in t"i$ .e"al'may+ .y or&er in #riting+ e8erci$e t"e %o#er$ o' t"e !entral Go-ernment un&er

$u.?$ection 012+ $o "o#e-er t"at t"e %erio& o' $u$%en$ion $"all not e8cee& t"irty&ay$+ an& #"ere t"e Go-ernor or &e%uty Go-ernor+ a$ t"e ca$e may .e+ &oe$ $o+"e $"all re%ort t"e matter to t"e !entral Go-ernment 'ort" #it"+ an& t"e or&er$"all+ a$ $oon a$ may .e+ .e %u.li$"e& in t"e GaMette o' in&ia,

0=2 T"e !entral Go-ernment may+ .y notication in t"e ocial gaMette e8tent'rom time to time %erio& o' any $u$%en$ion or&ere& un&er $u.?$ection 012 or $u.?$ection 052 'or $uc" %erio&+ not e8cee&ing $i8ty &ay$ at any one time+ a$ it t"ink$t+ $o "o#e-er t"at t"e total %erio& &oe$ not e8cee& one year,

042 A co%y o' any notication i$$ue& un&er $u.?$ection 052 $"all .e lai& on t"eta.le o' 19 Farliament a$ $oon a$ may .e a'ter it i$ i$$ue&,

, Inter%retation,? 5: FIn t"i$ Act+ unle$$ t"ere i$ anyt"ing re%ugnant in t"e$u.Pect or conte8t+?

51 F0a2 a%%ro-e& $ecuritie$O mean$?


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0i2 $ecuritie$ in #"ic" a tru$tee may in-e$t money+ un&er !l,0a2+ !l,0.2+ !l,0..2+ !l,0c2+ or !l,0&2+ o' Sec, 5: o' t"e In&ian Tru$t$ Act+ 1775 05 o' 17752

0ii2 $uc" o' t"e $ecuritie$ aut"ori$e& .y t"e !entral Go-ernment un&er !l,0'2 o'Sec, 5: o' t"e In&ian Tru$t$ Act+ 1775 05 o' 17752+ a$ may .e %re$cri.e&,

0.2 .ankingO mean$ t"e acce%ting+ 'or t"e %ur%o$e o' len&ing or in-e$tment+ o'&e%o$it$ o' money 'rom t"e %u.lic+ re%aya.le on &eman& or ot"er#i$e+ anit"&ra#al .y c"e/ue+ &ra't+ or ot"er#i$e

0c2 .anking com%anyO mean$ any com%any #"ic" tran$act$ t"e .u$ine$$ o'.anking 55 Fin In&ia,

E8%lanation,? Any com%any #"ic" i$ engage& in t"e manu'acture o' goo&$ orcarrie$ on any tra&e an& #"ic" acce%t$ &e%o$it$ o' money 'rom t"e %u.lic merely'or t"e %ur%o$e o' nancing it$ .u$ine$$ a$ $uc" manu'acturer or tra&er $"all not.e &eeme& to tran$act t"e .u$ine$$ o' .anking #it"in t"e meaning o' t"i$ clau$e

5= F0c?a2 .anking %olicyO mean$ any %olicy #"ic" i$ $%ecie& 'rom time to time.y t"e Re$er-e Bank in t"e intere$t o' t"e .anking $y$tem or in t"e intere$t o'monetary $ta.ility or $oun& economic gro#t"+ "a-ing &ue regar& to t"e intere$t$o' t"e &e%o$itor$+ t"e -olume o' &e%o$it$ an& ot"er re$ource$ o' t"e .ank an&t"e nee& 'or e/uita.le allocation an& t"e ecient u$e o' t"e$e &e%o$it$ an&

re$ource$

54 0cc2 .ranc"O or .ranc" oceO+ in relation to a .anking com%any+ mean$any .ranc" or .ranc" oce+ #"et"er calle& %ay oce or $u.?%ay oce or .y anyot"er name+ at #"ic" &e%o$it$ are recei-e&+ c"e/ue$ ca$"e&+ or money$ lent an&'or t"e %ur%o$e$ o' Sec,= inclu&e$ any %lace o' .u$ine$$ #"ere any ot"er 'ormo' .u$ine$$ re'erre& to in $u.?$ection 012 o' Sec,* i$ tran$acte&

5 F0&2 com%anyO mean$ any com%any a$ &ene& in Sec,= o' t"e !om%anie$Act+ 19* 01 o' 19*2+ an& inclu&e$ a 'oreign com%any #it"in t"e meaning o'Sec,91 o' t"at Act

5* F0&a2 corre$%on&ing ne# .ankO mean$ a corre$%on&ing ne# .ankcon$titute& un&er Sec,= o' t"e Banking !om%anie$ 0Ac/ui$ition an& Tran$'er o'Un&ertaking$2 Act+ 196: 0 o' 196:2+ or un&er Sec,= o' t"e Banking !om%anie$0Ac/ui$ition an& Tran$'er o' Un&ertaking$2 Act+ 197: 04 o' 197:2,


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56 F0e2

0'2 &eman& lia.ilitie$O mean$ lia.ilitie$ #"ic" mu$t .e met on &eman&+ an&time lia.ilitie$O mean$ lia.ilitie$ #"ic" are not &eman& lia.ilitie$

57 F0(2 3e%o$it In$urance !or%orationO mean$ t"e 3e%o$it In$urance!or%oration e$ta.li$"e& un&er Sec,= o' t"e 3e%o$it In$urance !or%oration Act+19*1 0DLII o' 19*12

5 F0(a2 3e-elo%ment BankO mean$ t"e In&u$trial 3e-elo%ment Bank o' In&iae$ta.li$"e& un&er Sec,= o' t"e In&u$trial 3e-elo%ment Bank o' In&ia Act+ 19*4017 o' 19*42

0(.2 E8im BankO mean$ t"e E8%ort?Im%ort Bank o' In&ia e$ta.li$"e& un&er Sec,=o' t"e E8%ort?Im%ort Bank o' In&ia Act+ 1971 057 'o 19712

59 F0(c2 Recon$truction BankO mean$ t"e In&u$trial Recon$truction Bank o'In&ia e$ta.li$"e& un&er Sec,= o' t"e In&u$trial Recon$truction Bank o' In&ia Act+1974

=: F0(&2 National Cou$ing BankO mean$ t"e National Cou$ing Bank e$ta.li$"e&un&er Sec,= o' t"e National Cou$ing Bank Act+ 1976

0g2 gol&O inclu&e$ gol& in t"e 'orm o' coin+ #"et"er legal ten&er or not+ or in t"e'orm o' .ullion or ingot+ #"et"er rene& or not

=1 F0gg2 )anaging agentO inclu&e$+ ?

0i2 Secretarie$ an& Trea$urer$+

0ii2 #"ere t"e managing agent i$ a com%any+ any &irector o' $uc" com%any+ an&


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any mem.er t"ereo' #"o "ol&$ $u.$tantial intere$t in $uc" com%any+

0iii2 #"ere t"e managing agent i$ a rm+ any %artner o' $uc" rm

=5 F0"2 )anaging 3irectorO+ in relation to a .anking com%any+ mean$ a &irector#"o+ .y -irtue o' an agreement #it" t"e .anking com%any or o' a re$olution%a$$e& .y t"e .anking com%any in general meeting or .y it$ Boar& o' 3irector$or+ .y -irtue o' it$ memoran&um or article$ o' a$$ociation i$ entru$te& #it" t"emanagement o' t"e #"ole+ or $u.$tantially t"e #"ole o' t"e a(air$ o' t"ecom%any+ an& inclu&e$ a &irector occu%ying t"e %o$ition o' a managing &irector+.y #"ate-er name calle&J

== Fro-i&e& t"at t"e managing &irector $"all e8erci$e "i$ %o#er$ $u.Pect to t"e$u%erinten&ence+ control an& &irection o' t"e Boar& o' 3irector$

=4 F0"?a2 National BankO mean$ t"e National Bank 'or Agriculture an& Rural3e-elo%ment e$ta.li$"e& un&er Sec,= o' t"e National Bank 'or Agriculture an&Rural 3e-elo%ment Act+ 1971

= F0i2

0P2 %recri.e&O mean$ %re$cri.e& .y rule$ ma&e un&er t"i$ Act

=* F0P?a2 Regional Rural BankO mean$ a Regional Rural Bank e$ta.li$"e& un&erSec,= o' t"e Regional Rural Bank$ Act+ 196* 051 o' 196*2

=6 F0k2

=7 F0l2 Re$er-e BankO mean$ t"e Re$er-e Bank o' In&ia con$titute& un&er Sec,=o' t"e Re$er-e Bank o' In&ia Act+ 19=4 05 o' 19=42

=9 F0m2

0n2 $ecure& loan or a&-anceO mean$ a loan or a&-ance ma&e on t"e $ecurity o'a$$et$ t"e market -alue o' #"ic" i$ not at any time le$$ t"an t"e amount o' $uc"loan or a&-ance an& un$ecure& loan or a&-anceO mean$ a loan or a&-ance not$o $ecure&

4: F0n?i2 Small In&u$trie$ BankO mean$ t"e Small In&u$trie$ 3e-elo%ment Banko' In&ia e$ta.li$"e& un&er Sec,= o' t"e Small In&u$trie$ 3e-elo%ment Bank o'In&ia Act+ 1979

41 F0n?a2 $mall $cale in&u$trial concernO mean$ an in&u$trial concern in #"ic"t"e in-e$tment in %lant an& mac"inery i$ not in e8ce$$ o' $e-en an& a "al' lak"$


11/178

o' ru%ee$ or $uc" "ig"er amount+ not e8cee&ing t#enty lak"$ o' ru%ee$+ a$ t"e!entral Go-ernment may+ .y notication in t"e cial GaMette+ $%eci'y in t"i$.e"al'+ "a-ing regar& to t"e tren&$ in in&u$trial &e-elo%ment an& ot"er rele-ant'actor$

45 F0n?.2 S%on$or BankO "a$ t"e meaning a$$igne& to it in t"e Regional RuralBank Act+ 196* 051 o' 196*2

0n?c2 State Bank o' In&iaO mean$ t"e State Bank o' In&ia con$titute& un&er Sec,=o' t"e State Bank o' In&ia Act+ 19 05= o' 192

4= F0n?&2 $u.$i&iary .ankO "a$ t"e meaning a$$igne& to it in t"e State Bank o'In&ia 0Su.$i&iary Bank2 Act+ 199 0=7 o' 1992+

45 F0n?e2 $u.$tantial intere$tO+?

0i2 in relation to a com%any mean$ t"e "ol&ing o' a .enecial intere$t .y anin&i-i&ual or "i$ $%ou$e or minor c"il&+ #"et"er $ingly o' taken toget"er+ in t"e

$"are$ t"ereo'+ t"e amount %ai&?u% ca%ital o' t"e com%any+ #"ic"e-er i$ le$$,

0ii2 in relation to a rm+ mean$ t"e .enecial intere$t "el& t"erein .y anin&i-i&ual or "i$ $%ou$e or minor c"il&+ #"et"er $ingly or taken toget"er+ #"ic"re%re$ent$ more t"an ten %er cent, o' t"e total ca%ital $u.$cri.e& .y all t"e%artner$ o' t"e $ai& rm

44F0o2 all ot"er #or&$ an& e8%re$$ion$ u$e& "erein .ut not &ene& an& &ene&in t"e !om%anie$ Act+ 19* 01 o' 19*2+ $"all "a-e t"e meaning$ re$%ecti-elya$$igne& to t"em in t"e Act,

4 F

!))ENTS

BankingO Q )eaning o',? H"en t"e Bank act$ a$ an aut"ori$e& &ealer in 'oreigne8c"ange an& a %er$on can recei-e 'oreign contri.ution$ only t"roug" any one o't"e .ranc"e$ o' a .ank+ $%ecie& in t"e a%%lication 'or regi$tration+ it i$ a

tran$action o' .anking .u$ine$$, BankingO a$ %er t"e &enition in t"e BankingRegulation Act mean$ t"e acce%tance o' &e%o$it$ o' money 'rom t"e %u.lic


12/178

re%aya.le on &eman& or ot"er#i$e, T"e contention t"ere'ore t"at t"e Bank o'!oc"in #a$ not tran$acting .anking .u$ine$$ #"en it #a$ 'unctioning a$ anaut"ori$e& &ealer cannot al$o .e acce%te&,4*

