Banking Regulation Act

November 30, 2014

Section 1. Short title, extent and commencement

THE BANKING REGULATION ACT, 1949³

(Act No. 10 of 1949)

[10th March, 1949]

(1) This Act may be called the Banking ⁴[Regulation] Act, 1949.

⁵[(2) It extends to the whole of India 6[* * *].]

(3) It shall come into force on such date7as the Central Government may, by notification in the Official Gazette, appoint in this behalf.

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3. For Statement of Objects and Reasons, see Gazette of India, 1948, Pt. V, pp. 311 and 312, for Report of Select Committee, see Gazette of India, 1949, Pt. V, pp. 45 to 48.

Extended to Dadra and Nagar Haveli by Reg. 6 of 1963 Section 2 and Schedule I w.e.f. 1-7-1965 and to Goa, Daman and Diu by Reg. 11 of 1963, Section 3 and Schedule Nothing in this Acts (except section 34A) shall apply to the Industrial Development Bank of India vide Act 18 of 1964, Section 34.

4.Substituted by Act 23 of 1965, Section 11, for “Companies” w.e.f. 1-3-1966.

5.Substituted by Act 20 of 1950, Section 2, for sub-section (2).

6.The words “except the State of Jammu and Kashmir” omitted by Act 62 of 1956, Section 2 and Schedule.

7.Came into force on 16th March, 1949; see Notification NO. F.4(46)-FI/49, dated 10th March, 1949, published in the Gazette of India, 1949, Pt. I, P. 326.

Section 2. Application of other laws not barred

The provisions of this Act shall be in addition to, and not, save as hereunder expressly provided, in derogation of the ¹[Companies Act, 1956 (1 of 1956)], and any other law for the time being in force.

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1.Substituted by Act 95 of 1956, Section 14 and Schedule, for “Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1- 1957.

Section 3. Act to apply to co-operative societies in certain cases

¹[Act to apply to co-operative societies in certain cases. Nothing in this Act shall apply to. —

(a) a primary agricultural credit society;

(b) a co-operative land mortgage bank; and

(c) any other co-operative society, except in the manner and to the extent specified in Part V.]

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1. Substituted by Act 23 of 1956, Section 12, for the former Section 12, for the former section w.e.f. 1-3-1966.

Section 4. Power to suspend operation of Act

(1) The Central Government, if on a representation made by the Reserve Bank in this behalf it is satisfied that it is expedient so to do, may by notification in the Official Gazette suspend for such period, not exceeding sixty days, as may be specified in the notification, the operation of all or any of the provisions of this Act, either generally or in relation to any specified banking company.

(2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the powers of the Central Government under sub-section (1) so however that the period of suspension shall not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be published in the Gazette of India.

(3) The Central Government may, by notification in the Official Gazette, extend from time to time the period of any suspension ordered under sub-section (1) or subsection (2) for such period, not exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed one year.

(4) A copy of any notification issued under sub-section (3) shall be laid on the table of ¹[Parliament] as soon as may be after it is issued.

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1. Substituted by the A. O. 1950, for “the Dominion Legislature”.

Section 5. Interpretation

¹[In this Act], unless there is anything repugnant in the subject or context, —

²[(a) “approved securities” means—

(i) securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Indian Trusts Act, 1882 (2 of 1882);

(ii) such of the securities authorised by the Central Government under clause (f) of section 20 of the Indian Trusts Act, 1882 (2 of 1882), as may be prescribed;]

(b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise;

(c) “banking company” means any company which transacts the business of banking ³[in India];

Explanation. — Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;

⁴[(ca) “banking policy” means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources;]

⁵[(cc) “branch” or “branch office” , in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transacted;]

⁶[(d) “company” means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;)

⁷[(da) “corresponding new bank” means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970); or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]

⁸[* * * * *]

(f) “demand liabilities” means liabilities which must be met on demand, and “time liabilities” means liabilities which are not demand liabilities;

⁹[(ff) “Deposit Insurance Corporation” means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);]

¹⁰[(ffa) “Development Bank” means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);

(ffb) “Exim Bank” means the Export-Import Bank of India established under section 3 of the Export-Import India Act, 1981 (28 of 1981);]

¹¹[(ffc) “Reconstruction Bank” means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);]

¹²[(ffd) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987;]

(g) “gold” includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;

¹³[(gg) “managing agent” includes. —

(i) Secretaries and Treasurers;

(ii) Where the managing agent is a company, and director of such company, and any member thereof who holds substantial interest in such company;

(iii) Where the managing agent is a firm, any partner of such firm;]

¹⁴[(h) “managing director”, in relation to a banking company, means a director who, by virtue of an agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a director occupying the position of a managing director, by whatever name called:]

¹⁵[Provided that the managing director shall exercise his powers subject to the superintendence, control and direction of the Board of Directors;]

¹⁶[(ha) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981;]

¹⁷[* * * * *]

(j) “prescribed” means prescribed by rules made under this Act;

¹⁶[(ja) “regional rural bank” means a regional rural bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);]

¹⁷[* * * * *]

¹⁸[(1) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);]

¹⁷[* * * * *]

(n) “secured loan or advance” means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and “unsecured loan or advance” means a loan or advance not so secured;

¹⁹[(ni) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India, 1989;]

²⁰[(na) “small-scale industrial concern” means an industrial concern in which the investment in plant and machinery is not in excess of seven and a half lakhs of rupees or such higher amount, not exceeding twenty lakhs of rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, having regard to the trends in industrial development and other relevant factors;]

²¹[(nb) “Sponsor Bank” has the meaning assigned to it in the Regional Rural Banks Act, 1976 (21 of 1976);

(nc) “State Bank of India” means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);]

²²[(nd)] “subsidiary bank” has the meaning assigned to it in the State Bank of India (Subsidiary Banks) Act, 1959;

²³[(ne)] ” substantial interest”. —

(i) in relation to a company, means the holding of a beneficial interest by an individual or his spouse or minor child, whether singly or taken together, in the shares thereof, the amount paid up on which exceeds five lakhs of rupees or ten percent of the paid-up capital of the company, whichever is less;

(ii) in relation to a firm, means the beneficial interest held therein by an individual or his spouse o r minor child, whether singly or taken together, which represents more than ten per cent of the total capital subscribed by all the partners of the said firm;]]

²⁴[(o) all other words and expressions used herein but not defined and defined in the Companies Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.]

²⁵[* * * * *]

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1. Substituted by Act 55 of 1963, Section 6, for “(1) In this Act,” w.e.f. 1-2-1964

2. Clause (a) Substituted by Act 1 of 1984, Section 13 w.e.f. 15-2-1984.

3. Substituted by Act 20 of 1950, Section 3, for “in any State”.

4. Inserted By Act 58 of 1958, Section 2 w.e.f. 1-2-1969.

5. Inserted By Act 58 of 1959, Section 2 w.e.f. 1-10-1959.

6. Substituted by Act 58 of 1959 Section 2, for clause (d) w.e.f. 1-10-1959.

7. Inserted By Act 1 of 1984, Section 13 w.e.f. 15-2-1984.

8. Clause (e) omitted by Act 52 of 1953, Section 2.

9. Inserted By Act 47 of 1961, Section 51 and Schedule II, Pt. II w.e.f. 1-1-1962.

10. Inserted By Act 1 of 1984, Section 13 w.e.f. 15-2-1984.

11. Inserted by Act 62 of 1984, Section 71 and Third Schedule w.e.f. 20-3-1985.

12. Inserted by Act 53 of 1987, Section 56 and Second Schedule w.e.f. 9-7-1988.

13. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.

14. Substituted by Act 33 of 1959, Section 2, for clause (h) w.e.f. 1-10-1959.23Added by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.

15. Added by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.

16. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.

17. Clauses (i), (k) and (m) omitted by Act 33 of 1959, Section 2 w.e.f. 1-5-1982.

18. Inserted by Act 1 of 1984, Section 13 w.e.f. 15-2-1984

19. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Pt. III w.e.f. 25-10-1989

20. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.

21. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969

22. Clause (nb) re/lettered as Clause (nb) by Act 1 of 1984, Section 13 w.e.f. 15-2-1984

23. Clause (nc) re/lettered as Clause (ne) by Act 1 of 1984, Section 13 w.e.f. 15-2-1984

24. Inserted by Act 33 of 1959, Section 2 w.e.f. 1-10-1959.

25. Sub-section (2) omitted by the A.O. 1950

Section 5A. Act to override memorandum, articles, etc.

¹[Act to override memorandum, articles, etc. Save as otherwise expressly provided in this Act. (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a banking company, or in any agreement executed by it, or in any resolution passed by the banking company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959); and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.]

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1. Inserted by Act 33 of 1959, Section 2 w.e.f. 1-10-1959.

Part II – Business of Banking Companies

Section 6. Forms of business in which banking companies may engage

(1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely: —

(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveller’s cheques and circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others, the negotiating of loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities;

(b) acting as agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a ¹[managing agent or secretary and treasurer] of a company;

(c) contracting for public and private loans and negotiating and issuing the same;

(d) the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures, or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue;

(e) carrying on and transacting every kind of guarantee and indemnity business;

(f) managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;

(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;

(h) undertaking and executing trusts;

(i) undertaking the administration of estates as executor, trustee or otherwise;

(j) establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the company or the dependents or connections of such persons; granting pensions and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object;

(k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company;

(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;

(m) acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub- section;

(n) doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company;

(o) any other form of business which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage.

(2) No banking company shall engage in any form of business other than those referred to in sub-section (1).

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1. Substituted by Act 33 of 1959, Section 4, for “managing agent” w.e.f. 1-10-1959

Section 7. Use of words “bank”, “banker”, “banking” or “banking company”

¹[Use of words “bank”, “banker”, “banking” or “banking company”. (1) No company other than a banking company shall use as part of its name ²[or in connection with its business] any of the words “bank”, “banker” or “banking” and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words.

(2) No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or his name any of the words “bank”, “banking” or “banking company”.

(3) Nothing in this section shall apply to. —

(a) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company;

(b) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).]

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1. Subsituted by Act 55 of 1963, Section 7, for the former section 7 w.e.f. 1-2-1964.

2. Inserted by Act 1 of 1984, Section 14 w.e.f. 15-2-1984

Section 8. Prohibition of trading

Notwithstanding anything contained in section 6 or in any contract, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or nego-tiation or with such of its business as is referred lo in clause (i) of sub-section (1) of section 6:

¹[Provided that this section shall not apply to any such business as is specified in pursuance of clause (o) of sub-section (1) of section 6.

Explanation. — For the purposes of this section, “goods” means every kind of movable property, other than actionable claims, stocks, shares, money, bullion and specie, and all instruments referred to in clause (a) of sub-section (1) of section 6.

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1. Subsituted by Act 1 of 1984, Section 15 w.e.f. 15-2-194

Section 9. Disposal of non-banking assets

Notwithstanding anything contained in section 6, no banking company shall hold any immovable property howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the acquisition thereof or from the commencement of this Act, whichever is later or any extension of such period as in this section provided, and such properly shall be disposed of within such period or extended period, as the case may be:

Provided that the banking company may, within the period of seven years as aforesaid deal or trade in any such property for the purpose of facilitating the disposal thereof:

Provided further that the Reserve Bank may in any particular case extend the aforesaid period of seven years by such period not exceeding five years where it is satisfied that such extension would be in the interests of the depositors of the banking company.

Section 10. Prohibition of employment of managing agents and restrictions on certain forms of employment

¹[Prohibition of employment of managing agents and restrictions on certain forms of employment. (1) No banking company —

(a) shall employ or be managed by a managing agent; or

(b) shall employ or continue the employment of any person—

(i) who is, or at any time has been, adjudicated insolvent, or has suspended payment or has compounded with his creditors, or who is, or has been, convicted by a criminal court of an offence involving moral turpitude; or

(ii) whose remuneration or part of whose remuneration takes the form of commission or of a share in the profits of the company:

²[Provided that nothing contained in this sub-clause shall apply to the payment by a banking company of—

(a) any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual practice prevailing in banking business;

(b) any commission to any broker (including guarantee broker), cashier-contractor, clearing and forwarding agent, auctioneer or any other person, employed by the banking company under a contract otherwise than as a regular member of the staff of the company; or]

(iii) whose remuneration is, in the opinion of the Reserve Bank, excessive; or

(c) shall be managed by any person—

³[(i) who is a director of any other company not being—

(a) a subsidiary of the banking company, or

(b) a company registered under section 25 of the Companies Act, 1956 (1 of 1956):

Provided that the prohibition in this sub-clause shall not apply in respect of any such director for a temporary period not exceeding three months or such further period not exceeding nine months as the Reserve Bank may allow; or]

(ii) who is engaged in any other business or vocation; or

(iii) ⁴[whose term of office as a person managing the company is] for period exceeding five years at any one time:

⁵[Provided that the term of office of any such person may be renewed or extended by further periods not exceeding five years on each occasion subject to the condition that such renewal/extension shall not be sanctioned earlier than two years from the date on which it is to come into force:

Provided also that where the term of office of such person is for an indefinite period, such term, unless it otherwise comes to an end earlier, shall come to an end immediately on the expiry of five years from the date of his appointment or on the expiry of three months from the date of commencement of section 8 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963), whichever is later:]

Provided further that nothing in this clause shall apply to a director, other than the managing director, of a banking company by reason only of his being such director.

Explanation. — For the purpose of sub-clause (iii) of clause (b), the expression “remuneration”, in relation to person employed or continued in employment, shall include salary, fees and perquisites but shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in respect of the expense actually incurted by him in the performance of his duties.

(2) In forming its opinion under sub-clause (iii) of clause (b) of sub-section (1), the Reserve Bank may have regard among other matters to the following: —

(i) the financial condition and history of the banking company, its size and area of operation, its resources, the volume of its business, and the trend of its earning capacity;

(ii) the number of its branches or offices;

(iii) the qualifications, age and experience of the person concerned;

(iv) the remuneration paid to other persons employed by the banking company or to any person occupying a similar position in any other banking company similarly situated; and

(v) the interests of its depositors.

⁶[⁷[***].]

(6) Any decision or order of the Reserve Bank made under this section shall be final for all purposes.]

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1. Subsituted by Act 33 of 1959, Section 6, for the proviso w.e.f. 1-10-1959

2. Subsituted by Act 33 of 1959, Section 6 for sub-clause (i) w.e.f. 1-10-1959.

3. Subsituted by Act 33 of 1959, Section 6 for sub-clause (i) w.e.f. 1-10-1959.

4. Subsituted by Act 55 of 1963, Section 8, for certain words w.e.f. 1-2-1964.

5. Subsituted by Act 55 of 1963, Section 8, for the first proviso w.e.f. 1-2-1964.

6. Subsituted by Act 33 of 1959, Section 6, for sub-section (3) w.e.f. 1-10-1959.

7. Sub-sections (3), (4) and (5) omitted by Act 55 of 1963, Section 8 w.e.f. 1-2-1964.

Section 10A. Board of directors to include persons with professional or other experience

¹[Board of directors to include persons with professional or other experience. (1) Notwithstanding anything contained in any other law for the time being in force, every banking company,

(a) in existence on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), or

(b) which comes into existence thereafter,

shall comply with the requirements of this section:

Provided that nothing contained in this sub-section shall apply to a banking company referred to in clause (a) for a period of three months from such commencement.

(2) Not less than fifty-one per cent, of the total number of members of the Board of directors of a banking company shall consist of persons, who—

(a) shall have special knowledge or practical experience in respect of one or more of the following matters, namely:—

(i) accountancy,

(ii) agriculture and rural economy,

(iii) banking,

(iv) co-operation,

(v) economics,

(vi) finance,

(vii) law,

(viii) small-scale industry,

(ix) any other matter the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to the banking company:

Provided that out of the aforesaid number of directors, not less than two shall be persons having special knowledge or practical experience in respect of agriculture and rural economy, co-operation or small-scale industry; and

(b) shall not—

(1) have substantial interest in, or be connected with, whether as employee, manager or managing agent,—

(i) any company, not being a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or

(ii) any firm,

which carries on any trade, commerce or industry and which, in either case, is not a small-scale industrial concern, or

(2) be proprietors of any trading, commercial or industrial concern, not being a small-scale industrial concern.

²[(2A) 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, —

(i) no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years;

(ii) a chairman or other whole-time director of a banking company who has been removed from office as such chairman, or whole-time director, as the case may be, under the provisions of this Act shall also cease to be a director of the banking company and shall also not be eligible to be appointed as a director of such banking company, whether by election or co-option or otherwise, for a period of four years from the date of his ceasing to be the -chairman or whole-time director as the case may be.]

(3) If, in respect of any banking company the requirements, as laid down in subsection (2), are not fulfilled at any time, the Board of directors of such banking company shall re-constitute such Board so as to ensure that the said requirements are fulfilled.

(4) If, for the purpose of re-constituting the Board under sub-section (3), it is necessary to retire any director or directors, the Board may, by lots drawn in such manner as may be prescribed, decide which director or directors shall cease to hold office and such decision shall be binding on every director of the Board.

(5) Where the Reserve Bank is of opinion that the composition of the Board of directors of a banking company is such that it does not fulfil the requirements of subsection (2), it may, after giving to such banking company a reasonable opportunity of being heard, by an order in writing, direct the banking company to so re-constitute its Board of directors as to ensure that the said requirements are fulfilled and, if within two months from the date of receipt of that order, the banking company does not comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn in such manner as may be prescribed, the person who ought to be removed from the membership of the Board of directors, remove such person from the office of the director of banking company and with a view to complying with the provision of sub-section (2) appoint a suitable person as a member of the Board of directors in the place of the person so removed whereupon the person so appointed shall be deemed to have been duly elected by the banking company as its director.

(6) Every appointment, removal or reconstitution duly made, and every election duly held, under this section shall be final and shall not be called into question in any court.

(7) Every director elected or, as the case may be, appointed under this section shall hold office until the date up to which his predecessor would have held office, if the election had not been held, or, as the case may be, the appointment had not been made.

(8) No act or proceeding of the Board of directors of a banking company shall be invalid by reason only of any defect in the composition thereof or on the ground that it is subsequently discovered that any of its members did not fulfil the requirements of this section.

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1. Section 10A to 10D Inserted by Act 58 of 1968, Section 3 w.e.f. 1-2-1969.

2. Inserted by Act 1 of 1984, Section 16 w.e.f. 15-2-1984.

Section 10B. Banking company to be managed by whole time chairman

¹[(1) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking company in existence on the commencement of the Banking Regulation (Amendment) Act, 1994 (20 of 1944), or which comes into existence thereafter shall have one of its directors, who may be appointed on a whole-time or a part-time basis, as chairman of its board of directors, and where he is appointed on a whole-time basis, as chairman of its board of directors, he shall be entrusted with the management of the whole of the affairs of the banking company :

Provided that the chairman shall exercise his powers subject to the superintendence, control and direction of the board of directors.

(1A) Where a chairman is appointed on a part-time basis, —

(i) such appointment shall be with the previous approval of the Reserve Bank and be subject to such conditions as the Reserve Bank may specify while giving such approval;

(ii) the management of the whole of the affairs of such banking company shall be entrusted to a managing director who shall exercise his powers subject to the superintendence, control and direction of the board of directors.]

(2) ²[Every chairman of the board of directors who is appointed on a whole-time basis and every managing director] of a banking company shall be in the whole-time employment of such company and shall hold office for such period, not exceeding five years, as the board of directors may fix, but shall, subject to the provisions of this section, be eligible for re-election of reappointment:

Provided that nothing in this sub-section shall be construed as prohibiting a chairman from being a director of a subsidiary of the banking company or a director of a company registered under section 25 of the Companies Act, 1956 (1 of 1956).

(3) Every person holding office on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), as managing director of a banking company shall—

(a) if there is a chairman of its board of directors, vacate office on such commencement, or

(b) if there is no chairman of its board of directors, vacate office on the date on which the chairman of its board of directors is elected or appointed in accordance with the provisions of this section.

(4) ³[Every chairman who is appointed on a whole-time basis and every managing director of a banking company appointed under sub-section (1A)] shall be person who has special knowledge and practical experience of—

(a) the working of a banking company, or of the State Bank of India or any subsidiary bank or a financial institution, or

(b) financial, economic or business administration :

Provided that a person shall be disqualified for being a ³[chairman who is appointed on a whole time basis or a managing director], if be—

(a) is a director of any company other than a company referred to in the proviso to sub-section (2), or

(b) is a partner of any firm which carries on any trade, business or industry, or

(c) has substantial interest in any other company or firm, or

(d) is a director, manager, managing agent, partner or proprietor of any trading, commercial or industrial concern, or

(e) is engaged in any other business or vocation.

(5) ³[A chairman of the board of directors appointed on a whole-time basis or a managing director] of a banking company may, by writing, under his hand addressed to the company, resign his office, ⁴[* * *].

⁵[(5A) ³[A chairman of the board of directors appointed on a whole-time basis or a managing director] whose term of office has come to an end, either by reason of his resignation or by reason of expiry of the period of his office, shall, subject to the approval of the Reserve Bank, continue in office until his successor assumes office.

(6) Without prejudice to the provisions of section 36AA where the Reserve Bank is of opinion that any person who, is, or has been elected to be, the ³[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of a banking company is not a fit and proper person to hold such office, it may, after giving to such person and to the banking company a reasonable opportunity of being heard by order in writing, require the banking company to elect or appoint any other person as the ³[chairman of the board of directors who is appointed on a whole-time basis or the managing director] and if, within a period of two months from the date of receipt of such order, the banking company fails to elect or appoint a suitable person as the ³[chairman of the board of directors who is appointed on a whole-time basis or the managing director], the Reserve Bank may, by order, remove the first-mentioned person from the office of the ⁶[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of the banking company and appoint a suitable person in his place whereupon the person so appointed shall be deemed to have been duly elected or appointed, as the case may be, as the ⁶[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of such banking company and any person elected or ⁶[appointed as chairman on a whole-time basis or managing director] under this sub-section shall hold office for the residue of the period of office of the person in whose place he has been so elected or appointed.

