86540
Lawyers Network
103860
Users
630
Cities Serving
114
Law Schools Network
59824
STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959
38 of 1959
[10th September, 1959,]
An Act to provide for the formation of certain Government or Government associated banks as subsidiaries of the State Bank of India and for the constitution, management and control of the subsidiary banks so formed, and for matters connected therewith, or incidental thereto. BE, it enacted by Parliament in the Tenth year of the Republic of India as follows:-
STATEMENT OF OBJECTS AND REASONS The future of certain major State-associated banks which are owned in part by the State Governments or with which such
Governments have been closely associated has been under consideration for some time.
The question has recently been comprehensively re-examined with particular reference to the necessity for making adequate and proper provision for the management of treasuries and sub-treasuries in the area served by these banks and the need for the expansion of these banks in these areas; and the views of the banks themselves have been ascertained.(2) The managements and shareholders of the Bank of Bikaner the Bank of Indore, the Bank of Jaipur the Bank of Mysore and the Travancore Bank have agreed to the proposal to reconstitute these banks as subsidiaries of the State Bank; ane the Governments of Bombay and the Punjab as well as the Reserve Bank of India have agreed to the reconstitution on similar lines of the State Bank of Saurashtra, the Bank of
Patiala and the State Bank of Hyderabad respectively. 3. The scheme for reconstitution provides for the transfer to and vesting in the State Bank of India of the share capital of each of the eight banks which have accepted the proposals. Compensation will be payable to the existing share-holders (including a State Government or the Reserve Bank of India as the case may be) on the basis of the excess of the assets over the liabilities representing the real value of the paid-up capital. Such compensation will be determined, in the event of a dispute, by an impartial tribunal, in accordance with the principles indicated in the Bill. 4. Provision is being made for minority shareholding by private share- holders up to 45 percent of the issued capital, in the case of each of the reconstituted banks. The management and administration of the reconstituted institutions will been trusted to Boards of Directors on which the State Bank of India will be adequately represented. The other provisions made in the Bill are generally based on those contained in the State Bank of India Act, 1955,"-Gaz. of Ind. 1959. Extra., Pt. II, Section 2, page 274.
CHAPTER 01: PRELIMINARY
SECTION 01: SHORT TITLE
This Act may be called THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 1959.
SECTION 02: DEFINITIONS
In this Act, unless the context otherwise requires,-
(a) "appointed day" means,-
(i) in relation to an existing bank, the date on which the corresponding new bank is constituted underS.3-;
(ii) in relation to a new bank, the date on which that new bank is constituted underS.3-;
(iii) in relation to the Hyderabad Bank, the date on which the amendments to the State Bank of Hyderabad Act, 1956, take effect under Part VII of the Third Schedule;
(iv) in relation to the Saurashtra Bank, the date on which the amendments to the Saurashtra State Banks (Amalgamation) Ordinance, 1950, take effect under part V of the Third Schedule;
(b) "corresponding bank", means,-
(i) in relation to the State Bank of Bikaner, the Bank of Bikaner, Limited;
(ii) in relation to the State Bank of Indore, the Bank of Indore, Limited;
(iii) [Omitted by the State-Associated Banks (Miscellaneous Provisions) Act, 1962 (56 of 1962), S. 3 (1- 1-1963);]
(iv) in relation to the State Bank of Mysore, the Bank of Mysore, Limited;
(v) in relation to the State Bank of Patiala, the Bank of Patiala,
(vi) in relation to the State Bank of Travancore, the Travancore Bank, Limited;
(c) "corresponding new bank" means,-
(i) in relation to the Bank of Bikaner, Limited, the State Bank of Bikaner;
(ii) in relation to Bank of Indore, Limited, the State Bank of Indore:
(iii) [Omitted by the State-Associated Banks (Miscellaneous Provi- sions) Act, 1962 (56 of 1962),S.3-(1-
1-1963);]
(iv) in relation to the Bank of Mysore, Limited, the State Bank of Mysore;
(v) in relation to the Bank of Patiala, the State Bank of Patiala;
(vi) in relation to the Travancore Bank, Limited, the State Bank of Travancore;
(d) "existing bank" means any of the following bank namely;-
(i) Bank of Bikaner, Limited;
(ii) Bank of Indore, Limited;
(iii) [Omited by the State-Associated Banks (Miscellaneous Provisions) Act, 1962 (56 of 1962),S.3-(1-1- 1963);]
(iv) Bank of Mysore, Limited;
(v) Bank of Patiala;
(vi) Travancore Bank, Limited;
(e) "Hyderabad Bank" means the Hyderabad State Bank constituted under the Hyderabad State Bank Act, 1950-F, and renamed the State Bank of Hyderabad under sub-section (1) of section 3of the State Bank of Hyderabad Act, 1956,
(f) "new bank" means any of the banks constituted underS.3-.
