Section 36AF of the Banking Regulation Act, 1949: Power of the Central Government to Make Scheme
Section 36AF forms part of Part IIC of the Banking Regulation Act, 1949, which deals with acquisition of the undertakings of banking companies in certain cases. It empowers the Central Government, after consultation with the Reserve Bank of India, to frame a scheme for giving effect to an acquisition under that Part.
Statutory wording checked against the official India Code text of the Banking Regulation Act, 1949.
- The Central Government may make a scheme after consulting the Reserve Bank.
- The scheme may provide for transfer of the acquired bank's undertaking, assets and liabilities.
- It may regulate the first management of the transferee bank and continuity of employees, pensions and related benefits.
- The scheme may also deal with compensation and overseas assets or liabilities.
- A scheme can later be added to, amended or varied by notification in the Official Gazette.
- The statutory scheme has overriding effect and is binding on specified stakeholders.
Meaning and scope of Section 36AF
The expression "scheme" in Section 36AF refers to the statutory framework made by the Central Government to implement the consequences of acquisition of a banking company's undertaking under Part IIC. The section gives the Government a broad but structured power to provide for transfer, management, employee continuity, pension and superannuation rights, compensation, overseas assets and liabilities, and incidental matters required to complete the transfer.
The power is not unilateral in the statutory sense: the Central Government must consult the Reserve Bank before making the scheme and also before adding to, amending or varying an existing scheme under sub-section (3).
Text of Section 36AF
36AF. 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 employee 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 clauses (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.
(5) Copies of every scheme made under this section 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 provisions 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 may be, 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.
What may a scheme under Section 36AF contain?
Sub-section (2) gives a detailed but non-exhaustive list. The words "without prejudice to the generality of the foregoing power" mean that the listed matters do not exhaust the Central Government's power, provided the subject remains connected with carrying out Part IIC.
Transfer of undertaking
The scheme may identify the corporation or company to which the acquired bank's undertaking, property, assets and liabilities are to be transferred and may specify matters concerning its capital, constitution, name and office.
Management of the transferee bank
The scheme may provide for the first Board of management of the transferee bank and related or incidental matters that the Central Government considers necessary or expedient.
Employees and service continuity
The scheme may provide for continuance of employees of the acquired bank in the Central Government or transferee bank, subject to the terms stated in Section 36AF(2)(c) and the cross-reference to clauses (i) and (j) of Section 45(5).
Pension, superannuation and compassionate benefits
Section 36AF(2)(d) protects continuity of specified pension, superannuation and compassionate benefits, subject to the conditions on which those benefits were granted.
Compensation and overseas assets
The scheme may regulate the manner of payment of compensation payable under Part IIC and may provide for effectual transfer of assets or liabilities situated outside India.
Publication, parliamentary laying and legal effect
A scheme made under Section 36AF must be published in the Official Gazette. Copies must also be laid before each House of Parliament as soon as may be after the scheme is made.
Related provisions
Section 36AF should be read with the other provisions of Part IIC, particularly Section 36AE on acquisition of undertakings, Section 36AG on compensation, and Section 36AH on constitution of the Tribunal.