(7) The banking company and any person against whom an order of removal is made under sub-section (6) may, within thirty days from the date of communication to it or to him of the order, prefer an appeal to the Central Government and the decision of the Central Government thereon, and subject thereto, the order made by the Reserve Bank under sub-section (6), shall be final and shall not be called into question in any court.

(8) Notwithstanding anything contained in this section, the Reserve Bank may, if in its opinion it is necessary in the public interest so to do, permit ⁶[the chairman of the board of directors who is appointed on a whole-time basis or the managing director] to undertake such part-time honorary work as is not likely to interfere with his duties as ⁶[such chairman or managing director].

(9) Notwithstanding anything contained in this section, where a person ⁶[appointed on a whole-time basis, as chairman of the board of directors or the managing director] dies or resigns or is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his office, the banking company may, with the approval of the Reserve Bank, make suitable arrangements for carrying out the ⁶[duties of chairman or managing director] for a total period not exceeding four months.

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1. Subsituted by Act 20 of 1994, Section 2, for sub-section (1) w.e.f. 31-1-1994.

2. Subsituted by Act 20 of 1994, Section 2, for certain words w.e.f. 31-1-1994.

3. Subsituted by Act 20 of 1994, Section 2 w.e.f. 31-1-1994.

4. Certain words omitted by Act 1 of 1984, Section 17 w.e.f. 15-2-1984.

5. Inserted by Act 1 of 1984, Section 17 w.e.f. 15-2-1984.

6. Subsituted by Act 20 of 1994, Section 2 w.e.f. 31-1-1994.

Section 10BB. Power of Reserve Bank to appoint [Chairman of the Board of directors appointed on a whole-time basis or a managing director] of a banking company

¹[Power of Reserve Bank to appoint [Chairman of the Board of directors appointed on a whole-time basis or a managing director] of a banking company. (1) Where the office, of the ²[chairman of the board of directors appointed on a whole-time basis or a managing director] of a banking company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the banking company, appoint a person eligible under sub-section (4) of section 10B to be so appointed, to be the ²[chairman of the board of directors appointed on a whole-time basis or a managing director] of the banking company and where the person so appointed is not a director of such banking company, he shall, so long as he holds the office of the ²[chairman of the board of directors appointed on a whole-time basis or a managing director], be deemed to be director of the banking company.

(2) The ³[chairman of the board of directors appointed on a whole-lime basis or a managing director] so appointed by the Reserve Bank shall be in the whole-time employment of the banking company and shall hold office for such period not exceeding three years, as the Reserve Bank may specify, but shall, subject to other provisions of this Act, be eligible for reappointment.

(3) The ³[chairman of the board of directors appointed on a whole-time basis or a managing director] so appointed by the Reserve Bank shall draw from the banking company such pay and allowances as the Reserve Bank may determine and may be removed from office only by the Reserve Bank.

(4) Save as otherwise provided in this section, the provisions of section 10B shall, as far as may be, apply to the ³[chairman of the board of directors appointed on a whole-time basis or a managing director] appointed by the Reserve Bank under subsection (1) as they apply to a ³[chairman of the board of directors appointed on a whole-time basis or a managing director] appointed by the banking company.]

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1. Inserted by Act 1 of 1984, Section 18 w.e.f. 15-2-1984.

2. Subsituted by Act 20 of 1994, Section 3 w.e.f. 31-1-1994.

3. Subsituted by Act 20 of 1994, Section 3 w.e.f. 31-1-1994.

Section 10C. Chairman and certain directors not to be required to hold qualification shares

¹[Chairman and certain directors not to be required to hold qualification shares. ²[Chairman of the board of directors who is appointed on a whole-lime basis or a managing director] of a banking company (by whomsoever appointed) and a director of a banking company (appointed by the Reserve Bank under section 10A) shall not be required to hold qualification shares in the banking company.]

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1. Subsituted by Act 1 of 1984, Section 19 w.e.f. 15-2-1984.

2. Subsituted by Act 20 of 1994, Section 4 w.e.f. 31-1-1994.

Section 10D. Provisions of sections 10A and 10B to override all other laws, contracts, etc.

Any appointment or removal of a ¹[director, chairman of the board of directors who is appointed on a whole-time basis or a managing director] in pursuance of section IOA or section 10B ²[or section 10BB] shall have effect and any such person shall not be entitled to claim any compensation for the loss or termination of office, notwithstanding anything contained in any law or in any contract, memorandum or articles of association.]

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1. Subsituted by Act 20 of 1994, sec 5 w.e.f. 31-1-1994.

2. Inserted by Act 1 of 1984, Section 20 w.e.f. 31-1-1984.

Section 11. Requirement as to minimum paid-up capital and reserves

(1) Notwithstanding anything contained in ¹[section 149 of the Companies Act, 1956 (1 of 1956)], no banking company in existence on the commencement of this Act, shall, after the expiry of three years from such commencement or of such further period not exceeding one year as the Reserve Bank, having regard to the interests of the depositors of the company, may think fit in any particular case to allow, carry on business ²[in India], and no other banking company shall after the commencement of this Act, commence or carry on business ²[in India] ³[unless it complies with such of the requirements of this section as are applicable to it].

⁴[(2) In the case of a banking company incorporated outside India—

(a) the aggregate value of its paid-up capital and reserves shall not be less than fifteen lakhs of rupees and if it has a place or places of business in the city of Bombay or Calcutta or both, twenty lakhs of rupees; and

(b) ⁵[the banking company shall deposit and keep deposited with the Reserve Bank either in cash or in the form of unencumbered approved securities, or partly in cash and partly in the form of such securities—

(i) an amount which shall not be less than the minimum required by clause (a); and

(ii) as soon as may be after the expiration of each ⁶[* * *] year, an amount calculated at twenty per cent of its profit for that year in respect of all business transacted through its branches in India, as disclosed in the profit and loss account prepared with reference to that year under section 29:]

Provided that any such banking company may at any time replace—

(i) any securities so deposited by cash or by any other unencumbered approved securities or partly by cash and partly by other such securities, so however, that the total amount deposited is not affected;

(ii) any cash so deposited by unencumbered approved securities of an equal value.]

⁷[(2A) Notwithstanding anything contained in sub-section (2), the Central Government may, on the recommendation of the Reserve Bank, and having regard to the adequacy of the amounts already deposited and kept deposited by a banking company under sub-section (2), in relation to its deposit liabilities in India, declare by order in writing that the provisions of sub-clause (ii) of clause (b) of sub-section (2) shall not apply to such banking company for such period as may be specified in the order.]

(3) In the case of any banking company to which the provisions of sub-section (2) do not apply, the aggregate value of its paid-up capital and reserves shall not be less than—

(i) if it has places of business in more than one State, five lakhs of rupees, and if any such place or places of business is or are situated in the city of Bombay or Calcutta or both, ten lakhs of rupees;

(ii) if it has all its places of business in one State none of which is situated in the city of Bombay or Calcutta, one lakh of rupees in respect of its principal place of business, plus ten thousand rupees in respect of each of its other places of business situated in the same district in which it has its principal place of business, plus twenty-five thousand rupees in respect of each place of business situated elsewhere in the State otherwise than in the same district:

Provided that no banking company to which this clause applies shall be required to have paid-up capital and reserves exceeding an aggregate value of five lakhs of rupees:

Provided further that no banking company to which this clause applies and which has only one place of business, shall be required to have paid-up capital and reserves exceeding an aggregate value of fifty thousand rupees:

⁸[Provided further that in the case of every banking company to which this clause applies and which commences banking business for the first time after the commencement of the Banking Companies (Amendment) Act, 1962 (36 of 1962), the value of its paid-up capital shall not be less than five lakhs of rupees;]

(iii) if it has all its places of business in one State, one or more of which is or are situated in the city of Bombay or Calcutta, five lakhs of rupees, plus twenty-five thousand rupees in respect of each place of business situated outside the city of Bombay or Calcutta, as the case may be:

Provided that no banking company to which this clause applies shall be required to have paid-up capital and reserves exceeding an aggregate value of ten lakhs of rupees.

Explanation. — For the purposes of this sub-section, a place of business situated ⁹[in a State] other than that in which the principal place of business of the banking company is situated shall, if it is not more than twenty-five miles distant from such principal place of business, be deemed to be situated within the same State as such principal place of business.

(4) Any amount deposited and kept deposited with the Reserve Bank under ¹⁰[* * *] sub-section (2) by any banking company incorporated ¹¹[outside India] shall, in the event of the company ceasing for any reason to carry on banking business ¹²[in India], be an asset of the company on which the claims of all the creditors of the company ¹²[in India] shall be a first charge.

¹³[(5) For the purposes of this section, —

(a) “place of business” means any office, sub-office, sub-pay office and any place of business at which deposits are received, cheques cashed, or moneys lent;

(b) “value” means the real or exchangeable value, and not the nominal value which may be shown in the books of the banking company concerned.]

(6) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any banking company, a determination thereof by the Reserve Bank shall be final for the purposes of this section.

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1. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “section 103 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Subsituted by Act 20 of 1950, Section 3, for “in any state”.

3. Subsituted by Act 33 of 1959, Section 7, for certain words w.e.f. 1-10-1959.

4. Subsituted by Act 33 of 1959, Section 7, for sub-section (2) w.e.f. 1-10-1959.

5. Subsituted by Act 36 of 1962, Section 2, for certain words.

6. The word “calendar” omitted by Act 66 of 1988, Section 7 w.e.f. 31-12-1988.

7. Inserted by Act 36 of 1962, Section 2.

8. Inserted by Act 36 of 1962, Section 2.

9. Subsituted by Act 62 of 1956, Section 2 and Schedule, for “in India”.

10. The words “the proviso to” omitted by Act 33 of 1959, Section 7 w.e.f. 1-10-1959.

11. Subsituted by Act 20 of 1950, Section 3, for “elsewhere than in a State”.

12. Subsituted by Act 20 of 1950, Section 3, for “in the States”.

13. Subsituted by Act 33 of 1959, Section 7, for sub-section (5) w.e.f. 1-10-1959.

Section 12. Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of shareholders

¹[Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of shareholders. (1) No banking company shall carry on business in India, unless it satisfies the following conditions, namely:—

(i) that the subscribed capital of the company is not less than one-half of the authorised capital, and the paid-up capital is not less than one-half of the subscribed capital and that, if the capital is increased, it complies with the conditions prescribed in this clause within such period not exceeding two years as the Reserve Bank may allow;

(ii) that the capital of the company consists of ordinary shares only or of ordinary shares or equity shares and such preferential shares as may have been issued prior to the 1st day of July, 1944:

Provided that nothing contained in this sub-section shall apply to any banking company incorporated before the 15th day of January, 1937.

[(2) No person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights ²[on poll] ³[in excess of ⁴(ten per cent)] of the total voting rights of all the shareholders of the banking company.]

(3) Notwithstanding anything contained in any law for the time being in force or in any contract or instrument no suit or other proceeding shall be maintained against any person registered as the holder of a share in a banking company on the ground that the title to the said share vests in a person other than the registered holder :

Provided that nothing contained in this sub-section shall bar a suit or other proceeding—

(a) by a transferee of the share on the ground that he has obtained from the registered holder a transfer of the share in accordance with any law relating to such transfer; or

(b) on behalf of a minor or a lunatic on the ground that the registered holder holds the share on behalf of the minor or lunatic.

(4) Every chairman, managing director or chief executive officer by whatever name called of a banking company shall furnish to the Reserve Bank through that banking company returns containing full particulars of the extent and value of his holding of shares, whether directly or indirectly, in the banking company and of any change in the extent of such holding or any variation in the rights attaching thereto and such other information relating to those shares as the Reserve Bank may, by order, require and in such form and at such time as may be specified in the order.]

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1. Subsituted by Act 95 of 1956, Section 3, for section 12 w.e.f. 14-1-1957.

2. Inserted by Act 33 of 1959, Section 8 w.e.f. 1-10-1959.

3. Subsituted by Act 55 of 1963, Section 9, for “inexcess of five percent” w.e.f. 1-12-1964.

4. Subsituted by Act 20 of 1994, sSection 6 w.e.f. 31-1-1994.

Section 12A. Election of new directors

¹[Election of new directors. (1) The Reserve Bank may, by order, require any banking company to call a general meeting of the shareholders of the company within such time, not less than two months from the date of the order, as may be specified in the order or within such further time as the Reserve Bank may allow in this behalf, to elect in accordance with the voting rights permissible under this Act fresh directors, and the banking company shall be bound to comply with the order.

(2) Every director elected under sub-section (1) shall hold office until the date up to which his predecessor would have held office, if the election had not been held.

(3) Any election duly held under this section shall not be called in question in any court.]

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1. Inserted by Act 95 of 1956, Section 4 w.e.f. 14-1-1957.

Section 13. Restriction on commission, brokerage, discount, etc. on sale of shares

Notwithstanding anything to the contrary contained in ¹[sections 76 and 79 of the Companies Act, 1956 (1 of 1956)], no banking company shall pay out directly or indirectly by way of commission, brokerage, discount or remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate two and one-half per cent of the paid-up value of the said shares.

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1. Subsituted by Act 95 of 1956, Section 14 and Schedule I, for “section 105 and 105A of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

Section 14. Prohibition of charge on unpaid capital

No banking company shall create any charge upon any unpaid capital of the company, and any such charge shall be invalid.

Section 14A. Prohibition of floating charge on assets

¹[Prohibition of floating charge on assets. (1) Notwithstanding anything contained in section 6, no banking company shall create a floating charge on the undertaking or any property of the company or any part thereof, unless the creation of such floating charge is certified in writing by the Reserve Bank as not being detrimental to the interests of the depositors of such company.

(2) Any such charge created without obtaining the certificate of the Reserve Bank shall be invalid.

(3) Any banking company aggrieved by the refusal of a certificate under subsection (1) may, within ninety days from the date on which such refusal is communicated to it, appeal to the Central Government.

(4)The decision of the Central Government where an appeal has been preferred to it under sub-section (3) or of the Reserve Bank where no such appeal has been preferred shall be final.]

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1. Inserted by Act 33 of 1959, Section 9 w.e.f. 1-10-1959.

Section 15. Restrictions as to payment of dividend

¹[(1)] No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off.

²[(2)] Notwithstanding anything to the contrary contained in sub-section (1) or in the Companies Act, 1956(1 of 1956), a banking company may pay dividends on its shares without writing off—

(i) the depreciation, if any, in the value of its investments in approved securities in any case where such depreciation has not actually been capitalised or otherwise accounted for as a loss;

(ii) the depreciation, if any, in the value of its investments in shares, debentures or bonds (other than approved securities) in any case where adequate provision for such depreciation has been made to the satisfaction of the auditor of the banking company;

(iii) the bad debts, if any, in any case where adequate provision for such debts has been made to the satisfaction of the auditor of the banking company.]

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1. Section 15 renumbered as sub-section (1) of that section by Act 33 of 1959, Section 10 w.e.f. 1-10-1959.

2. Inserted by Act 33 of 1959, Section 10 w.e.f. 1-10-1959.

Section 16. Prohibition of common directors

¹[(Prohibition of common directors. ²[(1) No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company.

(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholders to that banking company.]

(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty percent of the total voting rights of all the shareholders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf-

(a) either resign his office as a director of the banking company; or

(b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent, of the total voting rights of all the shareholders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.]

³[(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.]

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1. Subsituted by Act 95 of 1956, Section 5, for section 16 w.e.f. 14-1-1957.

2. Subsituted by Act 20 of 1994, Section 7 w.e.f. 22-3-1994.

3. Inserted by Act 58 of 1968, Section 4 w.e.f. 1-2-1969.

Section 17. Reserve Fund

¹[Reserve Fund. (1) Every banking company incorporated in India shall create a reserve fund and ²[* * *] shall, out of the balance of profit of each year as disclosed in the profit and loss account prepared under section 29 and before any dividend is declared, transfer to the reserve fund a sum equivalent to not less than twenty per cent of such profit.

³[(1A) Notwithstanding anything contained in sub-section (1), the Central Government may, on the recommendation of the Reserve Bank and having regard to the adequacy of the paid-up capital and reserves of a banking company in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not apply to the banking company for such period as may be specified in the order:

Provided that no such order shall be made unless, at the time it is made, the amount in the reserve fund under sub-section (1), together with the amount in the share premium account is not less than the paid-up capital of the banking company.]

(2) Where a banking company appropriates any sum or sums from the reserve fund or the share premium account, it shall, within twenty-one days from the date of such appropriation, report the fact to the Reserve Bank, explaining the circumstances relating to such appropriation:

Provided that the Reserve Bank may, in any particular case, extend the said period of twenty-one days by such period as it thinks fit or condone any delay in the making of such report.

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1. Subsituted by Act 33 of 1959, Section 1, for section 17 and 18 w.e.f. 1-10-1959.

2. Certain words omitted by Act 36 of 1962, Section 3.

3. Inserted by Act 36 of 1962, Section 3.

Section 18. Cash reserve

¹[Cash reserve. (1) Every banking company, not being a scheduled bank, shall maintain in India by way of cash reserve with itself or by way of balance in a current account with the Reserve Bank, or by way of net balance in current accounts or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the twentieth day of every month a return showing the amount so held on alternate Fridays during a month with particulars of its demand and time liabilities in India on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.

Explanation. —In this section, and in section 24, —

(a) “liabilities in India” shall not include—

(i) the paid-up capital or the reserves or any credit balance in the profit and loss account of the banking company;

(ii) any advance taken from the Reserve Bank or from the Development Bank or from the Exim Bank ²[or from the Reconstruction Bank] ³[or from the National Housing Bank] or from the National Bank ⁴[or from the Small Industries Bank] by the banking company;

(iii) in the case of a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank;

(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;

(c) “net balance in current accounts” shall, in relation to a banking company, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that banking company with State Bank of India or a subsidiary bank or a corresponding new bank over the aggregate of the credit balances in current account held by the said banks with such banking company;

(d) for the purposes of computation of liabilities, the aggregate of the liabilities of a banking company to the State Bank of India, a subsidiary bank, a corresponding new bank, a regional rural bank, another banking company, a co-operative bank or any other financial institution notified by the Central Government in this behalf, shall be reduced by the aggregate of the liabilities of all such banks and institutions to the banking company;

(e) the expression “co-operative bank” shall have the meaning assigned to it in clause (cci) of section 56.

(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of transactions, that such transaction or transactions shall be regarded as liability in India of a banking company and, if any question arises as to whether any transaction or class of transactions shall be regarded for the purposes of this section and section 24 as liability in India of a banking company, the decision of the Reserve Bank thereon shall be final.]

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1. Inserted by Act 62 of 1984, Section 71 and Third Schedule 20-3-1985.

2. Inserted by Act 62 of 1984, Section 71 and Third Schedule 20-3-1985

3. Inserted by Act 53 of 1987, Section 56 and Schedule w.e.f. 9-7-1988.

4. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Pt. II w.e.f. 25-10-1989.

Section 19. Restriction on nature of subsidiary companies

¹[(1) A banking company shall not form any subsidiary company except a subsidiary company formed for one or more of the following purposes, namely: —

(a) the undertaking of any business which, under clauses (a) to (o) of subsection (3) of section 6, is permissible for a banking company to undertake, or

(b) with the previous permission in writing of the Reserve Bank, the carrying on of the business of banking exclusively outside India, or

(c) the undertaking of such other business, which the Reserve Bank may, with the prior approval of the Central Government, consider to be conducive to the spread of banking in India or to be other wise useful or necessary in the public interest.

Explanation. —For the purposes of section 8, a banking company shall not be deemed, by reason of its forming or having a subsidiary company, to be engaged indirectly in the business carried on by such subsidiary company.]

(2) Save as provided in sub-section (1), no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent of the paid-up share capital of that company or thirty per cent of its own paid-up share capital and reserves, whichever is less:

Provided that any banking company which is on the date of the commencement of this Act holding any shares in contravention of the provisions of this sub-section shall not be liable to any penalty therefor if it reports the matter without delay to the Reserve Bank and if it brings its holding of shares into conformity with the said provisions within such period, not exceeding two years, as the Reserve Bank may think fit to allow.

(3) Save as provided in sub-section (1) and notwithstanding anything contained in sub-section (2), a banking company shall not, after the expiry of one year from the date of the commencement of this Act, hold shares, whether as pledgee, mortagagee or absolute owner, in any company in the management of which any managing director or manager of the banking company is in any manner concerned or interested.

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1. Subsituted Act 1 of 1984, Section 22 w.e.f. 15-2-1984.

Section 20. Restrictions on loans and advances

¹[Restrictions on loans and advances. (1) Notwithstanding anything to the contrary contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking company shall,—

(a) grant any loans or advances on the security of its own shares, or—

(b) enter into any commitment for granting any loan or advance to or on behalf of—

(i) any of its directors,

(ii) any firm in which any of its directors is interested as partner, manager, employee or guarantor, or

(iii) any company [not being a subsidiary of the banking company or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or a Government company] of which ²[or the subsidiary or the holding company of which] any of the directors of the banking company is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest, or

(iv) any individual in respect of whom any of its directors is a partner or guarantor.

