QUICK SUCCESS large extent, as the readers are still...

1 Quick Success Series – Remittance & Collection

Page 1

QUICK

SUCCESS

SERIES

LEGAL ASPECTS

OF BANKING

QUICK SUCCESS SERIES, an initiative of

SBILD,Deoghar to facilitate the preparation of

promotion seeking personnel of our Bank, ap-

pears to have succeeded in its objective to a

large extent, as the readers are still approach-

ing us for its revision/updation despite availa-

bility of plenty of other study materials.

We would not have been able to sustain this

unique effort of ours, without the active sup-

port and continuous encouragement of our

CGM&Head(STU)Shree P.C.Kandpal and his

team and Circle CDO,Shree Paresh Chandra

Barik.We are deeply indebted to him for his co-

operation and guidance.

Sri Sanjay Kumar, Chief Manager (Training) ,Sri

Kumar Priyank, Chief Manager (Training) Sri

Sanjay Kumar Sharma,Manager (Training and

Sri Jitendra Kumar Arun,Chief Manager (Train-

ing) Sri Vineet Kumar Das,Chief Manager

(Training) and Smt Sarita Gupta,Chief Manag-

er (Training),at this SBILD have owned up this

project and have taken pains to keep it rele-

vant to the users by updating & improving it.

Though every care has been taken while up-

dating the contents, we request our readers to

point out any lapses at the earliest. Needless

to mention this book is not a substitute of cir-

cular instructions issued by the Bank from time

to time. For detailed guidelines please refer to

Bank’s latest circulars. Soft copy of this edition

is available on our ftp://10.151.51.33 in QSS

folder and on SBI TIMES>PATNA CIRCLE>SBLC

Deoghar site.

Team SBILD, Deoghar is humbled by the re-

sponse and recognition, it is receiving from the

readers within and beyond the circle. We wish

the readers grand success in their endeavours.

Sri Kumar Umeshwer Singh, Director,

SBILD,Deoghar

814112

Mob - 8340486015

E-mail: [email protected]

Updated up to 30

th November 2018

Updated By: Sanjay Kumar Chief Manager (Training),

SBILD, Deoghar

Mobile- 9572512297

[email protected]

Quick Success Series

Legal Aspects Of Banking

Updated up to 30th

November 2018

2

� TDS compliance

� (Circular No – 1593/2017-18,dated – 31/03/2018)

As you are aware, requirements of TDS compliance for the current F.Y.2018-19 would be based on

the Finance Act, 2018. The major changes pertaining to TDS (applicable w.e.f. 1st

April 2018) are as

below:-

Under Section 193, TDS on any interest paid on 7.75% GOI Savings (Taxable) Bonds, 2018 shall be

deductible at the time of making payment of such interest to residents. However, no TDS will be deducted

if the amount of interest is less than or equal to ten thousand rupees during the financial year. Under Section 194A, amendment has been made to raise the threshold for nondeduction of tax at source on

interest on deposits of “senior citizens” from Rs. 10,000/- to Rs. 50,000/-. Further, it has been explained that

“senior citizen” shall mean an individual resident who is of the age of sixty years or more at any time during

the year.

“Education Cess on Income-tax” and “Secondary and Higher Education Cess on “Health and income-tax”

shall be discontinued and a new cess by the name of Education Cess”four per cent shall be levied at the rate

of of income tax including surcharge wherever applicable.

Major payments made by Bank where TDS is applicable:- Following payments made by the Bank are sub-

jected to Tax Deduction at Source (TDS) under the stipulated sections of Income Tax Act mentioned there

against:-

Interest on Securities – Section 193

Interest other than interest on securities – Section 194A

Payment/Credit to contractors/Sub-contractors – Section 194C

Commission/Brokerage – Section 194 H

Rent – Section 194I

Payment made by the Bank where TDS is not applicable – Under section 196 of Income Tax no deduction of

Tax shall be made from any sum payable to –

The Government

The RBI

A Mutual fund specified under clause 23D of section 10.

Interest payment made to any Banking companies/Financial Corporation/Other Notified Institutions

According to CBDT Circular No. 23/2017 dated 19th July, 2017, tax should not be deducted on the compo-

nent of “GST on services” (if indicated separately in the Invoice). GST for these purposes shall include Inte-

grated Goods and Services Tax, Central Goods and Services Tax, State Goods and Services Tax and Union Ter-

ritory Goods and Services Tax.

When to Deduct Tax-

TDS is to be deducted at the time of –

Credit of such sum to the account of the Payee

Payment there of

Crediting such sum to any accounts.



Updated up to 30th

November 2018

3

Importance of Permanent Account Number (PAN):- Under Section 206AA of the Income Tax Act, the rate of

TDS is higher of 20% or the applicable rate in all cases where valid PAN is not quoted by the recipient [except

on payment of interest under section 194LC or to non-residents not being a company or foreign company,

subject to prescribed conditions (as may be notified by Income Tax department)].Further, the declaration

filed in 15G and 15H is not valid unless the person filing the declaration furnishes his valid PAN in such decla-

ration. Therefore, branches should make extra efforts in persuading the customers to provide their PAN.

Individual (of less than 60 years of age) or a person (not being a Company or Firm), who is resident in India

and can request the Bank not to deduct tax at source on interest paid/payable on time deposits and rent

payable by furnishing a declaration in Form 15G to the effect that the tax on their estimated total income of

the relevant financial year will be Nil. However, the declaration in Form 15G is not applicable if the amount

of the income (individually or in aggregate) credited or paid or likely to be credited or paid during the con-

cerned financial year in which such income is to be included exceeds the maximum amount which is not

chargeable to tax (Rs.2,50,000/- for F.Y. 2018-19).

Resident senior citizen person (60 years or more during the previous year) can furnish similar undertaking in

Form 15H (certifying that his estimated taxable income is below the maximum amount which is not charge-

able to tax and tax thereon would be NIL), irrespective of the interest amount and rent amount paid or cre-

dited or likely to be paid or credited during the financial year.In this regard, it is to be noted that a customer

would need to provide the details of all of his/her time deposits with Bank in Form 15G/H. The declaration

given in the Form is valid for a financial year.

Under the centralised environment, TDS will be remitted centrally at whole bank level,while the branches

are responsible for ensuring correct deduction of tax. (Please refer our e-circular no. CFO/FRT-TAX/1/2017 -

18 dated 05.04.2017).

Under Centralised environment, from F.Y. 2017-18, the TDS statements (Form 24Q,26Q & 27Q) will be filed

at Central level (please refer circular no. CFO/FRT-TAX/1/2017 - 18 dated 05.04.2017).

Form 16A (for customers & Vendors) shall be accessible to branches/operating units through TDS Reporting

System (TRS) as well as through their Branch report folders.As a measure to conserve the environment and

facilitate Customers, TDS Certificates are being forwarded to customers by email. Branches / operating units

shall ensure updation of email IDs of Customers in CBS.. Form 16 (for Employees & Pensioners):- Part A of

Form 16 shall be accessible to branches/operating units through TDS Reporting System (TRS) as well as

through their Branch report folders. Part B of Form 16 shall be provided by HRMS/CPPC in the usual manner

(please refer circular no. CFO/FRT-TAX/1/2017 - 18 dated 05.04.2017).

