DR.

RAM MANOHAR LOHIYA NATIONAL LAW

2024-2025
BANKING & INSURANCE LAW
TITLE –Pleadings: Analysis, and Scope for Amendment.

Submitted by - Submitted to -

KAUSHIK DAS
Dr. Aparna Singh
Enrolment no. – 220101081
Associate Professor (Law),
BA LLB (Hons) 6th Semester
RMLNLU, Lucknow.
Section – ‘A’
 CONTENTS
1. INTRODUCTION
2. POWER OF CENTRAL GOVERNMENT TO MAKE SCHEME AND
RULES
3. POWER OF CENTRAL GOVERNMENT TO AMALGAMATE BANK
4. POWER OF CENTRAL GOVERNMENT TO WINDING UP
5. CONCLUSION
 ACKNOWLEDGEMENT

Gratitude and thanksgiving are a part of formal protocol, which is indeed to be followed
while preparing a project report. For this, first and foremost, I would thank God Almighty. I
express my sincere thanks to Dr. Aparna Singh for providing such an interesting topic. I am
indebted to my parents and siblings for guiding and motivating me all the time. I am also
thankful to my friends.
 INTRODUCTION

The banks are regulated and controlled by the R.B.I. and the Central Government. The
powers and actions are derived from the RBI Act, 1934 andBanking Regulation Act, 1949.
The former Act constitutes the Central Banking Legislation and the latter Act contains
legislation for regulating the activities of commercial and co-operative banks. The expression
'banking' has been defined in section 5(b) of the Banking Regulation Act, 1949as the
acceptance of money from the public repayable on demand or otherwise and withdrawal by
cheque, draft, order or otherwise. The recovery of money or deposit from the customers and
honouring their cheques is the essential characteristic of banking. If the company is
authorised only to grant loans, it will not be banking company, as lending of money may be
a phase of banking business but it is not the main phase or the distinguishing phase of
banking.1 But if the bank acts as an authorised dealer in foreign exchange to receive foreign
contribution through anyone of its branches, it transacts the banking business.2

This is clear from the definition of banking under the B.R.Act, where banking means the
acceptance of deposits of money from the public repayable on demand or The earliest
attempt in India in the direction of formulating a definition was that of the Hilton Young
Commission, which recommended that the term 'bank' or 'banker' should be interpreted as
meaning every person, firm or company using in its description or its title bank or banker or
banking and every company accepting deposits of money, subject to withdrawal by cheque,
draft or order. The Indian Companies (Amendment) Act, 1936, though rejected the former
part of the above definition, rightly so and substantially accepted its latter part.3 The
essence of banking is the acceptance of withdrawable deposits of money for the purpose of
lending or investment.4 In France, persons accepting funds from the public for use on their
own account for discounting of bill or granting of credit or rendering financial assistance to
others generally come under the banking legislation. But it has been accepted universally
that accepting of deposits in current account for customers and paying, as well as collecting
cheques for them, are the essential requisites of banking.
In France, the Privy Council pointed out that the words 'banking' and 'banker' may bear

1
Lakhirarn v. State of Haryana, 1989 (1) All India Cr 1.L.R. 1187.
2
Hirabai v. Dhugai Bai, 29 Bom.L.R. 42 &Bishop of Kottayam v. Union of India, A.I.R. 1986 Ker. 126.
3
K.L.Pande, Development of Banking in India Since 1949, 55,56( 6TH ed., 1968).
4
Ibid.
different shades of meaning at different periods of history and that their meaning may not be
uniform today in countries of different habits and different degrees of civilisation. In U.K.,
banking has generally been identified with the acceptance of deposits, withdrawable by
cheques by customers. In U.S.A. the Federal Banking legislation lays emphasis on
discounting of bills and accepting of deposit Definition of Banking Company under the
Banking Regulation Act The expression 'banking company' means any company, which
transacts the business of banking in India. The Banking Company is one which is formed and
registered under Section 335 of the Companies Act, 1956. The SBI is not a banking company
as it is not a company.5 But it is a subsidiary bank that falls within the definition of section
2(k) of the SBI (Subsidiary Banks) Act, 1959 and established by the Government of India.
The SBI and other banks in public sector are establishments under the Central Government
and are exempt from the provisions of State Shops and Establishments ACT. The different
branches of a banking company cannot be considered as separate entities, and the banking
company invests its officers. with requisite powers and authorities, and accordingly, the
officers of the banking company transact business on behalf of the banking. But the sole
repository of these powers and authorities is the banking company.