(2) Where any loan or advance granted by a banking company is such that a commitment for granting it could not have been made if clause (b) of sub-section (1) had been in force on the date on which the loan or advance was made, or is granted by a banking company after the commencement of section 5 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), but in pursuance of a commitment entered into before such commencement, steps shall be taken to recover the amounts due to the banking company on account of the loan, or advance together with interest, if any, due thereon within the period stipulated at the time of the grant of the loan or advance, or where no such period has been stipulated, before the expiry of one year from the commencement of the said section 5:

Provided that the Reserve Bank may, in any case, on an application in writing made to it by the banking company in this behalf, extend the period for the recovery of the loan or advance until such date, not being a date beyond the period of three years from the commencement of the said section 5, and subject to such terms and conditions, as the Reserve Bank may deem fit:

Provided further that this sub-section shall not apply if and when the director concerned vacates the office of the director of the banking company, whether by death, retirement, resignation or otherwise.

(3) No loan or advance, referred to in sub-section (2), or any part thereof shall be remitted without the previous approval of the Reserve Bank, and any remission without such approval shall be void and of no effect.

(4) Where any loan or advance referred to in sub-section (2), payable by any person, has not been repaid to the banking company within the period specified in that subsection, then, such person shall, if he is a director of such banking company on the date of the expiry of the said period, be deemed to have vacated his office as such on the said date.

Explanation. — In this section—

(a) “loans or advance” shall not include any transaction which the Reserve Bank may, having regard to the nature of the transaction, the period within which, and the manner and circumstances in which, any amount due on account of the transaction is likely to be realised, the interest of the depositors and other relevant considerations, specify by general or special order as not being a loan or advance for the purpose of this section;

(b) “director” include a member of any board or committee in India constituted by a banking company for the purpose of managing, or for the purpose of advising it in regard to the management of, all or any of its affairs.

(5) If any question arises whether any transaction is a loan or advance for the purposes of this section, it shall be referred to the Reserve Bank, whose decision thereon shall be final.]

———————

1. Subsituted by Act 58 of 1968, Section 5, for section 20 w.e.f. 1-2-1969.

2. Subsituted by Act 58 of 1968, Section 5, for section 20 w.e.f. 1-2-1969.

Section 20A. Restrictions on power to remit debts

¹[Restrictions on power to remit debts. (1) Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956), a banking company shall not, except with the prior approval of the Reserve Bank, remit in whole or in part any debt due to it by—

(a) any of its directors, or

(b) any firm or company in which any of its directors is interested as director, partner, managing agent or guarantor, or

(c) any individual if any of its directors is his partner or guarantor.

(2) Any remission made in contravention of the provisions of sub-section (1) shall be void and of no effect.]

———————

1. Inserted by Act 55 of 1963, Section 12 w.e.f. 1-2-1964.

Section 21. Power of Reserve Bank to control advances by banking companies

(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest ¹[or in the interests of depositors] ²[ or banking policy] so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.

(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section (1) the Reserve Bank may give directions to banking companies, either generally or to any banking company or group of banking companies in particular, ³[as to—

(a) the purposes for which advances may or may not be made,

(b) the margins to be maintained in respect of secured advances,

(c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual,

(d) the maximum amount up to which, having regard to the considerations referred to in clause (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and

(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.]

⁴[(3) Every banking company shall be bound to comply with any directions given to it under this section.]

———————

1. Inserted by Act 55 of 1963, Section 13 w.e.f. 1-2-1964.

2. Inserted by Act 58 of 1968, Section 6 w.e.f. 1-2-1969.

3. Subsituted by Act 55 of 1963, Section 13, for certain words w.e.f. 1-2-1954.

4. Inserted by Act 55 of 1963, Section 13 w.e.f. 1-3-1964.

Section 21A. Rates of interest charged by banking companies not to be subject to scrutiny by courts

¹[Rates of interest charged by banking companies not to be subject to scrutiny by courts. Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.]

———————

1. Inserted by Act 1 of 1984, Section 24 w.e.f. 15-2-1984.

Section 22. Licensing of banking companies

¹[(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose.]

(2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business ²[in India], shall apply in writing to the Reserve Bank for a licence under this section:

Provided that in the case of a banking company in existence on the commencement of this Act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of ³is section] or is by notice in writing informed by the Reserve Bank that a licence cannot be granted to it:

Provided further that the Reserve Bank shall not give a notice as aforesaid to a banking company in existence on the commencement of this Act before the expiry of the three years referred to in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow.

(3) Before granting any licence under this section, the Reserve Banking may require to be satisfied by an inspection of the books of the company or otherwise that ⁴[***] the following conditions are fulfilled, namely : —

⁵[(a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue;

(b) that the affairs of the company are not being, or are not likely to be, conducted in a manner deterimental to the interests of its present or future depositors;]

⁶[(c) that the general character of the proposed management of the company will not be prejudicial to the public interest or the interest of its depositors;

(d) that the company has adequate capital structure and earning prospects;

(e) that the public interest will be served by the grant of a licence to the company to carry on banking business in India;

(f) that having regard to the banking facilities available in the proposed principal area of operations of the company, the potential scope for expansion of banks already in existence in the area and other relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of the banking system consistent with monetary stability and economic growth;

(g) any other condition, the fulfilment of which would, in the opinion of the Reserve Bank, be necessary to ensure that the carrying on of banking business in India by the company will not be prejudicial to the public interest or the interests of the depositors.]

⁷[(3A) Before granting any licence under this section to a company incorporated outside India, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business by such company in India will be in the public interest and that the Government or law of the country in which it is incorporated does not discriminate in any way against banking companies registered in India and that the company complies with all the provisions of this Act applicable to banking companies incorporated outside India.]

⁸[(4) The Reserve Bank may cancel a licence granted to a banking company under this section —

(i) if the company ceases to carry on banking business in India; or

(ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or

(iii) if at any time, any of the conditions referred to in sub-section (3) ⁷[and sub-section (3A)] is not fulfilled:

Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the interests of the company’s depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition.

(5) Any banking company aggrieved by the decision of the Reserve Bank cancelling a licence under this section may, within thirty days from the date on which such decision is communicated to it, appeal to the Central Government.

(6) The decision of the Central Government where an appeal has been preferred to it under sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final.]

———————

1. Subsituted by Act 33 of 1959, Section 13, for sub-section (1) w.e.f. 1-10-1959.

2. Subsituted by Act 20 of 1950, Section 3, for “in any state”.

3. Subsituted by Act 33 of 1959, Section 13, for “sub-section” (2)” w.e.f. 1-10-1959.

4. The words “all or any of” omitted by Act 1 of 1984, Section 25 w.e.f. 15-2-1984.

5. Subsituted by Act 33 of 1959, Section 13, for clauses (a) and (b) w.e.f. 1-10-1959.

6. Subsituted by Act 1 of 1984, Section 25, for clause ( c) w.e.f. 15-2-1984.

7. Inserted by Act 1 of 1984, Section 25 w.e.f. 15-2-1984.

8. Subsituted by Act 33 of 1959, Section 13, for sub-sections (4) and (5) w.e.f. 1-10-1959.

Section 23. Restrictions on opening of new, and transfer of existing, places of business

¹[Restrictions on opening of new, and transfer of existing, places of business. (1) Without obtaining the prior permission of the Reserve Bank—

(a) no banking company shall open a new place of business in India or change otherwise than within the same city, town or village, the location of an existing place of business situated in India; and

(b) no banking company incorporated in India shall open a new place of business outside India or change, otherwise than within the same city, town or village in any country or area outside India, the location of an existing place of business situated in that country or area:

Provided that nothing in this sub-section shall apply to the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs thereof within which the banking company already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion.

(2) Before granting any permission under this section, the Reserve Bank may require to be satisfied by an inspection under section 35 or otherwise as to the financial condition and history of the company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location, of the place of business.

(3) The Reserve Bank may grant permission under sub-section (1) subject to such conditions as it may think fit to impose either generally or with reference to any particular case.

(4) Where, in the opinion of the Reserve Bank, a banking company has, at any time, failed to comply with any of the conditions imposed on it under this section, the Reserve Bank may, by order in writing and after affording reasonable opportunity to the banking company for showing cause against the action proposed to be taken against it, revoke any permission granted under this section.

²[(4A) Any regional rural bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank through the National Bank which shall give its comments on the merits of the application and send it to the Reserve Bank:

Provided that the regional rural bank shall also send an advance copy of the application directly to the Reserve Bank.]

(5) For the purpose of this section “place of business” includes any sub-office, pay office, subpay office and any place of business at which deposits are received, cheques cashed or moneys lent.]

———————

1. Subsituted by Act 33 of 1959, Section 14, for section 23 w.e.f. 1-10-1959.

2. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.

Section 24. Maintenance of a percentage of assets

(1) After the expiry of two years from the commencement of this Act, every banking company shall maintain ¹[in India] in cash, gold or unencumbered approved securities, valued at a price not exceeding the current market price, an amount which shall not at the close of business on any day be less than 20 percent of the total of its ²[demand and time liabilities] ³[in India].

⁴[Explanation— For the purposes of this section, “unencumbered approved securities” of a banking company shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of.]

⁵[(2) In computing the amount for the purposes of sub-section (1), the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India and any balances maintained in India by a banking company in current account with the Reserve Bank or the State Bank of India or with any other bank which may be notified in this behalf by the Central Government, including in the case of a scheduled bank the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) to be so maintained, shall be deemed to be cash maintained in India.]

⁶[(2A)(a) Notwithstanding anything contained in sub-section (1) or in sub-section (2), after the expiry of two years from the commencement of the Banking Companies (Amendment) Act, 1962 (36 of 1962),—

(i) a scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), and

(ii) every other banking company, in addition to the cash reserve which it is required to maintain under section 18,

⁷[shall maintain in India,—

(A) in cash, or

(B) in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination of, the following methods of valuation, namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the Reserve Bank from time to time,

an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding forty per cent, as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight;]

⁸[(b) in computing the amount for the purposes of clause (a), —

(i) the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India;

(ii) any cash or balances maintained in India by a banking company other than a scheduled bank with itself or with the Reserve Bank or by way of net balance in current account in excess of the aggregate of the cash or balance or net balance required to be maintained under section 18;

(iii) any balances maintained by a scheduled bank with the Reserve Bank in excess of the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934);

(iv) the net balance in current accounts maintained in India by a scheduled bank;

(v) any balances maintained by a Regional Rural Bank in call or fixed deposit with its Sponsor Bank, shall be deemed to be cash maintained in India].

⁹[Explanation. — For the purpose of clause (a) of this sub-section, the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities.

¹⁰[(2B) The Reserve Bank may, by notification in the Official Gazette, vary the percentage referred to in sub-section (2A) in respect of a Regional Rural Bank ¹¹[***].]

¹²[(3) For the purpose of ensuring compliance with the provisions of this section, every banking company shall, not later than twenty days after the end of the month to which it relates, furnish to the Reserve Bank in the prescribed form and manner a monthly return showing particulars of its assets maintained in accordance with this section, and its demand and time liabilities in India at the close of business on each alternate Friday during the month, or if any such Friday is a public holiday, at the close of business on the preceding working day:

Provided that every Regional Rural Bank shall also furnish a copy of the said return to the National Bank.]

(4)(a) If on any alternate Friday or, if such Friday is a public holiday, on the preceding working day, the amount maintained by a banking company at the close of business on that day falls below the minimum prescribed by or under clause (a) of sub-section (2A) such banking company shall be liable to pay to the Reserve Bank in respect of that day’s default, penal interest for that day at the rate of three per cent per annum above the bank rate on the amount by which the amount actually maintained falls short of the prescribed minimum on that day; and

(b) If the default occurs again on the next succeeding alternate Friday, or, if such Friday is a public holiday, on the preceding working day, and continues on succeeding alternate Fridays or preceding working days, as the case may be, the rate of penal interest shall be increased to a rate of five per cent per annum above the bank rate on each such shortfall in respect of that alternate Friday and each succeeding alternate Friday or preceding working day, if such Friday is a public holiday, in which the default continues.

(5)(a) Without prejudice to the provisions of sub-section (3), the Reserve Bank may require a banking company to furnish to it a return in the form and manner specified by it showing particulars of its assets maintained in accordance with this section and its demand and time liabilities in India, as at the close of business on each day of a month; and

(b) Without prejudice to the provisions of sub-section (4), on the failure of a banking company to maintain as on any day, the amount so required to be maintained by or under clause (a) of sub-section (2A) the Reserve Bank may, in respect of such default, require the banking company to pay penal interest for that day as provided in clause (a) of sub-section (4) and if the default continues on the next succeeding working day, the penal interest may be increased as provided in clause (b) of sub-section (4) for the concerned days.

(6)(a) The penalty payable under sub-section (4) and sub-section (5) shall be paid within a period of fourteen days from the date on which a notice issued by the Reserve Bank demanding payment of the same is served on the banking company and in the event of failure of the banking company to pay the same within such period, the penalty may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting banking company is situated, such direction to be made only upon an application made by the Reserve Bank in this behalf to the court; and

(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the banking company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit.

(7) When under the provisions of clause (b) of sub-section (4), penal interest at the increased rate of five per cent, above the bank rate has become payable by a banking company, if thereafter the amount required to be maintained on the next succeeding alternate Friday, or if such Friday is a public holiday, the next preceding working day, is still below the prescribed minimum, every director, manager or secretary of the banking company, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent alternate Friday or the preceding working day, as the case may be, on which the default continues.

(8) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an application in writing by the defaulting banking company, that the banking company had sufficient cause for its failure to comply with the provisions of clause (a) of sub-section (2A), the Reserve Bank may not demand the payment of the penal interest.

Explanation. — In this section, the expression “public holiday” means a day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881)].

———————

1. Inserted by Act 33 of 1959, Section 15 w.e.f. 1-10-1959.

2. Subsituted by Act 1 of 1984, Section 26, for “time and demand liabilities” w.e.f. 29-3-1985.

3. Subsituted by Act 20 of 1950, Section 3, for “in the States”.

4. Subsituted by Act 33 of 1959, Section 15, for the former Explanation w.e.f. 1-10-1959.

5. Subsituted by Act 33 of 1959, Section 15, for sub-section (2) w.e.f. 1-10-1959.

6. Inserted by Act 36 of 1962, Section 6.

7. Subsituted by Act 1 of 1984, Section 26, for certain words and figures w.e.f. 29-3-1985.

8. Subsituted by Act 1 of 1984, Section 26, for clause (b) w.e.f. 29-9-1985.

9. Inserted by Act 1 of 1984 Section 26 w.e.f. 29-3-1985.

10. Inserted by Act 21 of 1976, Section 33 w.e.f. 26-9-1975.

11. Certain words omitted by Act I of 1984, Section 26 w.e.f. 29-3-1985.

12. Subsituted by Act 1 of 1984, Section 26, for sub-section (3) w.e.f. 29-3-1985.

Section 25. Assets in India

¹[(1) The assets in India of every banking company at the close of business on the last Friday of every quarter or, if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of the business on the preceding working day, shall not be less than seventy-five percent of its demand and time liabilities in India.

(2) Every banking company shall, within one month from the end of every quarter, submit to the Reserve Bank a return in the prescribed form and manner of the assets and liabilities referred to in sub-section (1) as at the close of business on the last Friday of the previous quarter, or, if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881) at the close of business on the preceding working day:]

²[Provided that every regional rural bank shall also furnish a copy of the said return to the National Bank.]

For the purposes of this section, —

³[(a) “assets in India” shall be deemed to include export bills drawn in, and import bills drawn on and payable in India and expressed in such currencies as the Reserve Bank may from time to time approve in this behalf and also such securities as the Reserve Bank may approve in this behalf notwithstanding that all or any of the said bills or securities are held outside India;]

⁴[(b) “liabilities in India” shall not include the paid-up capital or the reserves or any crredit balance in the profit and loss account of the banking company;]

⁵[(c)] “quarter” means the period of three months ending on the last day of March, June, September or December.

———————

1. Subsituted by Act 33 of 1959, Section 16, for sub-sections (1) and (2) w.e.f. 1-10-1959.

2. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 10-5-1982.

3. Subsituted by Act 20 of 1950, Section 7, for clause (a).

4. Inserted by Act 33 of 1959, Section 16 w.e.f. 1-10-1959.

5. Clause (b) relettered as clause (c) by Act 33 of 1959, Section 16 w.e.f. 1-10-1959.

Section 26. Return of unclaimed deposits

Every banking company shall, within thirty days after the close of each calendar year, submit a return in the prescribed form and manner to the Reserve Bank as at the end of such calendar year of all accounts ¹[in India] which have not been operated upon for ten years ²[* * *]:

Provided that in the case of money deposited for a fixed period the said term of ten years shall be reckoned from the date of the expiry of such fixed period:

³[Provided further that every regional rural bank shall also furnish a copy of the said return to the National Bank.]

———————

1. Subsituted by Act 20 of 1950, Section 3, for “in a States”.

2. Certain words omitted by Act 55 of 1963, Section 14 w.e.f. 1-2-1964.

3. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.

Section 27. Monthly returns and power to call for other returns and information

(I) Every banking company shall, before me close of the month succeeding that to which it relates, submit to the Reserve Bank a return in the prescribed form and manner showing its assets and liabilities [in India] as at the close of business on the last Friday of every month or if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.

²[(2) The Reserve Bank may at any time direct a banking company to furnish it within such time as may be specified by the Reserve Bank, with such statements and information relating to the business or affairs of the banking company (including any business or affairs with which such banking company is concerned) as the Reserve Bank may consider necessary or expedient to obtain for the purposes of this Act, and without prejudice to the generality of the foregoing power may call for information every half-year regarding ³[the investments of a banking company and the classification of its advances in respect of industry, commerce and agriculture].]

¹[(3). Every regional rural bank shall submit a copy of the return which it submits to the Reserve Bank under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may also be exercised by the National Bank in relation to regional rural banks.]

———————

1. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.

2. Subsituted by Act 95 of 1956, Section 6, for sub-section (2) w.e.f. 14-1-1957.

3. Subsituted by Act 33 of 1959, Section 17, for certain words w.e.f. 1-10-1959.

Section 28. Power to publish information

¹[Power to publish information. The Reserve Bank or the National Bank, or both, if they consider it in the public interest so to do, may publish any information obtained by them under this Act in such consolidated form as they think fit.]

———————

1. Subsituted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.

Section 29. Accounts and balance-sheet

(1) At the expiration of each calendar year ¹[or at the expiration of a period of twelve months ending with such date² as the Central Government may, by notification in the Official Gazette, specify in this behalf,] every banking company incorporated 95[in India], in respect of all business transacted by it, and every banking company incorporated ³[outside India], in respect of all business transacted through its branches ⁴[in India], shall prepare with reference to ⁵[that year or period, as the case may be,] a balance-sheet and profit and loss account as on the last working day of ⁶[that year or the period, as the case may be] in the Forms set out in the Third Schedule or as near thereto as circumstances admit:

⁷[Provided that with a view to facilitating the transition from one period, of accounting to another period of-accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the preparation of, or for other matters relating to, the balance sheet or profit and loss account in respect of the concerned year or period, as the case may be.]

(2) The balance-sheet and profit and loss account shall be signed—

(a) in the case of a banking company incorporated ⁴[in India], by the manager or the principal officer of the company and where there are more than three directors of the company, by at least three of those directors, or where there are not more than three directors, by all the directors, and

(b) in the case of a banking company incorporated ³[outside India] by the manager or agent of the principal office of the company ⁴[in India].

(3) Notwithstanding that the balance-sheet of a banking company is under subsection (I) required to be prepared in a form other than the form ⁸[set out in Part I -of Schedule VI to the Companies Act, 1956 (1 of 1956)], the requirements of that relating to the balance-sheet and profit and loss account of a company shall, in so far as they are not inconsistent with this Act, apply to the balance-sheet or profit and loss account, as the case may be, of a banking company.

⁹[(3A) Notwithstanding anything to the contrary contained in sub-section (3) of section 210 of the Companies Act, 1956 (1 of 1956), the period to which the profit and loss account relates shall, in the case of a banking company, be the period ending with the last working day of the year immediately preceding the year in which the annual general meeting is held.]

¹⁰[Explanation. —In sub-section (3A), “year” means the year or, as the case may be, the period referred to in sub-section (1).]

(4) The Central Government, after giving not less than three months’ notice of its mention so to do by a notification in the Official Gazette, may from time to time by a like notification amend the Form set out in the Third Schedule.

———————

101. Inserted by Act 66 of 1988, Section 8 w.e.f. 30-12-1988.

102. 31st day of March (pecified by Central Government Vide S.O. 86 (E), dated 29 th January, 1992), published in the Gazette of India, Extra., Pt. II, Section 3(ii) NO. 77, dated 29th January, 1992.

103. Subsituted by Act 20 of 1950, Section 3, for “ourside the States”.

104. Subsituted by Act 20 of 1950, Section 3, for “in a State”.

105. Subsituted by Act 66 of 1988, Section 8, for “that year” w.e.f. 30-12-1988.

106. Subsituted by Act 66 of 1988, Section 8, for “the year” w.e.f. 30-12-1988.

107. Subsituted by Act 66 of 1988, Section 8, for “the year” w.e.f. 30-12-1988.

108. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “marked F in the Third Schedule to the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

109. Inserted by Act 1 of 1984, Section 27 w.e.f. 15-2-1984.

110. Inserted by Act 66 of 1988, Section 8 w.e.f. 30-12-1988.

Section 30. Audit

¹[(1) The balance-sheet and profit and loss account prepared in accordance with section 29 shall be audited by a person duly qualified under any law for the time being in force to be an auditor of companies.]

