STATE BANK OF INDIA ACT, 1955
(1) This Act may be called the State Bank of India Act, 1955.
(2) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint.
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1. Came into force on 1-7-1955 Vide S.R.O. 1077, dated the 14th May, 1955, published in the Gazette of India, Pt. II, Sec. 3, p. 869.
In this Act, unless the context otherwise requires,—
(a) “appointed day” means the date on which this Act comes into force;
(b) “Central Board” means the Central Board of Directors of the State Bank;
1[(bb) “Chairman” means the chairman of the Central Board;]
(c) “goods” includes bullion, wares and merchandise;
(d) “Imperial Bank” means the Imperial Bank of India constituted under the Imperial Bank of India Act, 1920 (47 of 1920);
1[(dd) “Local Board” means a Local Board constituted under section 21;]
(e) “prescribed” means prescribed by regulations made under this
(1) A Bank to be called the State Bank of India shall be constituted to carry on the business of banking and other business in accordance with the provisions of this Act and for the purpose of taking over the undertaking of the Imperial Bank.
(2) The Reserve Bank, together with such other persons as may from time to time become shareholders in the State Bank in accordance with the provisions of this Act, shall, so long as they are shareholders in the State Bank, constitute a body corporate with perpetual succession and a common seal under the name of the State Bank of India, and shall sue and be sued in that name.
(3) The State Bank shall have power to acquire and hold property, whether movable or immovable, for the purposes for which it is constituted and to dispose of the same.
Subject to the provisions of this Act, the authorised capital of the State Bank shall be twenty crores of rupees divided into 1[two crores] of fully paid up shares of 2[ten rupees] each:
Provided that the Central Government may increase or reduce the authorised capital as it thinks fit so however that the shares in all cases shall be fully paid up shares of 2[ten rupees] each.
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1. Subs. by Act 3 of 1994, sec. 2, for “twenty Lakhs” (w.r.e.f. 15-10-1993).
2. Subs. by Act 3 of 1994, sec. 2, for “one hundred rupees” (w.r.e.f. 15-10-1993).
(1) The issued capital of the State Bank shall, on the appointed day, be five crores, sixty-two lakhs and fifty thousand rupees divided into five lakhs, sixty-two thousand and five hundred shares, all of which shall, on the appointed day, stand allotted to the Reserve Bank in lieu of the shares of the Imperial Bank 1[transferred to and vested in it under section 6].
(2) The Central Board may from time to time increase the issued capital but no increase in the issued capital shall be made in such a manner that the Reserve Bank holds at any time less than fifty-five per cent. of the issued capital of the State Bank.
(3) No increase in the issued capital beyond twelve crores and fifty lakhs of rupees shall be made under sub-section (2) without the previous sanction of the Central Government.
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(1) Subject to the other provisions contained in this Act, on the appointed day,—
(a) all shares in the capital of the Imperial Bank shall be transferred to, and shall vest in, the Reserve Bank, free of all trusts, liabilities and encumbrances, and
(b) the undertaking of the Imperial Bank shall be transferred to, and shall vest in, the State Bank.
(2) The undertaking of the Imperial Bank shall be deemed to include all rights, powers, authorities and privileges, and all property, movable and immovable, including cash balances, reserve funds, investments and all other interests and rights in, or arising out of, such property as may be in the possession of that Bank immediately before the appointed day, and all books, accounts, and documents relating thereto, and shall also be dee
(1) Every officer or other employee of the Imperial Bank (excepting the managing director, the deputy managing director and other directors) in the employment of the Imperial Bank immediately before the appointed day shall, on and from the appointed day, become an officer or other employee, as the case may be, of the State Bank, and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to person, gratuity and other matters as he would have held the same on the appointed day if the undertaking of the Imperial Bank had not vested in the State Bank, and shall continue to do so unless and until his employment in the State Bank, is terminated or until his remuneration, terms or conditions are duly altered by the State Bank.
(2) Any person who, on the appointed day, is entitl
For the persons who immediately before the appointed day are the trustees of the following funds, that is to say,—
(a) the Imperial Bank of India Employees Provident Fund;
(b) the Imperial Bank of India Employees Pension and Guarantee Fund;
(c) the Bank of Bombay Officers Pension and Guarantee Fund;
(d) the Bank of Madras Pension and Gratuity Fund; and
(e) the Bank of Madras Officers Provident and Mutual Guarantee Fund,
there shall be substituted as trustees such persons as the Central Government may, by general or special order, specify.
(1) Every person who immediately before the appointed day is registered as a holder of shares in the Imperial Bank shall be entitled to compensation in accordance with the provisions contained in the First Schedule.