Branches should ensure that all the details of Form 15G and 15H received from customers are captured in

system, so that benefit of non-deduction of tax is passed on to customer. Further, the Branches shall be re-

quired to retain the physical forms for a period of seven years from the end of the financial year in which the

Form 15G/ Form 15H has been received.

We have to reiterate that non-compliance with TDS requirements provided in the IT Act is subject to severe

penalties, as below:-

In case of failure to deduct whole or part of TDS, the deductor is liable to pay simple interest @ 1% under

section 201(1A) for every month or part of a month on the amount of tax in arrear from the date on which

such tax was deductible to the date on which such tax is actually deducted. Further, the deductor may be

liable for penalty of sum equal to the amount of tax, which has been failed to be deducted.Branches/Offices

should, therefore, ensure that there is no violation of TDS provisions.



Updated up to 30th

November 2018

4

TDS Rate Chart –

Applicable Section Nature of Payment Threshold Amount Rate %

194A Interest By Banks 10000 10%

194C Payment to contractor –

Single Transaction

30000 2%

194C Payment to contractor

aggregate during FY

100000 2%

194I Rent(P & M, Land &

Building)

180000 2% -P&M

10% - L&B

� The quarterly TDS statements are:

TDS in respect of Salary-24Q

TDS in respect of payments other than Salary made to residents -26Q

TDS in respect of payments other than Salary made to non-residents -27Q

� After filing the TDS returns, the branch must log on to the TRACES website and download the TDS

certificates and verify them before signing and issuing it to the persons on whose account tax has

been deducted. The last date for issuance of certificates is as under:

Particular of certificate Due date for issuing of certificate

Form 16 (in case of salary)

31st May of the F.Y. immediately following the

F.Y. in which the income was paid and tax de-

ducted.

Form 16A ( other than salary)

For the Quarter ending 30th June

For the Quarter ending 30th September

For the Quarter ending 31st December

For the Quarter ending 31st March

30th July

30th Oct

30th January

30th May

Form 16B (for consideration towards acquisition

of immovable property other than agricultural

land from resident)

Within 15 days from due date of furnishing the

challan-cum-statement in Form 26QB

� Form 60

Any person who does not have a PAN and who enters into any transaction where PAN is required to

be quoted, can make a declaration in Form no. 60 giving therein the particulars of such transactions.

� Form 61

Any person, who does not have a PAN and having agricultural income and is not in receipt of any

other income chargeable to income tax, shall make a declaration in Form no. 61 giving therein the

particulars of such transactions.

� The Forms 60/61 so collected need to be forwarded it to the Commissioner of Income tax (Central

Information Branch) having territorial jurisdiction over the area in which the transaction is entered,

in two half yearly instalments i.e. on or before 31st October (for the forms received up to 30th Sep-

tember) and 30th April (for the forms received up to 31st March).

� However, Form 60/61 obtained at the time of opening an account (other than a time deposit ac-

count exceeding Rs. 50000/-) is not required to be furnished to Income tax authority and should be

retained at branch only.



Updated up to 30th

November 2018

5

RIGHT TO INFORMATION ACT (2005)

Responses to RTI requests should be furnished as quickly as possible and in no case should they be allowed

to cross the stipulated timelines provided under the RTI Act. The stipulated timelines are;

Sl.no. Situation Time limit for disposing off

applications

1 Supply of information in normal

course

30 days

2 Supply of information if it concerns

the life or liberty of a person

48 hours

3 Supply of information if the

application is received through

CAPIO

05 days shall be added to the time

period indicated at Sr. NO.1 and 2.

4 Supply of information if application /

request is received after transfer

from another public authority:

(a) In normal course

(a) Within 30 days of the receipt of the

application by the concerned public

Authority.

(b) In case the information

concerns the life or liberty of a

person.

(b) Within 48 hours of receipt of the

application by the concerned public

authority

5 Supply of information if it relates to

third party and the third party has

treated it as confidential.

Should be provided after following the

procedure given in Section 11 of the

RTI Act.

6 Supply of information where the

applicant is asked to pay additional

fee.

The period intervening between

informing the applicant about additional

fee and the payment of fee by the

applicant shall be excluded for

calculating the period of reply.

If the CPIO fails to give decision on the request for information within the prescribed period, the Central

Public Information Officer shall be deemed to have refused the request. It is pertinent to note that if a public

authority fails to comply with the specified time limit, the information to the concerned applicant would

have to be provided free of charge.

� Appeals :

� The appeal should be disposed off within 30 days of receipt of the appeal.

� In exception cases, the Appellate Authority may take 45 days for its disposal.

� However, in cases where disposal of appeal takes more than 30 days, the Appellate Authority should

record in writing the reasons for such delay. (e.cir.sl. No. : 639/2012 – 13 dt: 28/09/2012)



Updated up to 30th

November 2018

6

RTI STRUCTURE Establishment

APPELLATE AUTHORI-

TIES

CPIOs CAPIOs

LHO GM (Net work-I) AGM(Premises & Estate) CM (P&E),LHO * *

AGM SBLC

[AGM (P&E), if the SBLC is

headed by CM]

Manager / Dy. Manager

(Administration)

Administrative office GM (Respective Networks) DGM (B&O) of Respective

Zones

CM (GB) at Zonal Office

RBO GM (Respective Networks) Regional Manager C.M( Admin)

CPCs

GM (Respective

Networks)

DGM (B&O) for CPCs headed by

CMs

CM heads of CPCs

AGM (CPC) for CPCs headed by

CMs

CM/Manager in AGM headed CPCs

Branches (Directly report-

ing to GMs/DGMs

GM (Respective Networks) DGM/AGM (Branch Head) Chief Manager/Manager (Branch opera-

tions)

Branches (Others) GM (Respective Networks) Regional Managers( for other

Branches)

Branch Head (SMGS-IV & below)

** Modified vide e-cir: 774/2014-15 dt:27/09/2014)

Ref:e.cir.sl.no:568/2015-16 dt:06/08/2015

GROUP HEAD APPELLATE AUTHORITIES CPIOs CAPIOs

MD & GE (A&S) CGM-I(A&S) DGM (BPR &RM) CM (BPR & RM)

DMD & CDO

GM, SBSC DGM, SBLC AGM (Admin) SBSC

GM, (SBIRD) DGM, (SBIRD) AGM (Admin),SBIRD

GM, SBA DGM, SBA AGM (Admin) SBA

GM & Director, (SBIICM) DGM, (SBIICM) AGM/CM (Admin)

GM (CRPD) DGM (CRPD) AGM (CRPD)

CGM (HR)

DGM (PMD & PDG) AGM (PPG)

AGM (PMD)

DGM (CMD) AGM (CMD)

DGM (IR) for all other de-

partment under HR

AGM (HR) for all other depart-

ments under HR

CGM (STU) DGM (STU) AGM (L&D)

CIP GM (ITSS & QA) For all De-

partment of GITC

DGM (S & C) for all other

GITC issues

AGM/CM (Admin)