T"e e$$ential c"aracteri$tic o' .anking+ namely+ t"e %o#er to recei-e &e%o$it$

'rom t"e %u.lic #"ic" are re%aya.le in t"e manner in&icate& in Sec, 012 0.2 o't"e Act i$ a.$ent an& merely t"e %o#er o' granting loan$ i$ retaine& an&e8erci$e& t"at &oe$ not make t"e com%any a .anking com%any, Len&ing o'money may .e one %"a$e o' a .anking .u$ine$$ .ut it i$ not t"e main %"a$e ort"e &i$tingui$"ing %"a$e,46

Sco%e an& a%%lica.ility o',? A &enition clau$e i$ al#ay$ $u.Pect to t"e conte8t in#"ic" t"e #or& i$ u$e&, I' t"e conte8t $o re/uire$ a #or& or e8%re$$ion may .egi-en a meaning not co-ere& .y t"e &enition clau$e,47 In or&er t"at a .ankmay .e a .anking com%any it i$ in t"e r$t %lace nece$$ary t"at it mu$t .e acom%anyO, T"e State Bank o' Tra-ancore i$ not a com%anyO %ro%erly $o calle&,

It i$ $u.$i&iary .ank #"ic" 'all$ #it"in t"e &enition o' Sec,50k2 o' t"e State Banko' In&ia 0Su.$i&iary Bank$2 Act+ 199, It #a$ e$ta.li$"e& .y t"e !entralGo-ernment in accor&ance #it" t"e Act o' 199 an& i$ not a com%anyO an&+t"ere'ore+ not a .anking com%any, It mu$t 'ollo# t"at t"e &ecretal &e.t #"ic" t"ere$%on&ent i$ lia.le to %ay to t"e a%%ellant i$ not o#e& to a .anking com%any, It#a$ in&ee& not o#e& to any .anking com%any at all on 14t" uly+ 196:+ .eingt"e &ate on #"ic" t"e Act+ came into 'orce,49

Inter%retation o' Sec, 0.2,? Section 0.2 o' t"e Banking Regulation Act+ 1949&ene$ .anking a$ acce%ting 'or t"e %ur%o$e o' len&ing or in-e$tment+ o'&e%o$it$ o' money 'rom t"e %u.lic+ re%aya.le on &eman& or ot"er#i$e anit"&ra#al .y c"e/ue$+ &ra't$+ or&er or ot"er#i$e, n t"e %ro%er inter%retationo' t"e a.o-e clau$e+ t"ere'ore+ i$ t"at e8em%tion #"ic" "a$ .een contem%late&.y Sec,7:?052 0a2 0i2 i$ in re$%ect o' t"e Banking a$ &ene& un&er Sec, 0.2 o't"e Banking Regulation$ Act+ 1949, :

)erely .ecau$e t"e %etitioner$ t"e co?o%erati-e $ocietie$ in /ue$tion arere/uire& to a&-ance loan$ to t"eir mem.er$+ t"ey &o not cea$e to .e co?o%erati-e $ocietie$ go-erne& .y t"e Act nor can t"ey .e treate& a$ .ankingcom%anie$, It i$ al$o not %o$$i.le to "ol& t"at t"e$e acti-itie$ o' t"e %etitioner$amount to .ankingO a$ contem%late& un&er t"e Banking Regulation Act+ 1949+ina$muc" a$ t"e$e co?o%erati-e $ocietie$ are not e$ta.li$"e& 'or t"e %ur%o$e o'&oing .ankingOa$ &ene& in Sec, 0.2 o' t"e Banking Regulation Act+ 1949, 1

Branc" or .ranc" oce,? T"e &i(erent .ranc"e$ or .ranc" oce$ &o not "a-eun&er t"e $ai& Act+ $e%arate or &i$tinct %er$onality an& t"ey cannot .econ$i&ere& a$ $e%arate entitie$, All ocer$ o' t"e Banking com%any tran$acting.u$ine$$ at any %articular .ranc" or .ranc" oce acting on .e"al' o' t"e Banking!om%any an& in t"at regar&+ accor&ingly+ t"e Banking !om%any in-e$t$ $uc"ocer$ #it" re/ui$ite %o#er$ an& aut"oritie$ o' #"ic" t"e $ole re%o$itory i$ t"eBanking !om%any it$el',5

Bank Q Te$t 'or &eci&ing it$ negligence,? ne o' t"e te$t$ o' &eci&ing #"et"er t"eBank #a$ negligent t"oug" not al#ay$ conclu$i-e+ i$ to $ee #"et"er t"e Rule$ or

in$truction$ o' t"e Bank #ere 'ollo#e& or not,=


13/178

inancial in$titution,? Bank$ are nancial in$titution$ #"ic" are engage& inim%ro-ing t"e o# o' tra&e+ mo-ement o' commerce an& e8%an$ion o' .u$ine$$an& t"ere.y im%ro-ing t"e $ocio?economic con&ition o' t"e %eo%le,4

In or&er to attract t"e %ro-i$ion o' t"e 3e.t Reco-ery Act+ it mu$t .e a &e.t

o#ing to a Bank or nancial in$titution &uring it$ .u$ine$$ acti-itie$ a$ $"o#nun&er Sec, 0.2 an& 0c2 o' t"e Banking Regulation Act,

Banking !om%any,? )erely .ecau$e t"e a%%ellant co?o%erati-e $ociety a&-ance&loan$ to it$ nominee an& carrie& out ot"er nancial tran$action$+ it &i& not.ecome a .anking com%any or cea$e to .e a co?o%erati-e $ociety,*

Banking com%anyO mean$ any com%any #"ic" tran$act t"e .u$ine$$ o' .ankingin In&ia, Cence unPa. National Bank i$ a com%any #"ic" tran$act$ .u$ine$$ o'.anking in In&ia,6

A !o?o%erati-e Bank &oe$ not 'all in t"e category o' a .anking com%any,O7

9 F?A, Act to o-erri&e memoran&um+ article$+ etc,? Sa-e a$ ot"er#i$ee8%re$$ly %ro-i&e& in t"i$ Act+?

0a2t"e %ro-i$ion$ o' t"i$ Act $"all "a-e e(ect not#it"$tan&ing anyt"ing to t"econtrary containe& in t"e memoran&um or article$ o' a .anking com%any+ or inany agreement e8ecute& .y it+ or in any re$olution %a$$e& .y t"e .ankingcom%any in general meeting or .y it$ Boar& o' 3irector$+ #"et"er t"e $ame .eregi$tere&+ e8ecute& or %a$$e&+ a$ t"e ca$e may .e+ .e'ore or a'ter t"ecommencement o' t"e Banking !om%anie$ 0Amen&ment2 Act+ 199 0== o' 1992

an&

0.2any %ro-i$ion containe& in t"e memoran&um+ article$+ agreement or re$olutiona'ore$ai& $"all+ to t"e e8tent to #"ic" it i$ re%ugnant to t"e %ro-i$ion$ o' t"i$ Act+.ecome or .e -oi&+ a$ t"e ca$e may .e,

!))ENT

Statutory agreement$ Q H"at amount$ to,? T"e &irecti-e$ i$$ue& .y t"e Re$er-eBank+ no &ou.t+ "a-e $tatutory 'orce, T"ey lay &o#n t"e gui&eline$ a.out t"emet"o&ology o' o%eration$+ %olicy+ %roce&ure an& rate o' intere$t in nancing ora&-ancing loan$ to -ariou$ cla$$e$ o' %er$on$, But t"e loan tran$action$ entere&into .y t"e e8ecuti-e$ o' .anking in$titution$ in t"e u$ual cour$e o' t"eir.u$ine$$ are not $tatutory agreement$ t"ey are Pu$t commercial tran$action$go-erne& .y t"e gui&eline$ lai& &o#n .y t"e Re$er-e Bank, T"ere'ore it coul& not.e urge& t"at $ince t"e loan tran$action$ entere& into .y .ank$ #it" t"eircu$tomer$ are go-erne& .y $tatutory &irecti-e o' t"e Re$er-e Bank+ t"etran$action$ .ecome $tatutory agreement$ an& !ourt cannot a%%ly t"e U$ury

Act$ to $cale &o#n t"e intere$t c"arge& in -ie# o' t"e o-erri&ing e(ect gi-en tot"e Banking Regulation Act un&er Sec, ?A, *:


14/178

T NTESJ

1 or Statement o' .Pect$ an& Rea$on$+ $ee GaMette o' In&ia+ 1947+ t, + %%,=11 an& =15 'or Re%ort o' Select !ommittee+ $ee i.i&,+ 1949 t,+ %%,4 to 47,E8ten&e& to 3a&ra an& Nagar Ca-eli .y Reg,* o' 19*=+ Sec,5 an& Sc",1 0#,e,',

1$t uly+ 19*2 an& to Goa+ 3aman an& 3iu .yReg,11 o' 19*=+ Sec,= an&Sc"e&ule 0#,e,', 1$t une+ 19*42 Lak$"aee% I$lan&$ .y Reg,7 o' 19* 0#,e,',1$tcto.er+ 19*62, En'orce& in Sikkim #,e,',1t" 3ecem.er+1976 -i&e S,,1::7 0E2+&ate& 11t" 3ecem.er+ 1976, Not"ing in t"i$ Act 0e8ce%t Sec,=4?A2 $"all a%%ly tot"e In&u$trial 3e-elo%ment Bank o' In&ia+ -i&e Act 17 o' 19*4+ Sec,=4,

5 T"e #or& com%anie$ omitte& .y Act 5= o' 19*+ Sec,1:0#,e,',1$t )arc"+19**2,

= Su.$, .y i.i&,+ Sec,11+ 'or !om%anie$O 0#,e,', 1$t )arc"+ 19**2,

4 Su.$+ .y Act 5: o' 19:+ Sec,5+ 'or $u.?$ection 052,

T"e #or&$ e8ce%t t"e State o' ammu an& Ka$"mirO omitte& .y Act *5 o'19*+ Sec,5 an& Sc"e&ule,

* 1*t" )arc"+ 1949 $ee Notication No, ,4 04*2?l,49+ &ate& 1:t" )arc"+ 1949+GaMette o' In&ia+ 1949+ t, I+ %,=5*,

6 Su.$, .y Act 9 o' 19*+ Sec,14 an& Sc"e&ule+ 'or In&ian !om%anie$ Act+ 191=06 o' 191=2O0#,e,', 14t" anuary+ 1962,

7 State o' Kerala -, ),T, 3e-e$$ia+ A,I,R, 1966 S,!,==1 at %,=== Cemangini

inance an& Lea$ing 0,2 Lt&, , Tamilna&u )ercantile Bank Lt&,+ 0199*2 =!om%,L,,5=7 0!,L,B,2,

9 Amal !"an&ra 3utt -, Secon& A&&itional 3i$trict u&ge+ 019792 1 S,S,!, 1 at %,6 State o' C,, -, Sun&er$"an Kumar 0199:2 1 E,,R, 1 at %, 17 0C,,2 Agya Ram-, State o' U,,+ 199: 0562 A,!,!, 59 at %, = ro%o$e& 3"ar#a& 3i$tt, E8,Ser-icemen$ !o?o%, Society Lt&, -, State+ A,I,R, 199= Knt, 116 at %, 119,

1: aramani 3a-i&+ ! -, Bank o' )a&urai+ A,I,R, 197= )a&, 1 at %%, 1*+16,

11 )ut"ai -, Syn&icate Bank+ ollac"i+ 1977 Bank , * at %, 17,


15/178

15 In&ian Bank -, K, U$"a+ 199* 0=2 Bank,L,, 5** at %, 16= 0)a&,2,

1= Su.$, By Act 5= o' 19*+ Sec 15+'or t"e 'ormer $ection 0#,e,', 1$t )arc"+19**2,

14 G, Go%inat"an Nair -, State o' Kerala+ A,I,R, 1966 Ker, =* at %,=7,

1 S"armrao it"al !o?o%erati-e Bank Lt&, -, a&u.i&ri atta."iram B"at+199=012 Bank L,,== at %,=*:,

1* Syn&icate Bank -, Unite& !ommercial Bank+ 019912 6: !om%, !a$, 647 at%%,64+6 0Knt,2,

16 )anoP K, Set" -, K,,ernan&eM+ 1991 052 Bank !,L,R, =7 at %%, =79+=9: 0Ker,2,

17 N,!, Kumarae$an -, Ammeera%%a+ 1991 052 Bank !,L,R, =41 at %, =44 0Ker,2A.&ul Sama& -, Satya Narain )a"a#ar+ 1991 012 A,I,!r,L,R, 4:5 at %,4:4 0,;C,2+RaPi- Kumar -, State o' U,, 1991 All, L,, 994 at %,99 $#al I$%at U&yog -,Salem Steel Su%%lier$+ 1991 012 A,I,!r,L,R, 97= at %, 976 0)a&,2,