Meaning of Banking Policy under the Banking Regulation Act

The banking policy is specified from time to time by the RBI, taking into consideration
various factors, i.e., the interest of the banking system, monetary stability, sound economic
growth, etc.
The policy may be declared in the form of a directive or instructions issued to the banks. The
powers have been given to the RBI to give directions in various fields, namely, (i) under
section 21 to control advances by banking companies;6 (ii) under section 35A to give
directions to banking companies in the public interest or in the interest of the banking policy
or to prevent the affairs of any banking company from being conducted in a manner
detrimental to the interests of the depositors or to secure the proper management of any
banking company generally7 and (iii) under section 36 to exercise general powers on the
banking companies In India, banking business is conducted by the following types of
Organisations:-

5
PhoneixImpex v. State, A.I.R.1998 Raj.100.
6
Section 21, Banking Regulation Act, 1949.
7
T.S.Arumughan v. Lwkshrni Vilas Bwk Ltd., (1994) 80 Cornp.Case 81 1 (Mad).
 i) Statutory corporation- All the public sector banks, i.e., SBI and its associates, the
nationalised banks, fall under this category. The SBI has been constituted under
the SBI Act, 1955 and the six subsidiary/associate banks of State Bank have been
constituted under the SBI (Subsidiaries Bank) Act, 1959. The nationalised banks
constituted under the Banking Companies (Acquisition & Transfer of
Undertakings) Act, 1970 & 1980.
ii) Companies registered under the Companies Act, 1956:- All the banks in the
private sector are registered under the Companies Act, 1956 and are governed by
the Companies Act relating to their constitution and their banking business is
governed by the B.R.Act 1949 and RE31 Act 1934. iii) Co-operative societies
registered uder the Co-opera five Societies Act:- They transact the banking
business by obtaining licence from R.B.I. under B.R.Act, 1949.

Section 36 provides for further powers and functions of the Reserve Bank under it, and the
Reserve Bank may :-
(a) Caution or prohibit banking companies generally or any banking company in
particular against entering any particular transaction or class or transaction and
generally give advice to a banking company.8
(b) on a request in by the companies concerned and subject to the provisions of section
44A assist, as intermediary or otherwise in proposals for the amalgamation of such
banking companies.
(c) give assistance to any banking company by means of the grant of a loan or advance to
it under clause (3) of sub-section (1) of section 18 of the RBI Act, 1934.
(d) at any time, if it is satisfied that in public interest or interest of banking policy or for
preventing the affairs of banking company being conducted in a manner detrimental
to the interest of the banking company or its depositors it is necessary so to do so.9

POWER OF CENTRAL GOVERNMENT TO MAKE SCHEME AND RULES

8
JagdambeNihvad Company v. Punjab National Bank, Gwalior, 199 1 (2) Bank ILR 5 10
(MP).
9
Section 36, Banking Ragulation Act, 1949.
Under the Banking Regulation Act, the RBI has wider power of overall control over the
management of banks.10 These powers are spread over a number of sections of the Act.11
Section 10A12 was introduced to sub serve the purpose of social control. It also prescribed the
nature and composition of the board of directors who are responsible for the management of a
banking company. The Central Government is empowered to make schemes' in consultation
with the RBI for the purpose of management by the board of directors, the appointment of
Managing Directors, the holding of board meetings and allied matters. In All India Bank
Officers Confederation v Union of India in this case it was held that the object of section 9 of
the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970, which is
regarding Central Government's power to make a scheme for the constitution of the Board of
Directors, is to give the Boards a truly representative character so as to reflect the genuine
interests of the various persons manning or dealing with the bank as an industry and a
commercial enterprise. The Legislature has left it to the Central Government to devise a
scheme providing for appointment to the Board from among the specified categories either by
election or by nomination. The discretion of the Central Government is however not an
unrestrained discretion, but a discretion which must be reasonably exercised so as to give
effect to the true intent of the Legislature as to the composition of the Board of Directors.