²[(1A) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking shall, before appointing re-appointing or removing any auditor or auditors, obtain the previous approval of the Reserve Bank.

(1B) Without prejudice to anything contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, where the Reserve Bank is of opinion that it is necessary in the public interest or in the interest of the banking company or its depositors so to do, ³[it may at any time by order direct that a special audit of the banking company’s accounts, for any such transaction or class of transactions or for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order either appoint a person duly qualified under any law for the time being in force to be an auditor of companies or direct the auditor of the banking company himself to conduct such special audit] and the auditor shall comply with such directions and make a report of such audit to the Reserve Bank and forward a copy thereof to the company.

(1C) The expenses of, or incidental to ³[the special audit] specified in the order made by the Reserve Bank shall be borne by the banking company.]

(2) The auditor shall have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by ⁴[section 227 of the Companies Act, 1956 (1 of 1956), ⁵[,and auditors, if any, appointed by the law establishing, constituting or forming the banking company concerned.]

(3) In addition to the matters which under the aforesaid Act the auditor is required to state in his report, he shall, in the case of a banking company incorporated ⁶[in India], state in his report,—

(a) whether or not the information and explanation required by him have been found to be satisfactory;

(b) whether or not the transactions of the company which have come to his notice have been within the powers of the company;

(c) whether or not the returns received from branch offices of the company have been found adequate for the purposes of his audit;

(d) whether the profit and loss account shows a true balance ⁷[of profit or loss] for the period covered by such account;

(e) any other matter which he considers should be brought to the notice of the shareholders of the company.

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1. Subsituted by Act 58 of 1968, Section 8, for sub-section (1) w.e.f. 1-2-1969.

2. Inserted by Act 58 of 1968, Section 8 w.e.f. 1-2-1969.

3. Subsituted by Act 66 of 1988, Section 9, for certain words w.e.f. 30-12-1988.

4. Subsituted by Act 58 of 1968, Section 8 for “section 145 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 1-2-1969.

5. Inserted by Act 66 of 1988, Section 9, for certain words w.e.f. 30-12-1988.

6. Subsituted by Act 20 of 1950, Section 3, for “in a State.”

7. Subsituted by Act 55 of 1963, Section 15, for “of profit and loss”.

Section 31. Submission of returns

The accounts and balance-sheet referred to in section 29 together with the auditor’s report shall be published in the prescribed manner and three copies thereof shall be furnished as returns to the Reserve Bank within three months from the end of the period to which they refer:

Provided that the Reserve Bank may in any case extend the said period of three months for the furnishing of such returns by a further period not exceeding three months:

¹[Provided further that a regional rural bank shall furnish such returns also to the National Bank.]

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1. Inserted by Act 58 of 1968, Section 8 w.e.f. 1-2-1969.

Section 32. Copies of balance-sheets and accounts to be sent to registrar

¹[(1) Where a banking company in any year furnishes its accounts and balance-sheet in accordance with the provisions of section 31, it shall at the same time send to the registrar three copies of such accounts and balance-sheet and of the auditor’s report, and where such copies are so sent, it shall not be necessary to file with the registrar, in the case of a public company, copies of the accounts and balance-sheet and of the auditor’s report, and, in the case of a private company, copies of the balance-sheet and of the auditor’s report as required by sub-section (1) of section 220 of the Companies Act, 1956 (1 of 1956); and the copies so sent shall be chargeable with the same fee and shall be dealt with in all respects as if they were filed in accordance with that section.]

(2) When in pursuance of sub-section (2) of section 27 the Reserve Bank requires any additional statement or information in connection with the balance-sheet and accounts furnished under section 31, the banking company shall, when supplying such statement or information, send a copy thereof to the registrar.

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1. Subsituted by Act 33 of 1959, Section 19 w.e.f. 1-10-1959.

Section 33. Display of audited balance-sheet by companies incorporated outside India

Every banking company incorporated ¹[outside India] shall, not later than the first Monday in August of any year in which it carries on business, display in a conspicuous place in its principal office and in every branch office ²[in India] a copy of its last audited balance-sheet and profit and loss account prepared under section 29, and shall keep the copy so displayed until replaced by a copy of the subsequent balance-sheet and profit and loss account so prepared, and every such banking company shall display in like manner copies of its complete audited balance-sheet and profit and loss account relating to its banking business as soon as they are available, and shall keep the copies so displayed until copies of such subsequent accounts are available.

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1. Subsituted by Act 20 of 1950, Section 3, for “outside the States”.

2. Subsituted by Act 20 of 1950, Section 3, for “in a State”.

Section 34. Accounting provisions of this Act not retrospective

Nothing in this Act shall apply to the preparation of accounts by a banking company and the audit and submission thereof in respect of any accounting year which has expired prior to the commencement of this Act, and notwithstanding the other provisions of this Act, such accounts shall be prepared, audited and submitted in accordance with the law in force immediately before the commencement of this Act.

Section 34A. Production of documents of confidential nature

¹[Production of documents of confidential nature. (1) Notwithstanding anything contained in section 11 of the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force, no banking company shall, in any proceeding under the said Act or in any appeal or other proceeding arising therefrom or connected therewith, be compelled by any authority before which such proceeding is pending to produce, or give inspection of, any of its books of account or other document or furnish or disclose any statement or information, when the banking company claims that such document, statement or information is of a confidential nature and that the production or inspection of such document or the furnishing or disclosure of such statement or information would involve disclosure of information relating to—

(a) any reserves not shown as such in its published balance-sheet; or

(b) any particulars not shown therein in respect of provisions made for bad and doubtful debts and other usual or necessary provisions.

(2) If, in any such proceeding in relation to any banking company other than the Reserve Bank of India, any question arises as to whether any amount out of the reserves or provisions referred to in sub-section (1) should be taken into account by the authority before which such proceeding is pending, the authority may, if it so thinks fit, refer the question to the Reserve Bank and the Reserve Bank shall, after taking into account principles of sound banking and all relevant circumstances concerning the banking company, furnish to the authority a certificate stating that the authority shall not take into account any amount as such reserves and provisions of the banking company or may take them into account only to the extent of the amount specified by it in the certificate, and the certificate of the Reserve Bank on such question shall be final and shall not be called in question in any such proceeding.

²[(3) For the purposes of this section “banking company” includes the Reserve Bank, the Development Bank, the Exim Bank, ³[the Reconstruction Bank], ⁴[the National Housing Bank], the National Bank, ⁵[the Small Industries Bank] the State Bank of India, a corresponding new bank, a regional rural bank and a subsidiary bank.]

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1. Inserted by Act 23 of 1960, Section 2.

2. Subsituted by Act 1 of 1984, Section 28, for sub-section (3) w.e.f. 15-2-1984.

3. Inserted by Act 62 of 1984, Section 71 and Third Schedule w.e.f. 20-3-1985.

4. Inserted by Act 53 of 1987, Section 56 and Second Schedule w.e.f. 9-7-1988.

5. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Part III, w.e.f. 25-10-1989.

Section 35. Inspection

(1) Notwithstanding anything to the contrary contained in ¹[section 235 of the Companies Act, 1956 (1 of 1956)], the Reserve Bank at any time may, and on being directed so to do by the Central Government shall, cause an inspection to be made by one or more of its officers of any banking company and its books and accounts; and the Reserve Bank shall supply to the banking company a copy of its report on such inspection.

²[(1A) (a) Notwithstanding anything to the contrary contained in any law for the time being in force and without prejudice to the provisions of sub-section (1), the Reserve Bank, at any time, may also cause a scrutiny to be made by any one or more of its officers, of the affairs of any banking company and its books and accounts; and

(b) a copy of the report of the scrutiny shall be furnished to the banking company if the banking company makes a request for the same or if any adverse action is contemplated against the banking company on the basis of the scrutiny.]

(2) It shall be the duty of every director or other officer ³[or employee] of the banking company to produce to any officer making an inspection under sub-section (1) [or a scrutiny under sub-section (1A)] all such books, accounts and other documents in his custody or power and to furnish him with any statements and information relating to the affairs of the banking company as the said officer may require of him within such time as the said officer may specify.

(3) Any person making an inspection under sub-section (1) ⁴[for a scrutiny under sub-section (1A)] may examine on oath any director or other officer ³[or employee] of the banking company in relation to its business, and may administer an oath accordingly.

(4) The Reserve Bank shall, if it has been directed by the Central Government to cause an inspection to be made, and may, in any other case, report to the Central Government on any inspection ⁴[or scrutiny] made under this section, and the Central Government, if it is of opinion after considering the report that the affairs of the banking company are being conducted to the detriment of the interests of its depositors, may, after giving such opportunity to the banking company to make a representation in connection with the report as, in the opinion of the Central Government, seems reasonable, by order in writing—

(a) prohibit the banking company from receiving fresh deposits;

(b) direct the Reserve Bank to apply under section 38 for the winding up of the banking company:

Provided that the Central Government may defer, for such period as it may think fit, the passing of an order under this sub-section, or cancel or modify any such order, upon such terms and conditions as it may think fit to impose.

(5) The Central Government may, after giving reasonable notice to the banking company, publish the report submitted by the Reserve Bank or such portion thereof as may appear necessary.

⁵[Explanation. —For the purpose of this section, the expression “banking company” shall include—

(i) in the case of a banking company incorporated outside India, all its branches in India; and

(ii) in the case of a banking company incorporated in India—

(a) all its subsidiaries formed for the purpose of carrying on the business of banking exclusively outside India; and

(b) all its branches whether situated in India or outside India.]

⁶[(6) The powers exercisable by the Reserve Bank under this section in relation to regional rural banks may (without prejudice to the exercise of such powers by the Reserve Bank in relation to any regional rural bank whenever it considers necessary so to do) be exercised by the National Sank in relation to the regional rural banks, and accordingly, sub-sections (1) to (5) shall apply in relation to regional rural banks as if every reference therein to the Reserve Bank included also a reference to the National Bank.]

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1. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “section 138 of the Indian companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Inserted by Act 1 of 1984, Section 29 w.e.f. 15-2-1984.

3. Inserted by Act 55 of 1963, Section 17 w.e.f. 1-2-1964.

4. Inserted by Act 1 of 1984, Section 29 w.e.f. 15-2-1984.

5. Added Act 33 of 1959 Section 20 w.e.f. 1-10-1959.

6. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II. W.e.f. 1-5-1982.

Section 35A. Power of the Reserve Bank to give directions

¹[Power of the Reserve Bank to give directions. (1) Where the Reserve Bank is satisfied that—

(a) in the ²[public interest]; or

³[(aa) in the interest of banking policy; or]

(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

(c) to secure the proper management of any banking company generally,

it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.

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1. Subsituted by Act 7 of 1961, Section 2, for “national interest”.

2. Subsituted by Act 7 of 1961, Section 2, for “national interest”.

3. Inserted by Act 58 of 1968, Section 10 w.e.f. 1-2-1969.

Section 35B. Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve Bank

(1) In the case of a banking company—

(a) no amendment of any provision relating to ¹[the maximum permissible number of directors or] the ²[appointment or re-appointment or termination of appointment or remuneration of a chairman, a] ³[managing director or any other director, whole-time or otherwise] or of a manager or a chief executive officer by whatever name called, whether that provision be contained in the company’s memorandum or articles of association, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors shall have effect unless approved by the Reserve Bank;

⁴[(b) no appointment or re-appointment or termination of appointment of a chairman, a managing or whole-time director, manager or chief executive officer by whatever name called, shall have effect unless such appointment, re-appointment or termination of appointment is made with the previous approval of the Reserve Bank.]

⁵[Explanation. —For the purpose of this sub-section, any provision conferring any benefit or providing any amenity or perquisite, in whatever form, whether during or after the termination of the term of office ⁶[of the chairman or the manager] or the chief executive officer by whatever name called or the managing director, or any other director, whole-time or otherwise, shall be deemed to be a provision relating to his remuneration.]

(2) Nothing contained in sections ⁷[268 and 269, the proviso to sub-section (3) of section 309, sections 310 and 311, the proviso to section 387, and section 388] (in so far as section 388 makes the ⁸[provisions of sections 269, 310] and 311 apply in relation to the manager of a company) of the Companies Act, 1956 (1 of 1956), shall ⁹[apply to any matter in respect of which the approval of the Reserve Bank has to be obtained under sub-section (1)].

¹⁰[(2A) Nothing contained in section 198 of the Companies Act, 1956 (1 of 1956) shall apply to a banking company and the provisions of sub-section (1) of section 309 and of section 387 of that Act shall, in so far as they are applicable to a banking company, have effect as if no reference had been made in the said provisions to section 198 of that Act.]

(3) No act done by a person ¹¹[as chairman or a managing or whole-time director] or a director not liable to retire by rotation or a manager or a chief executive officer by whatever name called, shall be deemed to be invalid on the ground that it is subsequently discovered that his ¹²[appointment or reappointment] had not taken effect by reason of any of the provisions of this Act; but nothing in this sub-section shall be construed as rendering valid any act done by such person after his ¹³[appointment or reappointment] has been shown to the banking company not to have had effect.]

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1. Inserted by Act 1 of 1984, Section 30 w.e.f. 15-2-1984.

2. Subsituted by Act 58 of 1968, Section 11, for “appointment or reappointment or renuneration of a” w.e.f. 1-2-1969.

3. Subsituted by Act 33 of 1959, Section 21, for “managing or whole-time director or of a director no liable to retire by rotation” w.e.f. 1-10-1959.

4. Subsituted by Act 58 of 1968, Section 11, for clause (b) w.e.f. 1-2-1969.

5. Added by Act 33 of 1959, Section 21 w.e.f. 1-10-1959.

6. Subsituted by Act 58 of 1968, Section 11, for “of the manager” w.e.f. 1-2-1969.

7. Subsituted by Act 36 of 1962, Section 7, for “268, 269, 310, 311 and 388”.

8. Subsituted by Act 1 of 1984, Section 30 for “provisions of sections 310” w.e.f. 15-2-1984.

9. Subsituted by Act 33 of 1959, Section 21, for certain words w.e.f. 1-10-1959.

10. Inserted by Act 1 of 1984, Section 30 w.e.f. 15-2-1984.

11. Subsituted by Act 58 of 1968, Section 12, for “as a managing or whole-time director.

12. Subsituted by Act 58 of 1968, Section 11, for “appointment” w.e.f. 1-2-1969.

13. Subsituted by Act 58 of 1968, Section 11, for “appointment” w.e.f. 1-2-1969.

Section 36. Further powers and functions of Reserve Banks

(1) The Reserve Bank may—

(a) caution or prohibit banking companies or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company;

(b) on a request by the companies concerned and subject to the provision of section ¹[44A], assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies;

(c) give assistance to any banking company by means of the grant of a loan or advance to it underclause (3) of sub-section (1) of section 18 of the Reserve Bank of India Act, 1934 (2 of 1934);

²[(d)³[at any time, if it is satisfied that in the public interest or in me interest of banking policy or for preventing the affairs of the banking company being conducted in a manner detrimental to the interests of the banking company or its depositors it is necessary so to do,] by order in writing and on such terms and conditions as may be specified therein—

(i) require the banking company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the banking company; or require an officer of the banking company to discuss any such matter with an officer of the Reserve Bank;

(ii) depute one or more of its officers to which the proceedings at any meeting of the Board of directors of the banking company or of any committee or of any other body constituted by it; require the banking company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank;

(iii) require the Board of directors of the banking company or any committee or any other body constituted by it to give in writing to any officer specified by the Reserve Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;

(iv) appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being conducted and make a report thereon;

(v) require the banking company to make, within such time as may be specified in the order, such changes in the management as the Reserve Bank may consider necessary ⁴[***].]

(2) The Reserve Bank shall make an annual report to the Central Government on the trend and progress of banking in the country, with particular reference to its activities under clause (2) of section 17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, for the strengthening of banking business throughout the country.

(3) The Reserve Bank may appoint such staff at such places as it considers necessary for the scrutiny of the returns, statements and information furnished by banking companies under this Act, and generally to ensure the efficient performance of its functions under this Act.

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1. Subsituted by Act 33 of 1959, Section 22 for “45” w.e.f. 1-10-1959.

2. Subsituted by Act 95 of 1956, Section 8, for clause (d) w.e.f. 14-1-1957.

3. Subsituted by Act 58 of 1968, Section 12, for certain words w.e.f. 1-2-1969.

4. Certain words omitted by Act 58 of 1968, Section 12 w.e.f. 1-2-1969.

Section 36 A. Certain provisions of the Act not to apply to certain banking companies

¹[Certain provisions of the Act not to apply to certain banking companies. (1) The provisions of section II, sub-section (1) of section 12, and sections 17, 18, 24 and 25 shall not apply to a banking company—

(a) which, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959), has been refused a licence under section 22, or prohibited from accepting fresh deposits by a compromise, arrangement or scheme sanctioned by a court or by any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposits by virtue of any alteration made in its memorandum; or

(b) whose licence has been cancelled under section 22, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959).

(2) Where the Reserve Bank is satisfied that any such banking company as is referred to in sub-section (1) has repaid, or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the Reserve Bank may, by notice published in the Official Gazette, notify that the banking company has ceased to be a banking company within the meaning of this Act, and thereupon all the provisions of this Act applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice.]

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1. Inserted by Act 33 of 1959, Section 23 w.e.f. 1-10-1969.

Part II A – Control over Management

Section 36 AA. Power of Reserve Bank to remove managerial and other persons from office

¹[PART IIA: CONTROL OVER MANAGEMENT

(1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a banking company being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of any banking company it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, ²[any chairman, director,] chief executive officer (by whatever name called) or other officer or employee of the banking company.

(2) No order under sub-section (1) shall be made ³[unless the chairman, director] or chief executive officer or other officer or employee concerned has been given a reasonable opportunity of making a representation to the Reserve Bank against the proposed order:

Provided that if, in the opinion of the Reserve Bank, any delay would be detrimental to the interests of the banking company or its depositors, the Reserve Bank may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, ⁴[the chairman or, as the case may be, director or chief executive officer] or other officer or employee, shall not, with effect from the date of such order—

(a) ⁵[act as such chairman or director] or chief executive officer or other officer or employee of the banking company;

(b) in any way, whether directly or indirectly, be concerned with, or take part in the management of, the banking company.

(3)(a) Any person against whom an order of removal has been made under subsection (1) may, within thirty days from the date of communication to him of the order, prefer an appeal to the Central Government.

(b) The decision of the Central Government on such appeal, and subject thereto, the order made by the Reserve Bank under sub-section (I), shall be final and shall not be called into question in any court.

(4) Where any order is made in respect of ⁶[a chairman, director] or chief executive officer or other officer or employee of a banking company under sub-section (1), he shall cease to be ⁷[a chairman or, as the case may be, a director,] chief executive officer or other officer or employee of the banking company and shall not, in any way, whether directly or indirectly, be concerned with, or take part in the management of, any banking company for such period not exceeding five years as may be specified in the order.

(5) If any person in respect of whom an order is made by the Reserve Bank under sub-section (1) or under the proviso to sub-section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.

(6) Where an order under sub-section (1) has been made, the Reserve Bank may, by order in writing, appoint a suitable person in place of ⁸[the chairman or director], or chief executive officer or other officer or employee who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.

(7) Any person appointed as ⁹[chairman, director or chief executive officer] or other officer or employee under this section shall, —

(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;

(b) not incur any obligation or liability by reason only of his being a ⁹[chairman, director or chief executive officer] or other officer or employee or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.

(8) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.

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1. Part IIA (Sections 36AA to 36AC) Indicated by Act 55 of 1963, Section 18 w.e.f. 1-2-1964.

2. Substituted by Act 58 of 1968, Section 13, for “any director” w.e.f. 1-2-1969.

3. Substituted by Act 58 of 1968, Section 13, for “unless the director” w.e.f. 1-2-1969.

4. Substituted by Act 58 of 1968, Section 13, for “the director or, as the case may be, chief executive officer” w.e.f. 1-2-1969.

5. Substituted by Act 58 of 1968, Section 13, for “act as such director” w.e.f. 1-2-1969.

6. Substituted by Act 58 of 1968, Section 13, for “a director” w.e.f. 1-2-1969.

7. Substituted by Act 58 of 1968, Section 13, for “a director or as the case may be” w.e.f. 1-2-1969.

8. Substituted by Act 58 of 1968, Section 13, for “the director” w.e.f. 1-2-1969.

9. Substituted by Act 58 of 1968, Section 13, for “director or chief executive officer” w.e.f. 1-2-1969.

Section 36 AAA. Supersession of Board of directors of a multi-State co-operative bank

¹[Supersession of Board of directors of a multi-State co-operative bank. (1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a multi-State co-operative bank being conducted in a manner detrimental to the interest of the depositors of the multi-State co-operative bank or for securing the proper management of the multi-State co-operative bank, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede the Board of directors of such multi-State co-operative bank for a period not exceeding five years as may be specified in the order, which may be extended from time to time, so, however, that total period shall not exceed five years.

(2) The Reserve Bank may, on supersession of the Board of directors of the multi-State co-operative bank under sub-section (1) appoint an administrator for such period as it may determine.

(3) The Reserve Bank may issue such directions to the Administrator as it may deem appropriate and the Administrator shall be bound to follow such directions.

(4) Upon making the order of supersession of the Board of directors of a multi-State co-operative bank, -

(a) The Chairman, managing director and other directors as from the date of supersession of the Board shall vacate their offices as such;

(b) All the powers, functions and duties which may, by or under the provisions of the Multi-State Co-operative Societies Act, 2002 or this Act or any other law for the time being in force, be exercised and discharged by or on behalf of the Board of directors of such a multi-State Co-operative bank or by a resolution passed in general meeting of such co-operative bank, shall, until the Board of directors of such co-operative bank is reconstituted, be exercised and discharged by the Administrator appointed by the Reserve Bank under sub-section (2):

Provided that the power exercised by the Administrator shall be valid not withstanding that such power is exercisable by a resolution passed in the general meeting of such multi-State co-operative bank.