GROUP HEAD APPELLATE AUTHORITIES CPIOs CAPIOs

MD & GE (NBD)

GM (Cross selling)

DGM (PPBU-Ops) for all

PBBU matters-

including Home

Loans

AGM (PBU-NPA)

DGM (Ops-RE,H&HD) for

all matters related

to RE,H & HD and

Precious Metal

AGM (Home Loans)

AGM (Precious Metal)

DGM (Cross selling) AGM (Cross Selling)

GM(AB&R) for AB&R and

GAD

DGM (DRD & ACD) for AB

&R and GAD

AGM (ABD) for AB&R

AGM(GAD) for GAD

GM (SMEBU) DGM (SME-Ops) for SME-

BU

AGM (SME-Ops)

GM (Agri Business) DGM (BPM & MI) for Agri AGM (BPM&MI)



Updated up to 30th

November 2018

7

Business

GM (Outreach) DGM (RB-Ops) for Rural

Business Non-Farm

CM (Ops)

GM(NB Co-Ordination) DGM (Customer Service) AGM (Customer Service)

GM (Alternate Channel) DGM (ATM) AGM (ATM)

CGM (BO) DGM (RTI) for all Depart-

ment at Corporate

centre not mentions

elsewhere

AGM(RTI)

CFO

Global Markets

Corporate Centre

GM (Rupee Treasury

Global Market)

DGM (Compliance) AGM (Compliance)

Global Markets Unit

Kolkata

GM (GMUK) DGM(Funds Management) AGM (Compliance)

MD & GE (Corporate

Banking)

CAG CENTRAL

CGM -I (CAG)

DGM (CAG Cen-

tral)

AGM (MIS & SYS)

CAG BRANCHES

GM & RH (Branch Head

DGM & COO (for all CAG

Branches)

AGM (A&A) / CM (A&A)

TBU (Transaction Bank-

ing Unit)

GM (TBU)

DGM & RM (FIBU)

AGM 1 (FIBU)

DGM (CMP)

CM (Admin) CMP

AGM Capital Market

Branch

CM (Operation & COO)

MCG Corporate

Centre

CGM (MCG-I)

DGM (MC&BS)

AGM (GB)

MCROs (Mid Corporate

Regional Offices)

GM (MC) of respective MCRO

AGM (GB) at respective

MCRO

CM (HR) at respective

MCRO

MCG Branches

GM (MC) of Respective MCRO

DGM (Branch

Head )

AGM & COO

AGM (Branch

Head)

CM ( A&A)

International Banking

GM (Compliance)

DGM (O & IS)

AGM(O & IS)

SAMRO

GM of Concerned SAMRO

DGM of Concerned

SAMRO

AGM /CM of con-

cerned SA-

MROs as

identified by

GM /DGM

SAMB

GM of Concerned SAMRO

DGM of Concerned

Branch

AGM /CM of concerned

Branch as identified by

DGM of the Branch

SARBs

GM of Concerned

SARB

AGM of concerned SARB;

Senior CM /

MMGS-III

of the Br. DGM (SAMRO) if the

branch is headed by

C.M.

MD (Compliance &

Risk)

GM (CAU) for I&MA Deptt. Hyderabad

AGM (HR & Admin),

CM (Admin),

GM (I&A) ZIO For respective Z I O AGM (I&A) ZIO C.M. (HR & Admin) ZIO



Updated up to 30th

November 2018

8

NEGOTIABLE INSTRUMENT ACT, 1881

Sec 4 - Defines a promissory note

Sec 5 - Defines bill of exchange

Sec 6 - Cheque

Sec 8 - Holder

Sec 9 - Holder in due course

Sec 10 - Payment in due course

Sec 15 - Endorsement

Sec 18 - If the amount undertaken or ordered to be paid is stated differently in words and figures, the

amount in words shall be the amount undertaken or ordered to be paid.

Sec 20- An inchoate instrument is one which is signed and stamped as required by law, but which has not

been completely filled by the maker.

Sec 26- A minor may draw, indorse, deliver and negotiate such instruments so as to bind all parties except

himself.

Sec 87- Material alteration of negotiable instrument renders the same void.

Sec 99 - Noting

Sec 100 - Protest

Sec 131 - Protection to the collecting banker

Sec 138 to 142 - New Secs 138-142 added in 1988, detailing penalties for bouncing of cheques due to insuf-

ficiency of funds.

# If a cheque in discharge of a liability is returned by the bank unpaid, due to insufficient funds, such per-

son shall be deemed to have committed an offence and shall, be punished with imprisonment for a term

which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with

both.

THE NEGOTIABLE INSTRUMENTS (AMENDMENT) ORDINANCE, 2015

� In exercise of the powers conferred by clause (1) of article 123 of the Constitution, the President has prom-

ulgated ‘The Negotiable Instruments (Amendment) Ordinance 2015’. The same has been published in Ga-

zette dated 15th June, 2015 and has come into force with immediate effect.

� The Ordinance defines ‘a cheque in the electronic form’ & is focused on clarifying jurisdiction related issues

for filing cases for offence committed under section 138 of the Negotiable Instruments Act, 1881. It also pro-

vides that the offence u/s. 138 shall be inquired into and tried only by a Court within whose local jurisdiction

–

� the branch of the bank where the payee or holder in due course, as the case may be, maintains the

account is situated, if the cheque is delivered for collection through an account.

or

� the branch of the drawee bank where the drawer maintains the account is situated, if the cheque is

presented for payment by the payee or holder in due course otherwise through an account.

� It provides for retrospective application for the new provision of determining the jurisdiction of a court to try

a case under section 138 of the NI Act, 1881. The Ordinance also mandates centralisation of subsequent

complaints against the same drawer.

� Consequent upon passing of ‘The Negotiable Instruments (Amendment) Act 2015’ by the Parliament and

getting assent of the President on 26th December, 2015,‘ The Negotiable Instruments (Amendment) Second

Ordinance 2015’ stands repealed. (e.cir.sl.no.1433/2015-16 dt:20/02/2016)



Updated up to 30th

November 2018

9

Payment & settlement Act-2007

Sec 2(1)(c) Defines electronic fund transfer

Sec 25 (5) of the act provides that provisions of chapter XVII of the Negotiable Instruments Act,

1881 (26 of 1881), shall apply to the dishonour of EFT to the extent the circumstances permit

Sec 21 Duties of a system provider Sec 25 Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account. Sec 30 Power of Reserve Bank to impose fines

INDIAN CONTRACT ACT 1872

Sec 11 – Minor cannot enter into a contract

Sec 59 to 61 - Clayton’s Rule (Appropriation of payments when several debts are owed)

Sec 124 - Indemnity

Sec 126 – Guarantee

Sec 148 to 176 – Bailment/ Pledge

Sec 171 – Lien

Sec 172 – Pledge

Sec 182 – Agent and Principal

LIMITATION ACT 1963

Sec 4 – If prescribe period expires when the court is closed, suit may be filed on the next day when the

court reopens

Sec 18 - Revival/acknowledgement of debt

Sec 19 – Payment/deposit of any amount by the borrower himself by a signed voucher extends limitation

period further by 3 years

INFORMATION TECHNOLOGY ACT 2000

Sec-65-Tampering with computer source documents

Sec-66- Hacking with computer system Sec-66B-Receiving stolen computer or communication device Sec-66C-Using password of another person

Sec-67-Publishing information which is obscene in electronic form. Sec-67C-Failure to maintain records

TRANSFER OF PROPERTY ACT

Sec 58( a to f ) – Mortgage (EM) defined

Sec 100 – Registration of charge ( in case of companies) (not defined in companies act)

Sec 105 - Lease

PARTNERSHIP ACT 1932

Sec 25 – Joint and several liability of partners

Sec 30 – A minor can be admitted to the benefits of a partnership but cannot become a partner.