19 Su.$, .y t"e A,, 19:+ 'or t"e 3ominion legi$latureO,

5: Su.$, .y Act o' 19*=+ Sec, * 'or 012 In t"i$ ActO 0#,e,', 1$t e.ruary+ 19*42,

51 Su.$, .y Act No,1 o' 1974+ Sec,1=0#,e,', 1t" e.ruary+19742,

55 Su.$, .y Act 5: o' 19:+ Sec,=+ 'or in any StateO,

5= In$, .y Act 7 o' 19*7+ Sec,5 0#,e,', 1$t e.ruary+ 19*92,

54 In$, .y Act == o' 199+ Sec,5 0#,e,', 1$t cto.er+ 1992,

5 Su.$, .y i.i&,+ Sec,50ii2+ 'or !l,0&2+ 0#,e,', 1$t cto.er+ 1992,

5* In$, .y Act No,1 o' 1974+ Sec,1= 0#,e,', 1t" e.ruary+ 19742,

56 !lau$e 0e2+ omitte& .y Act 5 o' 19=+ Sec,5,

57 In$, .y Act 46 o' 19*1+ Sec,1 an& Sc", II 0#,e,', 1$t anuary+ 19*52,

59 In$, .y Act No,*5 o' 1974+ Sec,61 an& Sc", III 0#,e,', 5:t" )arc"+ 1972,

=: In$, .y Act No,= o' 1976+ Sec,* an& Sc", III 0#,e,', 9t" uly+ 19772,

=1 In$, .y Act 7 o' 19*7+ Sec,5 0#,e,', 1$t e.ruary+ 19*92,

=5 Su.$, .y Act == o' 199+ Sec,5+ 'or !l,0"2 0#,e,', 1$t cto.er+ 1992,

== A&&e& .y Act 7 o' 19*7+ Sec,5 0#,e,', 1$t e.ruary+ 19*92,


16/178

=4 In$, .y Act *1 o' 1971+ Sec,*1 Sc", II+ t,II 0#,e,', 1$t )ay+ 19752,

= !lau$e 0i2 omitte& .y Act == o' 199+ Sec,5 0#,e,', 1$t cto.er 1992,

=* In$, .y Act *1 o' 1971+ Sec,*1 Sc", II+

=6 !lau$e 0k2 omitte& .y Act+== o' 199+ Sec, 5 0#,e,', 17t" cto.er+ 1992,

=7 In$, .y Act 1 o' 1974+ Sec, 1= 0#,e,', 1t" e.ruary+ 19742,

=9 !lau$e 0m2 omitte& .y Act+== o' 199+ Sec,5 0#,e,',1$t cto.er 1992,

4: In$, .y Act No,=9 o' 1979+ Sc",II+ t,III+ 0#,e,',6t" )arc"+199:2,

41 In$, .y Act 7 o' 19*7+ Sec,5 0#,e,', 1$t e.ruary+ 19*92,

45 In$, .y Act 1 o' 1974+ Sec, 1= 0#,e,', 1t" e.ruary+ 19742,

4= !lau$e$ 0n?.2 an& 0n?c2 re?lettere& a$ !l$, 0n?&2 an& 0n?e2 .y i.i&,0#,e,', 1t"e.ruary+ 19742,


4 Su.?$ection 052 omitte& .y t"e A,,+ 19:,

4* Bi$"i% o' Kottayam -, Union o' In&ia+ A,I,R, 197* Ker, 15* at %, 159 anta

Sa"kari Bank Lt&, -, State o' )a"ara$tra+ 01992 75 !om%, !a$, 6:6 0Bom,2,

46 Lak"i Ram -, State o' Caryana + 1979 012 All In&ia !r, L,R, 1176 at %, 11790 ;C2 agannat" -, Bank o' In&ia+ 019942 7: !om%, !a$, 497 0),,2 Ne# Bank o'In&ia -, B"u%in&er Sing"+ 019942 7: !om%, !a$, :1 0 ; C2 !anara Bank -,

Tecom Engineer+ 019942 7: !om%, !a$, =5 0Ker,2 State Bank o' Bikaner ; ai%ur-, N,I,S,R, !or%oration+ 01992 75 !om%, !a$, 47 0RaP,2,

47 B"art Steel Tu.e$ Lt&, -, State o' Caryana+ A,I,R, 1966 unP, 579 at %, 59=

49 State Bank o' Tra-ancore -, )o"amme& )a"amme& K"an+ 019752 5 !om%,

!a$, 49: at %,49*,

: !ommi$$ioner o' Income Ta8 -, !o, %, Su%%ly ; !ommi$$ion S"o% Lt&,+ 199=012 Bank, !,L,R, === at %,==6J199= 05:42 I,T,R, 61= at %,617 0RaP,2 imal !"an&raGro-er -, Bank o' In&ia+ 05:::2 S,!,!, 155 at %,1=1JA,I,R,5::: S,!, 5171J5:::02 ,T,5760S,!,2J5:::042 S,L,T, 5:5J5::: 052 !,L,T, 5*4 0S,!,2,

1 ,S,S,S, Niyamit"a -, State o' Karnataka+ 019912 65 !om, !a$, 4:9 at %%, 4140Knt,2,

5 ag&am.e Nil#a& !om%any -, unPa. National Bank+ G#alior+ 1991 052 Bank

!,L,R, 1: at %%,17+ 19 0),,2,


17/178

= In&ian -er$ea$ Bank -, In&u$trial !"ain !oncern+ 1991 Bank ,517 at %,5540S,!,2 J 1991 Banker$ , 517 0S,!,2 J 0199:2 1 S,!,!,474,

4 S,K,Agar#ala -, Union o' In&ia+ 5::1 012 Gau"ati L,, 17= at %,194 A$$ociate&Tim.er In&u$trie$ -, !entral Bank o' In&ia+ 05:::2 6 S,!,!, 9= at %,1:: J

A,I,R,5::: S,!,5*79J 5::: 092 ,T,16J5::: 0*2 S,L,T, 1*1 0S,!,2 J 5::: 0=2 S,!,,5=5,

In&u$trial 3e-elo%ment Bank o' In&ia -, Kri$"na ilament$ Lt&,+ 05:::2 4)",L,,4=1 at %,4=,

* ya-a$aya Se-a Sa"akara Sang"a Niyamit"a -, State o' Karnataka+ 019912 65!om%, !a$, 4:9 at %,414 0Knt,2 A$$ociate& Tim.er In&u$trie$ -, !entral Bank o'In&ia+ 05:::2 6 S,!,!, 9= at %,96 A,I,R, 5::: S,!,5*79J5::: 092 ,T, 0S,!,2 16 J5::: 0*2 S,L,T, 1*1 0S,!,2 J 5::: 0=2 S,!,, 5=5,

6 All In&ia Ne# Bank o' In&ia Em%loyee$ e&eration+ Ne# 3el"i -, Union o' In&ia+A,I,R, 5::1 All,5: at %,5:7 Nort" Ea$t inance !or%oration Lt&, -, Union o' In&ia+05:::2 1:1 !om%, !a$, =6= at %,=91 0Sikkim2,

7 "oeni8 Im%e8 -, State o' RaPa$t"an+ A,I,R, 1997 RaP, 1:: at %, 1:=,


*: Go#&a+ 3,S, -, !or%oration Bank+ A,I,R, 197= Knt, 14= at %,16,

Banking Regulation Act 1949 > Bare Act > art :5 > Bu$ine$$ o' Banking!om%anie$BRA :5 )arc" 1:+ 1949ART IIBUSINESS BANKING !)ANIES

*, orm$ o' .u$ine$$ in #"ic" .anking com%anie$ may engage,? 012 In a&&ition tot"e .u$ine$$ o' .anking+ .anking com%any may engage in any one or more o'

t"e 'ollo#ing 'orm$ o' .u$ine$$+ namely J

0a2 t"e .orro#ing+ rai$ing+ or taking u% o' money t"e len&ing or a&-ancing o'money eit"er u%on or #it"out $ecurity t"e &ra#ing+ making acce%ting+&i$counting+ .uying+ $elling collecting an& &ealing in .ill$ o' e8c"ange+ "un&i$+%romi$$ory note$+ cou%on$+ &ra't$+ .ill$ o' la&ing+ rail#ay recei%t$ #arrant$+&e.enture$+ certicate$+ $cri%$ an& ot"er in$trument$+ an& $ecuritie$ #"et"ertran$'era.le or negotia.le or not t"e granting an& i$$uing o' letter$ o' cre&it+tra-eller$ c"e/ue$ an& circular note$ t"e .uying+ $elling an& &ealing in .ullionan& $%ecie t"e .uying an& $elling+ o' 'oreign e8c"ange inclu&ing 'oreign .anknote$ t"e ac/uiring "ol&ing+ i$$uing on commi$$ion+ un&er#riting an& &ealing in$tock+ 'un&$+ $"are &e.enture$+ &e.enture $tock+ .on&$+ o.ligation$+ $ecuritie$

an& in-e$tment$ o' all kin&$ t"e %urc"a$ing an& $elling o' .on&$+ $cri%$ or ot"er'orm$ o' $ecuritie$ on .e"al' o' con$tituent$ or ot"er$+ t"e negotiating o' loan$


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an& a&-ance$ t"e recei-ing o' all kin&$ o' .on&$+ $cri%$ or -alua.le$ on &e%o$itor 'or $a'e cu$to&y or ot"er#i$e t"e %ro-i&ing o' $a'e &e%o$it -ault$ t"ecollecting an& tran$mitting o' money an& $ecuritie$

0.2 acting a$ agent$ 'or any Go-ernment or local aut"ority or any ot"er %er$on or%er$on$ t"e carrying on o' agency .u$ine$$ o' any &e$cri%tion inclu&ing t"eclearing an& 'or#ar&ing o' goo&$+ gi-ing o' recei%t$ an& &i$c"arge$ an&ot"er#i$e acting a$ an attorney on .e"al' o' cu$tomer$+ .ut e8clu&ing t"e.u$ine$$ o' a 1 Fmanaging agent or $ecretary an& trea$urer o' a com%any

0c2 contracting 'or %u.lic an& %ri-ate loan$ an& negotiating an& i$$uing t"e $ame0&2 t"e e(ecting+ in$uring+ guaranteeing+ un&er#riting+ %artici%ating in managingan& carrying out o' any i$$ue+ %u.lic or %ri-ate+ o' State+ munici%al or ot"er loan$or o' $"are$+ $tock+ &e.enture$+ or &e.enture $tock o' any com%any+ cor%orationor a$$ociation an& t"e len&ing o' money 'or t"e %ur%o$e o' any $uc" i$$ue

0e2 carrying on an& tran$acting e-ery kin& o' guarantee an& in&emnity .u$ine$$

0'2 managing+ $elling an& realiMing any %ro%erty #"ic" may come into t"e%o$$e$$ion o' t"e com%any in $ati$'action or %art $ati$'action o' any o' it$ claim$0g2 ac/uiring an& "ol&ing an& generally &ealing #it" any %ro%erty or any rig"t+title or intere$t in any $uc" %ro%erty #"ic" may 'orm t"e $ecurity or %art o' t"e$ecurity 'or any loan$ or a&-ance$ or #"ic" may .e connecte& #it" any $uc"$ecurity

0"2 un&ertaking an& e8ecuting tru$t$

0i2 un&ertaking t"e a&mini$tration o' e$tate$ a$ e8ecutor+ tru$tee or ot"er#i$e

0P2 e$ta.li$"ing an& $u%%orting or ai&ing in t"e e$ta.li$"ment an& $u%%ort o'a$$ociation+ in$titution$+ 'un&$+ tru$t$ an& con-enience$ calculate& to .enetem%loyee$ or e8?em%loyee$ o' t"e com%any or t"e &e%en&ent$ or connection$ o'$uc" %er$on$ granting %en$ion$ an& allo#ance$ an& making %ayment$ to#ar&$in$urance $u.$cri.ing to or guaranteeing money$ 'or c"arita.le or .ene-olento.Pect$ or 'or any e8"i.ition or 'or any %u.lic+ general or u$e'ul o.Pect

0k2 t"e ac/ui$ition+ con$truction+ maintenance an& alteration o' any .uil&ing#ork$ nece$$ary or con-enient 'or t"e %ur%o$e$ o' t"e com%any