(g) "prescribed" means prescribed by regulations made under this Act;
(h) 'Reserve Bank" means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934;
(i) "Saurashtra Bank" means the State Bank of Saurashtra constituted under the Saurashtra State Banks (Amalgamation) Ordinance, 1950;
(j) "State Bank" means the State Bank of India constituted under the State Bank of India Act, 1955;
(k) "Subsidiary bank" means any new bank and includes the Hyderabad Bank and Saurashtra Bank;
(l) "Tribunal" means the Tribunal constituted underS.15-.
2[(m)] "workman" has the meaning assigned to it in the Industrial Disputes Act, 1947.]
CHAPTER 02
1[Constitution of new Banks and Change of Name of any Subsidiary Bank]
SECTION 03: ESTABLISHMENT OF NEW BANKS
With effect from such date as the Central Government may by notification in the Official Gazette, specify in this be- half, there shall be constituted the following new banks, namely:-
(a) the State Bank of Bikaner;4
(b) the State Bank of Indore;4
3(c) Omitted.
(d) the State Bank of Mysore;4
(e) the State Bank of Patiala ;
(f) the State Bank of Travancore ; and different dates may be specified for different new banks.
SECTION 03A: CHANGE OF NAME OF A SUBSIDIARY BANK
5[
(1) The Central Government after consulting the State Bank and the Reserve Bank may by notification in the Official Gazette, direct that the name of any subsidiary bank shall, with effect from such date as may be specified in this behalf, be changed to any other name and thereupon any reference to that subsidiary bank in this Act or any other law for the time being in force or in any contract, instrument or document shall be construed as a reference to that bank by its new name.
(2) The change in the name of a subsidiary bank under sub-section (1) shall not affect any rights or obligations of that bank or render defective any legal proceedings by or against it, and any legal proceedings which might have been continued or commenced by or against that bank by its former name may be continued by or against it by its new name.]
SECTION 04: NEW BANKS TO BE BODIES CORPORATE
(1) Every new bank shall be a body corporate with perpetual succession and a common seal and shall sue and be sued in its name.
(2) The body corporate constituting each of the new banks shall consist of the State Bank and other shareholders, if any for the time being of the new bank.
(3) Every new bank shall carry on the business of banking and other business in accordance with the provisions of this Act, and shall have power to acquire and hold property, whether movable or immovable, for the purposes of its business and to dispose of the same.
SECTION 05: HEAD OFFICE AND BRANCHES OF NEW BANKS
(1) The head office of each of the new banks shall be at such place as the Central Government may, by notification in the Official Gazette, from time to time, specify.
(2) Every new bank shall maintain as its branches all branches of the corresponding bank in existence immediately before the appointed day, and shall not establish any new branch or discontinue any branch except in consultation with the State Bank and with the approval of the Reserve Bank.
SECTION 06: AUTHORISED CAPITAL OF NEW BANKS
Provided that where the authorised capital is so increased, the shares issued shall be of the denomination specified in sub-section (2).
SECTION 07: ISSUED CAPITAL OF NEW BANKS
(1) On the appointed day, the issued capital of a new bank shall consist of such amount divided into fully paid-up shares of hundred rupees each, as the State Bank may, with the approval of the Reserve Bank, fix.
(2) All shares in the issued capital of a new bank shall on the appointed day, stand allotted to the State Bank.
(3) The State Bank shall, as soon as may be, after the determination, if any, by the Tribunal, of the amount of compensation payable in respect of an existing bank, consider whether any increase in, or reduction of, the issued capital of the corresponding new bank as fixed under sub-section (1), by way of adjustment, or transfer from, or to the reserves of such bank, or in any other manner, is necessary or expedient and may, thereafter with the approval of the Reserve Bank, direct that bank to increase or reduce its issued capital.
