Incorporation, capital management and business




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45K.Power of bank to collect information from non banking institutions as to deposits and to give directions  (1) The bank may at any time direct that every nonbanking institution shall furnish to the bank. in such form, at such intervals and within such times, such statements, information or particulars relating to or connected with deposits received by the non banking institution, as may be specified by the bank by general or special order.
(2) Without prejudice to the generality of the power vested in the bank under subsection (1), the statements, information or particulars to be furnished under sub section (1), may relate to all or any of the following matters. namely, the amount of the deposits, the purposes and periods for which, and the rates of interest and other terms and conditions on which, they are received.
(3) The Bank may, if it considers necessary in the public interest so to do, give directions to non banking institutions either generally or to any non banking institution or group of non banking institutions in particular, in respect of any matters relating to or connected with the receipt of deposits, including the rates of interest payable on such deposits, and the periods for which deposits may be received.
(4) If any non banking institution fails to comply with any direction given by the bank under sub section (3), the bank may prohibit the acceptance of deposits by that nonbanking institution.


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1. Ins. by act 23 of 1997, S.4. w.e.f. 9.1.1997.
The Reserve Bank of India Act, 1934 41

(5) 1[***]
(6) Every non banking institution receiving deposits shall, if so required by the Bank and within such time as the Bank may specify, cause to be sent at the cost of the non banking institution a copy of its annual balance sheet and profit and loss account or other annual accounts to every person from whom the non banking institution holds. as on the last day of the year to which the accounts relate, deposits higher than such sum as may be specified by the Bank.

NOTES
Directions issued by RBI arc statutory in nature. Power is wide enough but is hedged in and should be exercised in the public interest. This was observed in a proceeding wherein 1987 directions issued by RBI under this provision are challenged. The word 'any' qualifying matters relating to or connected with the receipt of deposits in this provision is of great significance and the impugned directions of 1987 are fully covered under S. 45 K(3) of the Act.
Peerless General Finance & Investment Company Ltd. V/s. Reserve Bank of India (1992) 2 SCC 343 AIR 1992 SC 1033.
Para 4 A inserted in Residuary Non Banking Companies (Reserve Bank) directions, 1987 is under challenge. By this para non banking companies are prohibited from taking depositors "any amounts towards processing or maintenance charges for meeting its revenue expenditure". Rejecting the challenge, it is held that the words "in respect of any matters relating to or connected with receipt of deposits" in S.45K (3) confer wide power on Reserve Bank to issue directions and the said power is not restricted or limited to receipt of deposits only. The aforesaid words must be given their natural meaning as construed by the Supreme Court in Pearless Il. This means that the Bank has been given the power to issue directions in respect of any matter relating to or connected with the receipt of deposits. S. 45 K(3) is an enabling provision enacted to empower the Reserve Bank to regulate the conditions on which deposits may be accepted by non banking companies or institutions and to prevent malpractices in the matter of acceptance of such deposits. Therefore para 4A inserted in 1987 directions falls within the power conferred by sec. 45 K (3) of the Act It is even held that the same is not even violative of Article 19( 1 )(g) of the Constitution of India.
Reserve Bank of Indict v. Pearless General Finance & Investment Co. Ltd. 1996 (1 ) SCC 642.
The aforesaid insertion of proviso to para 4 A in 1987 directions was also challenged as discriminatory and violative of Art. 14 of the Constitution. Contention is rejected. Charges for brochure/ application form etc. would not vary from person to person and therefore para 4 A is not discriminatory on ground of treating unequals with equals. Nor is it discriminatory on ground of non banking companies being treated differently from commercial bank in the matter of such charges.
Reserve Bank of 'Indict v. Pearless General Finance & Investment Co. Ltd. 1996 (I) SCC 642
*******
45L.Power of Bank to call for information from financial institutions and to give directions  (1) If the Bank is satisfied for the purpose of enabling it to regulate the credit system of the country to its advantage it is necessary so to do, it may
(a) require financial institutions either generally or any group of financial institutions or financial institution in particular, to furnish to the Bank in such form, at such intervals and within such time, such statements. information or particulars relating to the business of such financial

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1. Omitted by Act 51 of 1974.