What is postulated is such election or nomination as would lend to the Board of Directors, it’s
truly representative character in consonance and harmony with the expanding, delicate, vital
and significant role of the national policy and objectives and economic development. The
mode of election or nomination, must therefore be as such as would be ideally suitable and
appropriate to the banking industry". The Central Government must in this regard act in
consultation with the RBI. In exercise of its discretion, the Central Government cannot avoid
election where election is appropriate and feasible in respect of a particular category of
persons. For the appointment of representatives of depositors, farmers, workers, other than
employees and artisans the discretion is entirely that of the Central Government to choose the
mode of representatives. In the case of employees, election is the most logical, the most
appropriate, the most democratic and certainly the most advantageous form of representation.
They are well identified, well organized, well motivated and interested associates, the most

10
Section35,35A and 35B, Banking Regulation Act, 1949.
11
Section 12A, 35B, 36AA, 36AA(6) and 36AB, Banking Regulation Act, 1949.
12
Section 10A of the Banking Regulation Act, 1949 deals with the Board of Directors to be constituted of
persons with professional or other experience.
democratic and certainly the most advantageous form of representation. They are well
identified, well organized, well motivated and interested associates, and participants in the
banking industry. They are as much part of the bank as the management is. The
nationalization Act does not contemplate a management unmindful of the true and legitimate
interests of the employees. In a nationalized bank everyone is one as much as employee, as he
is an employer. There is no antithesis between the management and employees'. The
traditional existence of management culture prior to nationalization is no longer applicable
and the true management culture is one that represents various interests of all persons
specified under section 9 as well as the larger and wider interests of national economy as
postulated in the preamble of the Act.
Section 36AF of Banking Regulation Act, 1949 deals with the Power of the Central
Government to make scheme:-
(1) The Central Government may, after consultation with the Reserve Bank, make a scheme
for carrying out the purposes of this Part in relation to any acquired bank.
(2) In particular, and without prejudice to the generality of the foregoing power, the said
scheme may provide for all or any of the following matters namely:-
(a) the corporation, or the company incorporated for the purpose, to which the undertaking
including the property, assets and liabilities of the acquired bank may be transferred, and the
capital, constitution, name and office thereof;
(b) the constitution of the first board of management (by whatever name called) of the
transferee bank, and all such matters in connection therewith or incidental thereto as the
Central Government may consider to be necessary or expedient;
(c) the continuance of the services of all the employees of the acquired bank (excepting such
of them as, not being workmen within the meaning of the Industrial Disputes Act, 1947 (14
of 1947), are specifically mentioned in the scheme) in the Central Government or in the
transferee bank, as the case may be, on the same terms and conditions so far as may be, as are
specified in clause (i) and (j) of sub-section (5) of section 45;
(d) the continuance of the right of any person who, on the appointed day, is entitled to or is in
receipt of, a pension or other superannuation or compassionate allowance or benefit, from the
acquired bank or any provident, pension or other fund or any authority administering such
fund, to be paid by, and to receive from the Central Government or the transferee bank, as the
case may be, or any provident, pension or other fund or any authority administering such
fund, the same pension, allowance or benefit so long as he observes the conditions on which
the pension, allowance or benefit was granted, and if any question arises whether he has so
observed such conditions, the question shall be determined by the Central Government and
the decision of the Central Government thereon shall be final;
(e) the manner of payment of the compensation payable in accordance with the provisions of
this Part to the shareholders of the acquired bank, or where the acquired bank is a banking
company incorporated outside India, to the acquired bank in full satisfaction of their, or as the
case may be, its, claims;
(f) the provision, if any, for completing the effectual transfer to the Central Government or
the transferee bank of any asset or any liability which forms part of the undertaking of the
acquired bank in any country outside India;
(g) such incidental, consequential and supplemental matters as may be necessary to secure
that the transfer of the business, property, assets and liabilities of the acquired bank to the
Central Government or transferee bank, as the case may be, is effectual and complete.
(3) The Central Government may, after consultation with the Reserve Bank, by notification in
the Official Gazette, add to, amend or vary any scheme made under this section.
(4) Every scheme made under this section shall be published in the Official Gazette.13
(5) Copies of every scheme made under this subject shall be laid before each House of
Parliament as soon as may be after it is made.
(6) The provisions of this Part and of any scheme made thereunder shall have effect
notwithstanding anything to the contrary contained in any other provision of this Act or in
any other law or any agreement, award or other instrument for the time being in force.
(7) Every scheme made under this section shall be binding on the Central Government or, as
the case maybe, on the transferee bank and also on all members, creditors, depositors and
employees of the acquired bank and of the transferee bank and on any other person having
any right, liability, power or function in relation to, or in connection with, the acquired bank
or the transferee bank, as the case may be.14
Power of Central Government to make rules15:-
(1) The Central Government may, after consultation with the Reserve Bank, make rules to
provide for all matters for which provision is necessary or expedient for the purpose of giving
effect to the provisions of this Act and all such rules shall be published in the Official
Gazette.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules

