Section 41A of the Banking Regulation Act, 1949: Notice to Preferential Claimants and Secured and Unsecured Creditors
Section 41A forms part of the special winding-up framework for banking companies. It requires the official liquidator to call for claims from preferential claimants and from secured and unsecured creditors within prescribed time limits, and it sets consequences for failure to submit a claim or value a security in time.
Updated legal context: 13 September 2026.
What Section 41A does
- It requires the official liquidator to issue notice within fifteen days from the date of the winding-up order, subject to the historical transitional clause in the section.
- The notice is directed to preferential claimants and to secured and unsecured creditors.
- A creditor is required to send the amount claimed to the official liquidator within one month from service of the notice.
- A secured creditor must also value the security within that period.
- If a secured creditor does not submit the claim and valuation in time, the official liquidator may value the security and that valuation becomes binding under the section.
Text of Section 41A
(1) Within fifteen days from the date of the winding up order of a banking company or where the winding up order has been made before the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), within one month from such commencement, the official liquidator shall, for the purpose of making an estimate of the debts and liabilities of the banking company (other than its liabilities and obligations to its depositors), by notice served in such manner as the Reserve Bank may direct, call upon-
(a) every claimant entitled to preferential payment under section 530 of the Companies Act, 1956 (1 of 1956), and
(b) every secured and every unsecured creditor, to send to the official liquidator within one month from the date of the service of the notice a statement of the amount claimed by him.
(2) Every notice under sub-section (1) sent to a claimant having a claim under section 530 of the Companies Act, 1956 (1 of 1956), shall state that if a statement of the claim is not sent to the official liquidator before the expiry of the period of one month from the date of the service, the claim shall not be treated as a claim entitled to be paid under section 530 of the Companies Act, 1956, in priority to all other debts but shall be treated as an ordinary debt due by the banking company.
(3) Every notice under sub-section (1) sent to a secured creditor shall require him to value his security before the expiry of the period of one month from the date of the service of the notice and shall state that if a statement of the claim together with the valuation of the security is not sent to the official liquidator before the expiry of the said period, then, the official liquidator shall himself value the security and such valuation shall be binding on the creditor.
(4) If a claimant fails to comply with the notice sent to him under sub-section (1), his claim will not be entitled to be paid under section 530 of the Companies Act, 1956 (1 of 1956), in priority to all other debts but shall be treated as an ordinary debt due by the banking company; and if a secured creditor fails to comply with the notice sent to him under sub-section (1), the official liquidator shall himself value the security and such valuation shall be binding on the creditor.
Meaning of important terms
Official liquidator
For the purposes of the winding-up provisions of the Banking Regulation Act, the official liquidator is the person responsible for administering the winding up, identifying assets and liabilities, receiving claims and carrying out duties imposed by the Act and the orders of the competent court.
Preferential claimant
A preferential claimant is a creditor whose debt is entitled, under the applicable winding-up law, to priority over ordinary unsecured debts. Section 41A itself uses the historical expression by reference to Section 530 of the Companies Act, 1956. Under the Companies Act, 2013, preferential-payment provisions are principally found in Sections 326 and 327, subject to the scope and applicability of those provisions.
Secured creditor
A secured creditor is a creditor whose debt is backed by a security interest over property or assets. Section 41A requires a secured creditor receiving notice to state the amount claimed and to value the security within the prescribed period.
Unsecured creditor
An unsecured creditor is a creditor whose claim is not backed by a security interest in specified assets. Section 41A requires unsecured creditors receiving notice to submit the amount claimed within one month from service.
Time limits under Section 41A
The section uses two important periods. First, the official liquidator is ordinarily required to act within fifteen days from the winding-up order. Second, a creditor who receives the notice must send the statement of claim within one month from service of that notice. A secured creditor must also provide the valuation of its security within that one-month period.
Effect of failure to comply
For a claimant asserting preferential status, failure to submit the claim within the time stated in the notice results, under the wording of Section 41A, in loss of the claimed priority and treatment of the debt as an ordinary debt. For a secured creditor who does not provide the required claim and valuation, the official liquidator may value the security and that valuation is binding for the purposes of the section.
Current legal context: Companies Act, 2013 and the Insolvency and Bankruptcy Code
The Companies Act, 1956 has been repealed and replaced substantially by the Companies Act, 2013. However, Section 41A of the Banking Regulation Act still contains an express reference to Section 530 of the 1956 Act. The text should therefore be read as enacted, while current questions about priority of debts should also be checked against the applicable provisions of the Companies Act, 2013, including Sections 326 and 327, and any relevant savings or transitional provisions.
The Insolvency and Bankruptcy Code, 2016 generally excludes a "financial service provider" from the definition of "corporate person". Banking is a financial service regulated by the Reserve Bank of India. Accordingly, the ordinary corporate insolvency framework under the Code should not be assumed to replace the special Banking Regulation Act winding-up regime for a banking company.