(5) (a) The Reserve Bank may constitute a committee of three or more persons who have experience in law, finance, banking, administration or accountancy to assist the Administrator in discharge of his duties.

(b) The committee shall meet at such times and places and observe such rules of procedure as may be specified by the Reserve Bank.

(6) The salary and allowances to the Administrator and the members of the committee constituted by the Reserve Bank shall be such as may be specified by the Reserve Bank and may be payable by the concerned multi-State co-operative bank.

(7) On and before expiration of period of supersession of the Board of directors as specified in the order issued under sub-section (1), the Administrator of the multi-State co-operative bank shall call the general meeting of the society to elect new directors.

(8) Notwithstanding anything contained in any other law or in any other contract, or bye-laws of a multi-State co-operative bank, no person shall be entitled to claim any compensation for the loss or termination of his office.

(9) The Administrator appointed under sub-section (2) shall vacate office immediately after the board of directors of the multi-State co-operative society has been constituted. ]

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1. Inserted by Act 24 of 2004.

Section 36 AAB. Order of winding up of multi-State co-operative bank to be final in certain cases

¹[Order of winding up of multi-State co-operative bank to be final in certain cases. Where a multi-State co-operative bank, being an eligible co-operative bank, has been registered under section 13A of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, as an insured bank, and subsequently-

(a) in pursuance of a scheme prepared with the previous approval of the Reserve Bank under section 18 of the Multi-State Co-operative Societies Act, 2002, an order sanctioning a scheme of compromise and arrangement or reorganisation or reconstruction has been made; or

(b) on requisition by the Reserve Bank, an order for winding up of the multi-State co-operative bank has been made under section 87 of the Multi-State Co-operative Societies Act, 2002; or

(c) an order for the supersession of the Board the appointment of an administrator therefor has been made under section 36AAA,

Such order for sanctioning the scheme of compromise and arrangement or reorganisation or reconstruction under clause (a) or the winding up of the mult-State Co-operative Bank under clause (b) or any order for the supersession of the Board and the appointment of an administrator under clause (c) shall not be liable to be called in question in any manner.]

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1. Inserted by Act 24 0f 2004.

Section 36 AAC. Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank

¹[Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank. Where a multi-State co-operative bank, being an insured bank within the meaning of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, is wound up and the Deposit Insurance Corporation has become liable to the depositors’ of the insured bank under subsection (1) or subsection (2) of section 16 of the Act, the Deposit Insurance Corporation shall be reimbursed by the liquidator or such other person in the circumstances, to the extent and in the manner provided in section 21 of the Act.

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1. Inserted by Act 24 of 2004.

Section 36 AB. Power of Reserve Bank to appoint additional directors

(1) If the Reserve Bank is of ¹[opinion that in the interest of banking policy or in the public interest or] in the interests of the banking company or its depositors it is necessary so to do, it may, from time to time by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the banking company:

²[***]

(2) Any person appointed as additional director in pursuance of this section—

(a) shall hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;

(b) shall not incur any obligation or liability by reason only of his being a director or for any thing done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and

(c) shall not be required to hold qualification-shares in the banking company.

(3) For the purpose of reckoning any proportion of the total number of directors of the banking company, any additional director appointed under this section shall not be taken into account.

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1. Substituted by Act 58 of 1968, Section 14, for “opinion that” w.e.f. 1-2-1969.

2. Proviso omitted by Act 1 of 1984, Section 31 w.e.f. 15-2-1984.

Section 36 AC. Part IIA to override other laws

Any appointment or removal of a director, chief executive officer or other officer or employee in pursuance of section 36AA or section 36AB shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or any other law for the time being in force or in any contract or any other instrument.]

Part II B – Prohibition of Certain Activities in Relation to Banking Companies

Section 36 AD. Punishments for certain activities in relation to banking companies

¹[PART IIB: PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES

(1) No person shall—

(a) obstruct any person from lawfully entering or leaving any office or place of business of a banking company or from carrying on any business there, or

(b) hold, within the office or place of business of any banking company, any demonstration which is violent or which prevents, or is calculated to prevent, the transaction of normal business by the banking company, or

(c) act in any manner calculated to undermine the confidence of the depositors in the banking company.

(2) Whoever contravenes any provision of sub-section (1) without any reasonable excuse shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

²[(3) [*****] <![endif]>

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1. Parts IIB and IIC (sections 36 AD to 36 AJ) Inserted by Act 58 of 1968, Section 15 w.e.f. 1-2-1969.

2. Text omitted by Act ——— Previous text was “For the purposes of this section “banking company” includes the Reserve Bank, the Development Bank, the Exim Bank, [the Reconstruction Bank] [the National Housing Bank] the National Bank, [the Small Industries Bank] the State Bank of India, a corresponding new bank, a regional rural bank and a subsidiary bank”

Part II C – Acquisition of the Undertakings of Banking Companies in Certain Cases

Section 36 AE. Power of Central Government to acquire undertakings of banking companies in certain cases

(1) If, upon receipt of a report from the Reserve Bank, the Central Government is satisfied that a banking company—

(a) has, no more than one occasion, failed to comply with the directions given to it in writing under section 21 or section 35A, in so far as such directions relate to banking policy, or

(b) is being managed in a manner detrimental to the interests of its depositors, and that—

(i) in the interests of the depositors of such banking company, or

(ii) in the interest of banking policy, or

(iii) for the better provision of credit generally or of credit to any particular section of the community or in any particular area,

it is necessary to acquire the undertaking of such banking company, the Central Government may, after such consultation with the Reserve Bank as it thinks fit, by notified order, acquire the undertaking of such company (hereinafter referred to as the acquired bank) with effect from such date as may be specified in this behalf by the Central Government (hereinafter referred to as the appointed day):

Provided that no undertaking of any banking company shall be so acquired unless such banking company has been given a reasonable opportunity of showing cause against the proposed action.

Explanation. — In this Part, —

(a) “notified order” means an order published in the Official Gazette;

(b) “undertaking”, in relation to a banking company incorporated outside India, means the undertaking of the company in India.

(2) Subject to the other provisions contained in this Part, on the appointed day, the undertaking of the acquired bank and all the assets and liabilities of the acquired bank shall stand transferred to, and vest in, the Central Government.

(3) The undertaking of the acquired bank and its assets and liabilities shall be deemed to include all rights, powers, authorities and privileges and all property, whether movable or immovable, including, in particular, cash balances, reserve funds, investments, deposits and all other interests and rights in, or arising out of, such property as may be in the possession of or held by, the acquired bank immediately before the appointed day and all books, accounts and documents relating thereto, and shall also be deemed to include all debts, liabilities and obligations, of whatever kind, then existing of the acquired bank.

(4) Notwithstanding anything contained in sub-section (2), the Central Government may, if it is satisfied that the undertaking of the acquired bank and its assets and liabilities should, instead of vesting in the Central Government, or continuing to so vest, vest in a company established under any scheme made under this Part or in any corporation (hereinafter in this Part and in the Fifth Schedule referred to as the transferee bank) that Government may, by order, direct that the said undertaking,

including the assets and liabilities thereof, shall vest in the transferee bank either on the publication of the notified order or on such other date as may be specified in this behalf by the Central Government.

(5) Where the undertaking of the acquired bank and the assets and liabilities thereof vest in the transferee bank under sub-section (4), the transferee bank, shall, on and from the date of such vesting, be deemed to have become the transferee of the acquired bank and all the rights and liabilities in relation to the acquired bank shall, on and from the date of such vesting, be deemed to have been the rights and liabilities of the transferee bank.

(6) Unless otherwise expressly provided by or under this Part, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the appointed day and to which the acquired bank is a party or which are in favour of the acquired bank shall be of as full force and effect against or in favour of the Central Government, or as the case may be, of the transferee bank, and may be enforced or acted upon as fully and effectually as if in the place of the acquired bank the Central Government or the transferee bank had been a party thereto or as if they had been issued in favour of the Central Government or the transferee bank, as the case may be.

(7) If, on the appointed day, any suit, appeal or other proceeding of whatever nature is pending by or against the acquired bank, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the acquired bank or of anything contained in this Part, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the Central Government or the transferee bank as the case may be.

Section 36 AF. Power of the Central Government to make scheme

(1) The Central Government may, after consultation with the Reserve Bank, make a scheme for carrying out the purposes of this Part in relation to any acquired bank.

(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme may provide for all or any of the following matters, namely: —

(a) the corporation, or the company incorporated for the purpose, to which the undertaking including the property, assets and liabilities of the acquired bank may be transferred, and the capital, constitution, name and office thereof;

(b) the constitution of the first Board of management (by whatever name called) of the transferee bank, and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient;

(c) the continuance of the services of all the employees of the acquired bank (excepting such of them as, not being workmen within the meaning of the Industrial Disputes Act, 1947(14 of 1947), are specifically mentioned in the scheme] in the Central Government or in the transferee bank, as the case may be, on the same terms and conditions so far as may be, as are specified in clauses (i) and (j) of sub-section (5) of section 45;

(d) the continuance of the right of any person who, on the appointed day, is entitled to or is in receipt of, a pension or other superannuation or compassionate allowance or benefit, from the acquired bank or any provident, pension or other fund or any authority administering such fund, to be paid by, and to receive from, the Central Government or the transferee bank, as the case may be, or any provident, pension or other fund or any authority administering such fund, the same pension, allowance or benefit so long as he observes the conditions on which the pension, allowance or benefit was granted, and if any question arises whether he has so observed such conditions, the question shall be determined by the Central Government and the decision of the Central Government thereon shall be final;

(e) the manner of payment of the compensation payable in accordance with the provisions of this Part to the shareholders of the acquired bank, or where the acquired bank is a banking company incorporated outside India, to the acquired bank in full satisfaction of their, or as the case may be, its claims;

(f) the provision, if any, for completing the effectual transfer to the Central Government or the transferee bank of any asset or any liability which forms part of the undertaking of the acquired bank in any country outside India;

(g) such incidental, consequential and supplemental matters as may be necessary to secure that the transfer of the business, property, assets and liabilities of the acquired bank to the Central Government or transferee bank, as the case may be, is effectual and complete.

(3) The Central Government may, after consultation with the Reserve Bank, by notification in the Official Gazette, add to, amend or vary any scheme made under this section.

(4) Every scheme made under this section shall be published in the Official Gazette.

(5) Copies of every scheme made under this section shall be laid before each House of Parliament as soon as may be after it is made.

(6) The provisions of this Part and of any scheme made there under shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.

(7) Every scheme made under this section shall be binding on the Central Government or, as the case may be, on the transferee bank and also on all members, creditors, depositors and employees of the acquired bank and of the transferee bank and on any other person having any right, liability, power or function in relation to, or in connection with, the acquired bank or the transferee bank, as the case may be.

Section 36 AG. Compensation to be given to shareholders of the acquired bank

(I) Every person who, immediately before the appointed day, is registered as a holder of shares in the acquired bank or, when the acquired bank is a banking company incorporated outside India, the acquired bank, shall be given by the Central Government, or the transferee bank, as the case may be, such compensation in respect of the transfer of the undertaking of the acquired bank as it determined in accordance with the principles contained in the Fifth Schedule.

(2) Nothing contained in sub-section (1) shall affect the rights inter se between the holder of any share in the acquired bank and any other person who may have any interest in such shares 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 Central Government, or the transferee bank.

(3) The amount of compensation to be given in accordance with the principles contained in the Fifth Schedule shall be determined in the first instance by the Central Government, or the transferee bank, as the case may be, in consultation with the Reserve Bank, and shall be offered by it to all those to whom compensation is payable under sub-section (1) in full satisfaction thereof.

(4) If the amount of compensation offered in terms of sub-section (3) is not acceptable to any person to whom the compensation is payable, such person may, before such date as may be notified by the Central Government in the Official Gazette, request the Central Government in writing, to have the matter referred to the Tribunal constituted under section 36AH.

(5) If, before the date notified under sub-section (4), the Central Government receives requests, in terms of that sub-section, from not less than one-fourth in number of the shareholders holding not less than one-fourth in value of the paid-up share capital of the acquired bank, or, where the acquired bank is a banking company incorporated outside India, from the acquired bank, the Central Government shall have the matter referred to the Tribunal for decision.

(6) If, before the date notified under sub-section (4), the Central Government does not receive requests as provided in that sub-section, the amount of compensation offered ‘ under sub-section (3), and where a reference has been made to the Tribunal, the amount determined by it, shall be the compensation payable under sub-section (!) and shall be final and binding on all parties concerned.

Section 36 AH. Constitution of the Tribunal

(1) The Central Government may, for the purpose of this Part, constitute a Tribunal which shall consist of a Chairman and two other members.

(2) The Chairman shall be a person who is, or has been, a Judge of a High Court or of the Supreme Court, and, of the two other members, one shall be a person, who, in the opinion of the Central Government, has had experience of commercial banking and the other shall be a person who is a chartered accountant within the meaning of the Chartered Accountants’ Act, 1949 (38 of 1949).

(3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the Tribunal, the Central Government may fill the vacancy by appointing another person thereto in accordance with the provisions of sub-section (2), and any proceeding may be continued before the Tribunal, so constituted, from the stage at which the vacancy occurred.

(4) The Tribunal may, for the purpose of determining any compensation payable under this part, choose one or more persons having special knowledge or experience of any relevant matter to assist it in the determination of such compensation.

Section 36 AI. Tribunal to have powers of a civil court

(1) The Tribunal shall have the powers of a civil court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908) in respect of the following matters, namely :—

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses or documents.

(2) Notwithstanding anything contained in sub-section (1), or in any other law for the time being in force, the Tribunal shall not compel the Central Government or the Reserve Bank, —

(a) to produce any books of account or other documents which the Central Government, or the Reserve Bank, claims to be of a confidential nature;

(b) to make any such books or documents part of the record of the proceedings before the Tribunal; or

(c) to give inspection of any such books or documents to any party before it or to any other person.

Section 36 AJ. Procedure of the Tribunal

(1) The Tribunal shall have power to regulate its own procedure.

(2) The Tribunal may hold the whole or any part of its inquiry in camera

(3) Any clerical or arithmetical error in any order of the Tribunal or any error arising therein from any accidental slip or omission may, at any time, be corrected by the Tribunal either of its own motion or on the application of any of the parties.]

Part III – Suspension of Business and Winding up of Banking Companies

Section 36 B. High Court defined

¹[²[High Court defined. In this Part and in Part IIIA “High Court”, in relation to a banking company, means the High Court exercising jurisdiction in the place where the registered office of the banking company is situated or, in the case of a banking company incorporated outside India, where its principal place of business in India is situated.]]

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1. Inserted by Act 52 of 1953, Section 3.

2. Section 36A renumbered as section 36B by Act 33 of 1959, Section 24 w.e.f. 1-10-1959.

Section 37. Suspension of business

(1) The ¹[High Court] may on the application of a banking company which is temporarily unable to meet its obligations make an order (a copy of which it shall cause to be forwarded to the Reserve Bank) staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.

(2) No such application shall be maintainable unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts if the application is granted:

Provided that the ¹[High Court] may, for sufficient reasons, grant relief under this section even if the application is not accompanied by such report, and where such relief is granted, the 3[High Court] shall call for a report from the Reserve Bank on the affairs of the banking company on receipt of which it may either rescind any order already passed or pass such further orders thereon as may be just and proper in the circumstances.

²[(3) When an application is made under sub-section (1), the High Court may appoint a special officer who shall forthwith take into his custody or under his control all the assets, books, documents, effects and actionable claims to which the banking company is or appears to be entitled and shall also exercise such other powers as the High Court may deem fit to confer on him, having regard to the interests of the depositors of the banking company.]

³[(4) Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which an order under sub-section (1) has been made, are being conducted in a manner detrimental to the interests of the depositors, it may make an application to the High Court for the winding up of the company, and where any such application is made, the High Court shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section.]

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1. Substituted by Act 52 of 1953, Section 4, for “Court”.

2. Inserted by Act 52 of 1953, Section 5.

3. Inserted by Act 33 of 1959, Section 25 w.e.f. 1-10-1959.

Section 38. Winding up by High Court

¹[Winding up by High Court. (1) Notwithstanding anything contained in section 391, section 392, section 433 and section 583 of the Companies Act, 1956 (1 of 1956), but without prejudice to its powers under sub-section (1) of section 37 of this Act, the High Court shall order the winding up of a banking company—

(a) if the banking company is unable to pay its debts; or

(b) if an application for its winding up has been made by the Reserve Bank under section 37 or this section.

(2) The Reserve Bank shall make an application under this section for the winding up of a banking company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35.

(3) The Reserve Bank may make an application under this section for the winding up of a banking company—

(a) if the banking company—

(i) has failed to comply with the requirements specified in section 11; or

(ii) has by reason of the provisions of section 22 become disentitled to carry on banking business in India; or

(iii) has been prohibited from receiving fresh deposits by an order under clause (a) of sub-section (4) of section 35 or under clause (b) of sub-section (3A) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); or

(iv) having failed to comply with any requirement of this Act other than the requirements laid in section 11, has continued such failure, or, having contravened any provision of this Act continued such contravention beyond such period or periods as may be specified in that behalf by the Reserve Bank from time to time, after notice in writing of such failure or contravention has been conveyed to the banking company; or

(b) if in the opinion of the Reserve Bank—

(i) a compromise or arrangement sanctioned by a court in respect of the banking company cannot be worked satisfactorily with or without modifications; or

(ii) the returns, statements or information furnished to it under or in pursuance of the provisions of this Act disclose that the banking company is unable to pay its debts; or

(iii) the continuance of the banking company is prejudicial to the interests of its depositors.

(4) Without prejudice to the provisions contained in section 434 of the Companies Act, 1956 (I of 1956) a banking company shall be deemed to be unable to pay its debts if it has refused to meet any lawful demand made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the Reserve Bank, or within five working days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking company is unable to pay its debts.

(5) A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by the Reserve Bank to the registrar.]

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1. Substituted by Act 33 of 1959, Section 26, for the former section w.e.f. 1-10-1954.

Section 38 A. Court liquidator

¹[Court liquidator. (1) There shall be attached to every High Court a Court liquidator to be appointed by the Central Government for the purpose of conducting all proceedings for the winding up of banking companies and performing such other duties in reference thereto as the High Court may impose.

²[***]

(4) Where having regard to the number of banking companies wound up and other circumstances of the case, the Central Government is of opinion that it is not necessary or expedient to attach for the time being a Court liquidator to a High Court, it may, from time to time, by notification in the Official Gazette, direct that this section shall not have effect in relation to that High Court.]

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1. Inserted by Act 52 of 1953, Section 6.

2. Sub-sections (2) and (3) omitted by Act 95 of 1956, Section 14 and Schedule w.e.f. 14-1-1957

Section 39. Reserve Bank to be official liquidator

¹[Reserve Bank to be official liquidator. ²[(1)] Notwithstanding anything contained in section 38A of this Act or in section 448 or section 449 of the Companies Act, 1956(1 of 1956), where in any proceeding for the winding up by the High Court of a banking company, an application is made by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or any other bank notified by the Central Government in this behalf or any individual, as stated in such application shall be appointed as the official liquidator of the banking company in such proceeding and the liquidator, if any, functioning in such proceeding shall vacate office upon such appointment.]

³[(2) Subject to such directions as may be made by the High Court, the remuneration of the official liquidator appointed under this section, the cost and expenses of this establishment and the cost and expenses of the winding up shall be met out of the assets of the banking company which is being wound up, and notwithstanding anything to the contrary contained in any other law for the time being in force, no fees shall be payable to the Central Government, out of the assets of the banking company.]

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1. Section 39 has successively been amended by Act 52 of 1953, sections. 4 and 7; Act 23 of 1955, Section 53 and Schedule IV; Act 79 of 1956, Section 43 and Schedule II; Act 95 of 1956, Section 14 and Schedule; Act 33 of 1959, Section 27 and Act 37 of 1960, Section 2. to read as above.

2. Section 39 renumbered as sub-section (1) of that section by Act 58 of 1968, Section 16 w.e.f. 1-2-1969.

3. Inserted by Act 58 of 1969, Section 16 with retrospective effect.

Section 39 A. Application of Companies Act to liquidators

¹[Application of Companies Act to liquidators. (1) All the provisions of the Companies Act, 1956 (1 of 1956), relating to a liquidator, in so far as they are not inconsistent with this Act, shall apply to or in relation to a liquidator appointed under section 38A or section 39.

(2) Any reference to the “official liquidator” in this Part and Part IIIA shall be construed as including a reference to any liquidator of a banking company.]

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1. Inserted by 33 of 1959, Section 28 w.e.f. 1-10-1959.

Section 40. Stay of proceedings

Notwithstanding anything to the contrary contained in ¹[section 466 of the Companies Act, 1956 (1 of 1956)], the ²[High Court] shall not make any order staying the proceedings in relation to the winding up of a banking company, unless the 2[High Court] is satisfied that an arrangement has been made whereby the company can pay its depositors in full as their claims accrue.

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1. Substituted by Act 95 of 1956, Section 14 and Schedule for “Section 173 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Substituted by Act 42 of 1953, Section 4, for “Court”.

Section 41. Preliminary report by official liquidator

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

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1. Substituted by Act 37 of 1960, Section 3, for section 41.