(4) Without prejudice to the provisions contained in sub-section (3), a new bank, may, with the approval of the State Bank and the Reserve Bank, increase from time to time, its issued capital and the capital so increased shall consist of fully paid-up shares to be issued in such manner as the State Bank may, with the approval of the Reserve Bank, direct.
(5) No increase or reduction in the issued capital of a new bank shall be made in such a manner that the State Bank holds at any time less than fifty-five per cent of the issued capital of that bank.
SECTION 08: RESERVE FUND OF THE NEW BANKS
(1) Every new bank shall establish a reserve fund which, subject to the provisions of sub-section
(3) of section 7 and of sub-section (2) of this section, shall-
(a) on the appointed day, consist of such sum as the State Bank, with the approval of the Reserve Bank, may determine; and
(b) after the appointed day, consist of the sum aforesaid together with such further sums as may be transferred to the reserve fund by the new bank out of its annual net profits before declaring a dividend.
(2) The State Bank shall, as soon as may be after the determination, if any, of the amount of compensation by the Tribunal, in respect of an existing bank, consider whether any increase in or reduction of, the reserve fund of the corresponding new bank, by way of adjustment, by transfer from or to any account, or towards provision for bad and doubtful debts, depreciation of any assets or contingencies, or for any other purpose, is necessary, and may, thereafter, with the approval of the Reserve Bank, direct that bank to so increase or reduce its reserve fund.
SECTION 09: TRANSFER OF SHARES OF EXISTING BANKS TO STATE BANK
On the constitution of a new bank, all shares in the capital of the corresponding bank, where such corresponding bank has a share capital, shall stand transferred to, and shall vest in, the State Bank, free of all trusts, liabilities and encumbrances.
SECTION 10: TRANSFER OF UNDERTAKING OF EXISTING BANKS TO NEW BANKS
(1) Subject to the other provisions contained in this Act, when a new bank is constituted, the undertaking of the corresponding bank shall stand transferred to, and vest in, the new bank.
(2) The undertaking of the corresponding bank referred to in sub-section (1) shall be deemed to include all rights, powers, authorities and privileges and all property, movable and immovable, including cash balances, reserve funds investments and all other interests and rights in, or arising out of, such property and all books accounts and documents relating thereto as may be in the possession of that bank immediately before the appointed day, and shall also be deemed to include all debts, liabilities and obligations of whatever kind, then existing of that bank.
(3) Without prejudice to the other provisions contained in this Act, all contracts, deeds, bonds, agreements, powers of attorney grants of legal representation and other instruments of whatever nature, subsisting or having effect immediately before the appointed day and to which any existing bank is a party, or which are in favour of that bank, shall be of full force and effect against or in favour of the corresponding new bank, as the case may be, and may be enforced or acted upon as fully and effectually as if Instead of the existing bank the corresponding new bank had been a party thereto or as if they had been issued in favour of the corresponding new bank.
(4) If on the appointed day, any suit, appeal or other legal proceeding of whatever nature by or against an existing bank is pending, the same shall not abate be discontinued or be in any way prejudicially affected by reason of transfer to the corresponding new bank of the undertaking of the existing bank, or of anything contained in this Act, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the corresponding new bank.
SECTION 11: TRANSFER OF SERVICES OF EMPLOYEES OF EXISTING BANKS
(1) Save an other- wise provided in this Act, every employee of an existing bank in the employment of that bank immediately before the appointed day, shall, on and from that day, become an employee of the corresponding new bank and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same, terms and conditions and with the same rights and privileges as to pension, gratuity and other matters as he would have held the same on the appointed day, if the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and shall continue to do so unless and until his employment in that bank is terminated or until his remuneration or other terms and conditions of service are revised or altered by the corresponding new bank under, or in pursuance of, any law, or in accordance with any provision which, for the time being governs, his service: Provided that nothing contained in this sub-section shall apply to an employee of the bank of Patiala who holds a civil post under the State of Punjab unless, prior to the appointed day, he has intimated his consent to become an employee of the State Bank of Patiala by notice in writing, given to the Government of that State through the Bank of Patiala.
(2) Any person who, on the appointed day, is entitled to, or is in receipt of, a pension or other superannuation or compassionate allowance or other benefit from an existing bank or from any provident, pension or other fund or from any authority administering such fund, shall be entitled to be paid by, and to receive from, the corresponding new bank or any provident, pension or other fund or from 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 State bank and its decision thereon shall be final.