(2) Nothing contained in sub-section (1) shall affect the rights inter se between the holder of any share in the Imperial Bank and any other person who may have an interest in such share, and such other person shall be entitled to enforce his interest against the compensation awarded to the holder of such share, but not against the Reserve Bank.
(1) Save as otherwise provided in sub-section (2), the shares of the State Bank shall be freely transferable.
(2) Nothing contained in sub-section (1) shall entitle the Reserve Bank to transfer any shares held by it in the State Bank if such transfer will result in reducing the shares held by it to less than fifty-five per cent. of the issued capital of the State Bank.
No shareholder, other than the Reserve Bank, shall be entitled to exercise voting rights in respect of any shares held by him in excess of ten per cent. of the issued capital:
Provided that such shareholder shall be entitled to exercise voting rights at such higher percentage as the Central Government may, after consultation with the Reserve Bank, specify.]
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1. Subs. by Act 3 of 1994, sec. 3, for section 11 (w.r.e.f. 15-10-1993).
Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of the State Bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882), and also to be approved securities for the purposes of the Insurance Act, 1938 (4 of 1938), and the 1[Banking Regulation Act, 1949] (10 of 1949).
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1. Subs. by Act 3 of 1994, sec. 4, for “Banking Companies Act, 1949” (w.r.e.f. 15-10-1993)
(1) The State Bank shall keep at its Central Office, a register, in one or more books of the shareholders, and shall enter therein the following particulars so far as they may be available:—
(i) the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number;
(ii) the date on which each person is so entered as a shareholder;
(iii) the date on which any person ceases to be a shareholder; and
(iv) such other particulars as may be prescribed:
2[Provided that nothing in this sub-section shall apply to the shares held with a depository.]
&
The register of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996, shall be deemed to be a register of share holders for the purposes of the Act.]
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1. Ins. by Act 8 of 1997, sec. 4 (w.r.e.f. 15-1-1997).
1[Omitted]
1. Omitted by Act No. 3 of 1994, Section 6 (w.e.f 15th October, 1993).
No notice of any trust, express, implied or constructive, shall be entered on the register of shareholders or be receivable by the State Bank:]
2[Provided that nothing in this section shall apply to depository in respect of share held by it as a registered owner on behalf of the beneficial owners.]
Explanation.—For the purposes of section 13, section 13A and this section, the Expressions “beneficial owner”, “depository” and registered owner” shall have the meaning respectively assigned to there in clause (a) (e) and (j) of sub-section (i) of section 2 of the Depositories Act, 1996.]
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1. Subs. by Act 3 of 1994, sec. 7, for section 15 (w.r.e.f. 15-10-1993).
2. Ins. by Act 8 of 1997, sec. 5 (w.r
(1) Unless otherwise provided by the Central Government by notification in the Official Gazette, the central office of the State Bank shall be at Bombay.
(2) The State Bank shall have local head offices in Bombay, Calcutta and Madras and at such other places in India as the Central Government, in consultation with the Central Board, may determine.
(3) The State Bank shall maintain as its branches or agencies all branches or agencies of the Imperial Bank which were in existence 1[in India] immediately before the appointed day, and no such branch may be closed without the previous approval of the Reserve Bank.
(4) The State Bank may establish branches or agencies at any place in or outside India in addition to the branches or agencies referred to in sub-section (3).
&n
(1) The general superintendence and direction of the affairs and business of the State Bank shall be entrusted to the Central Board which may exercise all powers and do all such acts and things as may be exercised or done by the State Bank and are not by this Act expressly directed or required to be done by the State Bank in general meeting.
(2) The Central Board in discharging its functions shall act on business principles, regard being had to public interest.
(1) In the discharge of its functions 1[including those relating to a subsidiary bank,] the State Bank shall be guided by such directions in matters of policy involving public interest as the Central Government may, in consultation with the Governor of the Reserve Bank and the chairman of the State Bank, give to it.
(2) All directions given by the Central Government shall be given through the Reserve Bank and, if any question arises whether a direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final.
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1. Ins. by Act 38 of 1959, sec. 64 and Sch. III (w.e.f. 10-9-1959).
1[***] The Central Board shall consist of the following, namely:—
(a) a chairman and a vice-chairman to be appointed by the Central Government in consultation with the Reserve Bank 2[***];
(b) not more than two managing directors, if any, appointed 3[by the Central Government in consultation with the Reserve Bank];
4[(bb) the presidents of the Local Boards appointed under sub-section (5) of section 21, ex officio];
(c) if the total amount of the holdings of the shareholders, other than the Reserve Bank, whose names are on the 5[register of shareholders] three months before the date fixed for election of directors is—
(i) not more than ten per cent. of the total
(1) 1[The chairman and the vice-chairman and each managing director] shall hold office for such term, not exceeding five years, as the Central Government may fix when appointing them and shall be eligible for reappointment.
