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Section 18 of Bank Nationalisation Act, 1980 — Dissolution

Bare section text

Official Legislative Text

No provision of law relating to winding up of corporations shall apply to a corresponding new bank and no corresponding new bank shall be placed in liquidation save by order of the Central Government and in such manner as it may direct.

Educational Study Layer

Summary

The standard legal rules for closing down or bankrupting a company do not apply to the new banks created by this Act.
A new bank cannot be forced into liquidation by regular creditors or courts.
Only the Central Government has the authority to order the closure and liquidation of a corresponding new bank.
If the Central Government decides to close a bank, it also has the power to direct the exact process and manner for how the closure will happen.

Practical examples

1A large business client sues one of the new banks for a massive debt and tries to use standard corporate bankruptcy laws to close the bank down. The judge dismisses the bankruptcy attempt because the law clearly exempts these specific banks from normal winding-up procedures.

2After many years, the Central Government decides that one of the new banks is no longer needed. The Government issues an official order to place the bank in liquidation and creates a custom step-by-step plan for paying back the depositors and selling the bank's buildings.

FAQ

1. Can normal bankruptcy laws be used to close these new banks?

No, the standard laws relating to the winding up of corporations do not apply to them.

2. Who has the power to liquidate one of these new banks?

Only the Central Government can place a corresponding new bank in liquidation.

3. How is the liquidation process managed?

The Central Government directs the specific manner in which the bank will be closed.

Practice Quiz

Q1.Under Section 18 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, who holds the exclusive power to place a corresponding new bank in liquidation?

Q2.What happens if someone attempts to apply standard corporate winding-up laws to a corresponding new bank under Section 18 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980?

Q3.According to Section 18 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, how is the procedure for liquidating a corresponding new bank determined once the order is given?

Q4.Which of the following statements is true regarding the closure of a corresponding new bank under Section 18 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980?

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