Section 41 A. Notice to preferential claimants and secured and unsecured creditors

Within fifteen days from the date of the winding up order of a banking company or where the winding up order has been made before the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), within one month from such commencement, the official liquidator shall, for the purpose of making an estimate of the debts and liabilities of the banking company (other that its liabilities and obligations to its depositors), by notice served in such manner as the Reserve Bank may direct, call upon—

(a) every claimant entitled to preferential payment under section 530 of the Companies Act, 1956(1 of 1956), and

(b) every secured and every unsecured creditor,

to send to the official liquidator within one month from the date of the service of the notice a statement of the amount claimed by him.

(2) Every notice under sub-section (1) sent to a claimant having a claim under section 530 of the Companies Act, 1956 (1 of 1956), shall state that if a statement of the claim is not sent to the official liquidator before the expiry of the period of one month from the date of the service, the claim shall not be treated as a claim entitled to be paid under section 530 of the Companies Act, 1956, in priority to all other debts but shall be treated as an ordinary debt due by the banking company.

(3) Every notice under sub-section (1) sent to a secured creditor shall require him to value his security before the expiry of the period of one month from the date of the service of the notice and shall state that if a statement of the claim together with the valuation of the security is not sent to the official liquidator before the expiry of the said period, then, the official liquidator shall himself value the security and such valuation shall be binding on the creditor.

(4) If a claimant fails of comply with the notice sent to him under sub-section (1), his claim will not be entitled to be paid under section 530 of the Companies Act, 1956 (1 of 1956), in priority to all other debts but shall be treated as an ordinary debt due by the banking company; and if a secured creditor fails to comply with the notice sent to him under sub-section (1), the official liquidator shall himself value the security and such valuation shall be binding on the creditor.]

Section 42. Power to dispense with meetings of creditors, etc.

Notwithstanding anything to the contrary contained in ¹[²[section 460] of the Companies Act, 1956 (1 of 1956)], the ³[High Court] may, in the proceedings for winding up a banking company, dispense with any meetings of creditors or contributories ⁴[***] if it considers that no object will be secured thereby sufficient to justify the delay and expense.

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1. Substituted by Act. 95 of 1956, Section 14 and Schedule, for “sections 178A and 183 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Substituted by Act 1 of 1984 Section 33, for “sections 460, 464 and 465” w.e.f. 15-2-1984.

3. Substituted by Act 52 of 1953 Section 4, for “Court”.

4. The words “or with the appointment of a committee of inspection” omitted by Act 1 of 1984, Section 33 w.e.f. 15-2-1984.

Section 43. Booked depositors’ credits to be deemed proved

¹[Booked depositors’ credits to be deemed proved. In any proceeding for the winding up of a banking company, every depositor of the banking company shall be deemed to have filed his claim for the amount shown in the books of the banking company as standing to his credit and, notwithstanding anything to the contrary contained in ²[section 474 of the Companies Act, 1956 (1 of 1956)], the High Court shall presume such claims to have been proved, unless the official liquidator shows that there is reason for doubting its correctness.]

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1. Substituted by Act 52 of 1953, Section 8, for section 43.

2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 191 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

Section 43 A. Preferential payments to depositors

¹[Preferential payments to depositors. (1) In every proceeding for the winding up of a banking company where a winding up order has been made, whether before or after the commencement of the Banking Companies (Second Amendment) Act, 1960, (37 of 1960) within three months from the date of the winding up order or where the winding up order has been made before such commencement, within three months therefrom, the preferential payments referred to in section 530 of the Companies Act, 1956 (1 of 1956), in respect of which statements of claims have been sent within one month from the date of the service of the notice referred to in section 41 A, shall be made by the official liquidator or adequate provision for such payments shall be made by him.

(2) After the preferential payments as aforesaid have been made or adequate provision has been made in respect thereof, there shall be paid within the aforesaid period of three months—

(a) in the first place to every depositor in the savings bank account of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less; and thereafter;

(b) in the next place, to every other depositor of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less,

in priority to all other debts from out of the remaining assets of the banking company available for payment to general creditors:

Provided that the sum total of the amounts paid under clause (a) and clause (b) to any one person who in his own name (and not jointly with any other person) is a depositor in (he savings bank account of the banking company and also a depositor in any other account, shall not exceed the sum of two hundred and fifty rupees.

(3) Where within the aforesaid period of three months full payment cannot be made of the amounts required to be paid under clause (a) or clause (b) of sub-section (2) with the assets in cash, the official liquidator shall pay within that period to every depositor under clause (a) or, as the case may be, clause (b) of that sub-section on a pro rata basis so much of the amount due to the depositor under that clause as the official liquidator is able to pay with those assets; and shall pay the rest of that amount to every such depositor as and when sufficient assets are collected by the official liquidator in cash.

(4) After payments have been made first to depositors in the savings bank account and then to the other depositors in accordance with the foregoing provisions, the remaining assets of the banking company available for payment to general creditors shall be utilised for payment on a pro rata basis of the debts of the general creditors and of the further sums, if any, due to the depositors; and after making adequate provision for payment on a pro rata basis as aforesaid of the debts of the general creditors, the official liquidator shall, as and when the assets of the company are collected in cash, make payment on a pro rata basis as aforesaid, of the further sums, if any, which may remain due to the depositors referred to in clause (a) and clause (b) of sub-section (2).

(5) In order to enable the official liquidator to have in his custody or under his control in cash as much of the assets of the banking company as possible, the securities given to every secured creditor may be redeemed by the official liquidator—

(a) where the amount due to the creditor is more than the value of the securities as assessed by him or, as the case may be, as assessed by the official liquidator, on payment of such value; and

(b) where the amount due to the creditor is equal to or less than the value of the securities as so assessed, on payment of the amount due:

Provided that where the official liquidator is not satisfied with the valuation made by the creditor, he may apply to the High Court for making a valuation,

(6) When any claimant, creditor or depositor to whom any payment is to be made in accordance with ²[the provisions of this section], cannot be found or is not readily traceable, adequate provision shall be made by the official liquidator for such payment.

(7) For the purposes of this section, the payments specified in each of the following clauses shall be treated as payments of a different class, namely: —

(a) payments to preferential claimants under section 530 of the Companies Act, 1956 (1 of 1956);

(b) payments under clause (a) of sub-section (2) to the depositors in the savings bank account;

(c) payments under clause (b) of sub-section (2) to the other depositors;

(d) payments to the general creditors and payments to the depositors in addition to those specified in clause (a) and clause (b) of sub-section (2).

(8) The payments of each different class specified in sub-section (7) shall rank equally among themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall abate in equal proportion.]]

³[(9) Nothing contained in sub-sections (2), (3), (4), (7) and (8) shall apply to a banking company in respect of the depositors of which the Deposit Insurance Corporation is liable under section 16 of the Deposit Insurance Corporation Act, 1961, (47 of 1961).

(10) After preferential payments referred to in sub-section (1) have been made or adequate provision has been made in respect thereof, the remaining assets of the banking company referred to in sub-section (9) available for payment to general creditors shall be utilised for payment on pro rata basis of the debts of the general creditors and of the sums due to the depositors:

Provided (hat where any amount in respect of any deposit is to be paid by the liquidator to the Deposit Insurance Corporation under section 21 of the Deposit Insurance Corporation Act, 1961 (47 of 1961), only the balance, if any, left after making the said payment shall be payable to the depositor.]

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1. Substituted by Act 37 of 1960, Section 4, for section 43A.

2. Substituted by Act 47 of 1961, Section 51 and Schedule II, Pt. II, for “the foregoing provisions” w.e.f. 1-1- 1962.

3. Inserted by Act 47 of 1961, Section 51 and Schedule II, Pt. II w.e.f. 1-1-1962

Section 44. Powers of High Court in voluntary winding up

¹[Powers of High Court in voluntary winding up. (1) Notwithstanding anything to the contrary contained in section 484 of the Companies Act, 1956 (1 of 1956), no banking company may be voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue.

(2) The High Court may, in any case where a banking company is being wound up voluntarily, make an order that the voluntary winding up shall continue, but subject to the supervision of the court.

(3) Without prejudice to the provisions contained in sections 441 and 521 of the Companies Act, 1956 (1 of 1956), the High Court may of its own motion and shall on the application of the Reserve Bank, order the winding up of a banking company by the High Court in any of the following cases, namely: —

(a) where the banking company is being wound up voluntarily and at any stage during the voluntary winding up proceedings the company is not able to meet its debts as they accrue; or

(b) where the banking company is being wound up voluntarily or is being wound up subject to the supervision of the court and the High Court is satisfied that the voluntary winding up or winding up subject to the supervision of the court cannot be continued without detriment to the interests of the depositors.]

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1. Substituted by Act 33 of 1959, Section 30, for the former section w.e.f. 1-10-1959.

Section 44 A. Procedure for amalgamation of banking companies

¹[Procedure for amalgamation of banking companies. (1) Notwithstanding anything contained in any law for the time being in force, no banking company shall be amalgamated with another banking company, unless a scheme containing the terms of such amalgamation has been placed in draft before the shareholders of each of the banking companies concerned separately, and approved by a resolution passed by a majority in number representing two-thirds in value of the shareholders of each of the said companies, present either in person or by proxy at a meeting called for the purpose.

(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every shareholder of each of the banking companies concerned in accordance with the relevant articles of association indicating the time, place and object of the meeting, and shall also be published atleast once a week for three consecutive weeks in not less than two newspapers which circulate in the locality or localities where the registered offices of the banking companies concerned are situated, one of such newspapers being in a language commonly understood in the locality or localities.

(3) Any shareholder, who has voted against the scheme of amalgamation at the meeting or has given notice in writing at or prior to the meeting of the company concerned or to the presiding officer of the meeting that he dissents from the scheme of amalgamation, shall be entitled, in the event of the scheme being sanctioned by the Reserve Bank, to claim from the banking company concerned, in respect of the shares held by him in that company, their value as determined by the Reserve Bank when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares (o be paid to the dissenting shareholder shall be final for all purposes.

(4) If the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of this section, it shall be submitted to the Reserve Bank for sanction and shall, if sanctioned by the Reserve Bank by an order in writing passed in this behalf, be binding on the banking companies concerned and also on all the shareholders thereof.

²[***]

(6) On the sanctioning of a scheme of amalgamation by the Reserve Bank, the properly of the amalgamated banking company shall, by virtue of the order of sanction, be transferred to and vest in, and the liabilities of the said company shall, by virtue of the said order be transferred to, and become the liabilities of, the banking company which under the scheme of amalgamation is to acquire the business of the amalgamated banking company, subject in all cases to ³[the provisions of the scheme as sanctioned.]

⁴[(6A) Where a scheme of amalgamation is sanctioned by the Reserve Bank under the provisions of this section, the Reserve Bank may, by a further order in writing, direct that on such date as may be specified therein the banking company (hereinafter in this section referred to as the amalgamated banking company) which by reason of the amalgamation will cease to function, shall stand dissolved and any such direction shall take effect notwithstanding anything to the contrary contained in any other law.

(6B) Where the Reserve Bank directs a dissolution of the amalgamated banking company, it shall transmit a copy of the order directing such dissolution to the Registrar before whom the banking company has been registered and on receipt of such order the Registrar shall strike off the name of the company.

(6C) An order under sub-section (4) whether made before or after the commencement of section 19 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence that all the requirements of this section relating to amalgamation have been complied with, and a copy of the said order certified in writing by an officer of the Reserve Bank to be a true copy of such order and a copy of the scheme certified in the tike manner to be a true copy thereof shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of the said section 19), be admitted as evidence to the same extent as the original order and the original scheme.]

⁵[(7) Nothing in the foregoing provisions of this section shall affect the power of the Central Government to provide for the amalgamation of two or more banking companies ⁶[***] under section 396 of the Companies Act, 1956 (1 of 1956):

Provided that no such power shall be exercised by the Central Government except after consultation with the Reserve Bank.]

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1. Inserted by Act 20 of 1950, Section 8.

2. Sub-section (5) omitted by Act 55 of 1963, Section 19 w.e.f. 1-2-1964.

3. Substituted by Act 55 of 1963, Section 19, for “the terms of the order sanctioning the scheme” w.e.f. 1-2-1964.

4. Inserted by Act 55 of 1963, Section 19 w.e.f. 1-12-1964.

5. Inserted by Act 37 of 1960, Section 5.

6. The words “in national interest” omitted by Act 7 of 1961, Section 3.

Section 44 B. Restriction on compromise or arrangement between banking company and creditors

¹[²[Restriction on compromise or arrangement between banking company and creditors. ³[(1)] Notwithstanding anything contained in any law for the time being in force, no ⁴[High Court] shall sanction a compromise or arrangement between a banking company and its creditors or any class of them or between such company and its members or any class of them ⁵[or sanction any modification in any such compromise or arrangement unless the compromise or arrangement or modification, as the case may be,] is certified by the Reserve Bank ⁶[in writing as not being incapable of being worked and as not being detrimental to the interests of the depositors of such banking company.]

⁷[(2) Where an application under ⁸[section 39 of the Companies Act, 1956 (1 of 1956)], is made in respect of a banking company, the High Court may direct the Reserve Bank to make an inquiry in relation to the affairs of the banking company and the conduct of its directors and when such direction is given, the Reserve Bank shall make such inquiry and submit its report to the High Court.]

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1. Substituted by Act 20 of 1950, Section 9, for section 45 (now renumbered as section 44B).

2. Section 45 renumbered as section 44B by Act 37 of 1960, Section 6.

3. Section 45 (now renumbered as section 44B) renumbered as sub-section (1) of that section by Act 52 of 1953, Section 9.

4. Substituted by Act 52 of 1953, Section 4, for “Court”.

5. Substituted by Act 55 of 1963, Section 20, for “unless the compromise or arrangement” w.e.f. 1-2-1964.

6. Substituted by Act 52 of 1953, Section 9, for “as not being detrimental to the interests of the depositors of such company.”

7. Inserted by Act 52 of 1953, Section 9.

8. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913) “w..e.f. 14-1-1957.

Section 45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation

¹[Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation. (1) Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or ²[any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order of moratorium in respect of ³[a banking company].

(2) The Central Government, after considering the application made by the Reserve Bank under sub-section (1), may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.

(3) Except as otherwise provided by any directions given by the Central Government in the order made by it under sub-section (2) or at any time thereafter the banking company shall not during the period of moratorium make any payment to any depositors or discharge any liabilities or obligations to any other creditors.

⁴[(4) During the period of moratorium, if the Reserve Bank is satisfied that—

(a) in the public interest; or

(b) in the interests of the depositors; or

(c) in order to secure the proper management of the banking company; or

(d) in the interests of the banking system of the country as a whole,

it is necessary so to do, the Reserve Bank may prepare a scheme—

(i) for the reconstruction of the banking company, or

(ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as “the transferee bank”).

(5) The scheme aforesaid may contain provisions for all or any of the following matters, namely:

(a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privileges, the liabilities, duties and obligations of the banking company on its reconstruction or as the case may be, of the transferee bank;

(b) in the case of amalgamation of the banking company, the transfer to the transferee bank of the business, properties, assets and liabilities of the banking company on such terms and conditions as may be specified in the scheme;

(c) any change in the Board of directors, or the appointment of a new Board of directors, of the banking company on its reconstruction or, as the case may be, of the transferee bank and the authority of whom, the manner in which, and the other terms and conditions on which, such change or appointment shall be made and in the case of appointment of a new Board of directors or of any director the period for which such appointment shall be made;

(d) the alteration of the memorandum and articles of association of the banking company on its reconstruction or, as the case may be, of the transferee bank for the purpose of altering the capital thereof or for such other purposes as may be necessary to give effect to the reconstruction or amalgamation;

(e) subject to the provisions of the scheme, the continuation by or against the banking company on its reconstruction or, as the case may be, the transferee bank, of any actions or proceedings pending against the banking company immediately before the date of the order of moratorium;

(f) the reduction of the interest or rights which the members, depositors and other creditors have in or against the banking company before its reconstruction or amalgamation to such extent as the Reserve Bank considers necessary in the public interest or in the interest of the members, depositors and other creditors or for the maintenance of the business of the banking company;

(g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of their claim –

(i) in respect of their interest or rights in or against the banking company before its reconstruction or amalgamation; or

(ii) where their interest or rights aforesaid in or against the banking company has or have been reduced under clause (f), in respect of such interest or rights as so reduced;

(h) the allotment to the members of the banking company for shares held by them therein before its reconstruction or amalgamation [whether their interest in such shares has been reduced under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may be, in the transferee bank and where any members claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any members, the payment in cash to those members in full satisfaction of their claim—

(i) in respect of their interest in shares in the banking company before its reconstruction or amalgamation; or

(ii) where such interest has been reduced under clause (f) in respect of their interest in shares as so reduced;

(i) the continuance of the services of all the employees of the banking company (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee bank at the same remuneration and on the same terms and conditions of service, which they were getting, or as the case may be, by which they were being governed, immediately before the date of the order of moratorium:

Provided that the scheme shall contain a provision that—

(i) the banking company shall pay or grant not later than the expiry of the period of three years from the date on which the scheme is sanctioned by the Central Government, to the said employees the same remuneration and the same terms and conditions of service 5[as are, at the time of such payment or grant, applicable] to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the Reserve Bank (whose determination in this respect shall be final);

(ii) the transferee bank shall pay or grant not later than the expiry of the aforesaid period of three years, to the said employees the same remuner-ation and the same terms and conditions of service⁵[as are, at the time of such payment or grant, applicable] to the other employees corresponding rank or status of the transferee bank subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee bank:

Provided further that if in any case under clause (ii) of the first proviso any doubt or difference as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee bank ⁶[the doubt or difference shall be referred, before the expiry of a period of three years from the date of the payment or grant mentioned in that clause,] to the Reserve Bank whose decision thereon shall be final;

(j) notwithstanding anything contained in clause (i) where any of the employees of the banking company not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme under clause (i) or where any employees of the banking company have by notice in writing given to the banking company, or, as the case may be, the transferee bank at any time before the expiry of the one month next following the date on which the scheme is sanctioned by the Central Government, intimated their intention of not becoming employees of the banking company on its reconstruction or, as the case may be, of the transferee bank, the payment to such employees of compensation, if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund and other retirement benefits ordinarily admissible to them under the rules or authorisations of the banking company immediately before the date of the order of moratorium;

(k) any other terms and conditions for the reconstruction or amalgamation of the banking company;

(l) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.

(6)(a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the Reserve Bank may specify for this purpose.

(b) The Reserve Bank may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank.

(7) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modifications or with such modifications as it may consider necessary, and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf:

Provided that different dates may be specified for different provisions of the scheme.

⁷[(7A) The sanction accorded by the Central Government under sub-section (7), whether before or after the commencement of section 21 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence that all that requirements of this section relating to reconstruction, or, as the case may be, amalgamation have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of the said section 21), be admitted as evidence to the same extent . as the original scheme.]

(8) On and from the date of the coming into operation of the scheme or any provision thereof, the scheme or such provision shall be binding on the banking company, or, as the case may be, on the transferee bank and any other banking company concerned in the amalgamation and also on all the members, depositors and other creditors and employees of each of those companies and of the transferee bank, and on any other person having any right or liability in relation to any of those companies or the transferee bank ⁸[including the trustees or other persons managing, or connected in any other manner with, any provident fund or other fund maintained by any of those companies or the transferee bank].

(9)⁹[On and from the date of the coming into operation or, or as the case may be, the date specified in this behalf in, the scheme], the properties and assets of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become the liabilities of the transferee bank.

(10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government may by order do anything not inconsistent with such provisions which appears to it necessary or expedient for the purpose of removing the difficulty.

(11) Copies of the scheme or of any order made under sub-section (10) shall be laid before both Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government, or, as the case may be, the order has been made.

(12) Where the scheme is a scheme for amalgamation of the banking company, any business acquired by the transferee bank under the scheme or under any provision thereof shall, after the coming into operation of the scheme or such provision, be carried on by the transferee bank in accordance with the law governing the transferee bank, subject to such modifications in that law or such exemptions of the transferee bank from the operation of any provisions thereof as the Central Government on the recommendation of the Reserve Bank may, by notification in the Official Gazette, make for the purpose of giving full effect to the scheme:

Provided that no such modification or exemption shall be made so as to have effect for a period of more than seven years from the date of the acquisition of such business.

(13) Nothing in this section shall be deemed to prevent the amalgamation with a banking institution by a single scheme of several banking companies in respect of each of which an order of moratorium has been made under this section.

(14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.

(15) In this section, “banking institution” means any banking company and includes the Stale Bank of India or ¹⁰[a subsidiary bank or a corresponding new bank].

¹¹[Explanation. —References in this section of the terms and conditions of service as applicable to an employee shall not be construed as extending to the rank and status of such employee.]

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1. Inserted by Act 37 of 1960, Section 6.

2. Substituted by Act 7 of 1961, Section 4, for “any agreement”.

3. Substituted by Act 7 of 1961, Section 4, for “the banking company”.

4. Substituted by Act 7 of 1961, Section 4, for sub-sections (4) to (9).

5. Substituted by Act 1 of 1984, Section 34 for “as are applicable” w.e.f. 15-2-1984.

6. Substituted by Act 1 of 1984, Section 34 for “the doubt or difference shall be referred” w.e.f. 15-2-1984.

7. Inserted by Act 55 of 1963, Section 21 w.e.f. 1-2-1964.

8. Inserted by Act 1 of 1984, Section 34 w.e.f. 15-2-1984.

9. Substituted by Act 1 of 1984, Section 34 for certain words w.e.f. 15-2-1984.

10. Substituted by Act 1 of 1984, Section 34 for certain words w.e.f. 15-2-1984.

11. Inserted by Act 1 of 1984, Section 34 w.e.f. 15-2-1984.

Part III A – Special Provisions for Speedy Disposal of Winding up Proceedings

Section 45 A. Part III A to override other laws

¹[PART IIIA: SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS

The provisions of this Part and the rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in the ²[Companies Act, 1956 (1 of 1956)] or the Code of Civil Procedure, 1908 (5 of 1908), or the ³[Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force or any Instrument having effect by virtue of any such law; but the provisions of any such law or Instrument Insofar as the same are not varied by, or inconsistent with, the provisions of this Part or rules made thereunder shall apply to all proceedings under this Part.