Sec 42 - Death, insolvency of a partner dissolves the partnership

Sec 69 – A registered firm can file a suit against others to enforce rights arising from a contract but an un-

registered firm cannot. The creditors of an unregistered firm can file a suit against the firm



Updated up to 30th

November 2018

10

SBI ACT 1955

Sec 32 – Act as agent of RBI

Sec 34 1 (b) – Cannot lend against its own share

Sec 39 – Balance Sheet to be prepared as at 31st

March

RBI ACT 1934

Sec 28 - Note refund rules

Sec 35- RBI can carry out inspection of any bank

Sec 42 – Schedule/Non-Schedule banks defined.

Sec 42(1&6) – CRR to be maintained with RBI and it is fixed on market situations

Sec 45 – Nationalised banks can conduct Govt. business as agent of RBI

Sec 49 – Bank rate

[ A bearer draft cannot be issued ( sec 31). A fine up to the amount of the bearer draft issued may be im-

posed on the bank ( sec 58 B ) ]

Sec 24- RBI issues all currency notes for denomination 2,5,10,20,50,100,500,1000,5000,10000. It has the

power to direct discontinuation or non-issue of currency notes of any denomination.

BANKING REGULATION ACT 1949

Sec 6 – Forms of business a bank can transact

Sec 11 – Min paid up capital and reserves

Sec 19 – Restrictions regarding advances against shares

Sec 20 – Bank cannot grant loan against its own shares as it will amount to a reduction in its capital

Sec 24 – SLR maintenance

Sec 29 – Publication of balance sheet every year

Sec 35 – Inspection of branches by RBI

Sec 35A – Ombudsman appointed

Sec 45 –Return of paid instrument to customers

Sec 45ZA to ZF – Nomination facility

CONSUMER PROTECTION ACT (COPRA) 1986

District Forum

� 3 members

� Term is 5 years

� Claims up to Rs 20 lac

� Appeal against it can be filed within 30 days

State Commission

� 3 members

� Claims > Rs 20 lac up to Rs 100 lac

� Appeal will be allowed if either 50% amount ordered by district forum or Rs Rs 25000/- whi-

chever is less, is deposited

National Commission

� 5 members

� Claims > Rs 100 lac

� Appeal will be allowed if the appellate deposits 50% of the amount ordered by State Com-

mission or Rs Rs 35000/- whichever is less



Updated up to 30th

November 2018

11

INCOME TAX ACT-1961

Sec 194 – TDS (Tax Deducted at Source)

Sec 269 - If the aggregate of principal of a term deposit and interest is Rs 20000/- or more then payment

should not be made in cash.

Sec 271 – If violated Sec 269, the official responsible has to pay the penalty up to the amount of Term De-

posit

IMPORTANT POINTS RElATED

TO LEGAL ASPECTS

�� Bankers’ Books Evidence Act came into

existence in year 1891.

�� Bankers’ books include ledgers, day books,

cash books, micro films, magnetic tapes

etc.

�� Certified copy means a copy of any entry

in the books of a bank together with a cer-

tificate that it is true copy of the original

entry.

�� Maintenance of SLR: max 40%

�� Pursuant to the amendment of the Banking

Regulation Act, 1949, section 26A has been

inserted in that Act, empowering Reserve

Bank to establish a Depositor Education

and Awareness Fund (the Fund). Under

the provisions of this section the amount

to the credit of any account in India with

any bank which has not been operated

upon for a period of ten years or any depo-

sit or any amount remaining unclaimed for

more than ten years shall be credited to

the Fund, within a period of three months

from the expiry of the said period of ten

years.

�� Every scheduled commercial banks has to

publish its B/S & P&L A/c as on 31.03 latest

by June 30th of every year.

� Garnishee order is issued under Civil

Procedure code (1908) act

� A complaint under Consumer Protection

Act can be filed within 2 years from the

date on which the cause of action has ari-

sen.

� The ROC on the application of the compa-

ny, on being satisfied that the company

had sufficient cause for not filing particu-

lars of charge within 30 days may allow

registration after 30 days but within a pe-

riod of 300 days from the date of creation

of charge.

� If the particulars of charge or for modifica-

tion or satisfaction of charge are not filed

within 300 days the company or any per-

son interested in registration of charge can

file an application to the Central Govt. for

condonation of delay and extension of time

for filing particulars of charges. Central

Govt. can impose conditions for extension

of time. IMPORTANT- It is important to

note that it is imperative that charges

created in favour of the Bank are regis-

tered within a period of 30 days from the

date of creation of charge. Otherwise it is

possible that Bank may lose priority of

charge created in favour of the Bank.

� Reserve Bank of India vide their circular

dated 07.06.2013 advised all banks to sub-

ject the title deeds and other loan docu-

ments in respect of all exposures of Rs 5

Crs and above to periodical legal audit and

re-verification of title deeds with relevant

authorities as part of regular audit exercise

till the loans are fully repaid.

� As per Legal Audit Plan, the Auditors for

conducting the Legal Audit shall be out-

sourced and reputed Legal Firms/ Advo-

cates empanelled with our Bank would

carry out Legal Audit by visiting the

branches where the accounts are being

operated and documents are kept.

� The Legal Audit shall be conducted pref-

erably 3 months before the commence-

ment of RFIA / Credit Audit, so that auditee

branches can comply with rectification of

the deficiencies pointed out. A separate

Legal Audit Report Format (LARF) to be

submitted by Legal Auditor has been de-



Updated up to 30 th November 2018

12

signed. The format contains Value State-

ments pertaining to documentation, mort-

gage, charge creation, etc., corresponding

to Value Statements in the existing Credit

Audit Report Format (CARF).

� RFIA / Credit Auditors will award scores

based on the Legal Audit observations and

compliances by the branch during their

respective audits. The score so awarded

will be integrated in the Credit Manage-

ment Score of the Branch. The Legal Audit

is a regulatory prescription and its progress

will be reported to Bank’s ACB on quarterly

basis.

� Criminals Procedure Code came into

existence in 1973 year.

� Clayton’s Rule defines Appropriation of

payments when several debts are owned.

(under sec 59 to 61 of Indian Contract Act)

� Quasi Contracts means Loans to minors to

meet necessaries of life are binding on the

minor’s estate.

�� When the same person is the drawer

and the drawee of an instrument, the

holder can treat the instrument as Bill

of exchange or Promissory note ( e.g.

Banker’s cheque)

�� Inchoate instruments means incom-

plete instruments wherein some de-

tails would have been left blank.