13
Section 36A, Banking Regulation Act, 1949
14
Ibid.
15
Section 52, Banking Regulation Act, 1949.
may provide for the details to be included in the returns required by this Act and the manner
in which such return shall be submitted 269[and the form in which the official liquidator may
file lists of debtors to the Court having jurisdiction under Part III or Part IIIA and the
particulars which such lists may contain and any other matter which has to be, or may be,
prescribed.
(3) [***]16
(4) The Central Government may, by rules made under this section, annul, alter or add to, all
or any of the provisions of the Fourth Schedule.
(5) Every rule made by the Central Government under this Act shall be laid, as soon as may
be after it is made, before each House of Parliament, while it is in session, for a total period
of thirty days which may be comprised in one session or in two or more successive sessions,
and if, before the expiry of the session immediately following the session or the successive
sessions aforesaid, both Houses agree in making any modification in the rules or both Houses
agree that the rule should not be made, the rule shall thereafter have effect only in such
modified form or be of no effect, as the case may be; so, however, that any such modification
or annulment shall be without prejudice to the validity of anything previously done under that
rule.

POWER OF CENTRAL GOVERNMENT TO AMALGAMATE BANK

Section 44 A of the Act lays down the procedure for amalgamation of a banking company
with another the scheme containing the terms of amalgamation is to be approved by a
majority in number representing 2/3 rd of the value of the shareholders in a General Meeting.
A dissenting shareholder is entitled to receive the value of his share as may be determined by
the Reserve Bank. The reserve Bank has to sanction the scheme after the shareholders
approval on such sanction the assets and liabilities of the bank are transferred to the acquiring
bank. The reserve bank is empowered to order that the first bank be dissolved on a specified
date.
Section 44A Procedure for amalgamation of banking companies17:-
(1) Notwithstanding anything contained in any law for the time being in force, no banking
company shall be amalgamated with another banking company, unless a scheme containing