  1. The Reserve Bank of India Act. 1934

institutions or institution, as may be specified by the Bank by general or special order:


(b) give to such institutions either generally or to any such institution in particular, directions relating to the conduct of business by them or by it as financial institutions or institution.
(2) Without prejudice to the generality of the power vested in the Bank under clause (2) of sub section (1), the statements, information or particulars to be furnished by a financial institution may relate to all or any of the following matters, namely, the paid up capital, reserves or other liabilities, the investments whether in Government securities or otherwise, the persons to whom, and the purposes and periods for which, finance is provided and the terms and conditions, including the rates of interest, on which it is provided.
(3) In issuing directions to any financial institution under clause (b) of sub section (1), the Bank shall have due regard to the conditions in which. and the objects for which, the institution has been established, its statutory responsibilities, if any, and the effect the business of such financial institution is likely to have on trends in the money and capital markets.
45M. Duty of non banking institutions to furnish statements. etc., required by bank  It shall be the duty of every non banking institution to furnish the statements, information or particulars called for. and to comply with any direction given to it, under the provisions of this Chapter.
45MA.Powers and duties of auditors  (1) It shall be the duty of an auditor of a non banking institution to inquire whether or not the non banking institution has furnished to the Bank such statements, information or particulars relating to or connected with deposits received by it, as are required to be furnished under this chapter. and the auditor shall, except where he is satisfied on such inquiry that the non banking institution has furnished such statements, information or particulars, make a report to the Bank giving the aggregate amount of such deposits held by the non banking institution.
1[1 (A) The Bank may, on being satisfied that it is necessary so to do, in the public interest or in the interest of the depositors or for the purpose of proper assessment of the books of account, issue directions to any non banking financial company or any class of non banking financial companies generally or to the auditors of such non banking financial company or companies relating to balance sheet, profit and loss account, disclosure of liabilities in the books of accounts or any matter relating thereto.]
(2) Where, in the case of 2[a non banking financial company] the auditor has made, or intends to make, a report to the bank under sub section (1), he shall include in his report under sub section (2) of section 227 of the Companies Act, 1956 (1 of 1956), the contents of the report which he has made, or intends to make, to the bank.
3[3) Where the Bank is of the opinion that it is necessary so to do in the public interest or in the interest of the non banking financial company or in the interest of depositors of such company, it may at any time by

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1.Ins. by Act 23 of 1907, S5. w.e.f. 9.1.1997

2.Subs for words “a non-banking institution being company” by Act 23 of 1997, S.5. w.e.f. 9.1.1997

3.Ins. by Act 13 of 1997, S.5. w.e.f. 9.1.1997
The Reserve Bank of India Act. 1934 43

order direct that a special audit of the accounts of the non banking financial company in relation to any such transaction or class of transactions or for such period or periods, as may be specified in the order, shall be conducted and the bank may appoint an auditor or auditors to conduct such special audit and direct the auditor or the auditors to submit the report to it.


(4) The remuneration of the auditors as may be fixed by the Bank, having regard to the nature and volume of work involved in the audit and the expenses of or incidental to the audit, shall be borne by the non banking financial company so audited.]
1[45MB. Power of Bank to prohibit acceptance of deposit and alienation of assets  (1) If any non banking financial company violates the provisions of any section or fails to comply with any direction or order given by the Bank under any of the provisions of this Chapter, the Bank may prohibit the non banking financial company from accepting any deposit.
(2) Notwithstanding anything to the contrary contained in any agreement or instrument or any law for the time being in force, the Bank, on being satisfied that it is necessary so to do in the public interest or in the interest of the depositors, may direct the non banking financial company against which an order prohibiting from accepting deposit has been issued, not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the Bank for such period not exceeding six months from the date of the order.
45MC. Power of Bank to file winding up petition (1) The Bank, on being satisfied that a non banking financial company—
(a) is unable to pay its debt; or