0l2 $elling+ im%ro-ing+ managing+ &e-elo%ing+ e8c"anging+ lea$ing+ mortgaging+&i$%o$ing o' or turning into account or ot"er#i$e &ealing #it" all or any %art o't"e %ro%erty an& rig"t$ o' t"e com%any

0m2 ac/uiring an& un&ertaking t"e #"ole or any %art o' t"e .u$ine$$ o' any%er$on or com%any+ #"en $uc" .u$ine$$ i$ o' nature enumerate& or &e$cri.e& int"i$ $u.?$ection

0n2 &oing all $uc" ot"er t"ing$ a$ are inci&ental or con&uci-e to t"e %romotion ora&-ancement o' t"e .u$ine$$ o' t"e com%any


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0o2 any ot"er 'orm$ o' .u$ine$$ #"ic" t"e !entral Go-ernment may .ynotication in t"e cial GaMette+ $%eci'y a$ a 'orm o' .u$ine$$ in #"ic" it i$la#'ul 'or a .anking com%any to engage,

052 No .anking com%any $"all engage in any 'orm o' .u$ine$$ ot"er t"an t"o$ere'erre& to in $u.?$ection 012,

!))ENTS

Sco%e o' t"e $ection,? Section * o' t"e Act %ro-i&e$ ela.orately 'or a #i&e -arietyo' .u$ine$$ #"ic" a .anking com%any may engage it$el' in, A 'air con$i&erationo' t"i$ $ection a$ #ell a$ t"e &enition o' .ankingO in t"e Banking RegulationAct+ 1949+ #oul& "a-e no &ou.t in any one$ min& t"at c"it 'un& tran$actionin&ulge& in .y a .anking com%any at any rate %artake$ t"e c"aracter o' a.anking acti-ity,5

Grant o' o-er&ra't 'acilitie$,? Section * o' t"e Banking Regulation Act+ 1949&e$cri.e$ t"e 'orm$ o' .u$ine$$ #"ic" can .e con&ucte& .y a .anking com%anyin a&&ition to t"e .u$ine$$ o' .anking, H"en t"e .ank i$ engage& in &i(erentty%e$ o' .u$ine$$ a$ mentione& in t"i$ $ection+ it $ a%%arent t"at #"en t"e .anki$ granting t"e o-er&ra't 'acilitie$ to it$ client #"ic" i$ a cu$tomer+ it i$ %ro-i&ing$er-ice to "im,=

)oratorium on t"e .ank in 'orce Q H"et"er t"e .ank can tran$act .u$ine$$ a$ anaut"ori$e& &ealer in 'oreign e8c"ange un&re oreign E8c"ange Regulation Act,?Un&er Sec,* o' t"e Act a .anking com%any may engage in any ot"er .u$ine$$+$%ecie& t"erein in a&&ition to t"e .u$ine$$ o' .anking, T"u$ t"e Bank can .uyan& $ell 'oreign e8c"ange inclu&ing 'oreign .ank note$+ collect an& &eal in .ill$ o'

e8c"ange+ recei-e -alua.le on &e%o$it or 'or $a'e cu$to&y an& tran$act $e-eral'orm$ o' .u$ine$$, T"e moratorium contem%late& un&er Sec,4 012 o' t"e Act i$in re$%ect o' a .anking com%anyO an& not conne& to .anking .u$ine$$ only,)oratorium+ a$ t"e #or& $ignie$ i$ a $u$%en$ion o' acti-ity+ a tem%orary .an ont"e %er'ormance o' a legal o.ligation, Section 4 0=2 o' t"e Banking RegulationAct t"ere'ore enPoin$ t"at t"e Banking !om%any $"all not &uring t"e %erio& o'moratorium make any %ayment to any &e%o$itor or &i$c"arge any lia.ilitie$ oro.ligation$ to any cre&itor+ e8ce%t a$ ot"er#i$e &irecte& .y t"e !entralGo-ernment, T"e acti-ity o' t"e .anking com%any i$ t"u$ $u$%en&e& an& t"eBank cannot tran$act any .anking .u$ine$$ or e8c"ange in ot"er 'orm$ o'.u$ine$$, T"e 'act t"at 'or certain ty%e$ o' .u$ine$$+ a 'urt"er aut"ori$ation or

%ermi$$ion i$ in$i$te& un&er t"e 'oreign 0$ic2 &oe$ not a(ect t"e content o' t"e%o#er o' moratorium $anctione& un&er Sec,4 o' t"e Banking Regulation Act an&&oe$ not aut"oriMe any .u$ine$$+ .anking or ot"er#i$e+ &uring t"e o%eration o't"e moratorium, T"e Bank i$ in $tatu$ /uo &uring t"i$ %erio&, T"u$+ #"en t"emoratorium on t"e Bank i$ in 'orce+ t"e Bank cannot tran$act .u$ine$$ a$ anaut"ori$e& &ealer in 'oreign e8c"ange un&er t"e oreign E8c"ange RegulationAct al$o4

rgani$ation o' Loan )ela,? Cel& t"e $c"eme neit"er -iolate$ t"e gui&eline$ o't"e Re$er-e Bank o' In&ia nor t"e commercial Banking La#$,

InPunction re$training %ayment in term$ o' t"e letter o' cre&it ? Grant o',? It i$ #ell

$ettle& t"at letter$ o' cre&it coul& .e .ot" re-oca.le an& irre-oca.le, H"ile t"eirre-oca.le an& conrme& letter$ o' cre&it $tan& on a &i(erent 'ooting


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irre-oca.le letter$ o' cre&it #it"in t"e time can .e re-oke& .e'ore negotiation$, Iti$ $tate& t"at t"e contract .et#een t"e i$$uing .ank an& t"e interme&iary&e%en&e& u%on t"e term$ in #"ic" t"e 'ormer$ %romi$e to %ay #a$ couc"e&, It#oul& .ecome .in&ing in t"e ca$e o' a conrme& cre&it+ t"at i$ an irre-oca.lecre&it #"ic" "a$ .een conrme& .y t"e interme&iary or %aying .anker a$ $oona$ it i$ in&icate& to t"e .eneciary, I' t"e cre&it #a$ re-oca.le+ t"ere #a$ no%oint in "a-ing it conrme&+ $uc" a cre&it #a$ &eeme& to .e re-oca.le at anytime #it"out notice t"oug" it #a$ t"oug"t t"at a .anker %aying un&er are-oca.le cre&it coul& &eman& to .e reim.ur$e& in re$%ect o' any %ayment "e"a& ma&e u%to t"e time o' re-ocation, But in or&er to en'orce %ayment t"e&ocument$ ten&ere& mu$t con'orm to t"e e8act term$ an& con&ition$ $ti%ulate&in t"e letter o' cre&it, It #oul& not &o to .e more or le$$ $imilar, T"e !ourt$u$ually re'rain 'rom granting inPunction to re$train t"e %er'ormance o' t"econtractual o.ligation$ ari$ing out o' t"e letter o' cre&it or a .ank guarantee.et#een one .anker an& ot"er, I' $uc" tem%orary inPunction$ #ere to .e grante&in tran$action .et#een a .anker an& a .anker re$training a .ank 'rom recallingt"e amount &ue #"en %ayment #a$ ma&e un&er re$er-e to anot"er .ank or in

term$ o' t"e letter o' guarantee or cre&it+ e8ecute& .y it+ t"e #"ole .anking$y$tem in t"e country #oul& 'ail, It i$ only in e8ce%tional ca$e$ t"at t"e !ourt$#oul& inter'ere #it" t"e mac"inery o' irre-oca.le o.ligation$ a$$ume& .y.anker$, nce a letter o' cre&it i$ e$ta.li$"e& t"ere i$ a contract .et#een t"ei$$uing .ank an& t"e $eller, T"e .uyer "a$ no rig"t to inter-ene, I' t"e .ank %ay$in -iolation o' t"e letter o' cre&it t"en t"e .uyer can al#ay$ $ue t"e .ank 'or any&amage$ or .reac" o' "i$ contract, I'+ on t"e ot"er "an&+ t"ere are certain ot"erclaim$ o' t"e .uyer again$t t"e $eller t"en t"e .uyer can le a $uit 'or reco-eryo' $uc" &amage$ an& money 'rom t"e $eller, In -ie# o' #ell?$ettle& %rinci%le o'.alance o' con-enience in $uc" a ca$e in t"e a.$ence o' clear ca$e o' 'rau& tot"e kno#le&ge o' t"e .ank t"e !ourt $"oul& not grant inPunction re$training%ayment in term$ o' t"e letter o' cre&it a$ t"oug" in t"i$ ca$e t"e letter o' cre&it

#a$ irre-oca.le one+ it "a$ not yet .een re-oke&, T"u$ t"e or&er o' inPunction#a$ -acate&,*

Re$traint again$t enca$"ment o' .ank guarantee,? H"ere t"e amount #a$ in 'act&ue #"ic" im%elle& t"e %etitioner to in-oke t"e .ank guarantee+ t"e re$traintor&er %a$$e& .y t"e !ourt again$t enca$"ment o' .ank guarantee #a$ not

Pu$tie& .eing .a$e& on no e-i&ence,6

!on$titutional -ali&ity o' Art, 5* 0&2,? T"e !oun$el rai$e$ an ingeniou$ argumentt"at t"e la# re'erre& to in Art, 5*0&2 can .e c"allenge& only on t"e groun& t"at ito(en&$ %u.lic or&er+ morality an& "ealt", T"e !oun$el &eri-e$ in$%iration 'rom

t"i$ $u.mi$$ion 'rom t"e o%ening #or&$ o' t"e article, T"e !on$titution+ in Art,5*+ guarantee$ to e-ery religiou$ &enomination or any $ection t"ereo' certainrig"t$ relating to matter$ o' religion an& t"o$e a(ecting %ro%ertie$ an& t"eira&mini$tration, T"e$e rig"t$ are+ "o#e-er+ $u.Pect to %u.lic or&er+ morality an&"ealt", T"e$e rig"t$ cannot t"ere'ore .e a$$erte& or recogni$e& #"en t"ey are%lainly o%%o$e& to %u.lic or&er+ morality an& "ealt", It i$ t"i$ re$tricte& rig"t t"ati$ guarantee&, Article 5*0&2 regulate$ t"at rig"t in accor&ance #it" la#, T"e la#naturally may co-er #i&er el&$ an& cannot .e limite& to t"e t"ree $%ecie&$u.Pect$+ %u.lic or&er+ morality an& "ealt", Similarly+ #"ile t"i$ la# may .ec"allenge& a$ .eyon& t"e legi$lati-e com%etence o' t"e State or a$ o(en&ingArt$, 14 an& 19 o' t"e !on$titution+ i' cannot .e conten&e& t"at t"e c"allenge$"oul& al$o .e re$tricte& to t"e$e groun&$ .a$e& on %u.lic or&er+ morality an&

"ealt", A legi$lation .eyon& t"e legi$lati-e com%etence cannot &eri-e $u%%ortun&er t"i$ Article on t"e groun& t"at it i$ a legi$lation relating to %u.lic or&er+


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morality an& "ealt" an& a(ecting t"e rig"t to a&mini$ter %ro%ertie$ o' a religiou$in$titution, T"i$ %oint i$ a.$olutely .a$ele$$ an& "a$ to .e rePecte&,7

3e'ault in re%ayment o' .ank &ue$ Q Bank not Pu$tie& in &enying it$ $er-ice$ tot"e &e.tor,? Lea-ing all t"e contention$ o' t"e %artie$ o%en+ t"e re$%on&ent Bankmay not &eny .anking 'acilitie$ to t"e a%%ellant$ 'or o%eration o' a currentaccount to ena.le t"em to kee% t"eir .u$ine$$ going, It #oul& .e to no.o&y$.enet t"at a$ a re$ult o' a total &enial o' .anking 'acilitie$ V $er-ice$+ t"e.u$ine$$ o' a%%ellant$ $"oul& come to a grin&ing "alt, Su%reme !ourt+ t"ere'ore+&irecte& t"at #it"out %rePu&ice to t"e re$%ecti-e contention$ o' t"e %artie$+ t"ere$%on&ent $"all allo# t"e o%eration o' one current account+ #"ic" #ill .e 'ree'rom t"e inci&ent$ o' t"e .anker$ lien claime& .y t"e re$%on&ent $o a$ to ena.let"e a%%ellant to carry on it$ normal &ay?to?&ay .u$ine$$ tran$action$+ to o.tainletter$ o' cre&it a 'ull margin an& to ena.le %ayment o' $tatutory outgoing$+ta8e$+ #age$+ $alarie$+ ra#?material$+ etc, #"ic" are t"e u$ual .u$ine$$re/uirement$ o' a manu'acturing unit, T"ere $"all .e not o.ligation on t"e %art o't"e Bank to %ro-i&e any cre&it 'acility in t"i$ account, Co#e-er in%ut$ o' money

into t"i$ account $"all not .e $u.Pecte& to or a%%ro%riate& un&er t"e lien claime&.y t"e Bank,9