16
Sub- section (3) omitted by Act 1 of 1984, s. 41 (w.e.f 15-2-1984).
17
Section 44A,Banking Regulation Act, 1949.
the terms of such amalgamation has been placed in draft before the shareholders of each of
the banking companies concerned separately, and approved by the resolution passed by a
majority in number representing two-thirds in value of the shareholders of each of the said
companies, present either in person or by proxy at a meeting called for the purpose.
(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every
shareholder of each of the banking companies concerned in accordance with the relevant
articles of association, indicating the time, place and object of the meeting, and shall also be
published at least once a week for three consecutive weeks in not less than two newspapers
which circulate in the locality or localities where the registered offices of the banking
companies concerned are situated, one of such newspapers being in a language commonly
understood in the locality or localities.
(3) Any shareholder, who has voted against the scheme of amalgamation at the meeting or
has given notice in writing at or prior to the meeting to the company concerned or to the
presiding officer of the meeting that he dissents from the scheme of amalgamation, shall be
entitled, in the event of the scheme being sanctioned by the Reserve Bank, to claim from the
banking company concerned, in respect of the shares held by him in that company, their
value as determined by the Reserve Bank when sanctioning the scheme and such
determination by the Reserve Bank as to the value of the shares to be paid to the dissenting
shareholders shall be final for all purposes.
(4) If the scheme of amalgamation is approved by the requisite majority of shareholders in
accordance with the provisions of this section, it shall be submitted to the Reserve Bank for
sanction and shall, if sanctioned by the Reserve Bank by an order in writing passed in this
behalf, be binding on the banking companies concerned and also on all the shareholders
thereof.
(5) On the sanctioning of a scheme of amalgamation by the Reserve Bank, the property of the
amalgamated banking company shall, by virtue of the order of sanction, be transferred to and
vest in, and the liabilities of the said company shall, by virtue of the said order be transferred
to, and become the liabilities of the banking company, subject in all cases to [the provisions
of the scheme as sanctioned].
(5A) Where a scheme of amalgamation is sanctioned by the Reserve Bank under the
provisions of this section, the Reserve Bank may, by a further order in writing, direct
that on such date as may be specified therein the banking company (hereinafter in this
section referred to as the amalgamated banking company) which by reason of the
amalgamation will cease to function, shall stand dissolved and any such direction
 shall take effect notwithstanding anything to the contrary contained in any other law.
(5B) Where the Reserve Bank directs a dissolution of the amalgamated banking
company, it shall transmit a copy of the order directing such dissolution to the
Registrar before whom the banking company has been registered and on receipt of
such order the Registrar shall strike off the name of the company.
(6C) An order under sub-section (4) whether made before or after the commencement
of section 19 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963)
shall be conclusive evidence that all the requirements of this section relating to
amalgamation have been complied with, and a copy of the said order certified in
writing by an officer of the Reserve Bank to be true copy of such order and a copy of
the scheme certified in the like manner to be a true copy thereof shall, in all legal
proceedings (whether in appeal or otherwise and whether instituted before or after the
commencement of the said section 19), be admitted as evidence to the same extent as
the original order and the original scheme.
(6) Nothing in the foregoing provisions of this section shall affect the power of the Central
Government to provide of the amalgamation of two or more banking companies under
section 396 of the Companies Act, 1956 (1 of 1956):
PROVIDED that no such power shall be exercised by the Central Government except after
consultation with the Reserve Bank.
Section 45. Power of Reserve Bank to apply to Central Government for suspension of
business by a banking company and to prepare scheme of reconstitution or amalgamation.18
(1) Notwithstanding anything contained in the foregoing provisions of this Part or in any
other law or [any agreement or other instrument], for the time being in force, where it appears
to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the
Central Government for an order of moratorium in respect of 229[a banking company].
(2) The Central Government, after considering the application made by the Reserve Bank
under sub-section (1), may make an order of moratorium staying the commencement or
continuance of all actions and proceedings against the company for a fixed period of time on
such terms and conditions as it thinks fit and proper and may from time to time extend the
period so however that the total period of moratorium shall not exceed six months.
(3) Except as otherwise provided by any directions given by the Central Government in the
order made by it under subsection (2) or at any time thereafter, the banking company shall