(b) has by virtue of the provisions of section 45 IA become disqualified to carry on the business of a non banking financial institution; or

(c) has been prohibited by the Bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or

(d) the continuance of the non banking financial company is detrimental to the public interest or to the interest of depositors of the company,


may file an application for winding up of such non banking financial company under the Companies Act, 1956 (1 of 1956).
(2) A non banking financial company shall be deemed to be unable to pay its debts if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the Bank certifies in writing that such company is unable to pay its debt.
(3) A copy of every application made by the Bank under sub section (1) shall be sent to the Registrar of Companies.
(4) All the provisions of the Companies Act, 1956 (1 of 1956) relating to winding up of a company shall apply to a winding up proceeding initiated on the application made by the Bank under this provision.]

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I Sec. 45MB and 45MC ins. by Act 23 of 1997, S.6, w.e.f. 9.1.1997.
44 The Reserve Bank of India Act. 1934
45N.Inspection  (1) The bank may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons (hereinafter in this section referred to as the inspecting authority)
(i) of any non banking institution, including a financial institution, for the purposes of verifying the correctness or completeness of any statement, information or particulars furnished to the bank or for the purpose of obtaining any information or particulars which the non banking institution has failed to furnish on being called upon to do so; or

(ii) of any non banking institution being a financial institution, if the bank considers it necessary or expedient to inspect that institution.


(2) It shall be the duty of every director or member of any committee or other body for the time being vested with the management of the affairs of the non banking institution or other officer or employee thereof to produce to the inspecting authority all such books, accounts and other documents in his custody or power and to furnish that authority with any statements and information relating to the business of the institution as that authority may require of him, within such time as may be specified by that authority.
(3) The inspecting authority may examine on oath any director or member of any committee or body for the time being vested with the management of the affairs of the non banking institution or other officer or employee thereof, in relation to its business and may administer an oath accordingly.
45NA. Deposits not to be solicited by unauthorised persons  No person shall solicit on behalf of any non banking institution either by publishing or causing to be published any prospectus or advertisement or in any other manner deposits of money from the public unless

(a) he has been authorised in writing by the said non banking institution to do so and specifies the name of the institution which has so authorised him, and


(b) the prospectus or advertisement complies with any order made by the bank under section 45J and with any other provision of law for the time being in force, applicable to the publication of such prospectus or advertisement.
1[45NB. Disclosure of information  (1). Any information relating to a non banking financial company—
(i) contained in any statement or return submitted by such company under the provisions of this Chapter; or

(ii) obtained through audit or inspection or otherwise by the Bank,


shall be treated as confidential and shall not, except otherwise provided in this section, be disclosed.
(2) Nothing in this section shall apply to—
(a) the disclosure by any non banking financial company, with the previous permission of the bank, of any information furnished to the Bank under sub section (1);

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1and 45NC ins. by Act 23 of 1997, S.7, w.e.f. 9.1.1997