Bank &ue$ Q Banking 'acilitie$ cannot .e $to%%e&,? It a%%ear$ t"at lea-ing all t"econtention$ o' t"e %artie$ o%en+ t"e re$%on&ent?.ank may not &eny .anking'acilitie$ to t"e a%%ellant$ 'or o%eration o' a current account to ena.le t"em tokee% t"eir .u$ine$$ going, It #oul& .e to no.o&y$ .enet t"at a$ a re$ult o' atotal &enial o' a .anking 'acilitie$V$er-ice$+ t"e .u$ine$$ o' a%%ellant $"oul&come to a grin&ing "alt,1:

In'erence o' 'rau&,? In'erence o' 'rau& i$ to .e &ra#n not 'rom in&i-i&ual e-ent$,Eac" e-ent .y it$el' may not .e $ucient 'or &ra#ing in'erence o' 'rau&, Totality

o' t"e e-ent$ cumulati-ely "a-e t"e e(ect o' 'rau&, In t"i$ ca$e+ i' t"e 'act$ an&corre$%on&ence$ 'rom t"e $tage o' glo.al ten&er till t"e $uit i$ le& arecon$i&ere& toget"er+ a clear im%re$$ion o' 'rau& in t"e tran$action o' ca%ti-e%o#er %lant .y &e'en&ant No$,1 to = i$ create& an& &e'en&ant No,4 cannot .e'ully &i$$ociate& 'rom it,11

In t"e in$tant ca$e it i$ an a&mitte& 'act t"at in t"e %laint it$el'+ t"ere #a$ noallegation o' 'rau&, It #a$ initially only in t"e r$t a%%lication 'or t"e grant o'inPunction t"at in a %aragra%" it "a$ .een mentione& t"at t"e a%%ellant "a&in-oke& t"e .ank guarantee ar.itrarily, T"i$ a%%lication contain$ no 'act or%articular$ in $u%%ort o' t"e allegation o' 'rau&, A $imilar .al& a-erment alleging

'rau& i$ al$o containe& in t"e $econ& a%%lication 'or inPunction relating to .ankguarantee No, 4:V46, T"i$ i$ not a ca$e #"ere &e'en&ant No,1 "a& at any timeallege& 'rau& %rior to t"e ling o' inPunction a%%lication, T"e main contract+%ur$uant to #"ic" t"e .ank guarantee #ere i$$ue& #a$ not $oug"t to .e a-oi&e&.y alleging 'rau&+ nor #a$ it at any %oint o' time allege& t"at t"e .ank guarantee#a$ i$$ue& .ecau$e any 'rau& "a& .een %laye& .y t"e a%%ellant, T"ere i$ no&ou.t t"at t"e .al& a$$ertion o' 'rau& "a& .een ma&e $olely #it" a -ie# too.tain an or&er o' inPunction, In t"e a.$ence o' e$ta.li$"e& 'rau& an& not a mereallegation o' 'rau& an& t"at al$o "a-ing .een ma&e only in t"e inPunctiona%%lication+ t"e !ourt coul& not+ in t"e %re$ent ca$e+ "a-e grante& an inPunctionrelating to t"e enactment o' t"e .ank guarantee$,15

1= F6, U$e o' #or&$ .ankO+ .ankerO+ .ankingO+ or .anking com%anyO,? 012 Nocom%any ot"er t"an a .anking com%any $"all u$e a$ %art o' it$ name 14 For in


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connection #it" it$ .u$ine$$ any o' t"e #or&$ .ankO+ .ankerO or .ankingOan& no com%any $"all carry on t"e .u$ine$$ o' .anking in In&ia unle$$ it u$e$ a$%art o' it$ name at lea$t one o' $uc" #or&$,

052 No rm+ in&i-i&ual or grou% o' in&i-i&ual$ $"all+ 'or t"e %ur%o$e o' carrying onany .u$ine$$ u$e a$ %art o' it$ or "i$ name any o' t"e #or&$ .ankO+ .ankingO+or .anking com%anyO,

0=2 Not"ing in t"i$ $ection $"all a%%ly to Q0a2 $u.$i&iary to a .anking com%any 'orme& 'or one or more o' t"e %ur%o$e$mentione& in $u.?$ection 012 o' Sec,19+ #"o$e name in&icate$ t"at it i$$u.$i&iary o' t"at .anking com%any0.2 any a$$ociation o' .ank$ 'orme& 'or %rotection o' !om%anie$ Act+ 19* 01 o'19*2,

!))ENTS

Sa'eguar&$ 'or genuine an& "one$t .ank cu$tomer$,? In or&er to en$ure t"atgenuine an& "one$ .ank cu$tomer$ are not "ara$$e& or %ut to incon-enience$ucient $a'eguar&$ "a-e al$o .een %ro-i&e& in !"a%ter I+ Negotia.leIn$trument$ Act, Suc" $a'eguar&$ are J

0a2 t"at no !ourt $"all take cogniMance o' $uc" o(ence e8ce%t on a com%laint+ in#riting+ ma&e .y t"e %ayee or "ol&er in &ue cour$e o' t"e c"e/ue0.2 t"at $uc" com%laint i$ ma&e #it"in one mont" o' t"e &ate on #"ic" t"e cau$eo' action ari$e$ an&0c2 t"at no !ourt in'erior to t"at o' a )etro%olitan )agi$trate or a u&icial)agi$trate o' t"e r$t cla$$ $"all try any $uc" o(ence,1

Banker? )eaning o',? T"ere can .e no &ou.t t"at or&inarily t"e %o$ition o' t"e.ank -i$?a?-i$ a %er$on &ealing #it" t"e .ank i$ t"at o' &e.tor an& cre&itor, It i$+o' cour$e+ %er'ectly o%en to $uc" %er$on to $"o# t"at in a %articular tran$actiont"e .ank "a$ recei-e& money in tru$t, A common in$tance i$ #"ere a .ank i$%ai& money 'or t"e e8%re$$ %ur%o$e o' it .eing remitte& to a %er$on at $omeot"er %lace, In any %articular ca$e it i$ 'or t"e %er$on alleging tru$t to e$ta.li$"it, In t"e %re$ent ca$e t"ere i$ no e-i&ence #"ate-er to $"o# t"at t"e tran$action#a$ anyt"ing more t"an t"e or&inary %urc"a$e &eman& &ra't on anot"er .ranc"o' t"e .ank, T"e %lainti( "a$ a&mitte& in "i$ e-i&ence t"at "e "a$ %re-iou$ly%urc"a$e& &ra't 'rom t"e &e'en&ant .ank on $e-eral occa$ion in connection #it""i$ .u$ine$$, Ce $tate& t"at "e lle& in a 'orm .e'ore %urc"a$e o' t"e &ra't .ut

t"i$ 'orm containe& no mention o' t"e %ur%o$e 'or #"ic" t"e &ra't #a$ .eing%urc"a$e& on t"e 'act$+ t"ere'ore+ t"ere i$ not ca$e t"at t"e relation$"i% .et#eent"e %lainti( an& t"e &e'en&ant .ank #a$ anyt"ing ot"er t"an o' cre&itor an&&e.tor,1*

T"e relation$"i% .et#een a &e%o$itor an& a .ank i$ t"e $im%le relation$"i% o' acre&itor an& a &e.tor, A &e%o$itor #"o &e%o$it$ money in .ank in "i$ currentaccount i$ not"ing more t"an a cre&itor an& it cannot .e $ai& t"at t"ere "a$ .eenany entru$tment to t"e .ank 'or any %articular %ur%o$e, T"e .ank i$+ o' cour$e+lia.le to re'un& t"e money to t"e &e%o$itor #"en t"e &e%o$itor call$ 'or it+ .utt"e money &e%o$ite& .elong$ to t"e .ank an& t"e .ank i$ entitle& to &eal #it" ita$ it like$,16


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7, ro"i.ition o' tra&ing,? Not#it"$tan&ing anyt"ing containe& in Sec,* or in anycontract+ no .anking com%any $"all &irectly or in&irectly &eal in t"e .uying or$elling or .artering o' goo&$+ e8ce%t in conne8ion #it" t"e realiMation o' $ecuritygi-en to or "el& .y it+ or engage in any tra&e+ or .uy+ $ell o' .arter goo&$ 'orot"er$ ot"er#i$e t"an in conne8ion #it" .ill$ o' e8c"ange recei-e& 'or collectionor negotiation or #it" $uc" o' it$ .u$ine$$ a$ i$ re'erre& to in !l,0i2 o' $u.?$ection012 o' Sec,*J

17 Fro-i&e& t"at t"i$ $ection $"all not a%%ly to any $uc" .u$ine$$ a$ i$$%ecie& in %ur$uance o' !l, 02 o' $u.?$ection 012 o' Sec,*,

E8%lanation,? or t"e %ur%o$e$ o' t"i$ $ection+ goo&$O mean$ e-ery kin& o'mo-a.le %ro%erty+ ot"er t"at actiona.le claim$+ $tock$+ $"are$+ money+ .ullionan& $%ecie+ an& all in$trument$ re'erre& to in !l,0a2 o' $u.?$ection 012 o' Sec,*,

!))ENT

Section 7 o' t"e Act i$ a %ointer to t"e re$triction im%o$e& .y Sec,15 o' t"e !"itun& Act 04: o' 19752, 19

9, 3i$%o$al o' non?.anking a$$et$,? Not#it"$tan&ing anyt"ing containe& in Sec,*+no .anking com%any $"all "ol& any immo-a.le %ro%erty+ "o#$oe-er ac/uire&+e8ce%t $uc" a$ i$ re/uire& 'or it$ o#n u$e+ 'or any %erio& e8cee&ing $e-en year$'rom t"e ac/ui$ition t"ereo' or 'rom t"e commencement o' t"i$ Act+ #"ic"e-er i$later or any e8ten$ion o' $uc" %erio& a$ in t"i$ $ection %ro-i&e&+ an& $uc"%ro%erty $"all .e &i$%o$e& o' #it"in $uc" %erio& or e8ten&e& %erio&+ a$ t"e ca$emay .eJ

ro-i&e& t"at t"e .anking com%any may+ #it"in t"e %erio& o' $e-en year$ a$

a'ore$ai&+ &eal or tra&e in any $uc" %ro%erty 'rom t"e %ur%o$e o' 'acilitating t"e&i$%o$al t"ereo'J

ro-i&e& 'urt"er t"at t"e Re$er-e Bank may in any %articular ca$e e8ten& t"ea'ore$ai& %erio& o' $e-en year$ .y $uc" %erio& not e8cee&ing -e year$ #"ere iti$ $ati$e& t"at $uc" e8ten$ion #oul& .e in t"e intere$t$ o' t"e &e%o$itor$ o' t"e.anking com%anyJ

!))ENT

T"e #or& $"allO ? )eaning o',? It "a$ .een lai& &o#n con$i$tently .y t"e

Su%reme !ourt t"at t"e mere u$e o' t"e #or& $"allO .y it$el' in t"e $tatute &oe$not make t"e %ro-i$ion man&atory+ .ut it i$ t"e &uty o' t"e !ourt$ o' Pu$tice to tryto get at t"e real intention o' t"e Legi$lature .y care'ully atten&ing to t"e #"ole$co%e o' t"e $tatute to .e con$true&, In eac" ca$e+ one "a$ to look to t"e$u.Pect?matter+ con$i&er t"e im%ortance o' t"e %ro-i$ion$ an& t"e relation o' t"at%ro-i$ion #it" t"e general o.Pect inten&e& to .e $ecure& .y t"e Act an& u%on t"ere-ie# o' t"e ca$e in t"at a$%ect &eci&e #"et"er t"e enactment i$ man&atory oronly &irectory,5:

51 F1:, ro"i.ition o' em%loyment o' managing agent$ an& re$triction$ oncertain 'orm$ o' em%loyment,? 012 No .anking com%any Q

0a2 $"all em%loy or .e manage& .y a managing agent or0.2 $"all em%loy or continue t"e em%loyment o' any %er$on?