2[(1A) Notwithstanding anything contained in sub-section (1), the Central Government shall have the right to terminate the term of office of the chairman, vice-chairman or a managing director, as the case may be, at any time before the expiry of the term fixed under sub-section (1) by giving him notice of not less than three months in writing or three months’ salary and allowances in lieu of such notice and the chairman, vice-chairman or a managing director, as the case may be, shall also have the right to relinquish his office at any time before the expiry of the term so fixed by giving to the Central Government notice of not less than three months in writing.]
(1) There shall be constituted at each place where the State Bank has a local head office, a local Board which shall consist of the following members, namely:—
(a) the chairman, ex officio;
2[(b) all such directors elected or nominated to the Central Board under clause (c) or clause (d) of section 19 as are ordinarily resident in the area falling within the jurisdiction of the local head office;]
(c) six members to be nominated by the Central Government in consultation with the Reserve Bank;
3[***]
(e) 4[the chief general manager] of the local head office, appointed by the State Bank, ex officio.
5[(2) Whe
2[(1) Subject to the provisions contained in this section and in sub-section (2) of section 21, a member of a Local Board nominated under clause (c) of sub-section (1) of section 21 shall hold office for such term, not exceeding three years, as the Central Government may specify in this behalf 3[***] and shall be eligible for renomination:
Provided that no such director shall hold office continuously for a period exceeding six years;]
4[***]
(3) A director of the Central Board becoming a member of a Local Board by virtue of the Provisions of clause (b) of sub-section (1) of section 21 shall cease to hold office as such member on his ceasing to be a director or on his ceasing to be ordinarily resident in the relevant area.
(4) The president and the v
Save as may otherwise be prescribed and subject to any general or special directions which the Central Board may give from time to time, a Local Board shall, in respect of the area 2[“falling within the jurisdiction”] of the local head office for which the Board has been constituted, exercise all powers and perform all functions and duties of the State Bank 3[in relation to the business of banking and the forms of business set out in clause (a), (b), (e), (f), (g), (h), (i), (k) and (1) of sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949), and such other forms of business referred to in sub-section (1) of the said section 6 as may be approved by the Central Board in this behalf and shall also] exercise such other powers and perform such other functions and duties as may be conferred on or assigned to it by the Central Board:
4[Provided that a Local Board
(1) A Local Committee may be constituted by the Central Board for any area and shall consist of such number of members as may be prescribed.
(2) The chairman shall be an ex officio member of every such Local Committee.
(3) A Local Committee shall exercise such powers and perform such functions and duties as the Central Board may confer on or assign to it.]
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1. Ins. by Act 35 of 1964, sec. 6 (w.e.f. 1-12-1964).
(1) No person shall be qualified to be a director of the Central Board or a member of a Local Board or of a Local Committee if—
(a) he holds the office of director, provisional director, promoter, agent or manager of any banking company already established or advertised as about to be established; or
(b) he is a salaried officer of Government not specially authorised by the Central Government to be a director or member; or
(c) he has been removed or dismissed from the service of Government on a charge of corruption or bribery; or
(d) he holds any office of profit under the State Bank other than the office of chairman, vice-chairman, 1[managing director, 2[chief general manager] or legal or technical adviser]; or
&n
If a director of the Central Board or a member of a Local Board or a Local Committee—
(a) becomes subject to any of the disqualifications mentioned in section 22; or
(b) resigns his office by giving notice in writing under his hand, in the case of the 1[chairman, vice-chairman and a managing director], to the Central Government and in the case of other directors or members of the Local Boards or the committees, to the Central Board, and the resignation is accepted; or
(c) is absent without leave of the Central Board, the Local Board or the Local Committee, of which he is a director or member, as the case may be, for more than three consecutive meetings thereof,
his seat shall thereupon become vacant.
&nbs
(1) The Central Government may, after consulting the Reserve Bank, remove from office 1[the chairman, vice-chairman or a managing director].
2[***]
(3) The Central Government, after consulting the Reserve Bank, may remove from office any director 3[appointed under clause (ca) or clause (cb) or nominated under clause (d)] 4[of section 19] 5[or any member of a Local Board nominated under clause (c) of sub-section (1) of section 21] and 6[appoint or nominate, as the case may be,] in his stead another person to fill the vacancy.