The Reserve Bank of India Act. 1934 45
(b) the publication by the Bank, if it considers necessary in the public interest so to do, of any information collected by it under sub section (1) in such consolidated form as it may think fit without disclosing the name of any non banking financial company or its borrowers;
(c) the disclosure or publication by the non banking financial company or by the Bank of any such information to any other non banking financial company or in accordance with the practice and usage customary amongst such companies or as permitted or required under any other law.
Provided that any such information received by a non banking financial company under this clause shall not be published except in accordance with the practice and usage customary amongst companies or as permitted or required under any other law.
(3) Notwithstanding anything contained in this Act or in any other law for the time being in force, the Bank, if it is satisfied that, in the public interest or in the interest of the depositors or the non banking financial company or to prevent the affairs of any nonbanking financial company being conducted in a manner detrimental to the interest of the depositors, it is expedient so to do, may, either on its own motion or on being requested, furnish or communicate any information relating to the conduct of business by any nonbanking financial company to any authority constituted under any law.
(4) Notwithstanding anything contained in any law for the time being in force, no court or tribunal or other authority shall compel the Bank to produce or to give for inspection of any statement or other material obtained by the bank under any provisions of this Chapter.
45NC. Power of bank to exempt  The Bank, on being satisfied that it is necessary so to do. may declare by notification in the Official Gazette that any or all of the provisions of this Chapter shall not apply to a non banking institution or a class of nonbanking institutions or a non banking financial company or to any class or non banking financial companies either generally or for such period as may be specified, subject to such conditions, limitations or restrictions as it may think fit to impose.)
45 O.Penalties  [Repealed by the Reserve Bank of India (Amendment) Act, 1974 (51 of 1974)].
45P.Cognizance of offences  [Repealed by the Reserve Bank of India (Amendment) Act, 1974 (51 of 1974)].
45Q.Chapter IIIB to override other laws  The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
1 [45QA.Power of Company Law Board to order repayment of deposit  (1) Every deposit accepted by a non banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.
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1.Sec.45QA and 45QB ins. by Act 23 of 1997, S.8, w.e.f. 9.1.1997
46 The Reserve Bank of India Act, 1934

(2) Where a non banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under section 10E of the Companies Act, 1956 (1 of 1956) may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order.


Provided that the Company Law Board may, before making any order under this sub section, give a reasonable opportunity of being heard to the non banking financial company and the other persons interested in the matter.
45QB.Nomination by depositors (1) Where a deposit is held by a non banking institution to the credit of one or more persons, the depositor or, as the case may be, all the depositors together may nominate, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), one person to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the non banking institution.
(2) Notwithstanding anything contained in any other law for the time being in force, or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made purports to confer on any person the right to receive the amount of deposit from the non banking institution, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949).
(3) Where the nominee is a minor, it shall be lawful for the depositor making the nomination to appoint, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), any person to receive the amount of deposit in event of his death during the minority of the nominee.
(4) Payment by a non banking institution in accordance with the provisions of this section shall constitute a full discharge to the non banking financial institution of its liability in respect of the deposit.
Provided that nothing contained in this sub section shall affect the right or claim which any person may have against the person to whom any payment is made under this section.
(5) No notice of the claim of any person, other than the person or persons in whose name a deposit is held by a non banking institution, shall be receivable by the nonbanking institution, nor shall the non banking institution be bound by any such notice even though expressly given to it.
Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such deposit is produced before a non banking institution, the non banking institution shall take due note of such decree, order, certificate or other authority.]

The Reserve Bank of India Act, 1934 47
'CHAPTER III C

PROHIBITION OF ACCEPTANCE OF DEPOSITS BY

UNINCORPORATED BODIES
45R. Interpretation  The words and expressions used in this Chapter and defined in Chapter IIIB shall have the meanings respectively: assigned to them therein.
2(45S. Deposits not to be accepted in certain cases   (1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit
(i) if his or its business wholly or partly includes any of the activities specified in clause (c) of section 45 I: or

(ii) if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner.

Provided that nothing contained in this sub section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners.
(2) Where any person referred to in sub section (I) holds any deposit on the 1st day of April. 1997 which is not in accordance with sub section (1), such deposit shall be repaid by that person immediately after such deposit becomes due for repayment or within three years from the date of such commencement, whichever is earlier.
Provided that if the bank is satisfied on an application made by any person to the Bank that such person is unable to repay a part of the deposits for reasons beyond his control or such repayment shall cause extreme hardship to him, it may, by an order in writing, extend such period by a period not exceeding one year subject to such conditions as may be specified in the order.
(3) On and from the date of 1st day of April, 1997, no person referred to in subsection (1) shall issue or cause to be issued any advertisement in any form for soliciting deposit.
Explanation  For the purposes of this section, a person shall be deemed to be a relative of another if, and only if

(

i) they are members of a Hindu undivided family: or



(ii) they are husband and wife; or

(iii) the one is related to the other in the manner indicated in the List of relatives below:

.

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