24/178

0i2 #"o i$+ or at any time "a$ .een+ a&Pu&icate& in$ol-ent+ or "a$ $u$%en&e&%ayment or "a$ com%oun&e& #it" "i$ cre&itor$+ or #"o i$+ or "a$ .een+ con-icte&.y !riminal !ourt o' an o(ence in-ol-ing moral tur%itu&e or0ii2 #"o$e remuneration or %art o' #"o$e remuneration take$ t"e 'orm o'commi$$ion or o' a $"are in t"e %rot$ o' t"e com%anyJ55 Fro-i&e& t"at not"ing containe& in t"i$ $u.?clau$e $"all a%%ly to t"e%ayment .y .anking com%any o' Q0a2 any .onu$ in %ur$uance o' a $ettlement or a#ar& arri-e& at or ma&e un&erany la# relating to in&u$trial &i$%ute$ or in accor&ance #it" any $c"eme 'rame&.y $uc" .anking com%any or in accor&ance #it" t"e u$ual %ractice %re-ailing in.anking .u$ine$$ 0.2 any commi$$ion to any .roker 0inclu&ing guarantee .roker2+ ca$"ier?contractor+ clearing an& 'or#ar&ing agent+ auctioneer or any ot"er %er$on+em%loye& .y t"e .anking com%any un&er a contract ot"er#i$e t"an a$ regularmem.er o' t"e $ta( o' t"e com%any or0iii2 #"o$e remuneration i$+ in t"e o%inion o' t"e Re$er-e Bank+ e8ce$$i-e or0c2 $"all .e manage& .y any %er$on ?

5= F0i2 #"o i$ a &irector o' any ot"er com%any not .eing Q0a2 a $u.$i&iary o' t"e .anking com%any+ or0.2 a com%any regi$tere& un&er Sec,5 o' t"e !om%anie$ Act+ 19* 01 o' 19*2Jro-i&e& t"at t"e %ro"i.ition in t"i$ $u.?clau$e $"all not a%%ly in re$%ect o' any$uc" &irector 'or a tem%orary %erio& not e8cee&ing t"ree mont"$ or $uc" 'urt"er%erio& not e8cee&ing nine mont"$ a$ t"e Re$er-e Bank may allo# or0ii2 #"o i$ engage& in any ot"er .u$ine$$ or -acation or0iii2 54F#"o$e term$ o' oce a$ a %er$on managing t"e com%any i$ 'or a %erio&e8cee&ing -e year$ at any one timeJ5 Fro-i&e& t"at t"e term o' oce o' any $uc" %er$on may .e rene#e& ore8ten&e& .y 'urt"er %erio&$ not e8cee&ing -e year$ on eac" occa$ion $u.Pect tot"e con&ition t"at $uc" rene#al or e8ten$ion $"all not .e $anctione& earlier t"an

t#o year$ 'rom t"e &ate on #"ic" it i$ to come into 'orce Jro-i&e& al$o t"at #"ere t"e term o' oce o' $uc" %er$on i$ 'or an in&enite%erio&+ $uc" term+ unle$$ it ot"er#i$e come$ to an en& earlier+ $"all come to anen& imme&iately on t"e e8%iry o' -e year$ 'rom t"e &ate o' "i$ a%%ointment oron t"e e8%iry o' t"ree mont"$ 'rom t"e &ate o' commencement o' Sec, 7 o' t"eBanking La#$ 0)i$cellaneou$ ro-i$ion$2 Act+ 19*= 0 o' 19*=2+ #"ic"e-er i$laterJro-i&e& 'urt"er t"at not"ing in t"i$ clau$e $"all a%%ly to a &irector+ ot"er t"ant"e managing &irector+ o' a .anking com%any .y rea$on only o' "i$ .eing $uc"&irector,E8%lanation,? or t"e %ur%o$e o' $u.?clau$e 0iii2 o' !l,0.2+ t"e e8%re$$ion

remunerationO+ in relation to a %er$on em%loye& or continue& in em%loyment+$"all inclu&e $alary+ 'ee$ an& %re/ui$ite$ .ut $"all not inclu&e any allo#ance$ orot"er amount$ %ai& to "im 'or t"e %ur%o$e o' reim.ur$ing "im in re$%ect o' t"ee8%en$e$ actually incurre& .y "im in t"e %er'ormance$ o' "i$ &utie$,

052 In 'orming it$ o%ining un&er $u.?clau$e 0iii2 o' !l,0.2 o' $u.?$ection 012+ t"eRe$er-e Bank may "a-e regar& among ot"er matter$ to t"e 'ollo#ingJ0i2 t"e nancial con&ition an& "i$tory o' t"e .anking com%any+ it$ $iMe an& areao' o%eration+ it$ re$ource$+ t"e -olume o' it$ .u$ine$$+ an& t"e tren& o' it$earning ca%acity0ii2 t"e num.er o' it$ .ranc"e$ or oce$ 0iii2 t"e /ualication$+ age an& e8%erience o' t"e %er$on concerne&


25/178

0i-2 t"e remuneration %ai& to ot"er %er$on$ em%loye& .y t"e .anking com%anyor to any %er$on occu%ying a $imilar %o$ition in any ot"er .anking com%any$imilarly $ituate& an&0-2 t"e intere$t$ o' it$ &e%o$itor$,5* F56 0*2 Any &eci$ion or or&er o' t"e Re$er-e Bank ma&e un&er t"i$ $ection $"all .enal 'or all %ur%o$e$,

!))ENTS

uri$&iction o' !i-il !ourt$, Q !i-il $uit c"allenging &i$mi$$al o' an em%loyee o'State Bank Q Not $eeking relie' un&er t"e In&u$trial 3i$%ute$ Act Q uri$&iction o'!i-il !ourt not .arre&,57

Bank$ circular No, , AV77V*)V15V77+ &ate& 51$t No-em.er+ 1977 QA%%lica.ility an& $co%e o', Q nly %aragra%" 1 o' t"e circular i$ material, T"e $ai&%aragra%"+ inter alia+ %ro-i&e$ t"at 'or lling u% t"e -acancy o' %art timeV'ull time

$#ee%er 'or t"e ne#ly o%ene& .ranc"e$Voce$+ re/ui$ition i$ to .e $ent to t"elocal em%loyment e8c"ange &etailing t"erein t"e nature o' -acancy+remuneration to .e %ai& to t"e $electe& can&i&ate$ a$ #ell a$ t"e eligi.ilitycriteria o' t"e can&i&ate$ 'or t"e $ai& %o$t, T"e $ai& %olicy 'urt"er %ro-i&e$ t"atot"er $ource$ may .e ta%%e& #"en em%loyment e8c"ange 'aile& to $u%%ly$uita.le can&i&ate$ 'or recruitment in t"e %o$t o' $#ee%er, It may .e mentione&t"at t"i$ circular i$ a%%lica.le in t"e ca$e$ o' lling u% t"e %o$t o' $uc" $#ee%er$'or t"e ne#ly o%ene& .ranc"e$ an& oce$ o' t"e .ank, In t"e gi-en ca$e it #a$o%en to t"e .ank aut"oritie$ to "a-e 'ollo#e& t"e %ro-i$ion$ o' t"e circular .e'oregi-ing t"e a%%ointment on a tem%orary .a$i$ to t"e %etitioner .ut #"en once t"ere$%on&ent .ank "a$ alrea&y a%%ointe& a %er$on "ol&ing out 'uture "o%e$ an&&ream$ #"et"er t"e .ank $"oul& .e or&ere& to $"atter $uc" &ream$ taking

$"elter un&er $uc" recruitment %olicy,59

(ence in-ol-ing moral tur%itu&e, ? (ence in-ol-ing moral tur%itu&e i$ one#"ic" in-ite$ $"ame on t"e %er$on #"o .ecame guilty t"ereo', In 'act+ in t"emo&ern #orl&+ t"ere are $o many o(ence$ 'or in$tance+ o(ence$ relating totrac rule$+ #it" #"ic" any %er$on em%loye& may .ecome guilty o' at any time,

T"ere'ore+ a $im%le con-iction .y a !riminal !ourt #oul& not nece$$arily entail&i$/ualication to em%loyment in %u.lic $er-ice or in a .ank, T"at i$ #"y+ t"e la#maker "a$ care'ully circum$cri.e& t"e nature o' t"e o(ence+ t"e con-iction+t"ere'ore+ #oul& "a-e im%lication in t"e matter o' em%loyment an& t"e onlycategory o' o(ence$ are t"o$e #"ic" in-ite $"ame on t"e %er$on #"o .ecame

guilty+ #"ic" $"ame #ill irra&iate on t"e in$titution #"ic" em%loy$, In t"i$ ca$e+t"e %etitioner #a$ not in a %o$ition to $"o# t"e !u$tom$ !learance !erticate inre$%ect o' t#o item$ o' article$, T"e 'act o' %o$$e$$ing !R an& -i&eo camera#it"out t"e corre$%on&ing cu$tom$ &ocument$ i$ .y no $tretc" o' imagination ano(ence in-ol-ing moral tur%itu&e an&+ t"ere'ore+ no automatic termination o'$er-ice can take %lace on t"e .a$i$ o' t"e con-iction recor&e& again$t t"eaccu$e&=:

)oral tur%itu&e Q Te$t,? T"e te$t #"ic" can .e a%%lie& 'or Pu&ging #"et"er ano(ence &oe$ or &oe$ not in-ol-e moral tur%itu&e can .e $ummari$e& a$ 'ollo#$J012 #"et"er t"e act lea&ing to a con-iction #a$ $uc" a$ coul& $"ock t"e moralcon$cience o' $ociety in general

052 #"et"er t"e moti-e #"ic" le& to t"e act #a$ a .a$e one+ an&


26/178

0=2 #"et"er on account o' t"e act "a-ing .een committe& t"e %er%etrator coul&.e con$i&ere& to .e o' a &e%ra-e& c"aracter or a %er$on #"o #a$ to .e looke&&o#n u%on .y t"e $ociety,It i$ not %o$$i.le to lay &o#n any a.$tract $tan&ar& #"ic" con$titute$ moraltur%itu&e, T"ere are certain criminal o(ence$ like t"e't+ ro..ery+ criminal .reac"o' tru$t+ mi$a%%ro%riation o' %ro%erty+ #"ic" &irectly in-ol-e moral tur%itu&e, In$uc" ca$e$ no ela.orate in-e$tigation i$ re/uire& to n& out t"e &e%ra-e&con&uct o' t"e &elin/uent em%loyee, I' t"e o(ence &oe$ not $"o# any element o'-ilene$$+ &e%ra-ity an& #eakne$$ o' c"aracter o' t"e o(en&er t"e &i$ci%linaryaut"ority i$ re/uire& to con$i&er t"e 'act an& circum$tance$ o' t"e ca$e to n&out #"et"er t"e moti-e #"ic" le& to t"e con-iction #a$ &e%ra-e, It i$ a $ettle&la# t"at moral tur%itu&e cannot .e a%%lie& in it$ #i&e$t term, Co#e-er+ t"eratio &eci&en&i o' t"e -ariou$ ca$e$ in&icate t"at t"e /ue$tion #"et"er a certaino(ence in-ol-e$ moral tur%itu&eO or not #ill nece$$arily &e%en& on t"ecircum$tance$ in #"ic" t"e o(ence i$ committe&, It i$ not e-ery %uni$"a.le actt"at can .e con$i&ere& to .e an o(ence in-ol-ing moral tur%itu&e, Any criminalcon-iction %er $e &oe$ not amount to moral tur%itu&e, So it 'ollo#$ t"at #"en

t"e em%loyee i$ con-icte& on criminal c"arge "i$ &i$mi$$al cannot .e automaticunle$$+ t"ere i$ a $%ecic rule in t"at regar&,=1

r&er o' &i$mi$$al,? r&er o' &i$mi$$al cannot .e c"allenge& on groun& t"at i$#a$ .a$e& on mere con-iction an& not on con&uct #"ic" le& to con-iction or t"atit #a$ not a $%eaking or&er or t"at t"e em%loyee #a$ $u.$e/uently relea$e& on%ro.ation,=5

Bi%artite agreement,?In t"e in$tant ca$e in &e%artmental en/uiry an em%loyee#a$ %uni$"e& to increment $to%%age an& later on con-icte& o' criminal c"arge$on c"arge?$"eet $u.mitte& .y !,B,I, It #a$ "el& t"at t"e con-iction #a$ not-iolati-e o' Art, 5:052 o' t"e !on$titution,==