(4) The shareholders, other than the Reserve Bank may, by a resolution passed by majority, of the votes of such shareholders holding in the aggregate not less than one-half of the share capital held by all such shareholders, remove any director elected under clause (c) 7[*
1[(1) If the chairman, vice-chairman or a managing director is rendered incapable of discharging his duties by reason of infirmity or otherwise or is absent on leave or otherwise in circumstances not involving the vacation of his office, the Central Government may, in consultation with the Reserve Bank, appoint another person to officiate in the vacancy.]
2[(2) Where any vacancy occurs before the expiry of the term of office of a director, other than the chairman, vice-chairman or a managing director or 3[a director appointed under clause (ca) or 4[clause (cb) of section 19 or of a member of a Local Board other than the chief general manager, the vacancy shall be filled—
(a) in the case of an elected director, by election; and
(b) in the case of a director nominated under claus
(1) Without prejudice to the provisions contained in sections 27, 28 and 29, the directors shall be paid such fees and allowances for attending the meetings of the Central Board or of any of its Committees and for attending to any other work of the State Bank as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1) no fees shall be payable to a managing director or any other director who is an officer of the Central Government or the Reserve Bank.
(1) The chairman shall preside at all meetings of the Central Board and, subject to such general or special directions as the Central Board may give, exercise all such powers and do all such acts and things as may be exercised or done by the State Bank.
(2) The chairman shall receive such salary, fees, allowances and perquisites 1[as may be determined by the Central Government]:
2[***]
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1. Subs. by Act 73 of 1976, sec. 4, for certain words (w.e.f. 11-6-1976).
2. Proviso omitted by Act 73 of 1976, sec. 4 (w.e.f. 11-6-1976).
(1) The vice-chairman shall preside at the meetings of the Central Board in the absence of the chairman and, subject to the general control of the chairman, exercise such powers and perform such duties as may be entrusted or delegated to him by the Central Board.
(2) The vice-chairman shall receive such salary; fees, allowances and perquisites 1[as may be determined by the Central Government.]
2[***]
(3) The fact that the vice-chairman exercises any of the powers and does any act or thing for or on behalf of the State Bank shall be conclusive proof of his authority to do so.
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1. Subs. by Act 73 of 1976, sec. 4, for certain words.
2. Proviso omitted
(1) A managing director—
(a) shall be a whole-time officer of the State Bank; and
(b) subject to the general control of the chairman and vice-chairman, shall exercise such powers and perform such duties as may be entrusted or delegated to him by the Central Board.
(2) A managing director shall receive such salary and allowances 1[as may be determined by the Central Government]:
2[***]
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1. Subs. by Act 73 of 1976, sec. 4, for certain words (w.e.f. 11-6-1976).
2. Proviso omitted by Act 73 of 1976, sec. 4 (w.e.f. 11-6-1976).
The Central Board may constitute such and so many committees, including an executive committee, of itself as it deems fit to exercise such powers and perform such duties as may, subject to such conditions, if any, as the Central Board may impose, be delegated to them by the Central Board.
(1) The Central Board shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.
(2) All questions at the meeting shall be decided by a majority of the votes of the directors present and in the case of equality of votes, the chairman or, in his absence the vice-chairman shall have a second or casting vote.
(3) A director who is directly or indirectly concerned or interested in any contract, loan, arrangement or proposal entered into or proposed to be entered into by or on behalf of the State Bank shall at the earliest possible opportunity disclose the nature of the interest to the Central Board and shall not be present at any meeting of the Central Board when any such contract, loan, arrangement or proposal is discussed unless his presence is
(1) A Local Board shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.
(2) All questions at the meeting shall be decided by a majority of the votes of the members present and in the case of equality of votes, the person presiding at the meeting shall have a second or casting vote.
(3) A member who is directly or indirectly concerned or interested in any contract, loan, arrangement or proposal entered into or proposed to be entered in to by or on behalf of the State Bank, shall at the earliest possible opportunity, disclose the nature of his interest to the Local Board and shall not be present at any meeting of the Local Board when any such contract, loan, arrangement or proposal is discussed unless his presence is required by the other m
(1) The State Bank shall, if so required by the Reserve Bank act as a agent of the Reserve Bank at all places in India where it has a branch [or where there is a branch of a subsidiary Bank], and where there is no branch of the Banking department of the Reserve Bank, for-
(a) paying, receiving, collecting and remitting money, bullion and securities on behalf of any Government in India; and
(b) undertaking and transacting any other business which the Reserve Bank may from time to time entrust to it.