�� If no rate of interest is mentioned in

the Promissory note intt @ 18% p.a is

to be paid.

�� Dishonour of cheques are defined in

sec 138 to 142 of NI Act.

�� On the dishonour of a cheque the

payee must give a notice to the

drawer within 30 days days of the re-

ceipt of information from the bank.

�� Scheduled Banks defined as The

names of banks with capital and re-

serves of Rs 5 lakhs and above will be

included in the II schedule to the Act (

S 42)

�� If the aggregate of principal of a term

deposit and interest is Rs 20000/- or

more then payment should not be

made in cash.

�� A minor can be admitted to the bene-

fits of a partnership. (But he cannot

become a partner; also documents will

be signed by the guardian on minor’s

behalf).

�� A registered partnership firm can sue

third parties to enforce rights arising

from a contract. An unregistered firm

cannot; the creditors of an unregis-

tered firm can sue the firm.

� Forms of legal representation: Legal

Representation is a legal decision

granted on the death of a person

owning property or money in order to

dispose-off the said property or mon-

ey. It is governed by the provisions of

the Indian Succession Act, 1925. The

three forms of legal representations

are (a) probate (b) letter of Adminis-

tration and (c) Succession certificate.

� a) Probate: If the deceased has left a

will, it must be first produced in a

court. The court after satisfying itself

that it is the last will of deceased and

was duly executed, will issue a pro-

bate, empowering the executor of the

will to do all acts specified in the will.

The executer is appointed by the per-

son making the will. A copy of the will

is always attached to the probate. A

probate is only conclusive as to the

appointment of executer and validity

of the will. It applies to both movable

and immovable properties. A probate

issued by a High court is valid

throughout India. If it is issued by a

district court, the probate is valid

within the state and in case the value

of property outside the state does not

exceed Rs.10, 000/-, it is even valid

outside the state. If a supplementary

will called (a codicil) is discovered af-

ter the grant of a probate, a separate

probate of that codicil may be granted

to the executer.

� b) Letter of Administration: It is

issued by a court in favour of an Adminis-

trator (i) when the deceased has not left a

will or (ii) when the deceased has left a will




13

but has not named an executor, or (iii) the

executor named therein refuses to act or

he himself is dead .A letter of administra-

tion covers not only debts due to the de-

ceased and transferable securities but also

all kinds of movable and immovable prop-

erties. It is valid throughout India if issued

by a High court. If it is issued by a District

Court, it is valid within the state. However,

if the value of the property outside the

state does not exceed Rs.10,000/ even a

letter of administration issued by a District

Court is valid throughout the Country.

� c) Succession Certificate: A Succession

Certificate is granted when the deceased

has not left any will It is issued to the legal

heirs in respect of only debts and securi-

ties. It is to be noted that a succession cer-

tificate does not cover gold loan ornaments

articles in safe deposit/safe deposit lockers

etc. It is valid throughout India even if

granted by a District Court. The certificate

should specify the debts and securities and

will be granted in a special form. The certif-

icate empowers a person to whom it is

granted to collect debt and securities and

interest thereon.

�� Credit Information Companies (Regu-

lations) Act, 2005(CIC Act) and the

Rules and Regulations framed there

under have come into force with effect

from December 14, 2006. Section 17 of

the CIC (Regulations)Act, 2005 provides

for collection (from members) and fur-

nishing (to specified users) of credit in-

formation by Credit Information Com-

panies. The CIC Act provides statutory

backing for sharing of credit informa-

tion by Credit Institutions with Credit

Information Companies subject to con-

ditions stipulated therein. Therefore

with CIC Act coming into force, the

“consent clause” has become redun-

dant and hence the consent of the bor-

rower prescribed vide Annexure- I & II

of Circular No. CPP/CKG/CIR/40 dated

13.11.2002, need not be insisted upon

now. (e-cir:461/2013-14

dt:03/08/2013)

�� Since the Govt. of India has directed

the Bank to establish Facilitation cen-

ters to help less conversant bidders,

who intend to participate in e-auction

under SARFAESI / DRT. The branches,

which conduct e-auction under SAR-

FAESI / DRT, should make arrange-

ments for Facilitation Center to provide

all information about the process of e-

auction and facilitate the bidders to bid

in the e -auction in a transparent man-

ner.(e-cir:544/2013-14 dt:24/08/2013)

�� Guidelines on KYC/AML/CFT measures

are issued by Reserve Bank of India un-

der Section 35A of the Banking Regula-

tion Act, 1949 and Rule 7 of Prevention

of Money- Laundering (Maintenance of

Records) Rules, 2005.

�� As per Rule 114B it is compulsory to

quote PAN in all documents pertaining

to financial transactions notified from

time to time by CBDT.

�� Person not having the PAN are to make

a declaration in form No. 60/61, giving

therein the particulars of such transac-

tions. Person with agricultural income

and those who are not in receipt of any

income chargeable to tax, have to make

a declaration in Form No.61.

�� RBI has permitted Banks to formulate a

scheme for providing services at the

premises of a customer (Doorstep bank-

ing) under section 23 of Banking Regula-

tion act 1949.

�� SARFAESI-2002 Act came into force

from 21st August 2002.Under the act a

secured creditor shall have the following

powers:-(i) To take possession, sell or

lease the secured assets (both movable

and immovable assets, (ii) To take over

the management of the business of the

borrower, (iii) To appoint a manager,

(iv) To recover any money payable by

third parties to the borrower, (v) In case

a joint financing under consortium or

multiple lending arrangement, if 75% of

the secured creditors in value agree to




14

initiate recovery actions, the same shall

be binding on all the secured creditors.

� Securitization: A process by which

a single asset or a pool of assets are

transferred from the balance sheet of

the originator (bank) to a bankruptcy

remote SPV (trust) in return for an im-

mediate cash payment.

� An entity which may be a trust, com-

pany or other entity constituted or es-

tablished by a ‘Deed’ or ‘Agreement’ for

a specific purpose.

�� Minutes of the Board meetings and the

memoranda are commercial confidence

for the Bank and are exempted from

disclosure in terms of Section 8(1)(d) of

the RTI Act, 2005. (e-cir:899/2013-14

dt:07/09/2013)

�� The Mental Health Act, 1987 provides

for a law relating to the treatment and

care of mentally ill persons and to make

better provision with respect to their

property and affairs.

�� According to the said Act, “Mentally ill

person” means a person who is in need

of treatment by reason of any mental

disorder other than mental retardation.

Sections 53 and 54 of this Act provide

for the appointment of guardians for

mentally ill persons and in certain cases,

managers in respect of their property.

The prescribed appointing authorities

are the district courts and collectors of

districts under the Mental Health Act,

1987. (e-cir:1188/2013-14

dt:23/01/2014).

�� RBI has now advised that banks are

insisting on guardianship certificate

from all mentally ill persons. In this re-

gard it is clarified that paragraph 2(iii) of

our aforesaid ecircular is not intended

to insist on appointment of a guardian

as a matter of routine from every per-

son “who is in need of treatment by

reason of any mental disorder”.

