Section 5 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 in hindi
General effect of vesting.
- (1)The undertaking of each existing bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, reserve funds, investments and all other rights and interests in, or arising out of, such property as were immediately before the commencement of this Act in the ownership, possession, power or control of the existing bank in relation to the undertaking, whether within or without India, and all books of account, registers, records and all other documents of whatever nature relating thereto and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the existing bank in relation to the undertaking.
- (2)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 commencement of this Act, stand entrusted to the chief executive officer for the time being of the corresponding new bankand the chief executive officer may exercise all powers and do all such acts and things as may be exercised or done by the existing bank for the purpose of effectively transferring such assets and discharging such liabilities.
- (3)The chief executive officer of the corresponding new bank shall, in exercise of the powers conferred on him by sub-section (2), 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 may either himself or through any person authorised by him in this behalf realise any asset and discharge any liability of the existing bank.
- (4)Unless otherwise expressly provided by 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 commencement of this Act and to which the existing bank is a party or which are in favour of the existing bank shall be of as full force and effect against or in favour of the corresponding new bank, and may be enforced or acted upon as fully and effectually as if in the place 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.
- (5)If, on the appointed day, any suit, appeal or other proceeding of whatever nature in relation to any business of the undertaking which has been transferred under section 4, is pending by or against the existing bank, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer 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.
- (6)Nothing in this Act shall be construed as applying to the assets, rights, powers, authorities and privileges and property, movable and immovable, cash balances and investments in any country outside India (and other rights and interests in, or arising out of, such property) and borrowings, liabilities and obligations of whatever kind subsisting at the commencement of this Act, of any existing bank operating in that country if, under the laws in force in that country, it is not permissible for a banking company, owned or controlled by Government, to carry on the business of banking there.
Summary
- Everything the old bank owned or owed automatically transfers to the new bank.
- This includes all cash, property, debts, contracts, and legal cases.
- If a foreign country's laws block this automatic transfer, the new bank's chief executive officer is responsible for manually transferring the assets.
- Any pending lawsuits involving the old bank do not end, they simply continue with the new bank stepping in.
- Foreign assets and debts do not transfer at all if the foreign country forbids government-owned banks from operating there.
Practical examples
FAQ
1. Do the old bank's debts disappear when the government takes over?
No, all liabilities and obligations of the old bank become the complete responsibility of the new bank.
2. What happens if a foreign country does not recognize this Indian transfer law?
The chief executive officer of the new bank is given the power to manually transfer assets and pay off debts in that foreign country to follow their local laws.
3. Do I need to sign a new contract if I had an agreement with the old bank?
No, all existing contracts and agreements automatically continue in full force with the new bank.
Test yourself
1.Under Section 5 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, what happens to a lawsuit pending against an existing bank relating to business transferred under Section 4?
2.Under Section 5 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, who takes charge of transferring foreign assets if the foreign country's laws do not automatically accept the Indian transfer law?
3.Under Section 5 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, in which situation will the foreign assets and liabilities of an existing bank NOT transfer to the corresponding new bank?
4.Under Section 4 of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, an existing bank's undertaking vests in a corresponding new bank. Under Section 5 of the same Act, what is the effect of this on powers of attorney granted in favour of the existing bank before the commencement of the Act?