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1. Substituted by Act 53 of 1953 of 1953, Section 10, fro the former Part IIIA which was Inserted by Act 20 of 1950, Section 10.

2. Substituted by Act 95 of 1956, Section 14 and Schedule, “Indian Companies Act 1913 (7 of 1913)” w.e.f. 14-1-1957.

3. Substituted by Act 1 of 1984, Section 35 for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.

Section 45 B. Power of High Court to decide all claims in respect of banking companies

The High Court shall, save as otherwise expressly provided in section 45C, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made under ¹[section 391 of the Companies Act, 1956 (1 of 1956)] by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fad, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order for the winding up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953).

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1. Substituted by act 1 of 1984, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

Section 45 C. Transfer of pending proceedings

(1) Where a winding up order is made or has been made in respect of a banking company, no suit or other legal proceeding, whether civil or criminal, in respect of which the High Court has jurisdiction under this Act and which is pending in any other court immediately before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), or the date of the order for the winding up of the banking company, whichever is later, shall be proceeded with except in the manner hereinafter provided.

(2) The official liquidator shall, within three months from the date of the winding up order or the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), whichever is later, or such further time as the High Court may allow, submit to the High Court a report containing a list of all such pending proceedings together with particulars thereof.

(3) On receipt of a report under sub-section (2), the High Court may, if it so thinks fit, give the parties concerned an opportunity to show cause why the proceedings should not be transferred to itself and after making an inquiry in such manner as may be provided by rules made under section 45U, it shall make such order as it deems fit transferring to itself all or such of the pending proceedings as may be specified in the order and such proceedings shall thereafter be disposed of by the High Court.

(4) If any proceedings pending in a court is not so transferred to the High Court under sub-section (3), such proceeding shall be continued in the court in which the proceeding was pending.

(5) Nothing in this section shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.

Section 45 D. Settlement of list of debtors

(1) Notwithstanding anything to the contrary contained in any law for the time being in force, the High Court may settle in the manner hereinafter provided a list of debtors of a banking company which is being wound up.

(2) Subject to any rules that may be made under section 52, the official liquidator shall, within six months from the date of the winding up order or the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), whichever is later, from time to time, file to the High Court lists of debtors containing such particulars as are specified in the Fourth Schedule:

Provided that such lists may, with the leave of the High Court, be filed after the expiry of the said period of six months.

(3) On receipt of any list under sub-section (2), the High Court shall, wherever necessary, cause notices to be issued on all persons affected and after making an inquiry in such manner as may be provided by rules made under section 45U, it shall make an order settling the list of debtors:

Provided that nothing in this section shall debar the High Court from settling any such list in part as against such of the persons whose debts have been settled without settling the debts of all the persons placed on the list.

(4) At the time of the settlement of any such list, the High Court shall pass an order for the payment of the amount due by each debtor and make such further orders as may be necessary in respect of the relief claimed, including reliefs against any guarantor or in respect of the realisation of any security.

(5) Every such order shall, subject to the provisions for appeal, be final and binding for all purposes as between the banking company on the one hand and the person against whom the order is passed all persons claiming through or under him on the other hand, and shall be deemed to be a decree in a suit.

(6) In respect of every such order, the High Court shall issue a certificate specifying clearly the reliefs granted and the names and descriptions of the parties against whom such reliefs have been granted, the amount of costs awarded and by whom, and out of what funds and in what proportions, such costs are to be paid; and every such certificate shall be deemed to be a certified copy of the decree for all purposes including execution.

(7) At the time of settling the list of debtors or at any other time prior or subsequent thereto, the High Court shall have power to pass any order in respect of a debtor on the application of the official liquidator for the realisation, management, protection, preservation or sale of any property given as security to the banking company and to give such powers to the official liquidator to carry out the aforesaid directions as the High Court thinks fit.

(8) The High Court shall have power to sanction a compromise in respect of any debt and to order the payment of any debt by Instalments.

(9) In any case in which any such list is settled ex parte as against any person, such person may, within thirty days from the date of the order settling the list, apply to the High Court for an order to vary such list, so far as it concerns him, and if the High Court is satisfied that he was prevented by any sufficient cause from appearing on the date fixed for the settlement of such list and that he has a good defence to the claim of the banking company on merits, the High Court may vary the list and pass such orders in relation thereto as it thinks fit:

Provided that the High Court may, if it so thinks fit, entertain the application after the expiry of the said period of thirty days.

(10) Nothing in this section shall—

(a) apply to a debt which has been secured by a mortgage of immovable property, if a third party has any interest in such immovable property; or

(b) prejudice the rights of the official liquidator to recover any debt due to a banking company under any other law for the time being in force.

Section 45 E. Special provisions to make calls on contributories

Notwithstanding that the list of the contributories has not been settled under ¹[section 467 of the Companies Act, 1956 (1 of 1956)], the High Court may, if it appears to it necessary or expedient so to do, at any time after making a winding up order, make a call on and order payment thereof by any contributory under sub-section (1) of ²[section 470 of the Companies Act, 1956 (1 of 1956)], if such contributory has been placed on the list of contributories by the official liquidator and has not appeared to dispute his liability.

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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 184 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 187 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

Section 45 F. Documents of banking company to be evidence

(1) Entries in the books of account or other documents of a banking company which is being wound up shall be admitted in evidence in all ¹[legal proceedings]; and all such entries may be proved either by the production of the books of account or other documents of the banking company containing such entries or by the production of a copy of the entries, certified by the official liquidator under his signature and stating that it is a true copy of the original entries and that such original entries are contained in the books of account or other documents of the banking company in his possession.

(2) Notwithstanding anything to the contrary contained in the Indian Evidence Act, 1872 (1 of 1872), all such entries in the books of account or other documents of a banking company shall, as against the directors, ²[officers and other employees] of the banking company in respect of which the winding up order has been made ³[***], by prima facie evidence of the truth of all matters purporting to be therein recorded.

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1. Substituted by Act 55 of 1963, Section 22, for “proceedings by or against the banking company” w.e.f. 1-2-1964.

2. Inserted by Act 55 of 1963, Section 22 w.e.f. 1-2-1964.

3. Certain words omitted by Act 55 of 1963, Section 22 w.e.f. 1-2-1964.

Section 45 G. Public examination of directors and auditors

(1) Where an order has been made for the winding up of a banking company, the official liquidator shall submit a report whether in his opinion any loss has been caused to the banking company since its formation by any act or omission (whether or not a fraud has been committed by such ‘ act or omission) of any person in the promotion or formation of the banking company or of any director or auditor of the banking company.

(2) If, on consideration of the report submitted under sub-section(1), the High Court is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a director or an auditor of the banking company should be publicly examined, it should hold a public sitting on a date to be appointed for that purpose and direct that such person, director or auditor shall attend there at and shall be publicly examined as to the promotion or formation or the conduct of the business of the banking company, or as to his conduct and dealings, Insofar as they relate to the affairs of the banking company:

Provided that no such person shall be publicly examined unless he has been given an opportunity to show cause why he should not be so examined.

(3) The official liquidator shall take part in the examination and for that purpose may, if specially authorized by the High Court in that behalf, employ such legal assistance as may be sanctioned by the High Court.

(4) Any creditor or contributory may also take part in the examination either personally or by any person entitled to appear before the High Court.

(5) The High Court may put such questions to the person examined as it thinks fit.

(6) The person examined shall be examined on oath and shall answer all such questions as the High Court may put or allow to be put to him.

(7) A person ordered to be examined under this section may, at his own cost, employ any person entitled to appear before the High Court who shall be at liberty to put to him such questions as the High Court may deem just for the purpose of enabling him to explain or qualify any answer given by him:

Provided that if he is, in the opinion of the High Court, exculpated from any charges made or suggested against him, the High Court may allow him such costs in its discretion as it may deem fit.

(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined and may thereafter be used in evidence against him in any proceeding, civil or criminal, and shall be open to the Inspection of any creditor or contributory at all reasonable limes.

(9) Where on such examination, the High Court, is of opinion (whether a fraud has been committed or not)—

(a) that a person, who has been a director of the banking company, is not fit to be a director of a company, or

(b) that a person, who has been an auditor of the banking company or a partner of a firm acting as such auditor, is not fit to act as an auditor of a company or to be a partner of a firm acting as such auditor,

the High Court may make an order that person shall not, without the leave of the High Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of an company or, as the case may be, act as an auditor of, or be a partner of firm acting as auditors of any company for such period not exceeding five years as may be specified in the order.

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

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

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

(2) Where an application is made, to the High Court under ¹[section 543 of the Companies Act, 1956 (I of 1956)], and the High Court has reason to believe that a property belongs to any promoter, director, manager, liquidator or officer of the banking company, whether the property stands in the name of such person or any other person at an ostensible owner, then the High Court may, at any time, whether before or after making an order under sub-section (1), direct the attachment of such property, or such portion thereof, as it thinks fit and the property so attached shall remain subject to attachment unless the ostensible owner can prove to the satisfaction of the High Court that he is the real owner and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to attachment of property shall, as far as may be, apply to such attachment,

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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

Section 45 I. Duty of directors and officers of banking company to assist in the realisation or property

Every director or other officer of a banking company which is being wound up shall give such assistance to the official liquidator as he may reasonably require in connection with the realisation and distribution of the property of the banking company.

Section 45 J. Special provisions for punishing offences in relation to banking companies being wound up

(1) The High Court may, if it thinks fit, take cognizance of and try in a summary way and offence alleged to have been committed by any person who has taken part in the promotion or formation of the banking company which is being wound , up or by any director, manager or officer thereof:

Provided that the offence is one punished under this Act or under the 1[Companies Act, 1956(1 of 1956)].

(2) When trying any such offence as aforesaid, the High Court may also try any other offence not referred to in sub-section (1) which is an offence with which the accused may, under the ²[Code of Criminal Procedure, 1973 (2 of 1974)], be charged at the same trial.

(3) In any case tried summarily under sub-section (1), the High Court—

(a) need not summon any witness, if it is satisfied that the evidence of such witness will not be material;

(b) shall not be bound to adjourn a trial for any purpose unless such adjournment is, in the opinion of the High Court, necessary in the interests of justice;

(c) shall, before passing any sentence, record judgment embodying the substance of the evidence and also the particulars specified in section 263 of the ²[Code of Criminal Procedure, 1973 (2 of 1974)], so far as that section may be applicable,

and nothing contained in sub-section (2) of section 262 of the [Code of Criminal Procedure, 1973 (2 of 1974)], shall apply to any such trial.

(4) All offences in relation to winding up alleged to have been committed by any person specified in sub-section (1) which are punishable under this Act or under the ¹[Companies Act, 1956(1 of 1956)], and which are not tried in a summary way under ‘ sub-section (1) shall, notwithstanding anything to the contrary in that Act or the ²[Code of Criminal Procedure, 1973 (2 of 1974)], or in any other law for the time being in force, be taken cognizance of and tried by a Judge of the High Court other than the Judge for the time being dealing with the proceedings for the winding up of the banking company.

(5) Notwithstanding anything to the contrary contained in the ³[Code of Criminal Procedure, 1973 (2 of 1974)], the High Court may take cognizance of any offence under this section, without the accused being committed to it for trial ⁴[***].

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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “Indian Companies Act. 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Substituted by Act 1 of 1984, Section 35, for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.

3. Substituted by Act 1 of 1984, Section 35, for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.

4. Certain words omitted by Act 1 of 1984, Section 35 w.e.f. 15-2-1984.

Section 45 K. Power of High court to enforce schemes of arrangements, etc.

[Rep. by the Banking Companies (Amendment) Act, 1959, Section 31 (w.e.f. 1-10-1959).]

Section 45 L. Public examination of directors and auditors, etc., in respect of a banking company under schemes of arrangement

(1) Where an application for sanction a compromise or arrangement in respect of a banking company is made under ¹[section 39] of the Companies Act, 1956 (1 of 1956)], or where such sanction has been given and the High Court is of opinion, whether on a report of the Reserve Bank or otherwise, that any ‘ person who has taken part in the promotion or formation of the banking company or has been a director or auditor of the banking company should be publicly examined, it may direct such examination of such person and the provisions of section 45G shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up.

(2) Where a compromise or arrangement is sanctioned under ¹[section 391 of the Companies Act, 1956 (1 of 1956)], in respect of a banking company, the provisions of ²[section 543 of the said Act] and of section 45H of this Act shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or arrangement were an order for the winding up of the banking company.

³[(3) Where ⁴[a scheme of reconstruction or amalgamation of a banking company] has been sanctioned by the Central Government under section 45 and the Central Government is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a director or auditor of the banking company should be publicly examined, that Government may apply to the High Court for the examination of such person and if on such examination the High Court finds (whether a fraud has been committed or not) that person is not fit to be a director of a company or to act as an auditor of a company or to be a partner of a firm acting as such auditors, the Central Government shall make an order that that person shall not, without the leave of the Central Government, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of any company or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors of, any company for such period not exceeding five years as may be specified in the order.

(4) Where ⁵[a scheme of reconstruction or amalgamation of a banking company] has been sanctioned by the Central Government under section 45, the provisions of section 543 of the Companies Act, 1956 (1 of 1956), and of section 45H of this Act shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the scheme of reconstruction or amalgamation, as the case may be, were an order for the winding up of the banking company; and any reference in the said section 543 to the application of the official liquidator shall be construed as a reference to the application of the Central Government.]

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1. Substituted by Act 95 of 1965, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.

2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the said Act” w.e.f. 14-1-1957.

3. Inserted by Act 37 of 1960, Section 7.

4. Substituted by Act 7 of 1961, Section 5, for certain words.

5. Substituted by Act 7 of 1961, Section 5, for certain words.

Section 45 M. Special provisions for banking companies working under schemes of arrangement at the commencement of the Amendment Act

Where any compromise or arrangement sanctioned in respect of a banking company under ¹[section 391 of the Companies Act, 1956 (1 of 1956)] is being worked at the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953) the High Court may, if it so thinks fit, on the application of such banking company, —

(a) excuse any delay in carrying out any of the provisions of the compromise or arrangement; or

(b) allow the banking company to settle the list of its debtors in accordance with the provisions of section 45D and in such a case, the provisions of the said section shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or arrangement were an order for the winding up of the banking company.

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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-5-1957.

Section 45 N. Appeals

(1) An Appeal shall lie from any order or decision of the High Court in a civil proceeding under this Act when the amount or value of the subject-matter of the claim exceeds five thousand rupees.

(2) The High Court may by rules provide for an appeal against any order made under section 45J and the conditions subject to which any such appeal would lie.

(3) Subject to the provisions of sub-section (1) and sub-section (2 )and notwithstanding anything contained in any other law for the time being in force, every order or decision of the High Court shall be final and binding for all purposes as between the banking company on the one hand, and all persons who are parties thereto and all persons claiming through or under them or any of them, on the other hand.

Section 45 O. Special period of limitation

(1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded.

(2) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or ¹[section 543 of the Companies Act, 1956(1 of 1956)] or in any other law for the time being in force, there shall be no period of limitation for the recovery of arrears of calls from any director of a banking company which is being wound up or for the enforcement by the banking company against any of its directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its directors, the period of limitation shall be twelve years from the date of the accrual of such claims ²[or five years from the date of the first appointment of the liquidator, whichever is longer].

(3) The provisions of this section, Insofar as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953).

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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-5-1957.

2. Inserted by Act 33 of 1959, Section 32 w.e.f. 1-10-1959.

Section 45 P. Reserve Bank to tender advice in winding up proceeding

Where in any proceeding for the winding up of a banking company in which any person other than the Reserve Bank has been appointed as the official liquidator and the High Court has directed the official liquidator to obtain the advice of the Reserve Bank on any matter (which it is hereby empowered to do), it shall be lawful for the Reserve Bank to examine the record of any such proceeding and tender such advice on the matter as it may think fit.

Section 45 Q. Power to Inspect

(1) The Reserve Bank shall, on being directed so to do by the Central Government or by the High Court, cause an Inspection to be made by one or more of its officers of a banking company which is being wound up and its books and accounts.

(2) On such Inspection, the Reserve Bank shall submit its report to the Central Government and the High Court.

(3) If the Central Government, on consideration of the report of the Reserve Bank, is of opinion that there has been a substantial irregularity in the winding up proceedings, it may bring such irregularity to the notice of the High Court for such action as the High Court may think fit.

(4) On receipt of the report of the Reserve Bank under sub-section (2) or on any irregularity being brought to its notice by the Central Government under sub-section (3), the High Court may, if it deems fit, after giving notice to and hearing the Central Government in regard to the report, give such directions as it may consider necessary.

Section 45 R. Power to call for returns and information

The Reserve Bank may, at any time by a notice in writing, require the liquidator of a banking company to furnish it, within such time as may be specified in the notice or such further time as the Reserve Bank may allow, any statement or information relating to or connected with the winding up of the banking company; and it shall be the duty of every liquidator to comply with such requirements.

Explanation. —For the purposes of this section and section 45Q, a banking company working under a compromise or arrangement but prohibited from receiving fresh deposits, shall, as far as may be, deemed to be banking company which is being wound up.

Section 45 S. Chief Presidency Magistrate and District Magistrate to assist official liquidator in taking charge of property of banking company being wound up

(1) For the purpose of enabling the official liquidator or the special officer appointed under sub-section (3) of section 37 to take into his custody or under his control, all property, effects and actionable claims to which a banking company ¹[***] is or appears to be entitled, the official liquidator or the special officer, as the case may be, may request in writing the ²[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], within whose jurisdiction any property, books of accounts or other documents of such banking company may be situate or be found, to take possession thereof, and the ²[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], as the case may be, shall, on such request being made to him, —

³[(a)take possession of such property, books of accounts or other documents, and

(b) forward them to the official liquidator or the special officer.]

⁴[(2) Where any such property and effects are in the possession of the ²[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], as the case may be, such Magistrate shall, on request in writing being made to him by the official liquidator or the special officer referred to in sub-section (1), sell such property and effects and forward the net proceeds of the sole to the official liquidator or the special officer:

Provided that such sale shall, as far as practicable, be effected by public auction.

(3) For the purpose of securing compliance with the provisions of sub-section (1), the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate] may take or cause to be taken such steps and use of cause to be used such fore as may, in his opinion, be necessary.

(4) No act of the ²[Chief Metropolitan Magistrate or the Chief Judicial Magistrate] done in pursuance of this section shall be called in question in any court or before any authority.]

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1. Certain words omitted by Act 55 of 1963 Section 13 w.e.f. 1-2-1964.

2. Substituted by Act 1 of 1984, Section 36 for certain words w.e.f. 15-2-1984.

3. Substituted by Act 53 of 1963, Section 23 w.e.f. 1-2-1964.

4. Substituted by Act 53 of 1963, Section 23 for sub-section (2) w.e.f. 1-2-1964.

Section 45 T. Enforcement of orders and decisions of High Court

(1) All orders made in any civil proceeding by a High Court may be enforced in the same manner in which decrees of such court made in any suit pending therein may be enforced.

(2)Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908(5 of 1908), a liquidator may apply for the execution of a decree by a court, other than the one which made it on production of a certificate granted under subsection (6) of section 45D and on his certifying to such other court in writing the amount remaining due or relief remaining unenforced under the decree.

(3) Without prejudice to the provisions of sub-section (1) or sub-section (2), any amount found due to the banking company by an order or decision of the High Court, may, with the leave of the High Court, be recovered ¹[by the liquidator in the same manner as an arrear of land revenue and for the purpose of such recovery the liquidator may forward to the Collector within whose jurisdiction the property of the person against whom any order or decision of the High Court has been made is situate, a certificate under his signature specifying the amount so due and the person by whom it is payable].

²[(4) On receipt of a certificate under sub-section (3), the Collector shall proceed to recover from such person the amount specified therein as if it were an arrear of land revenue:

Provided that without prejudice to any other powers of the Collector, he shall, for the purposes of recovering the said amount, have all the powers which, under the Code of Civil Procedure, 1908 (5 of 1908), a civil court has for the purpose of the recovery of an amount due under a decree.]

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1. Substituted by Act 53 of 1963, Section 24 for “in the same manner as on arrear of land revenue” w.e.f. 1-2-1964.

2. Inserted by Act 53 of 1963, Section 24 w.e.f. 1-2-1964.

Section 45 U. Power of High Court to make rules

The High Court may make rules consistent with this Act and the rules made under section 52 prescribing—

(a) the manner in which inquiries and proceedings under Part III or Part IIIA may be held;

(b) the offences which may be tried summarily;

(c) the authority to which, and the conditions subject to which, appeals may be preferred and the manner in which such appeals may be filed and heard;

(d) any other matter for which provision has to be made for enabling the High Court to effectively exercise its functions under this Act.

Section 45 V. References to directors, etc., shall be construed as including references to past directors, etc.

For the removal of doubts it is hereby declared that any reference in this Part to a director, manager, liquidator, officer or auditor of a banking company shall be construed as including a reference to any past or present director, manager, liquidator, officer or auditor of the banking company.