(3) For the persons who immediately before the appointed day are the trustees of, or the members of any authority administering, any fund constituted for the benefit of the employees of an existing bank, there shall be substituted as trustees or members such persons as the State Bank may, by general or special order, specify.
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 or any other law or in any agreement for the time being in force, the transfer from an existing bank of the services of any officer or employee of that bank to the corresponding new bank in terms of this section shall not entitle any such officer or employee, to any compensation to which he would, but for this provision, have been entitled under any such law or agreement and no claim in respect of such compensations shall be entertained by any court, tribunal or other authority.
SECTION 12: SPECIAL PROVISION FOR TRANSFER OF FOREIGN ASSETS
(1) If, according to the laws of any country outside India, the provisions of this Act by themselves are not effective to transfer or vest any asset or liability situated in that country which forms part of the undertaking of an existing bank to, or in, the corresponding new bank the affairs of the existing bank in relation to such asset or liability shall, on and from the appointed day, stand, entrusted to the5[managing director] for the time being of the corresponding new bank and the5[managing director] may exercise all powers and do all such acts and things as are exercised or done by the existing bank for the purpose of effectively winding up the affairs of that bank.
(2) The 5[managing director] of the corresponding new bank shall, in exercise of the powers conferred on him by sub-section (1), take all such steps as may be required by the laws of any such country outside India for the purpose of effecting such transfer or vesting, and in connection therewith the5[managing director] may either himself or through any person authorised by him in this be- half, realise any assets and discharge any liability of the existing bank and transfer the net proceeds thereof to the corresponding new bank.
(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), on and from the appointed day, no person shall make any claim or demand or take any proceeding in India against any existing bank or any person acting in its name or on its behalf except in so far as may be necessary for enforcing the pro- visions of this section or except in so far as it relates to any offence committed by such person.
6[(4) For the purposes of this section,-
(a) "corresponding new bank" means in relation to the Bank of Jaipur Limited, the institution constituted under section 3 as the State Bank of Bikaner;
(b) "existing bank" includes the Bank of Jaipur Limited.
CHAPTER 03 COMPENSATION
SECTION 13: COMPENSATION TO SHAREHOLDERS OF EXISTING BANKS OTHER THAN THE BANK OF PATIALA
(1) Every person who and any State Government which immediately before the appointed day is registered as a holder of shares in the books of an existing bank shall be given by the State Bank such compensation in respect of the transfer to the State Bank of the shares in the capital of that bank as is deter- mined in accordance with the principles contained in the First Schedule.
(2) The amount of compensation to be given in accordance with the principles contained in the First Schedule shall be determined by the first instance by the State Bank, in consultation with the Reserve Bank, and shall be offered by it to all those to whom compensation is payable under subsection
(1) in full satisfaction thereof.
(3) If the amount of compensation offered by the State Bank in terms of sub-section (2) is not acceptable to any shareholder of an existing bank, such shareholder may before such date as may be notified by the Central Government in the Official Gazette, request the Central Government, in writing to have the matter referred to the Tribunal.
(4) If, before the date notified under sub-section (3), the Central Government receives request, in terms of that sub-section, from not less than one-fourth in number of the shareholders, holding not less than one-fourth in value of the paid-up share capital of the existing bank, the Central Government shall have the matter referred to the Tribunal for decision.
(5) If, before the date notified under sub-section (3). the Central Government does not receive requests as provided in that sub-section, the amount of compensation offered by the State Bank, and where a reference has been made to the Tribunal, the amount determined by it, shall be the compensation payable under sub-sec. (1) and shall be final and binding on all parties concerned.
(6) Subject to the provisions of the succeeding sub-section the amount of compensation shall be paid,-
(a) if the shareholder has not applied for shares of the corresponding new bank in accordance with the provisions of sub-section (7), by a cheque drawn on the State Bank; and
(b) if he has applied for share of the corresponding new bank in accordance with the provisions of that sub-section, in shares of the corresponding new bank to the extent of the value of such shares allotted to him and the balance by a cheque drawn on the State Bank.