(2) The terms and conditions on which any such agency business shall be carried on by the State Bank on behalf on the Reserve Bank shall be such as may be agreed upon.
(3) If no agreement can be reached on any matter referred to in sub-section (2) or
Subject to the other provisions contained in this Act, the State Bank may carry on and transact the business of Banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of business specified in sub-section (1) of section 6 of that Act.]
(1) Save as otherwise provided in 86[this Act], the State Bank shall not own or acquire any [***] immovable property except for the purpose of providing buildings or other accommodation in which to carry on the business of the State Bank or for providing residences for its officers and other employees :
Provided that if any such building or other accommodation is not immediately required for any of the purposes of the State Bank, the State Bank may utilize it to the best advantage by letting it out or in any other manner.
(1) The State Bank may, with the sanction of the Central Government, and shall, if so directed by the Central Government in consultation with the Reserve Bank, enter into negotiations for acquiring the business including the assets and liabilities, of any banking institution.
1[(2) The terms and conditions relating to such acquisition, if agreed upon by the Central Board of the State Bank and the directorate or management of the banking institution concerned and approved by the Reserve Bank, shall be submitted to the Central Government for its sanction and that Government may by order in writing (hereafter in this section referred to as the order of sanction) accord its sanction thereto.
(3) Notwithstanding anything contained in this Act or any other law for the time being in force or any instrument regulating the constitution of the ban
Section 35 of the State Bank of India Act, 1955, provides the legal framework under which the State Bank of India (SBI) can acquire the business of other banking institutions, including subsidiaries and other banks, subject to certain conditions and procedures. This section is pivotal in the context of bank amalgamations, acquisitions, and restructuring, and has been the subject of judicial scrutiny regarding its scope, interpretation, and constitutional validity.
Section 35 authorizes the SBI to negotiate, acquire, and take over the business, assets, and liabilities of other banking institutions, with the prior sanction of the Central Government and in consultation with the Reserve Bank of India (RBI). Sub-sections detail the procedural requirements, scope of the power, and the definition of 'banking institution' under clause (13) of the section. It also empowers the SBI to act as an agent of the Central Government or other authorities in certain circumstances.
Section 35 itself does not prescribe criminal punishments; rather, violations of procedural requirements or misuse of powers under this section can lead to legal challenges, including declarations of invalidity or orders to reverse acquisitions. Non-compliance with procedure may attract judicial review, and in some cases, the courts have declared certain acquisitions or actions null and void for procedural lapses.
"Legal authority" - Section 35 confers explicit power on SBI to acquire other banks, including subsidiaries, subject to approval, establishing a statutory basis for mergers and acquisitions - [Sources: All India Bank Officers Association VS State Bank of India, All India Bank Officers' Association VS State Bank of India, State of Rajasthan VS Uka]
"Procedural compliance" - Acquisition under Section 35 requires prior negotiation, approval by the RBI, and sanction by the Central Government; failure to follow these steps can render the action illegal - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. ]
"Inclusive definition of 'banking institution'" - Clause (13) of Section 35 defines 'banking institution' broadly to include any individual, association, or department engaged in banking, including subsidiaries and associations, facilitating wide applicability - [Sources: All India Bank Officers Association VS State Bank of India, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. , State of Rajasthan VS Uka]
"Scope for amalgamation" - The section provides a comprehensive legal framework for bank mergers, including subsidiaries, without requiring parliamentary approval for each case, as upheld by courts - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Umesh Kumar VS State Bank Of India]
"Power to act as agent" - SBI can act as an agent of the Central Government or RBI in certain circumstances, expanding its operational scope beyond mere acquisition - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka]
"Judicial validation" - Courts have consistently upheld the constitutional validity of Section 35, emphasizing its role in banking sector restructuring and its compliance with constitutional provisions - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Umesh Kumar VS State Bank Of India]
"Constitutional considerations" - Section 35’s provisions align with constitutional mandates under Articles 19 and 14, especially regarding the power of the State to regulate banking and financial institutions - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka]
"Interplay with other laws" - Section 35 operates compatibly with laws like the Banking Regulation Act, 1949, and the RBI Act, 1934, and does not conflict with statutory provisions unless procedural lapses occur - [Sources: State of Rajasthan VS Uka, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. , Ajay Kumar Verma VS Union Of India]
"Limitations and safeguards" - The section mandates prior approval and consultation, acting as safeguards against arbitrary or illegal acquisitions, with courts scrutinizing procedural compliance - [Sources: All India Bank Officers Association VS State Bank of India, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. , Umesh Kumar VS State Bank Of India]