18
Section 45, Banking Regulation Act, 1949.
not during the period of moratorium make any payment to any depositors or discharge any
liabilities or obligations to any other creditors.
(4) During the period of moratorium, if the Reserve Bank is satisfied that:
(a) in the public interest; or
(b) in the interests of the depositors; or
(c) in order to secure the proper management of the banking company; or
(d) in the interest of the banking system of the country as a whole, it is necessary so to
do, the Reserve Bank may prepare a scheme-
i. for the reconstruction of the banking company, or
ii. for the amalgamation of the banking company with any other banking
institution (in this section referred to as "the transferee bank")
(5) The scheme aforesaid may contain provision for all or any of the following matters,
namely:
(a) the constitution, name and registered office, the capital, assets, powers, rights, interests,
authorities and privileges, the liabilities, duties and obligations of the banking company on its
reconstruction or, as the case may be, of the transferee bank;
(b) in the case of amalgamation of the banking company, the transfer to the transferee bank of
the business, properties, assets and liabilities of the banking company on such terms and
conditions as may be specified in the scheme;
(c) any change in the Board of Directors, or the appointment of a new Board of Directors, of
the banking company on its reconstruction or, as the case may be, of the transferee bank and
the authority by whom, the manner in which, the other terms and conditions on which, such
change or appointment shall be made and in the case of appointment of a new Board of
Directors or of any Director, the period for which such appointment shall be made;
(d) the alteration of the memorandum and articles of association of the banking company on
its reconstruction or, as the case may be of the transferee bank for the purpose of altering the
capital thereof or for such other purpose as may be necessary to give effect to the
reconstruction or amalgamation;
(e) subject to the provisions of the scheme, the continuation by or against the banking
company on its reconstruction or, as the case maybe, the transferee bank, of any actions or
proceedings pending against the banking company immediately before the date of the order
of moratorium;
(f) the reduction of the interest or rights which the members, depositors and other creditors
have in or against the banking company before its reconstruction or amalgamation to such
extent as the Reserve Bank considers necessary in the public interest or in the interests of the
members, depositors and other creditors or for the maintenance of the business of the banking
company;
(g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of
their claim-
i. in respect of their interest or right in or against the banking company before its
reconstruction or amalgamation; or
ii. where their interest or rights aforesaid in or against the banking company has or have been
reduced under clause (f), in respect of such interest or rights as so reduced;
(h) the allotment to the members of the banking company for shares held by them therein
before its reconstruction or amalgamation [whether their interest in such shares has been
reduced under clause (f) or not], of shares in the banking company on its reconstruction or, as
the case may be, in the transferee bank and where any members claim payment in cash and
not allotment of shares, or where it is not possible to allot shares to any members, the,
payment in cash to those members in full satisfaction of their claim-
i. in respect of their interest in shares in the banking company before its reconstruction or
amalgamation; or
ii. where such interest has been reduced under clause (f) in respect of their interest in shares
as so reduced;
iii. the continuance of the services of all the employees of the banking company (excepting
such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947
(14 of 1947) are specifically mentioned in the scheme) in the banking company itself on its
reconstruction or, as the case may be, in the transferee bank at the same remuneration and on
the same terms and conditions of service, which they were getting or, as the case may be, by
which they were being governed, immediately before the date of the order of moratorium:
PROVIDED that the scheme shall contain a provision that:-
(i) the banking company shall pay or grant not later than the expiry of the period of
three years from the date on which the scheme is sanctioned by the Central
Government, to the said employee the same remuneration and the same terms and
conditions of service [as are, at the time of such payment or grant, applicable] to
employees of corresponding rank or status of a comparable banking company to
be determined for this purpose by the Reserve Bank (whose determination in this
respect shall be final);
(ii) the transferee bank shall pay or grant not later than the expiry of the aforesaid
 period of three years, to the said employees the same remuneration and the same
terms and conditions of service [as are, at the time of such payment or grant,
applicable] to the other employees of corresponding rank or status of the
transferee bank subject to the qualifications and experience of the said employees
being the same as or equivalent to those of such other employees of the transferee
bank:
PROVIDED FURTHER that if in any case under clause (ii) of the first proviso any doubt or
difference arises as to whether the qualification and experience of any of the said employees
are the same as or equivalent to the qualifications and experience of the other employees of
corresponding rank or status of the transferee bank, [the doubt or difference shall be referred,
before the expiry of a period of three years from the date of the payment or grant mentioned
in that clause ], to the Reserve Bank whose decision thereon shall be final;
(j) notwithstanding anything contained in clause (i) where any of the employees of the