Branches should seek for appointment

of a guardian only in such cases, where

they are convinced on their own or

based on documentary evidence availa-

ble, that the concerned person is men-

tally ill and is not able to enter into a va-

lid and legally binding contract. (e-

cir:1416/2015--16 dt:16/02/2016)

�� Major Changes Brought In By Banking

Law (Amendments) Act, 2012

�� The said Amendment Act has amended

the BR Act, the Banking Companies (Ac-

quisition and Transfer of Undertakings)

Act, 1970, the Banking Companies (Ac-

quisition and Transfer of Undertakings)

Act, 1980 and also made consequential

amendments to certain other enact-

ments including the Indian Stamp Act,

1899 and the Indian Contract Act, 1972

�� Amendment to Section 12 to provide for

issue of preference shares:

�� Amendment to the said Section now

enables banks to issue preference

shares subject to the guidelines to be

framed by RBI. However banks cannot

proceed to issue preference shares and

have to wait for RBI to prescribe guide-

lines in respect of the same.

�� The amendment also provides that pro-

visions of Section 87(2)(b) of the Com-

panies Act, 1956 will not be applicable.

Thus default in payment of dividend

would not confer voting rights (in re-

spect of all resolutions placed before

the general meeting of the bank) to

holders of preference share capital of a

Bank.

�� The preference shareholders in a bank

will continue to have power to vote in

respect of matters affecting their rights

directly as provided in Section 87(2).

�� Banks may alter the capital clause in

the Memorandum of Association such

that the capital clause contains the two

classes of shares viz., equity shares and

preference shares.

�� The amendment to Section 12 also pro-

vides power to RBI for increasing the

ceiling on a phased manner for exercise

of voting rights on poll from 10% to 26%

in a bank. Earlier there was no such




15

power and voting rights was restricted

to 10% of the total voting rights.

�� Insertion of new Section 26A for setting

up DEAF: Depositor Education and

Awareness Fund: By this section, RBI has

been empowered to establish Depositor

Education and Awareness Fund. Funds

lying in any non-operative accounts for

10 years or more or any deposits not

claimed for 10 years or more in a bank

now requires to be credited to the said

Fund within 3 months from the expiry of

10 years.

�� Insertion of new Section 29A for seeking

annexure of financial statements of as-

sociate enterprise of the bank: This Sec-

tion provides power to RBI to require a

bank to annex to its financial statements

or to provide separately the financial

statements of any associate enterprise

like holding company, subsidiary com-

pany, joint venture company etc. or to

cause inspection of books of accounts of

such associate enterprise.

�� Insertion of new Section 36ACA for su-

persession of powers of Board of bank:

By this Section RBI has been empo-

wered to supersede the powers of the

Board of Directors a Bank for a period

not exceeding 6 months, if affairs of a

Bank is conducted in a manner detri-

mental to the interests of public or its

deposit holders in consultation with the

Central Government. The period can be

extended however not exceeding 12

months in total.

�� Amendments to Stamp Act, 1899 A

new Section 8E is inserted in the Stamp

Act, 1899 whereby any conversion of a

branch of a bank in to its wholly owned

subsidiary or transfer of shareholding in

a bank to a holding company in terms of

scheme or guidelines of the bank will

not be liable to stamp duty and any in-

strument transferring any property

movable or immovable or any right or

liability in relation to the above will also

be not chargeable to duty.

�� Amendments to Contract Act, 1872:

Section 28 of the Contract Act, 1872

declares that Agreements in restraint of

legal proceedings to be void. The said

Section is amended so as to exempt

Guarantee Agreements executed in fa-

vour of the Bank or financial institution

for proper enforcement of guarantee

provided to banks and their redemp-

tion.

�� Government of India, Ministry of Fi-

nance, Department of Revenue (CBDT),

has issued Notification No. 63/2014,

F.No.142/09/2014-TPL dated 13th

No-

vember, 2014. As per the said notifica-

tion, the Central Government made

the amendments to the Tax Savings

Bank Term Deposit Scheme, 2006. This

scheme may be called the Bank Term

Deposit (Amendment) Scheme, 2014.

�� The existing limit of Rs 1,00,000/-

per financial year, in our SBI Tax Savings

Scheme 2006 has been enhanced to Rs

1,50,000/- with immediate effect.

�� It has been decided by the Compe-

tent Authority that the branches should

not carry out any financial transactions

requested by the Non-NRI customers,

too, through e-mail even if the request is

made by a letter scanned as an attach-

ment.(e-cir:1115/2013-14 Dt:09/01/2014)

�� Companies Act, 2013: A statistical

Snapshot

Number of schedules: 7

Number of chapters: 29

Number of sections: 470

� The 2013 Act has introduced several new

concepts and has also tried to streamline

many of the requirements by introducing

new definitions.

� A few of these significant aspects are:




16

� One-person company: The 2013 Act

introduces a new type of entity to the ex-

isting list i.e. apart from forming a public or

private limited company, the 2013 Act

enables the formation of a new entity a

‘one-person company’ (OPC).

� An OPC means a company with only one

person as its member [section 3(1) of 2013

Act].

� Private company: The 2013 Act introduces

a change in the definition for a private

company, inter-alia, the new requirement

increases the limit of the number of mem-

bers from 50 to 200. [Section-2(68) of 2013

Act].

� Small company: A small company has been

defined as a company, other than a public

company.

(i) Paid-up share capital of which does not

exceed 50 lakh INR or such higher amount

as may be Prescribed which shall not be

more than five crore INR

(ii) Turnover of which as per its last profit-

and-loss account does not exceed two

crore INR or such higher amount as may be

prescribed which shall not be more than 20

crore INR:

� As set out in the 2013 Act, this sec-

tion will not be applicable to the

following:

• A holding company or a subsidiary com-

pany

• A company registered under section 8

• A company or body corporate governed

by any special Act [section 2(85) of 2013

Act]

� Dormant company: The 2013 Act states

that a company can be classified as dormant

when it is formed and registered under this

2013 Act for a future project or to hold an

asset or intellectual property and has no

significant accounting transaction. Such a

company or an inactive one may apply to the

ROC in such manner as may be prescribed

for obtaining the status of a dormant com-

pany. [Section-455 of 2013 Act].

� Class action suits: The 2013 Act introduces

a new concept of class action suits which can

be initiated by shareholders against the

company and auditors.

� The 2013 Act increases the limit for

number of directorships that can be held by

an individual from 12 to 15 [section 149(1) of

2013 Act].

� Key Managerial Personnel (KMP) - The

Provisions relating to appointment of KMP

includes (i) the Chief Executive Officer (CEO)

or the managing director (MD) or the man-

ager (ii) the company secretary (iii) the

whole-time director; (iv) the Chief Financial

Officer (CFO); and (v) such other officer as

may be prescribed is applicable only for

Public Limited Companies having paid up

capital more than 10 crores and Private

Limited Companies are exempted from ap-

pointment of KMPs.

� Attending at least one Board Meeting by a

director in a year is a must; else he has to

vacate his/her office.