"Legal challenges" - Challenges to acquisitions under Section 35 often involve arguments on procedural lapses, definition scope, or constitutional validity, but courts have generally upheld its validity - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Ajay Kumar Verma VS Union Of India]
"Amalgamation of subsidiaries" - The courts have clarified that subsidiaries can be amalgamated or acquired under Section 35, provided procedural requirements are met, reinforcing the section’s broad scope - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka]
"Authority of RBI" - The Reserve Bank’s role under Section 35 includes approval, inspection, and regulation, ensuring the action aligns with banking policy and public interest - [Sources: State of Rajasthan VS Uka, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. ]
"Legal validity of acquisitions" - Validity depends on strict adherence to procedural requirements, including approval, negotiation, and proper notification, as courts have struck down violations - [Sources: All India Bank Officers Association VS State Bank of India, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. ]
"Scope of judicial review" - Courts review procedural compliance and constitutional validity but generally do not interfere with the merits of an acquisition unless illegalities are established - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Umesh Kumar VS State Bank Of India]
"Implication for bank restructuring" - Section 35 facilitates smooth restructuring, amalgamation, and consolidation of banks, including subsidiaries, vital for financial stability and sectoral reforms - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka]
"Legal precedents" - Supreme Court and High Court decisions have consistently upheld the scope and validity of Section 35, emphasizing its role in maintaining banking stability - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Umesh Kumar VS State Bank Of India]
"No automatic transfer" - Acquisition under Section 35 does not automatically transfer assets or liabilities unless the prescribed procedures are followed and formalities completed - [Sources: All India Bank Officers Association VS State Bank of India, Soraisam Ongbi Amusana Devi VS State Bank of India and Ors. , State of Rajasthan VS Uka]
"Protection of public interest" - The section’s emphasis on approval and consultation aims to protect public interest, depositors’ rights, and financial stability, aligning with constitutional principles - [Sources: All India Bank Officers Association VS State Bank of India, State of Rajasthan VS Uka, Umesh Kumar VS State Bank Of India]
Note: This commentary synthesizes judicial interpretations, statutory provisions, and legal principles derived from the provided sources, emphasizing the broad scope, procedural safeguards, and constitutional validation of Section 35 of the SBI Act, 1955.
(1) Where any arrangement entered into by the State Bank with a company provides for the appointment by the State Bank of one or more directors of such company, such provisions and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the State Bank in pursuance of the arrangement as aforesaid.
(2) Any director appointed as aforesaid shall—
(1) The State Bank shall maintain a special fund to be known as the Integration and Development Fund into which shall be paid—
(a) the dividends payable to the Reserve Bank on such shares of the State Bank held by it as do not exceed fifty-five per cent. of the total issued capital; and
(b) such contributions as the Reserve Bank or the Central Government may make from time to time:
1[Provided that if the balance in the Integration and Development Fund on the date of declaration of any dividends by the State Bank is rupees five crores or more, no amount shall be paid into that Fund under clause (a) and the dividends payable to the Reserve Bank shall be paid to that Bank; and if such balance on such date is less than rupees five crores, only so much of the dividends then payable
The State Bank shall establish a Reserve Fund which shall consists of—
(a) the amount held in the Reserve Fund of the Imperial Bank transferred to the State Bank on the appointed day; and
(b) such further sums as may be transferred to it by the State Bank out of its annual net profits before declaring a dividend.
(1) After making provision for bad and doubtful debts, depreciation in assets, equalisation of dividends, contribution to staff and superannuation funds and for all other matters for which provision is necessary by or under this Act or which are usually provided for by banking companies, the State Bank may, out of its net profits, declare a dividend.
(2) Subject to the provisions of paragraph 6 of the First Schedule, the rate of dividend shall be determined by the Central Board.
The Central Board shall cause the books of the State Bank to be closed, and balanced 1[as] on the 31st day of December 2[or such other date in each year as the Central Government may, by notification in the Official Gazette, specify:]
3[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the closing and balancing of, or for other matters relating to, the books in respect of the concerned years.]
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1. Ins. by Act 48 of 1973, sec. 14 (w.e.f. 31-12-1973).
2. Subs. by Act 66 of 1988, sec. 14 for “in each year” (w.e.f. 30-1
(1) The State Bank shall furnish to the Central Government and to the Reserve Bank 1[within three months from the 31st day of December, 2[or the date specified under section 39, as the case may be] as on which its books are closed and balanced]; its balance sheet, together with the profit and loss account and the 3[auditors’ report and a report by the Central Board on the working and activities of the State Bank] during the period covered by the accounts:
4[Provided that the Central Government may, after consultation with the Reserve Bank, extend the said period of three months by such further period, not exceeding three months, as it may think fit.]