Em%loyment o' %er$on$ on commi$$ion .a$i$,? Section 1: o' t"e BankingRegulation Act &oe$ not %re-ent em%loyment o' %er$on$ on commi$$ion .a$i$,

T"e %ro-i$o to Sec,1: make$ it clear t"at commi$$ion can .e %ai& to %er$on$ #"oare not in regular em%loyment, Un&ou.te&ly t"e 3e%o$it !ollector$ are notregular em%loyee$ o' t"e Bank, But t"ey ne-ert"ele$$ are #orker$ #it"in t"emeaning o' t"e term$ a$ &ene& in t"e In&u$trial 3i$%ute$ Act, T"ere i$ clearlyrelation$"i% o' ma$ter an& $er-ant .et#een t"e 3e%o$it !ollector$ an& t"econcerne& Bank,=4

Sta( #orking on commi$$ion cannot .e &eeme& a$ regular em%loyee,? A rea&ing

o' t"e $u.$tanti-e %ro-i$ion$ a$ #ell a$ t"e e8ce%tion unmi$taka.ly $"o#$ t"eintention o' t"e arliament t"at t"e %er$on to #"om a commi$$ion i$ %aya.le a$remuneration cannot .e a regular $ta( o' t"e .ank .ut t"at "e may .e em%loye&on contract, Em%loyment on t"e .a$i$ o' contract i$+ un&er t"e $c"eme o' t"e$ection+ treate& on a &i(erent 'ooting t"an a %er$on #"o i$ a regular $ta( o' t"e.ank, A &e%o$it collector+ like t"e re$%on&ent+ #oul& .e one #"o i$ $/uarelyco-ere& .y t"e e8ce%tion+ i,e, t"e %ro-i$o+ $ince "i$ remuneration totally con$i$t$o' commi$$ion 'or #"ic" rea$on "e coul& not .e a regular $ta(, I' "e #oul& "a-e.een a regular $ta( 'rom t"e &ate o' "i$ engagement a$ a &e%o$it collector+ "ecoul& not "a-e .een %ai& remuneration .y #ay o' commi$$ion, Suc"engagement o' "im+ an& o' t"e &e%o$it collector$ #"o #ere a&mitte&ly engage&a'ter t"e 1949 Act+ #oul& "a-e .een again$t t"e %ro-i$ion o' la# an& #oul& "a-e

.een null an& -oi&,=


27/178

Su$%en$ion o' %ayment, T"e ling o' an in$ol-ency %etition in t"e %re$ent ca$e"a-ing t"e $ame %rinci%le an& cau$ing t"e i$$ue o' notice an& %u.lication ma&ein t"e GaMette a$ #ell a$ $er-ice o' notice on $ome o' t"e re$%on&ent$ to t"e%etition #oul&+ con$titute $ucient .a$i$ to $u.$tantiate t"e claim o' t"ere$%on&ent t"at t"e %etitioner $u$%en&e& %ayment #it"in t"e meaning o'Sec,1:012 0.2 0i2 o' t"e Act, !on$e/uently+ &e "or$ any ot"er material$ on t"e-ery a&mitte& con&uct an& cour$e o' action a&o%te& .y t"e %etitioner an& "a-ingregar& to t"e $ti%ulation containe& in t"e Banking Regulation Act+ 1949 t"etermination on account o' lo$$ o' con&ence cannot .e $ai& to .e one in-ol-ingany mi$con&uct an& con$e/uently+ t"e non?com%liance #it" %aragra%" 51 o't"e Bi?%artite $ettlement &oe$ not -itiate t"e or&er o' termination, T"e %lea o'-iolation o' Art, 14 o' t"e !on$titution o' In&ia an& c"allenge to %aragra%" 55 o't"e Bi?%artite $ettlement al$o &o not merit acce%tance, !on$e/uently+ t"e%ro-i$ion$ containe& in %ara 51 an& 55 "a& &i(erent an& &i$tinct role$ to %layan& "a& .een "el& to .e .in&ing all along u%on t"e %artie$ an& t"e %lea .a$e& onArt,14 o' t"e !on$titution o' In&ia+ i$ #"olly mi$concei-e&,=*

ro.ation &oe$ not o.literate t"e $tigma o' con-iction,? In t"e in$tant ca$e it #a$$u.mitte& .y t"e learne& coun$el a%%earing 'or re$%on&ent No,1 t"at once a%er$on "a$ .een relea$e on %ro.ation+ $uc" %er$on &oe$ not $u(er 'rom any&i$/ualication attac"ing to "i$ con-iction o' an o(ence un&er any la# an& t"att"e Banking Aut"ority #ere not Pu$tie& in %rocee&ing again$t re$%on&ent N,1un&er t"e &i$ci%linary rule$, A &ee% t"oug"t #a$ gi-en to t"i$ matter an& it #a$"el& t"at relea$e o' t"e o(en&er on %ro.ation &oe$ not o.literate t"e $tigma o'con-iction on $uc" %er$on an& an em%loyee i$ not entitle to rein$tatement in$er-ice automatically .y getting t"e .enet o' %ro.ation o' goo& con&uct,=6

Bank #orker collecting &e%o$it 'rom &oor to &oor #orkmen,? T"e $econ&

re$%on&ent i$ a #orkman a$ &ene& .y t"e Act on t"e 'act$ an& circum$tance$ o't"i$ ca$e+ "a-ing regar& to t"e term$ an& con&ition$ $et out in t"e agreement.et#een t"e Bank an& t"e $econ& re$%on&ent, T"e e-i&ence in t"i$ ca$e clearlye$ta.li$"e$ t"at t"e $econ& re$%on&ent i$ a $er-ant o' t"e Bank an& not anin&e%en&ent contractor,=7

Cu$.an& com%elling "i$ #i'e to accom%any "im to "i$ o#n "ou$e Q Action &oe$not in-ol-e moral tur%itu&e,? In t"e %re$ent ca$e+ t"e con-iction #a$ ultimatelyma&e .y t"e a%%ellate !ourt only un&er Sec,=*+ I,,!, a$ one o' an a.&uction,

T"e learne& u&ge note& t"at t"e com%lainant #a$ t"e %etitioner$ #i'e an& t"erecoul& not .e a con-iction un&er Sec,=*4+ I,,!, 'or #"ic" "e #a$ c"arge&, Ce

u%"el& t"e con-iction un&er Sec,=*+ I,,!, only on t"e groun& t"at $"e #a$'orce& to come 'rom one %lace to anot"er again$t "er #i$", But+ t"e 'act t"at $"e#a$ "i$ #i'e+ cannot .e ignore&, I' a "u$.an& e-en mi$takenly com%el$ "i$ #i'eto accom%any "im to "i$ o#n "ou$e+ no rea$ona.le %er$on can $ay t"at t"i$action in-ol-e& moral tur%itu&e,=9

3i$/ualication 'or continuing in $er-ice,? It i$ rele-ant to notice t"at un&erSe,1:012 0.2 o' t"e Banking Regulation Act+ any an& e-ery con-iction .y a!riminal !ourt &oe$ not o%erate a$ a &i$/ualication 'or continuing in $er-ice+only t"e con-iction .y a !riminal !ourt o' an o(ence in-ol-ing moral tur%itu&eo%erate$ a$ $uc" &i$/ualication, nce it i$ 'oun& t"at an em%loyee "a$ .eencon-icte& o' an o(ence in-ol-ing moral tur%itu&e+ t"e em%loyer "a$ no o%tion

.ut to terminate "i$ $er-ice, T"at i$ t"e comman& o' Sec,1: 012 0.2, No#+ t"ere$%on&ent$ contention+ #"ic" "a$ .een acce%te& .y t"e learne& $ingle u&ge+ i$


28/178

t"at .y -irtue o' Sec, 15 o' t"e ro.ation o' (en&er$ Act+ 197+ t"e&i$/ualication containe& in Sec,1:012 0.2 &oe$ not attac" to "im,

Accor&ing to Sec,15 o' t"e ro.ation o' o(en&er$ Act+ 197+ t"ere'ore+ a %er$oncon-icte& o' an o(ence .ut &ealt #it" un&er Sec,4 $"all not $u(er&i$/ualication+ i' any+ attac"ing to a con-iction o' an o(ence un&er $uc" la#O,Section 1:012 0.2 o' t"e Banking Regulation Act &oe$+ in&ee& %ro-i&e 'or a&i$/ualication, T"oug" t"e #or& &i$/ualication not u$e& t"erein+ it $ay$e8%re$$ly t"at a %er$on con-icte& .y a criminal !ourt o' an o(ence in-ol-ingmoral tur%itu&e $"all not .e continue& in t"e em%loyment o' a .anking!om%any,4:

41 F1:?A, Boar& o' 3irector$ to inclu&e %er$on$ #it" %ro'e$$ional or ot"ere8%erience, Q 012 Not#it"$tan&ing anyt"ing containe& in any ot"er la# 'or t"etime .eing in 'orce+ e-ery .anking com%any+?

0a2 in e8i$tence on t"e commencement o' Sec,= o' t"e Banking La#$

0Amen&ment2 Act+ 19*7 09 o' 19*72+ or0.2 #"ic" come$ into e8i$tence t"erea'ter+$"all com%ly #it" t"e re/uirement$ o' t"i$ $ection J

ro-i&e& t"at not"ing containe& in t"i$ $u.?$ection $"all a%%ly to a .ankingcom%any re'erre& to in !l,0a2 'or a %erio& o' t"ree mont"$ 'rom $uc"commencement,

052 Not le$$ t"at 'ty?one %er cent o' t"e total num.er o' mem.er$ o' t"e Boar&o' 3irector$ o' a .anking com%any $"all con$i$t o' %er$on$+ #"o?

0a2 $"all "a-e $%ecial kno#le&ge or %ractical e8%erience in re$%ect o' one or

more o' t"e 'ollo#ing matter$+ namely J0i2 accountancy+0ii2 agriculture an& rural economy+0iii2 .anking+0i-2 co?o%eration+0-2 economic$+0-i2 nance+0-ii2 la#+0-iii2 $mall?$cale in&u$try+0i82 any ot"er matter+ t"e $%ecial kno#le&ge o'+ an& %ractical e8%erience in+#"ic" #oul&+ in t"e o%inion o' t"e Re$er-e Bank+ .e u$e'ul to t"e .anking

com%anyJro-i&e& t"at out o' t"e a'ore$ai& num.er o' &irector$+ not le$$ t"an t#o $"all .e%er$on$ "a-ing $%ecial kno#le&ge or %ractical e8%erience in re$%ect o'agriculture an& rural economy+ co?o%erati-e or $mall?$cale in&u$try an&0.2 $"all not Q012 "a-e $u.$tantial intere$t in+ or .e connecte& #it"+ #"et"er a$ em%loyee+manager or managing agent+?0i2 any com%any+ not .eing a com%any regi$tere& un&er Sec,5 o' t"e !om%anie$Act+ 19* 01 o' 19*2+ or0ii2 any rm+#"ic" carrie$ on any tra&e+ commerce or in&u$try an& #"ic"+ in eit"er ca$e+ i$not a $mall?$cale in&u$trial concern+ or

052 .e %ro%rietor$ o' any tra&ing commercial or in&u$trial concern+ not .eing a$mall?$cale in&u$trial concern,


29/178

45 F05?A2 Not#it"$tan&ing anyt"ing to t"e contrary containe& in t"e !om%anie$Act+ 19* 01 o' 19*2+ or in any ot"er la# 'or t"e time .eing in 'orce+?0i2 no &irector o' a .anking com%any+ ot"er t"an it$ !"airman or #"ole?time&irector+ .y #"ate-er name calle&+ $"all "ol& oce continuou$ly 'or a %erio&e8cee&ing eig"t year$0ii2 a !"airman or ot"er #"ole?time &irector o' a .anking com%any #"o "a$ .eenremo-e& 'rom oce a$ $uc" !"airman or #"ole time &irector+ a$ t"e ca$e may.e+ un&er t"e %ro-i$ion$ o' t"i$ Act+ $"all al$o cea$e to .e a &irector o' t"e.anking com%any an& $"all al$o not .e eligi.le to .e a%%ointe& a$ a &irector o'$uc" .anking com%any+ #"et"er .y election or co?o%tion or ot"er#i$e+ 'or a%erio& o' 'our year$ 'rom t"e &ate o' "i$ cea$ing to .e t"e !"airman or #"ole?time &irector+ a$ t"e ca$e may .e,