� Financial Year - The Companies Act 1956

Act provided companies to elect financial

year. The Companies Act 2013 Act eliminates

the existing flexibility in having a financial

year different than 31 March. The 2013 Act

provides that the financial year for all com-

panies should end on 31 March, with certain

exceptions approved by the National Com-

pany Law Tribunal. Companies should align

the financial year to 31 March within two

years from 01 April 2014.




17

� Eligibility age to become Manag-

ing Director or whole time Direc-

tor - The eligibility criteria for the

age limit has been revised to 21

years as against the existing re-

quirement of 25 years.

� Number of directorships held by

an individual - Section 165 pro-

vides that a person cannot have di-

rectorships (including alternate di-

rectorships) in more than 20

(twenty) companies, including ten

(ten) public companies.

� Board meetings – At least 7 days

notice to be given for Board Meet-

ing. The Board need to meet at

least 4 times within a year. There

should not be a gap of more than

120 days between two consecutive

meetings.

� Appointment of Statutory Audi-

tors- Every Listed Company can

appoint an individual auditor for 5

years and a firm of auditors for 10

years. This period of 5 / 10 years

commences from the date of their

appointment. Therefore, those

companies who have reappointed

their statutory auditors for more

than 5 / 10 years have to appoint

another auditor in their Annual

General Meeting for year 2014.

� Corporate Social Responsibility

(CSR) – the company has to consti-

tute a CSR committee of the Board

and 2% of the average net profits

of the last three financial years are

to be mandatorily spent on CSR ac-

tivities by an Indian company if any

of the following criteria is met:

� Net worth of Rs.500 crores or

� Turnover of Rs. 1000 crores or

more or

� Net profit of Rs. 5 crores or more

� Financial statements - Financial State-

ments are now defined under the Act as

comprising of the following. All compa-

nies (except one person Company, small

company and dormant company)are

now mandatorily required to maintain

the following, which may not include

the cash flow statement) –

� A balance sheet as at the end of

the financial year

� A profit and loss account / an in-

come and expenditure account for

the financial year, as the case may

be

� Cash flow statement for the finan-

cial year

� A statement of changes in equity (if

applicable)

� Any explanatory note annexed to,

or forming part of, any document

referred to in sub-clause (i) to sub-

clause (iv)

� CVA: Credit valuation adjustment

� HPTF: High Power Task Force Committee

� DEAF: Depositor Education and awareness

Fund

� SPV: Special Purpose Vehicle

� RTI - QM & TS:RTI Query Management

and Tracking System

� FATCA: Foreign Accounts Tax Com-

pliance Act

� CRS: Common Reporting Standards

� INDIAN STAMP ACT: VALIDITY PE-

RIOD FOR USE OF STAMP PAPER: The

Hon'ble Supreme Court has considered le-

gal issue whether a stamp paper purchased

more than six months prior to the date of

execution of a document is valid or not

based on the case of Thiruvengada Pillai Vs

Navneethammal in WP (Civil) No 290 of

2001 decided on 19.02.2008. The Hon'ble

Apex Court, while deciding the issue in af-

firmative observed that the Indian Stamp

Act nowhere prescribes any expiry date for

use of stamp paper. The Section 54 merely




18

provides that a person possessing any

stamp paper for which he has no imme-

diate use (which is not spoiled or rendered

unfit or useless) can seek refund of the val-

ue thereof by surrendering such stamp pa-

per to the Collector provided it was pur-

chased within the period of six months

next preceding the date on which it was so

surrendered. The stipulation of the period

of six months prescribed in Section 54 ibid

is only for the purpose of seeking refund of

the value of unused stamp paper, and not

for the use of stamp paper, to use it within

six months. Therefore, there is no impedi-

ment for user of stamp paper purchased

more than six months prior to the date of

execution of a document.

Lok Adalat is a forum where disputes pend-

ing in the court of law, or at pre-litigation

stage, are settled amicably. Lok Adalat has

been given statutory status under the Legal

Services Authorities Act, 1987. An award

made by the Lok Adalat is deemed to be a

decree of a Civil Court and is final and bind-

ing on all parties. Settlement of cases

through Lok Adalat has certain advantages

over other methods of recovery. Monetary

ceiling of cases to be referred to the Lok

Adalat organized by Civil Courts is Rs. 20

lacs. Further, our branches can participate

in Lok Adalats to be organised by

DRTs/DRATs irrespective of the amounts

involved in the cases. (Standard Operating

Procedure is laid down in e.cir.845/2015-16

dt:05/10/2015)

To recover Bank’s dues, suits before Civil

Courts may be filed when the amount of

total debt due from the borrowers is less

than Rs.10 lac. Documents should not be

time barred and should be in order. Civil

suit is to be filed immediately on approval

but in any case within a maximum period

of 3 months from the date of approval.

Plaint is to be signed by the authorized

Branch official. Demand Draft for court

fees, process fees and copying fees has to

be prepared. Affidavit of Branch official has

also to be filed along with the plaint, in

duplicate. The case number allotted by the

Court has to be obtained from the Court by

the Branch. (Standard Operating Procedure

is laid down in e.cir.940/2015-16

dt:28/10/2015)

� Government of India has levied Swachh

Bharat Cess @0.5% on value of all the

taxable services from 15-11-2015. Effec-

tive rate of service tax would be 14.5%.

GLOSSARY

AGNATES

A person is said to be “agnate” of another

if the two are related by blood or adoption

wholly through males. If there are no heirs

of Class I and Class II, then upon the “ag-

nates” of the deceased can claim.

COGNATES

One is a “Cognate” of another, if the two

are related by blood or adoption, but not

wholly through males. If there are no ag-

nate, then upon the “Cognates” of the de-

ceased can claim.

CLASS I HEIRS

Son, daughter, widow, mother,

son/daughter of a predeceased

son/daughter.Son/daughter of a prede-

ceased son of a predeceased son, or widow

of a predeceased son of a predeceased

son.

CLASS II HEIRS

Father, son’s daughter’s children, daugh-

ter’s grand children, children of brothers

and sisters etc.




19

Insolvency and Bankruptcy Code-2016

Why required: Existing mechanism is in-

adequate and ineffective as no single law is

dealing with insolvency and bankruptcy in

India. The resolution under existing law is

taking significant time. All these are result-

ing in an ineffective mechanism of NPA

recovery.

IBC -2016 was assented by president of

India & notified on 28th

May 2016. It prom-

ises to deal in a time bound manner.

Applicability

Individual

Partnership firms

Any company incorporated under the

companies act 2013 or under any provi

sions

Any other company governed by any spcial

act

Any LLP incorporated under the LLP Act

2008

Any other body, as notified by the Central

Government

Who can invoke?

Financial Creditor: Any person to whom a

financial debt is owed including a person to

whom such debt is legally assigned or tras-

ferred.

Operational Creditor: A person to whom an

operation debt is owed & includes any per-

son to whom such debt is legally assigned

or transferred.

Corporate Debtor: A corporate person who

owes a debt to any person.

Adjudicating authority

National Company Law Tribunal- Deals with

insolvency matters of company, limited

liability partnership.

Debt Recovery Tribunal: Deal with insol-

vency matters of Individual & Partnership

Firm

Appellate Authority:

For NCLT:- NCLAT

For DRT:- DRAT

Adjudicating authority within 14 days of

receipt of application, by an order admit

the application if it is complete or will re-

ject the application.