(2) The balance sheet and the profit and loss account shall be signed by the chairman, vice-chairman, managing directors, if any, and a majority of the other directors.
(1) The affairs of the State Bank shall be 1[audited by two or more auditors] duly qualified to act as auditors of companies under 2[section 226 of the Companies Act, 1956 (1 of 1956)]. who shall be appointed by the Reserve Bank in consultation with the Central Government.
(2) The auditors shall receive such remuneration as the Reserve Bank may fix in consultation with the Central Government.
(3) An auditor may be a shareholder but not director or member of a Local Board or of a Local Committee or an officer of the State Bank shall be eligible to be an auditor during the continuance in office as such director, member or officer.
(4) An auditor shall on relinquishing office be eligible for reappointment.
(5) the auditors shall severally be, and conti
(1) A general meeting 1[in this Act] referred to as an annual general meeting) shall be held 2[in each year] at such time and at such place where there is a local head office of the State Bank, as shall from time to time be specified by the Central Board, 3[***] and a general meeting may be convened by the State Bank at any other time:
4[Provided that such annual general meeting shall be held before The expiry of six weeks from the date on which the balance-sheet, together with the profit and loss account and auditors’ report, is, under sub-section (1) of section 40, forwarded to the Central Government or to the Reserve Bank, whichever date is earlier.]
(2) The shareholders present at an annual general meeting shall be entitled to discuss the balance-sheet and the profit and loss account of the State Bank made up to the previous 31st day
1[(1)] The State Bank may appoint such number of officers, advisers and employees as it considers necessary or desirable for the efficient performance of its functions, and determine the terms and conditions of their appointment and service.
2[(2) The officers, advisers and employees of the State Bank shall exercise such powers and perform such duties 3[as may, by general or special order, be] entrusted or delegated to them by the Central Board.]
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1. Section 43 renumbered as sub-section (1) thereof by Act 35 of 1964, sec. 14 (w.e.f. 1-12-1964).
2. Ins. by Act 35 of 1964, sec. 14 (w.e.f. 1-12-1964).
3. Subs. by Act 1 of 1984, sec. 46, for “as may be” (w.e.f. 15-2-1984).
(1) No officer, adviser or other employee [other than an employee within the meaning of clause (13) of section 2 of the Payment of Bonus Act, 1965 (21 of 1965)] of the State Bank shall be entitled to be paid any bonus.
(2) No employee of the State Bank, being an employee within the meaning of clause (13) of section 2 of the Payment of Bonus Act, 1965 (21 of 1965), shall be entitled to be paid any bonus except in accordance with the provisions of that Act.
(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of any court, tribunal or other authority and notwithstanding anything contained in any other provision of the Act or in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being air force or any practice, usage or custom or any contract, agreement, settlement, aw
(1) The State Bank shall observe, except as otherwise required by law, the practices and usages customary among bankers, and, in particular, it shall not divulge any information relating to or to the affairs of its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for the State Bank to divulge such information.
(2) Every director, member of a Local Board or of a Local Committee, auditor advisor officer or other employee of the State Bank shall, before entering upon his duties make a declaration of fidelity and secrecy as in the form set out in the Second Schedule.
1[(3) Nothing contained in this section shall apply to the credit information disclosed under the Credit Information Companies (Regulation) Act, 2005.]
&nb
No provision of law relating to the winding up of companies shall apply to the State Bank, and the State Bank shall not be placed in liquidation save by other of the Central Government and in such manner as it may direct.
(1) Every director and every member of a Local Board or a Local Committee shall be indemnified by the State Bank against all losses and expenses incurred by him in or in relation to the discharge of his duties except such as are caused by him own wilful act or default.
(2) Neither a director not a member of a Local Board or a Local Committee shall be responsible for any loss or expense caused to the State Bank by the insufficiency or deficiency of the value of or title to any property or security acquired or taken on behalf of the State Bank or by the insolvency or wrongful act of any customer or debtor or by anything done in or in relation to the execution of the duties of his office or otherwise than for his wilful act or default.
(1) No act or proceeding of the Central Board or of a Local Board or a Local Committee shall be questioned on the ground merely of the existence of any vacancy or defect in the constitution of the Board or Committee, as the case may be.
(2) All acts done by any person acting in good faith as a director or as a member of a Local Board or of a Local Committee shall, notwithstanding that there was some defect in his appointment or qualifications, be as valid as if he was a director of the Central Board or a member of the Local Board or the Local Committee, as the case may be.
