Section 41 of the Banking Regulation Act, 1949 - Preliminary Report by Official Liquidator

Section 41 of the Banking Regulation Act, 1949 deals with the preliminary report that an official liquidator must submit after a winding-up order is made in respect of a banking company. The provision is designed to identify available and expected cash assets quickly so that preferential claims, depositors and other creditors can be dealt with as speedily as the statutory scheme permits.

Section 41 at a glance

The provision applies after a winding-up order is made in respect of a banking company.
The official liquidator must submit a preliminary report to the High Court within two months from the date of the winding-up order.
The report must include the information contemplated by the provision and identify cash assets in custody or control.
It must also state the assets likely to be converted into cash within the relevant two-month period.
The liquidator must make every endeavour to collect as much of the banking company's assets in cash as practicable for speedy application in the winding-up process.

Meaning and scope of Section 41

The Banking Regulation Act, 1949 contains special provisions for the suspension of business and winding up of banking companies. Section 41 forms part of that special framework. Its focus is not merely on preparing a formal report: it requires early identification and collection of liquid assets so that claims can be addressed without avoidable delay.

For the Act, a banking company is defined in Section 5(c) as a company which transacts the business of banking in India. The current official text of the Act may be checked through the India Code page for the Banking Regulation Act, 1949.

Current statutory text of Section 41

41. Preliminary report by official liquidator. - Notwithstanding anything to the contrary contained in section 455 of the Companies Act, 1956 (1 of 1956), where a winding up order has been made in respect of a banking company whether before or after the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), the official liquidator shall submit a preliminary report to the High Court within two months from the date of the winding up order or where the winding up order has been made before such commencement, within two months from such commencement, giving the information required by that section so far as it is available to him and also stating the amount of assets of the banking company in cash which are in his custody or under his control on the date of the report and the amount of its assets which are likely to be collected in cash before the expiry of that period of two months in order that such assets may be applied speedily towards the making of preferential payments under section 530 of the Companies Act, 1956 and in the discharge, as far as possible, of the liabilities and obligations of the banking company to its depositors and other creditors in accordance with the provisions hereinafter contained; and the official liquidator shall make for the purposes aforesaid every endeavour to collect in cash as much of the assets of the banking company as practicable.

Legislative note: Section 41 was substituted by Section 3 of the Banking Companies (Second Amendment) Act, 1960 (Act 37 of 1960).

What must the preliminary report contain?

Section 41 requires the preliminary report to contain the information required by the provision so far as it is available to the official liquidator. In particular, the report must state:

the amount of the banking company's assets held in cash in the liquidator's custody or under the liquidator's control on the date of the report; and
the amount of assets expected to be collected in cash before expiry of the two-month period.

The purpose is practical. The provision directs attention to cash that is already available and cash that can be realised quickly, because those funds may then be applied toward preferential payments and, so far as possible, liabilities owed to depositors and other creditors.

Two-month time limit

Where the winding-up order is made after commencement of the 1960 amendment, the preliminary report is to be submitted within two months from the date of the winding-up order. The statutory text also contains a transitional rule for winding-up orders made before commencement of that amendment.

Duty to realise assets in cash

The closing part of Section 41 places an affirmative duty on the official liquidator to make every endeavour to collect in cash as much of the banking company's assets as practicable. This supports the wider objective of speedy administration of a bank winding up and protection of depositors and creditors.

Who may act as official liquidator?

Section 39 of the Banking Regulation Act contains a special rule concerning appointment of the official liquidator in proceedings for winding up a banking company. On an application by the Reserve Bank of India in the circumstances stated in that provision, the Reserve Bank, State Bank of India, another notified bank, or an individual named in the application may be appointed as official liquidator. Section 39A applies relevant company-law provisions relating to liquidators insofar as they are not inconsistent with the Banking Regulation Act.

Companies Act, 1956 references in the present text

The current official text of Section 41 continues to refer expressly to Sections 455 and 530 of the Companies Act, 1956. The Companies Act, 1956 has otherwise been repealed subject to savings by Section 465 of the Companies Act, 2013. For that reason, the text above preserves the wording of Section 41 as it presently appears in the Banking Regulation Act rather than replacing those statutory cross-references in the bare provision.

For current company-law provisions and savings, see the Companies Act, 2013 on India Code.

Related provisions

Section 41 should be read with the connected provisions governing winding up of banking companies, including Section 41A on notice to preferential claimants and secured and unsecured creditors, Section 42 on dispensing with meetings of creditors, Section 43 on booked depositors' credits, and Section 43A on preferential payments to depositors.

Official legal resources

For the latest consolidated statutory text, amendments, rules and notifications, readers should verify the official sources before relying on the provision in a proceeding.