0=2 I'+ in re$%ect o' any .anking com%any+ t"e re/uirement$+ a$ lai& &o#n in $u.?$ection 052 are not 'ullle& at any time+ t"e Boar& o' 3irector$ o' $uc" .ankingcom%any $"all re?con$titute $uc" Boar& $o a$ to en$ure t"at t"e $ai&

re/uirement$ are 'ullle&,

042 I'+ 'or t"e %ur%o$e o' re?con$tituting t"e Boar& un&er $u.?$ection 0=2 it i$nece$$ary to retire any &irector or &irector$+ t"e Boar& may+ .y lot$ &ra#n in$uc" manner a$ may .e %re$cri.e&+ &eci&e #"ic" &irector or &irector$ $"all cea$eto "ol& oce an& $uc" &eci$ion $"all .e .in&ing on e-ery &irector o' t"e Boar&,

02 H"ere t"e Re$er-e Bank i$ o' o%inion t"at t"e com%o$ition o' t"e Boar& o'3irector$ o' a .anking com%any i$ $uc" t"at it &oe$ not 'ull t"e re/uirement$ o'$u.?$ection 052+ it may+ a'ter gi-ing to $uc" .anking com%any rea$ona.leo%%ortunity o' .eing "ear&+ .y an or&er in #riting+ &irect t"e .anking com%any to$o recon$titute it$ Boar& o' 3irector$ a$ to en$ure t"at t"e $ai& re/uirement$ are

'ullle& an&+ i' #it"in t#o mont"$ 'rom t"e &ate o' recei%t o' t"at or&er+ t"e.anking com%any &oe$ not com%ly #it" t"e &irector$ ma&e .y Re$er-e Bank+t"at .ank may+ a'ter &etermining .y lot$ &ra#n in $uc" manner a$ may .e%re$cri.e&+ t"e %er$on #"o oug"t to .e remo-e& 'rom t"e mem.er$"i% o' t"eBoar& o' 3irector$+ remo-e $uc" %er$on 'rom t"e oce o' t"e &irector o' $uc".anking com%any an& #it" a -ie# to com%lying #it" t"e %ro-i$ion$ o' $u.?$ection 052+ a%%oint a $uita.le %er$on a$ a mem.er o' t"e Boar& o' 3irector$ int"e %lace o' t"e %er$on $o remo-e& #"ereu%on t"e %er$on $o a%%ointe& $"all .e&eeme& to "a-e .een &uly electe& .y .anking com%any a$ it$ &irector,

0*2 E-ery a%%ointment+ remo-al or recon$titution &uly ma&e an& e-ery election

&uly "el&+ un&er t"i$ $ection $"all .e nal an& $"all not .e calle& into /ue$tion inany !ourt,

062 E-ery &irector electe& or+ a$ t"e ca$e may .e+ a%%ointe& un&er t"i$ $ection$"all "ol& oce until t"e &ate u%to #"ic" "i$ %re&ece$$or #oul& "a-e "el& oce+i' t"e election "a& not .een "el&+ or+ a$ t"e ca$e may .e+ t"e a%%ointment "a&not .een ma&e,

072 No act or %rocee&ing o' t"e Boar& o' 3irector$ o' a .anking com%any $"all .ein-ali& .y rea$on only o' any &e'ect in t"e com%o$ition t"ereo' or on t"e groun&t"at it i$ $u.$e/uently &i$co-ere& t"at any o' it$ mem.er$ &i& not 'ull t"ere/uirement$ o' t"i$ $ection,


30/178

!))ENTS

I$$ue o' &irection to ll u% -acancy o' #orkman .a&,? In $o 'ar a$ t"e Sc"e&ule&Bank$ are concerne&+ t"ere i$ no $uc" %ro-i$ion ena.ling t"e em%loyee$ tore%re$ent in t"e Boar& o' 3irector$ o' t"e Banking !om%any, In a.$ence o' any%ro-i$ion ena.ling t"e Re$er-e Bank o' In&ia to i$$ue &irection$ t"e r$tre$%on&ent Bank+ to ll u% t"e -acancy cau$e& a$ a re$ult o' t"e retirement o't"e #rit %etitioner 'rom t"e Boar& o' 3irector$+ t"ere cannot .e any &irection tot"e Re$er-e Bank o' In&ia to i$$ue &irection a$ %raye& 'or,4=

!om%any la# i$ a $el'?containe& !o&e,? T"e !om%any La# i$ a $el'?containe&!o&e an& t"e %ro-i$ion$ o' t"e !om%any La# $"all .e a%%lica.le to t"e r$tre$%on&ent Bank an& in $o 'ar a$ t"e a%%ointment o' t"e 3irector i$ concerne&+t"e %ro-i$ion$ o' t"e Act $"all %re-ail, Sec,5* 0=2 o' t"e !om%anie$ Act %ro-i&e$t"at at t"e annual general meeting at #"ic" a 3irector retire$ t"e !om%any mayll u% t"e -acancy .y a%%ointing t"e retiring &irector or $ome ot"er %er$ont"ereto, Co#e-er+ in -ie# o' t"e 'act t"at t"e %ro-i$ion$ o' t"e Banking

Regulation Act are al$o a%%lica.le+ $uc" a%%ointment o' &irector$ $"all .econ$i$tent #it" t"e %ro-i$ion containe& un&er Sec,1:?A o' t"e Act, Section 1:?Ao' t"e Act 'urt"er %ro-i&e$ t"at #"ere t"e Re$er-e Bank o' In&ia i$ o' o%inion t"att"e com%o$ition o' t"e Boar& o' 3irector$ o' a .anking com%any i$ $uc" t"at it&oe$ not 'ull t"e re/uirement$ o' $u.?$ection 052 it may+ a'ter gi-ing to $uc".anking com%any a rea$ona.le o%%ortunity o' .eing "ear&+ .y an or&er in #riting&irect t"e .anking com%any to $o recon$titute t"e Boar& o' 3irector$ a$ toen$ure t"at t"e $ai& re/uirement$ are 'ullle& an& i' t"e Banking !om%any &oe$not com%ly #it" t"e &irection$ ma&e .y t"e Re$er-e Bank+ t"e Re$er-e Bank mayremo-e $uc" %er$on 'rom t"e oce o' 3irector an& #it" a -ie# to com%lying #it"t"e %ro-i$ion$ o' $u.?$ection 0=2 a%%oint a $uita.le %er$on a$ a mem.er o' t"eBoar& o' 3irector$+ in t"e %lace o' t"e %er$on $o remo-e& #"ereu%on t"e %er$on

$o a%%ointe& $"all .e &eeme& to "a-e .een &uly electe& .y t"e .ankingcom%any a$ it$ &irector, rom t"e a.o-e+ it i$ mani'e$t t"at i' t"e com%o$ition o'&irector$ .y t"e com%any &oe$ not 'ull t"e re/uirement$ o' $u.?$ection 052 o'Sec,1:?A o' t"e Act+ t"e Re$er-e Bank "a$ aut"ority to &irect t"em torecon$titute t"e Boar& o' 3irector$ $o a$ to en$ure t"at t"e re/uirement$ o' $u.?$ection are 'ullle&, In ca$e t"e Bank &oe$ not com%ly #it" t"e &irection$+ t"eRe$er-e Bank "a$ aut"ority to remo-e t"e t#o 3irector$ an& to a%%oint $uita.le%er$on $o a$ to en$ure t"at t"e re/uirement$ o' $u.?$ection 052 o' Sec,1:?A o't"e Act are 'ullle&, Un&er Sec,=?A o' t"e Banking Regulation Act+ t"e Re$er-eBank "a$ %o#er to i$$ue &irection$ #"en it i$ $ati$e& t"at in t"e %u.lic intere$tor in t"e inter$ o' .anking %olicy or to %re-ent t"e a(aire$ o' any .anking

com%any .eing con&ucte& in a manner &etrimental to t"e intere$t o' t"e&e%o$itor$ or in a manner %rePu&icial to t"e intere$t o' t"e .anking com%any orto $ecure t"e %ro%er management o' any .anking com%any generally an& t"e.anking com%any $"all com%ly #it" $uc" &irection$, T"e$e are t"e contingencie$at #"ic" Re$er-e Bank "a$ aut"ority to a%%oint &irector$,44

1:?B, Banking com%any to .e manage& .y #"ole?time !"airman,?4 F012 Not#it"$tan&ing anyt"ing containe& in any la# 'or t"e time .eing in'orce or in any contract to t"e contrary+ e-ery .anking com%any in e8i$tence ont"e commencement o' t"e Banking Regulation 0Amen&ment2 Act+ 1994+ or #"ic"come$ into e8i$tence t"erea'ter $"all "a-e one o' it$ &irector$+ #"o may .ea%%ointe& on a #"ole?time or a %art?time .a$i$ a$ !"airman o' it$ Boar& o'

3irector$+ an& #"ere "e i$ a%%ointe& on a #"ole?time .a$i$+ a$ !"airman o' it$


31/178

Boar& o' 3irector$+ "e $"all .e entru$te& #it" t"e management o' t"e #"ole o't"e a(air$ o' t"e .anking com%anyJ

ro-i&e& t"at t"e !"airman $"all e8erci$e "i$ %o#er$ $u.Pect to t"e$u%erinten&ence+ control an& &irection o' t"e Boar& o' &irector$,

ro-i&e& 'urt"er t"at not"ing in t"i$ $u.?$ection $"all a%%ly to a .ankingcom%any in e8i$tence on t"e commencement o' t"e $ai& $ection 'or a %erio& o't"ree mont"$ 'rom $uc" commencement,

01?A2 H"ere a !"airman i$ a%%ointe& on a %art?time .a$i$+?0i2 $uc" a%%ointment $"all .e #it" t"e %re-iou$ a%%ro-al o' t"e Re$er-e Bank an&.e $u.Pect to $uc" con&ition$ a$ t"e Re$er-e Bank may $%eci'y #"ile gi-ing $uc"a%%ro-al

0ii2 t"e management o' t"e #"ole o' t"e a(air$ o' $uc" .anking com%any $"all .eentru$te& to a managing &irector #"o $"all e8erci$e "i$ %o#er$ $u.Pect to t"e

$u%erinten&ence+ control an& &irection o' t"e Boar& o' &irector$,

052 4*FE-ery !"airman o' t"e Boar& o' 3irector$ #"o i$ a%%ointe& on a #"ole?time .a$i$ an& e-ery managing &irector o' a .anking com%any $"all .e in t"e#"ole?time em%loyment o' $uc" com%any an& $"all "ol& oce 'or $uc" %erio&+not e8cee&ing -e year$+ a$ t"e Boar& o' 3irector$ may 8+ .ut $"all+ $u.Pect tot"e %ro-i$ion$ o' t"e $ection+ .e eligi.le 'or re?election or re?a%%ointmentJ

ro-i&e& t"at not"ing i$ t"i$ $u.?$ection $"all .e con$true& a$ %ro"i.iting a!"airman 'rom .eing a &irector o' a $u.$i&iary o' t"e .anking com%any or a&irector o' a com%any regi$tere& un&er Sec,5 o' t"e !om%anie$ Act+ 19* 01 o'19*2,

0=2 E-ery %er$on "ol&ing oce on t"e commencement o' Sec,= o' t"e BankingLa#$ 0Amen&ment2 Act+ 19*7 07 o' 19*72+ a$ managing &irector o' t"e .ankingcom%any $"all ?

0a2 i' t"ere i$ a !"airman o' it$ Boar& o' 3irector$+ -acate oce on $uc"commencement+ or0.2 i' t"ere i$ no !"airman o' it$ Boar& o' 3irector$+ -acate oce on t"e &ate on#"ic" t"e !"airman o' it$ Boar& o' 3irector$ i$ electe& or a%%ointe& inaccor&ance #it" t"e %ro-i$ion$ o' t"i$ $ection,

042 4*FE-ery !"airman #"o i$ a%%ointe& on a #"ole?time .a$i$ an& e-ery)anaging 3irector o' a .anking com%any a%%ointe& un&er $u.?$ection 01?A2 $"all.e a %er$on #"o "a$ $%ecial kno#le&ge an& %ractical e8%erience o' ?

0a2 t"e #orking o' a .anking com%any+ or o' t"e State Bank o' In&ia or any$u.$i&iary .ank or nancial in$titution$ or0.2 nancial+ economic or .u$ine$$ a&mini$trationJ

ro-i&e& t"at a %er$on $"all .e &i$/ualie& 'or .eing 4*F!"airman #"o i$a%

gist bract

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