banking company not being workmen within the meaning of the Industrial Disputes Act,
1947 (14 of 1947) are specifically mentioned in the scheme under clause (i), or where any
employees of the banking company have by notice in writing given to the banking company
or, as the case may be, the transferee bank at any time before the expiry of one month next
following the date on which the scheme is sanctioned by the Central Government, intimated
their intention of not becoming employees of the banking company on its reconstruction or,
as the case may be, of the transferee bank, the payment to such employees of compensation,
if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension,
gratuity, provident fund and other retirement benefits ordinarily admissible to them under the
rules or authorizations of the banking company immediately before the date of the order of
moratorium;
(k) any other terms and conditions for the reconstruction or amalgamation of the banking
company;
(l) such incidental, consequential and supplemental matters as are necessary to secure that the
reconstruction or amalgamation shall be fully and effectively carried out.
(6)(a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the
banking company and also to the transferee bank and any other banking company concerned
in the amalgamation, for suggestions and objections, if any, within such period as the Reserve
Bank may specify for this purpose;
(b) the Reserve Bank may make such modifications, if any, in the draft scheme as it may
consider necessary in the light of the suggestions and objections received from the banking
company and also from the transferee bank, and any other banking company concerned in the
amalgamation and from any members, depositors or other creditors of each of those
companies and the transferee bank.
(7) The scheme shall thereafter be placed before the Central Government for its sanction and
the Central Government may sanction the scheme without any modifications or with such
modifications as it may consider necessary; and the scheme as sanctioned by the Central
Government shall come into force on such date as the Central Government may specify in
this behalf:
PROVIDED that different dates may be specified for different provisions of the scheme.
[(7A) The sanction accorded by the Central Government under sub-section (7), whether
before or after the commencement of section 21 of the Banking Law (Miscellaneous
Provisions) Act, 1963 (55 of 1963), shall be conclusive evidence that all the requirements of
this section relating to reconstruction, or, as the case may be, amalgamation have been
complied with and a copy of the sanctioned scheme certified in writing by an officer of the
Central Government to be a true copy thereof, shall, in all legal proceedings (whether in
appeal or otherwise and whether instituted before or after commencement of the said section
21), be admitted as evidence to the same extent as the original scheme.]
(8) On and from the date of coming into operation of the scheme or any provision thereof, the
scheme or such provision shall be binding on the banking company or, as the case may be, on
the transferee bank and any other banking company concerned in the amalgamation and also
on all the members, depositors and other creditors and employees of each of those companies
and of the transferee bank, and on any other person having any right or liability in relation to
any of those companies or the transferee bank[including the trustees or other persons
managing, or connected in any other manner with, any provident fund or other fund
maintained by any of those companies or the transferee bank.]
(9) On and from the date of the coming into operation of, or as the case may be, the date
specified in this behalf in the scheme], the properties and assets of the banking company
shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in,
and the liabilities of the banking company shall, by virtue of and to the extent provided in the
scheme, stand transferred to, and become the liabilities of, the transferee bank.
(10) If any difficulty arises in giving effect to the provisions of the scheme, the Central
Government may by order do anything not inconsistent with such provision which appears to
it necessary or expedient for the purpose of removing the difficulty.
(11) Copies of the scheme or of any order made under sub-section(10) shall be laid before
both Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the
Central Government, or, as the case may be, the order has been made.
(12) Where the scheme is a scheme for amalgamation of the banking company, any business
acquired by the transferee bank under the scheme or under any provision thereof shall, after
the coming into operation of the scheme or such provision, be carried on by the transferee
bank in accordance with the law governing the transferee bank, subject to such modifications
in that law or such exemptions of the transferee bank from the operation of any provisions
thereof as the Central Government on the recommendation of the Reserve Bank may, by
notification in the Official Gazette, make for the purpose of giving full effect to the scheme:
PROVIDED that no such modification or exemption shall be made so as to have effect for a
period of more than seven years from the date of the acquisition of such business.
(13) Nothing in this section shall be deemed to prevent the amalgamation with a banking
institution by a single scheme of several banking companies in respect of each of which an
order of moratorium has been made under this section.
(14) The provisions of this section and of any scheme made under it shall have effect
notwithstanding anything to the contrary contained in any other provisions of this Act or in
any other law or any agreement, award or other instrument for the time being in force.
(15) In this section, "banking institution" means any banking company and includes the State
Bank of India or [a subsidiary bank or a corresponding new bank.19