(7) Any shareholders of an existing bank to whom compensation is payable under this section may, before the expiry of three months from the date of the final determination of the amount of such compensation under sub-section (5), or such extended period as the Static Bank may think fit in any particular case to allow, apply to the State Bank for the transfer to him of shares in the capital of the corresponding new bank in lieu of such compensation or part thereof; and for the purposes of such transfer, the value of each share of the corresponding new bank shall be such as may be determined in this behalf by the State Bank with the approval of the Reserve Bank.
(8) On receipt of an application under sub-section (7), the State Bank shall issued to the corresponding new bank a warrant, in the form specified in the rules made under this Act, directing it to transfer in favour of the person specified in the warrant such number of shares as may be allotted to the applicant in accordance with sub-sections (9) and (10), out of the shares in the capital of that bank standing allotted to the State Bank under the provisions of this Act, and the corresponding new bank shall be bound to comply with such warrant.
(9) A shareholder of an existing bank who has applied for sharee in the capital of the corresponding new bank shall be allotted-
(a) such number of shares, having such total face value as would bear to forty-five per cent of the issued capital of the corresponding new bank the same proportion as the paid-up value of his shares in the capital of the existing bank in respect of which he is paid compensation bears to the total paid-up capital of that bank; and
(b) if the total number of shares allotted under clause (a) to all applicants is less than forty-five per cent of the issue capital of the corresponding new bank, such number of additional shares as the State Bank may deem fit having regard to the provisions of this Act, the circumstances of the case and the desirability of securing as wide a distribution of shares among as large a number of shareholders as possible.
Explanation.-For the purpose of determining the number of shares under these sub- sections fractions of a share shall be disregarded.
(10) Notwithstanding anything contained in sub-section (9), an allotment of shares under that subsection shall be
(11) A warrant issued by the State Bank under sub-section (8) shall not be liable to duty under the Indian Stamp Act, 1899.
(12) Nothing contained in this section shall affect the rights inter se between the holder of any share in an existing bank, and any other person who may have an interest in such share and such other person shall been titled to enforce his interest against the compensation awarded to the holder of such share, but not against the State Bank.
7[(13) For the purposes of this section,-
(a) "corresponding new bank" does not include the State Bank of Patiala and means in relation to the Bank of Jaipur Limited the institution constituted under section 3 as the State Bank of Bikaner ;
(b) "existing bank" includes the Bank of Jaipur Limited, but does not includes the Bank of Patiala.]
SECTION 14: COMPENSATION PAYABLE BY THE STATE BANK IN RESPECT OF THE BANK OF PATIALA THE SAURASHTRA BANK AND THE HYDERABAD BANK
(1) The State Government of Punjab in respect of the Bank of Patiala, the7[State Government of Gujarat] in respect of the Saurashtra Bank and the Reserve Bank in respect of the Hyderabad Bank, shall be given, by reason of the provisions of this Act of the amendments contained in Part V or Part VII of the Third Schedule, such compensation by the State Bank as is determined in accordance with the principles contained in the First Schedule.
(2) The amount of compensation to be given in accordance with the principles contained in the First Schedule shall be determined in the first instance by the State Bank, and shall be offered by it to the State Government of Punjab, the8[State Government of Gujarat], or the Reserve Bank, as the case may be, in full satisfaction of the compensation payable under sub-section (1) : Provided that in determining the amount of compensation to be offered to the State Government of Punjab or the8[State Government of Gujarat), the State Bank shall consult the Reserve Bank.
(3) If the amount of compensation offered by the State Bank in terms of sub-section (2) is not acceptable to the State Government of Punjab, the8[State Government of Gujarat] or the Reserve Bank, as the case may be, the State Government concerned or the Reserve Bank, may before such date as may be notified9by the Central Government in the Official Gazette, request the Central Government to have the matter referred to the Tribunal for decision, and where any such request is received, the Central Government shall refer the matter accordingly.
(4) If before the date notified under sub-section (3), the State Government of Punjab, the 8[State Government of Gujarat] or the Reserve Bank as the case may be has not made any such request, the amount of compensation offered by the State Bank, and where a reference has been made to the Tribunal the amount determined by it, shall be the compensation payable under sub-section (1) and shall be final and binding on all parties concerned.
(5) The amount of compensation shall be paid by a cheque drawn on the Reserve Bank.
SECTION 15: CONSTITUTION OF THE TRIBUNAL
86540
103860
630
114
59824