[Rep. by the State Bank of India (Amendment) Act, 1964 (35 of 1964), sec. 15 (w.e.f. 1-12-1964).]
(1) The Central Government, in consultation with the Reserve Bank, may, by notification in the Official Gazette, 1[make rules to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act].
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for—
(a) the procedure for the payment of compensation under this Act;
(b) the determination of persons to whom the said compensation shall be payable in all cases, including cases where shares in the Imperial Bank have been held by more than one person, or where they have been transferred before the appointed day but the transfer has not been registered or where the shareholder is dead;
(1) The Central Board may, after consultation with the Reserve Bank and with the previous sanction of the Central Government 1[, by notification in the Official Gazette,] make regulations, not inconsistent with this Act and the rules made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for—
(a) the nature of shares of the State Bank, the manner in which and the conditions subject to which shares may be held and transferred and generally all matters relating to the rights and duties of shareholders;
2[(b) the maintenance of register of shareholders, and the particulars to be entere
If, according to the laws of any country outside India, the provisions of this Act by themselves are not effective to transfer to and vest in the State Bank any asset or liability which forms part of the undertaking of the Imperial Bank and which is situate in that country, the Imperial Bank shall take all such steps as may be required by the laws of that country for the purpose of effecting or perfecting such transfer and vesting, and in connection therewith the Imperial Bank may realise any asset and discharge any liability and transfer the net proceeds thereof to the State Bank.]
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1. Subs. by Act 33 of 1955, sec. 5, for section 51 (with retrospective effect).
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960) sec. 2 and Sch. I (w.e.f. 26-12-1960).]
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960), sec. 2 and Sch. 1 (w.e.f. 26-12-1960).]
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960), sec. 2 and Sch. I (w.e.f. 26-12-1960).]
—————
1. Ins. by Act 33 of 1955, sec. 6 (with retrospective effect).
On and from the appointed day, no person shall make any claim or demand or take any proceeding in India against the Imperial Bank or a director, officer or other employee thereof in his capacity as such director, officer or employee except in so far as may be necessary for enforcing the provisions of this Act or except in so far as it relates to any offence committed by any such director, officer or employee.]
—————
1. Ins. by Act 33 of 1955, sec. 6 (with retrospective effect).
On and from the appointed day, any reference to the Imperial Bank or to the Bank of Bengal, the Bank of Madras or the Bank of Bombay in any law other than this Act or the Imperial Bank of India Act, 1920 (47 of 1920) or in any contract or other instrument shall, except as otherwise provided in any general or special order made by the Central Government, be deemed to be a reference to the State Bank.]
—————
1. Ins. by Act 33 of 1955, sec. 6 (with retrospective effect).
(1) On such day as the Central Government may by notification in the Official Gazette, specify in this behalf, the Imperial Bank shall stand dissolved, and the Imperial Bank of India Act, 1920 (47 of 1920), shall stand repealed.
(2) On the day specified in the notification under sub-section (1), the State Bank shall pay to the Reserve Bank a sum of ten lakhs rupees.
(3) If, on the day specified in the notification under sub-section (1), the Imperial Bank has in its possession or custody any assets created on or after the appointed day, such assets shall be disposed of in accordance with directions issued by the Central Government in this behalf.]
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1. Ins. by Act 33 of 1955, sec. 6 (with retrospective effect).
The First Schedule
(See section 9)
1. In this Schedule, “shareholder” means any person who immediately before the appointed day in registered as the holder of a share in the Imperial Bank.
2. As compensation for the shares in the capital of the Imperial Bank which by reason of this Act, are transferred to and vested in the Reserve Bank, the Reserve Bank shall pay to every shareholder, in the manner set out hereinafter, an amount calculated at the rate of one thousand seven hundred and sixty-five rupees and ten annas per share in the case of a fully paid-up share and four hundred and thirty-one rupees twelve annas and four pies per share in the case of a partly paid-up share.
3. Notwithstanding the trans
The Second Schedule
(See section 44)
I, ........................., do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as director, member of Local Board, member of Local Committee, auditor, adviser, officer or other employee (as the case may be) of the State Bank and which properly relate to the office or position in the said State Bank held by me.
I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the State Bank or to the affairs of any person having any dealing with the State Bank; nor will I allow any such person to inspect or have access to any books o
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960), sec. 2 and Sch. I (w.e.f. 26-12-1960).]
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960), sec. 2 and Sch I (w.e.f. 26-12-1960).]
[Rep. by the Repealing and Amending Act, 1960 (58 of 1960), sec. 2 and Sch. I (w.e.f. 26-12-1960).]
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