Notice of rejection: Adjudicating authority

shall before rejecting application, issue no-

tice to applicant to rectify defects in appli-

cation within 7 days from the date of re-

ceipt of such notice.

Minimum amount for which IBC can be

invoked

Individual & Partnership: Rs 1000/-

Company and Limited Liability Partnership:

Rs 100000/-

It can be increased by Central Government

to Rs 1 Lakh & 1 Crore respectively

The company itself can also file an applica-

tion, for initiating corporate insolvency

resolution process with the adjudicating

authority.

Time line for resolution

180 days + additional 90 days = 270 days

Fast Track

90 days + 45 days (one time) = 135 days

Adjudicating authority after admission of

application shall, bay an order

Declare a moratorium

Cause a Public Announcement

Appoint Interim Resolution Professional

Moratorium Effect:

Adjudicating authority shall be order pro-

hibit:

Institution / Continuation / proceedings of

suits including execution of any judgment,

decree or order in a Court.

Transferring, encumbering, alienating or

disposing of assets / legal right / beneficial

interest.




20

Any action to foreclosure, recover or en-

force any security interest created includ-

ing any action under SARFAESI Act 2002

Recovery of any property by owner or les-

sor where such property is occupied.

Public Announcement

Name and address of defaulted corporate

debtor

Name of registrar with which corporate

debtor is incorporated or registered

Last date for submission of claims

Details of Interim resolution professional

Penalties for false claims

Date on which insolvency resolution

process ends.

Interim Resolution Professionals

Adjudicating authority within 14 days from

admission of application appoint a IRP.

Tenure: Maximum 30 days from date of

appointment

Role of Interim Resolution Professional

Management of affairs of corporate debtor

Power of board of directors and partners

(LLP) will stand suspended and will be ex-

ercised by IRP

Officers and Managers of corporate debtor

shall report to IRP

Financial Institution maintain accounts of

corporate debtor shall follow instruction of

IRP

Resolution Professional

A resolution professional will be appointed

by committee of creditors in their first

meeting within 7 days of constitution of

committee. It can replace the IRP or re-

solve to appoint IRP as a resolution profes-

sional.

Resolution professional shall conduct the

insolvency resolution process and manage

the operations of the company during the

period of corporate insolvency resolution

process.

Duties of resolution professional

Convene and attend all meeting of the

committee of creditors and present all res-

olution plans at the meetings.

Maintain an updated list of claims and pre-

pare information memorandum

Take immediate custody and control of all

the assets including business records of

company/ LLP

Represent and act on behalf of the compa-

ny / LLP with third parties.

All decisions of committee should be taken

by vote of not less than 75%

Position of financial creditors in case of

consortium finance: Each financial creditor

shall be part of the committee with voting

share in proportion to their share in finan-

cial debt.

Resolution plan will be binding on the cor-

porate debtor, its employees, members,

creditors, guarantors and other stakehold-

er.

If resolution plan not approved or not

ready within 180 days or adjudicating au-

thority rejects the resolution plan, It will

pass a liquidation order.

Resolution professional will act as a liquida-

tor and all the power of the board of direc-

tors will best with the liquidator.

The following debs will be paid in

priority

Insolvency Resolution cost and liquidation

cost

Debt to secured creditor (who have relin-

quished their security interest) & workmen

dues (for 24 months before commence-

ment)




21

Wages & Unpaid dues to employees (other

than workmen) for 12 months before

commencement

Financial debts to unsecured creditors

Workmen dues for earlier period

Crown debts and debts to secured creditor

following enforcement of security interest.

Remaining debts

Preference shareholders

Equity Shareholders or partners.

Reporting Requirement

Lenders shall report credit information,

including classification of an account as

SMA to Central Repository of Information

on Large Credits (CRILC) on all borrower

entities having aggregate exposure of Rs 5

Crore and above.

CRILC-Main Report to be submitted on

Monthly Basis w.e.f 01st

April 2018.

Weekly reporting of all borrower entities in

default with aggregate exposure of Rs 5

crore and above on every Friday, or the

preceding working day if Friday is holiday

w.e.f 23rd

February 2018

Implementation of Resolution Plan

Board approved policy should be there for

resolution of stressed assets.

Resolution plan may involve any action /

plan / reorganization including, but not

limited to,

regularization of the account by payment

of all overdues by the borrower entity

sale of the exposure to other entities

change in ownership

Restructuring.Resolution plan should be

clearly documented

Implementation Conditions for Resolution

Plan

RP is deemed to be implemented only if

the following conditions are met:

The borrower entity is no longer in default

with any of the lenders

If the resolution involves restructuring;

then

All related documentation, including ex-

ecution of necessary agreements between

lenders and borrower/ creation of security

charge / perfection of securities are com-

pleted by all lenders and

The new capital structure and/or changes

in the terms of conditions of the existing

loans get duly reflected in the books of all

the lenders and the borrower.

Independent Credit Evaluation

RP involving restructuring/ change in own-

ership in respect of account with aggregate

exposure of Rs100 cr and above- ICE of re-

sidual debt by one credit rating agency

specifically authorized by RBI for this pur-

pose.

Aggregate exposure of Rs 500 cr and

above- Two ICE.

Only such RP which receive a credit opinion

of RP4 or better shall be considered for

implementation. If more than one ICE opi-

nion require than all should be RP4 or bet-

ter.

Timelines for large accounts to be referred

under Insolvency and Bankruptcy code

(IBC)

Account with aggregate exposure of

Rs2000 cr and above, on or after March 1,

2018 (reference date), including accounts

where resolution may have been initiated

under any of the existing schemes as well

as accounts classified as restructured stan-

dard asset which are currently in respec-

tive specified periods, RP shall be imple-

mented as per the following timelines:

If in default as on the reference date, then

180 days from the reference date.




22

If in default after the reference date, then

180 days from the date of first such de-

fault.

IF RP in respect of such large accounts is

not implemented as per the above time-

lines, bank shall file insolvency application

under IBC 2016 within 15 days from the

expiry of said timeline.

In respect of such large accounts, where a

RP involving restructuring / change in own-

ership is implemented within the 180 day

period, the account should not be in de-

fault at any point of time during the “ spe-

cified period” , failing which the bank shall

file an insolvency application under IBC

within 15 days from the date of such de-

fault.

Specified Period: It means the period from

the date of implementation of RP up to the

date by which at least 20% of the outstand-

ing principal debt as per the RP and inter-

est capitalization sanctioned as part of the

restructuring, if any, is repaid.

Provided that the specified period cannot

end before one year from the commence-

ment of the first payment of interest or

principal (whichever is later) on the credit

facility with longest period of moratorium

under the terms of RP.

Default after expiry of specified period: To

be treated as fresh default for the purpose

of this new framework.

Accounts with aggregate exposure of or

above Rs 100 crore and uptoRs 2000

crore:

RBI will announce, over a period of 2 years,

reference dates for implementing the RP.

Above guidelines will not be applicable on

borrower entities in respect of which spe-

cific instruction have already been issued

by RBI to bank for reference under IBC.

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