POWER OF CENTRAL GOVERNMENT TO WIND UP

Sections 38 to 44 of the Banking Regulation Act 1949 lay down the provisions for winding
up of a banking company. Under section 38 of the Act, the High court has to order the
winding up for a banking company, if it is unable to pay its debts, or if the company is under
a moratorium and the reserve bank applies to the high court for its winding up on the ground
that its affairs are being conducted in a manner detrimental to the interests of the depositors,
(A banking company is deemed to be unable to pay its debts, if it has refused to meet any
lawful demand made at any of its offices within two days and the Reserve Bank certifies that
the company is unable to pay its Debts.) The Reserve Bank is required to apply for the
winding up of the banking company if the Central Government directs it to do so after
inspection under section 35 of the Act.

19
Section 45, Banking Regulation Act, 1949.
The Reserve Bank may apply for winding up of a banking company if (1) it fails to comply
with the requirements as to minimum paid up capital and reserves as laid down in section
1120 or (I) is disentitled to carry on the banking business for want of license under section 22
(02) (III) it has been prohibited from receiving fresh deposits by the Central Government on
the reserve Bank or (IV) it has failed to comply with any requirement of the Act and
continues to do so, even after the Reserve Bank calls upon it to do so or (V) the Reserve Bank
thinks that compromise or arrangement sanctioned by the court cannot be worked
satisfactorily or (VI) The reserve Bank thinks that, according to the returns furnished by the
company it is unable to pay its debts or its continuance is prejudicial to the interests of the
depositors.
Under section 38 A of the Act, every High court has a court liquidator attached to it, for the
winding up of a banking company, in special cases under section 39, the reserve bank or the
State Bank of India or any other notified Bank or any individual can be appointed as the
official liquidator on an application by the Reserve Bank.21
A banking company cannot be voluntarily wound up unless the Reserve Bank certifies that it
is able to pay its debts in full.22

CONCLUSION

A bank is a financial institution that provides banking and other financial services to their
customers. A banker works within the financial system to provide loans, accept deposits, and
provide other services to their customers. They must do so within a climate of extensive
regulation, designed primarily to protect the public interests. The main reasons why the banks
are heavily regulated are as follows:
• To protect the safety of the public’s savings.
• To control the supply of money and credit in order to achieve a nation’s broad
economic goal.
• To ensure equal opportunity and fairness in the public’s access to credit and other
vital financial services.
• To promote public confidence in the financial system, so that savings are made
speedily and efficiently.

20
Section 11, Banking Regulation Act, 1949.
21
Section 38, Banking Regulation Act, 1949.
22
Available at http://shodhganga.inflibnet.ac.in/bitstream/10603/94123/14/14_chapter6.pdf.
• To avoid concentrations of financial power in the hands of a few individuals and
institutions.
• Provide the Government with credit, tax revenues and other services. To help sectors
of the economy that they have special credit needs for eg. Housing, small business
and agricultural loans etc.

In this context it is to be noted that India has very large geographical area and population,
it also has huge no. of banks which are needed to be regulated to keep the economy
stable. If the banks are not regulated it would create imbalance in the economy.
Regulatory regime over banking companies means the regulation of control over banking
companies. In India, banking companies are regulated by Banking Regulation Act, 1949
and Reserve Bank of India Act, 1934.
The central government control banking companies in more than one way.Therefore, the
hypothesis of the researcher has been disproved as: -
- Under section 52 of the Banking Regulation Act, the central government has been
empowered to make rules regarding banking operations in India.
- Under section 45 power has been given to Central Government for suspension of
business by a banking company and to prepare scheme of reconstitution or
amalgamation. And the procedure for amalgamation is contained in section 44A.
Recently our Central Government has undergone the policy of DEMONETISATION of
Rs. 500 and Rs.1000 notes which mean that the currency notes ceases to have the legal
tender. Demonetisation was a step against black money government has carried its policy
through RBI.
RBI had restricted the withdrawal limit of cash from banks and had also converted the old
currency notes. Demonetisation process was carried out in a very effective manner by
banks throughout the India which could not have been possible without the regulatory
regime over banking companies.