AAP Tax Law - legal and tax information

Banking Regulation Act, 1949

Section 45H: Special Provisions for Assessing Damages Against Delinquent Directors, etc.

Section 45H of the Banking Regulation Act, 1949 creates a special rule for recovery or restoration of money or property from promoters, directors, managers, liquidators or officers of a banking company in winding-up related proceedings. It also permits attachment of property where the High Court has reason to believe that the property belongs to such a person.

Current-law note: The text of Section 45H continues to refer expressly to Section 543 of the Companies Act, 1956. The Companies Act, 2013 now contains Section 340, titled "Power of Tribunal to assess damages against delinquent directors, etc." Accordingly, Section 45H should be read with the current company winding-up framework and applicable transitional provisions when used in a present-day matter.
On this page Text of Section 45H Meaning and effect Sub-section (1): repayment or restoration Sub-section (2): attachment of property Current Companies Act context Related provisions

Text of Section 45H of the Banking Regulation Act, 1949

45H. Special provisions for assessing damages against delinquent directors, etc.

(1) Where an application is made to the High Court under section 543 of the Companies Act, 1956 (1 of 1956) against any promoter, director, manager, liquidator or officer of a banking company for repayment or restoration of any money or property and the applicant makes out a prima facie case against such person, the High Court shall make an order against such person to repay and restore the money or property unless he proves that he is not liable to make the repayment or restoration either wholly or in part.

Provided that where such an order is made jointly against two or more such persons, they shall be jointly and severally liable to make the repayment or restoration of the money or property.

(2) Where an application is made to the High Court under section 543 of the Companies Act, 1956 (1 of 1956), and the High Court has reason to believe that a property belongs to any promoter, director, manager, liquidator or officer of the banking company, whether the property stands in the name of such person or any other person as an ostensible owner, then the High Court may, at any time, whether before or after making an order under sub-section (1), direct the attachment of such property, or such portion thereof, as it thinks fit. The property so attached shall remain subject to attachment unless the ostensible owner proves to the satisfaction of the High Court that he is the real owner. The provisions of the Code of Civil Procedure, 1908 relating to attachment of property apply, as far as may be, to such attachment.

Historical note: the reference to Section 543 of the Companies Act, 1956 was substituted for Section 235 of the Indian Companies Act, 1913 by Act 95 of 1956, section 14 and the Schedule, with effect from 14 January 1957.

Meaning and Effect of Section 45H

The provision is designed to speed up recovery of banking-company money or property from persons responsible for its management or liquidation. Once the applicant establishes a prima facie case, sub-section (1) places the burden on the person proceeded against to show why he or she is not liable, wholly or partly, for repayment or restoration.

  • It applies to a promoter, director, manager, liquidator or officer of a banking company.
  • The proceeding concerns repayment or restoration of money or property.
  • A prima facie case by the applicant activates the special burden contemplated by Section 45H(1).
  • Where liability is imposed on two or more persons jointly, the statutory proviso makes their liability joint and several.
  • The High Court may attach property believed to belong to the concerned person even if it stands in the name of an ostensible owner.
  • Rules under the Code of Civil Procedure, 1908 relating to attachment apply, so far as they can be applied.

Section 45H(1): Repayment or Restoration

Sub-section (1) operates after an application of the kind described in the provision is made and the applicant establishes a prima facie case. The statutory language then requires the person proceeded against to prove that he or she is not liable to repay or restore the money or property, either wholly or partly.

The proviso is important where more than one responsible person is covered by the order. In that situation, the liability for repayment or restoration is joint and several, allowing the amount to be recovered in accordance with that form of liability.

Section 45H(2): Attachment of Property

Sub-section (2) protects the effectiveness of the recovery proceeding. If the High Court has reason to believe that property belongs to a promoter, director, manager, liquidator or officer of the banking company, it may direct attachment of the whole or an appropriate portion of that property.

The power is not defeated merely because the property stands in another person's name. Where another person is shown as the ostensible owner, the attachment can continue unless that person proves to the satisfaction of the High Court that he or she is the real owner.

Current Companies Act Context

The Banking Regulation Act text still contains the historical cross-reference to Section 543 of the Companies Act, 1956. For modern company winding-up law, Section 340 of the Companies Act, 2013 is the current provision specifically titled "Power of Tribunal to assess damages against delinquent directors, etc." It permits the Tribunal, in the course of winding up, to inquire into misapplication or retention of company money or property, misfeasance or breach of trust, and to order repayment, restoration or contribution by way of compensation.

Because the Banking Regulation Act contains special provisions for banking companies, the precise forum, procedural route and interaction with the Companies Act, 2013, the Insolvency and Bankruptcy Code, 2016 and transitional provisions should be checked against the facts and date of the particular winding-up proceeding.

Section 45H forms part of Part IIIA of the Banking Regulation Act, 1949, which contains special provisions for speedy disposal of winding-up proceedings. It should therefore be read in the context of nearby provisions dealing with claims, evidence, examination of directors and officers, realisation of property and enforcement.

See also Section 45G - Public examination of directors and auditors and Section 45I - Duty of directors and officers to assist in realisation of property.

Disclaimer: This page is a general legal information resource. Statutory provisions, notifications, case law and transitional rules should be verified from official sources before being relied upon in legal proceedings.