Section 45 W. Part II not to apply to banking companies being wound up

Nothing contained in Part II shall apply to a banking company which is being wound up.

Section 45 X. Validation of certain proceedings

Notwithstanding anything contained in section 45B or any other provision of this Part or in section 11 of the Banking Companies (Amendment) Act, 1950 (20 of 1950), no proceeding held, judgment delivered or decree or order made before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), by any court other than the High Court in respect of any matter over which the High Court has jurisdiction under this Act shall be invalid or be deemed ever to have been invalid merely by reason of the fact that such proceeding, judgment, decree or order was held, delivered or made by a court other man the High Court.]

Part III B – Provisions Relating to Certain Operations of Banking Companies

Section 45 Y. Power of Central Government to make rules for the preservation of records

The Central Government may, after consultation with the Reserve Bank and by notification in the Official Gazette, make rules specifying the periods for which—

(a) a banking company shall preserve its books, accounts and other documents; and

(b) a banking company shall preserve and keep with itself different instruments paid by it.

Section 45 Z. Return of paid instruments to customers

(1) Where a banking company is required by its customer to return to him a paid instrument before the expiry of the period specified by rules made under section 45 Y, the banking company shall not return the instrument except after making and keeping in its possession a true copy of all relevant parts of such instrument, such copy being made by a mechanical or other process which in itself ensures the accuracy of the copy.

(2) The banking company shall be entitled to recover from the customer the cost of making such copies of the instrument.

Explanation. —In this section, “customer” includes a Government department and a corporation incorporated by or under any law.

Section 45 ZA. Nomination for payment of depositors’ money

(1) Where a deposit is held by a banking company to the credit of one or more persons, the depositor or, as the case may be, all the depositors together, may nominate, in the prescribed manner, one person to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the banking company.

(2) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made in the prescribed manner purports to confer on any person the right to receive the amount of deposit from the banking company, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.

(3) Where the nominee is a minor, it shall be lawful for the depositor making the nomination to appoint in the prescribed manner any person to receive the amount of deposit in the event of his death during the minority of the nominee.

(4) Payment by a banking company in accordance with the provisions of this section shall constitute a full discharge to the banking company of its liability in respect of the deposit:

Provided that nothing contained in this sub-section shall affect the right or claim which any person may have against the person to whom any payment is made under this section.

Section 45 ZB. Notice of claims of other persons regarding deposits not receivable

No notice of the claim of any person, other than the person or persons in whose name a deposit is held by a banking company, shall be receivable by the banking company, nor shall the banking company be bound by any such notice though even expressly given to it:

Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such deposit is produced before a banking company, the banking company shall take due note of such decree, order, certificate or other authority.

Section 45 ZC. Nomination for return of articles kept in safe custody with banking company

(1) Where any person leaves any article in safe custody with a banking company, such person may nominate, in the prescribed manner, on person to whom, in the event of the death of the person leaving the article in safe custody, such article may be returned by the banking company.

(2) Where the nominee is a minor, it shall be lawful for the person making the nomination to appoint in the prescribed manner any person to receive the article deposited in the event of his death during the minority of the nominee.

(3) The banking company shall, before returning any articles under this section to the nominee or the person appointed under sub-section (2), prepare, in such manner as may be directed by the Reserve Bank from time to time, an inventory of the said articles which shall be signed by such nominee or person and shall deliver a copy of the inventory so prepared to such nominee or person.

(4) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such article, where a nomination made in the prescribed manner purports to confer on any person the right to receive the article from the banking company, the nominee shall, on the death of the person leaving the article in safe custody, become entitled to the return of the article to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner:

Provided that nothing contained in this section shall affect the right or claim which any person may have against the person to whom the article is returned in pursuance of this sub-section.

Section 45 ZD. Notice of claims of other persons regarding articles not receivable

No notice of the claim of any person, other than the person or persons in whose name any article is held by a banking company in safe custody, shall be receivable by the banking company, nor shall the banking company be bound by any such notice even though expressly given to it:

Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such article is produced before a banking company, the banking company shall take due note of such decree, order, certificate or other authority.

Section 45 ZE. Release of contents of safety lockers

(1) Where an individual is the sole hirer of a locker from a banking company, whether such locker is located in the safe deposit vault of such banking company or elsewhere, such individual may nominate one person to whom, in the event of the death of such individual, the banking company may give access to the locker and liberty to remove the contents of the locker.

(2) Where any such locker is hired from a banking company by two or more individuals jointly and under the contract of hire, the locker is to be operated under the joint signatures of two or more of such hirers, such hirers may nominate one or more persons to whom, in the event of the death of such joint hirer or hirers, the banking company may give, jointly with the surviving joint hirer or joint hirers, as the case may be, access to the locker and liberty to remove the contents of such locker.

(3) Every nomination under sub-section (1) or sub-section (2) shall be made in the prescribed manner

(4) The banking company shall, before permitting the removal of the contents of any locker by any nominee or jointly by any nominee and survivors as aforesaid, prepare, in such manner as may be directed by the Reserve Bank from time to time, an inventory of the contents of the locker which shall be signed by such nominee or jointly by such nominee and survivors and shall deliver a copy of the inventory so prepared to such nominee or nominee and survivors.

(5) On the removal of the contents of any locker by any nominee or jointly by any nominee and survivors as aforesaid, the liability of the banking company in relation to the contents of the locker shall stand discharged.

(6) No suit, prosecution or other legal proceedings shall lie against a banking company for any damage caused or likely to be caused, for allowing access to any locker, and liberty to remove the contents of such locker, in pursuance of the provisions of subsection (1) or sub-section (2) as the case may be.

Section 45 ZF. Notice of claims of oilier persons regarding safety lockers not receivable

No notice of the claim of any person, other than hirer or hirers of a locker, shall be receivable by a banking company nor shall the banking company be bound by any such notice even though expressly given to it:

Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to the locker or its contents is produced before the banking company, the banking company shall take due note of such decree, order, certificate or other authority.]

Part IV – Miscellaneous

Section 46. Penalties

(1) Whoever in any return, balance-sheet or other document ¹[or in any information required or furnished] by or under or for the purposes of any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false, or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

(2) If any person fails to produce any book, account or other document or to furnish any statement or information which under sub-section (2) of section 35 it is his duty to produce or furnish, or to answer any question relating to the business of a banking company which is asked by ²[an officer making an inspection or scrutiny under that section.] he shall be punishable with a fine which may extend to ³[two thousand rupees] in respect of each offence, and if he persists in such refusal, to a further fine which may extend to 4[one hundred rupees] for every day during which the offence continues.

(3) If any deposits are received by a banking company in contravention of an order under clause (a)of sub-section (4) of section 35, every director or other officer of the banking company, unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it shall be deemed to be guilty of such contravention and shall be punishable with a fine which may extend to twice the amount of the deposits so received.

⁵[⁶[⁷[(4) If any other provision of this Act is contravened or if any default is made in—

(i) complying with any requirement of this Act or of any order, rule or direction made or condition imposed thereunder, or

(ii) carrying out the terms of, or the obligations under, a scheme sanctioned under sub-section (7) of section 45,

by any person, such person shall be punishable with fine which may extend to ⁸[fifty thousand rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to two thousand and five hundred rupees] for every day, during which the contravention or default continues.]

(5) Where a contravention or default has been committed by a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the contravention or default was committed without his knowledge or that he exercised all due diligence to prevent the contravention or default.

(6) Notwithstanding anything contained in sub-section (5), where a contravention or default has been committed by a company, and it is proved that the same was committed with the consent or connivance of, or is attributable to any gross negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that contravention or default and shall be liable to be proceeded against and punished accordingly.

Explanation. —For the purposes of this section, —

(a) “company” means any body corporate and includes a firm or other association of individuals, and

(b) “direction”, in relation to a firm, means a partner in the firm.]

⁹[***]

——————–

1. Substituted by Act 95 of 1956, Section 9, for “required” w.e.f. 14-1-1957.

2. Substituted by Act 1 of 1984, Section 38, for “an officer making an imspection under that section” w.e.f. 15-2-1984.

3. Substituted by Act 33 of 1959, Section 33, for “five hundred rupees” w.e.f. 1-10-1959.

4. Substituted by Act 33 of 1959, Section 33, for “fifty rupees” w.e.f. 1-10-1959.

5. Sub-sections (4) Substituted by Act 33 of 1959 w.e.f. 1-10-1959.

6. Sub-section (4), (5) and (6) Substituted by Act 55 of 1963, sec 25, for sub-section (4) w.e.f. 1-2-1964.

7. Substituted-section (4) Substituted by Act 1 of 1984, sec .38 w.e.f. 15-2-1984.

8. Substituted by Act20 of 1994, Section 8 w.e.f. 31-1-1994.

9. Original sub-section (5) omitted by Act 33 of 1959, Section 33 w.e.f. 1-10-1959.

Section 46 A. Chairman, director, etc., to be public servants for the purposes of Chapter IX of the Indian Penal Code

¹[Chairman, director, etc., to be public servants for the purposes of Chapter IX of the Indian Penal Code. ²[Every Chairman who is appointed on a whole-time basis, managing director, director, auditor] liquidator, manager and any other employee of a banking company shall be deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).]

——————–

1. Inserted by Act 95 of 1956, Section10 w.e.f.

2. Substituted by Act 20 of 1994, Section 9 w.e.f. 31-1-1994.

Section 47. Cognizance of offences

No court shall take a cognizance of any offence punishable under ¹[sub-section (5)of section 36AA or] section 46 except upon complaint in writing made by an officer of ²[the Reserve Bank or, as the case may be, the National Bank] generally or specially authorised in writing in this behalf by ³[the Reserve Bank, or as the case may be, the National Bank] and ⁴[no court other than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class or any court superior thereto] shall try any such offence.

——————–

1. Inserted by Act 55 of 1963, Section 26 w.e.f. 1-2-1964.

2. Substituted by Act 61 of 1981, Section 61 and second Schedule, Pt. II, for “the Reserve Bank”

3. Substituted by Act 61 of 1981, Section 61 and second Schedule, Pt. II, for “the Reserve Bank”

4. Substituted by Act 1 of 1984, Section 39, for certain words w.e.f. 15-2-1984.

Section 47 A. Power of Reserve Bank to impose penalty

¹[Power of Reserve Bank to impose penalty. (1)Notwithstanding anything contained in section 46, if a contravention or default of the nature referred to in subsection (3) or sub-section (4) of section 46, as the case may be, is made by a banking company, then, the Reserve Bank may impose on such banking company—

(a) where the contravention is of the nature referred to in sub-section (3) of section 46, a penalty not exceeding twice the amount of the deposits in respect of which such contravention was made;

(b) where the contravention or default is of the nature referred to in sub-section (4) of section 46, a penalty not exceeding ²[five lakh rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where such the contravention or default is a continuing one, a further penalty which may extend to twenty-five thousand rupees] for every day, after the first, during which the contravention of default continues.

³[(2) For the purpose of adjudging the penalty under sub-section (1), the Reserve Bank shall serve notice on the banking company requiring it to show cause why the amount specified in the notice should not be imposed and a reasonable opportunity of being heard shall also be given to such banking company.]

(4) No complaint shall be filed against any banking company in any court of law in respect of any contravention or default in respect of which any penalty has been imposed by the Reserve Bank under this section.

(5) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of fourteen days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the banking company and in the event of failure of the banking company to pay the sum within such period, may be levied on a direction made by the principal civil court having jurisdiction in the area where the registered office of the banking company is situated; or, in the case of a banking company incorporated outside India, where its principal place of business in India is situated:

Provided that no such direction shall be made except on an application made to the court by the Reserve Bank or any officer authorised by that Bank in this behalf.

(6) The court which makes a direction under sub-section (5) shall issue a certificate specifying the sum payable by the banking company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a civil suit.

(7) Where any complaint has been filed against any banking company in any court in respect of the contravention or default of the nature referred to in sub-section (3) or, as the case may be, sub-section (4) of section 46, then, no proceedings for the imposition of any penalty on the banking company shall be taken under this section.]

——————–

1. Inserted by Act 58 of 1968, Section 17 w.e.f. 1-2-1969.

2. Substituted by Act 20 of 1994, Section 10 w.e.f. 31-1-1994.

3. Substituted by Act 20 of 1994, Section 10, for sub-sections (2) and (3) w.e.f. 31-1-1994.

Section 48. Application of fines

A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding of the person on whose information the fine is recovered.

Section 49. Special provisions for private banking companies

The exemptions, whether express or implied, in favour of a private company in ¹[sections 90, 165, 182, 204 and 255, clauses (a) and (b) of sub-section (1) of section 293 and sections 300, 388A and 416 of the Companies Act, 1956 (1 of 1956)], shall not operate in favour of a private company which is a banking company.

——————-

1. The words and figures “sections. 17, 77, 83B, 86H, 91B and 91D and sub-section (5) of section 144 of the Indian Companies Act, 1913 (7 of 1913)” have successively been amended by Act 95 of 1956, Section 11, Act 33 of 1959, Section 34 and Act 55 of 1963, Section 27 to read as above.

Section 49 A. Restriction on acceptance of deposits withdrawable by cheque

¹[Restriction on acceptance of deposits withdrawable by cheque. No person other than a banking company, the Reserve Bank, the State Bank of India or any other ²[banking institution, firm or other person notified by the Central Government in this behalf on the recommendation of the Reserve Bank] shall accept from the public deposits of money withdrawable by cheque:

Provided that nothing contained in this section shall apply to any savings bank scheme run by the Government.

——————-

1. Inserted by Act 33 of 1959, Section 35 w.e.f. 1-10-1959.

2. Substituted by Act 55 of 1963, Section 28, for certain words w.e.f. 1-2-1964.

Section 49 B. Change of name by a banking company

Notwithstanding anything contained in section 21 of the Companies Act, 1956 (1 of 1956), the Central Government shall not signify its approval to the change of name of any banking company unless the Reserve Bank certifies in writing that it has no objection to such change.

Section 49 C. Alteration of memorandum of a banking company

Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), no application for the confirmation of the alteration of the memorandum of a banking company shall be maintainable unless the Reserve Bank certifies that there is no objection to such alteration.]

Section 50. Certain claims for compensation barred

No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any of the provisions ¹[contained in sections 10, 12A, 16, 35A, 35B, ²[36, 43A and 45] or by reason of the compliance by a banking company with any order or direction given to it under this Act].

———————

1. Substituted by Act 95 of 1956, Section 12, for certain words w.e.f. 14-1-1957.

2. Substituted by act 37 of 1960, Section 8, for “and 36”.

Section 51. Application of certain provisions to the State Bank of India and other notified banks

¹[Application of certain provisions to the State Bank of India and other notified banks. ²[(1)] Without prejudice to the provisions of the State Bank of India Act, 1955(23 of 1955) or any other enactment, the provisions of sections 10, 13 to 15, 17, ³[19 to 21A, 23 to 28, 29] excluding sub-section (3) ⁴[sub-section (1B), (1C) and (2) of sections 30, 31,] 34, 35, 35A, 36 [excluding clause(a) of sub-section(1)] 45Y to 45ZF, 46 to 48] 50, 52 and 53 shall also apply; so far as may be, to and in relation to the State Bank of India ⁵[or any corresponding new bank or a Regional Rural Bank or any subsidiary bank] as they apply to and in relation to banking companies:

⁶[Provided that—

(a) nothing contained in clause (c) of sub-section (1) of section 10 shall apply to the chairman of the State Bank of India or to a ⁷[managing director] of any subsidiary bank insofar as the said clause precludes him from being a director of, or holding an office in, any institution approved by the Reserve Bank;

⁸[(b) nothing contained in sub-clause (iii) of clause (b) of sub-section (!) of section 20 shall apply to any bank referred to in sub-section (1), insofar as the said sub-clause (iii) of clause (b) precludes that bank from entering into any commitment for granting any loan or advance to or on behalf of a company (not being a Government company) in which not less than forty per cent of the paid-up capital is held (whether singly or taken together) by the Central Government or the Reserve Bank or a corporation owned by that bank; and

(c) nothing contained in section 46 or in section 47A shall apply to, —

(i) an officer of the Central Government or the Reserve Bank, nominated or appointed as director of the State Bank of India or any corresponding new bank or a Regional Rural Bank or any subsidiary bank or a banking company; or

(ii) an officer of the State Bank of India or a corresponding new bank or a Regional Rural Bank or a subsidiary bank nominated or appointed as director of any of the said banks (not being the bank of which he is an officer) or of a banking company.;]

⁹[***]

¹⁰[(2) References to a banking company in any rule or direction relating to any provision of this Act referred to in sub-section (1) shall, except where such rule or direction provides otherwise, be construed as referring also to the State Bank of India, a corresponding new bank, a Regional Rural Bank and a subsidiary bank.]

———————

1. Substituted by Act 79 of 1956, Section 43 and ScheduleII, for section 51 w.e.f. 22-10-1956.

2. Section 51 renumbered as sub-section (1) thereof by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.

3. Substituted by Act 1 of 1984, Section 40, for certain words and figures w.e.f. 15-2-1984.

4. Substituted by Act 66 of 16988, Section 10, for “31”w.e.f. 30-12-1988.

5. Substituted by Act 1 of 1984, Section 40, for certain words w.e.f. 15-2-1984.

6. Substituted by Act 38 of 1959, Section 64 and Schedule III, for the proviso w.e.f. 10-9-1959.

7. Substituted by Act 1 of 1984, Section 40, for “general manager w.e.f. 15-2-1984.

8. Clauses (b) and (c) Substituted by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.

9. Explanation omitted by Act 58 of 1968, Section 18 w.e.f. 1-2-1969.

10. Inserted by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.

Section 52. Power of Central Government to make rules

(1) The Central Government may, after consultation with the Reserve Bank, 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 and all such rules shall be published in the Official Gazette.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for the details to be included in the returns required by (his Act and the manner in which such returns shall be submitted 1[and the form in which the official liquidator may file lists of debtors to the court having jurisdiction under Part III or Part IIIA and the particulars which such lists may contain and any other matter which has to be, or may be, prescribed].

²[***]

¹[(4) The Central Government may by rules made under this section annul, alter or add to, all or any of the provisions of the Fourth Schedule.]

³[(5) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]

———————

1. Added by Act 52 of 1953, Section 11.

2. Sub-section (3) omitted by Act 1 of 1984, Section 4 w.e.f. 15-2-1984.

3. Inserted by Act 1 of 1984, Section 41 w.e.f. 15-2-1984.

Section 53. Power to exempt in certain cases

The Central Government may, on the recommendation of the Reserve Bank, declare, by notification in the Official Gazette, that any or all of the provisions of this Act shall not apply to any banking company ¹[or institution] or to any class of banking companies either generally or for such period as may be specified.

———————

1. Inserted by Act 55 of 1963, Section 29 w.e.f. 1-2-1964.

Section 54. Protection of action taken under Act

(1) No suit or other legal proceeding shall be lie against the Central Government, the Reserve Bank or any officer for anything which is in good faith done or intended to be done in pursuance of this Act.

(2) Save as otherwise expressly provided by or under this Act, no suit or other legal proceeding shall lie against the Central Government, the Reserve Bank or any officer for any damage caused or likely to be caused by anything in good faith done or intended to be done in pursuance of this Act.

Section 55. Amendment of Act 2 of 1934

The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the fourth column of the First Schedule, and the amendments to section 18 thereof as specified in the said Schedule shall be deemed to have had effect on and from the 20th day of September, 1947.

Section 55 A. Power to remove difficulties

¹[Power to remove difficulties. If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, as occasion requires, do anything (not inconsistent with the provisions of this Act) which appears to it to be necessary for the purpose of removing the difficulty:

Provided that no such power shall be exercised after the expiry of a period of three years from the commencement of section 20 of the Banking Laws (Amendment) Act, 1968 (58 of 1968).]

——————–

1. Inserted by Act 58 of 1968, Section 20 w.e.f. 1-2-1969.

Part V – Application of the Act to Co-Operative Banks

Section 56. Act to apply to co-operative societies subject to modifications

The provisions of this Act, as in force for the time being, shall apply to, or in relation to, cooperative societies as they apply to, or in relation to banking companies subject to the following modifications, namely:—

(a) throughout this Act, unless the context otherwise requires,—

(i) references to a “banking company” or “the company” or “such company” shall be construed as references to a co-operative bank;

(ii) reference to “commencement of this Act” shall be construed as reference to commencement of the Banking Laws(Application to Co-operative Societies) Act, 1965 (23 of 1965);

(b) in section 2, the words and figures “the Companies Act, 1956 (1 of 1956) and” shall be omitted;

(c) in section 5,—

1[(i) after clause (cc), the following clauses shall be inserted, namely:—

(cci) “Co-operative bank” means a state co-operative bank, a central co-operative bank and a primary co- operative bank;

(ccii) “co-operative credit society” means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank;

36(cciia) “co-operative society” means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State Co-operative Societies, or any other Central or State law relating to Co-operative Societies for the time being in force;';

(cciii) “director” in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society;

37(cciiia) “multi-State co-operative bank” means a multi-State co-operative society which is a primary co-operative bank;

38(cciiib) “multi-State co-operative society” means a multi-State co-operative society registered as such under any Central Act for the time being in force relating to the multi-State co-operative societies but does not include a national co-operative society and a federal co-operative;';

(cciv) “primary agricultural credit society” means a co-operative society,—

(1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and

(2) the bye-laws of which do not permit admission of any other co-operative society as member:

Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;

(ccv) “primary co-operative bank” means a co-operative society, other than a primary agricultural credit society,-

(1) the primary object or principal business of which is the transaction of banking business;

(2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and

(3) the bye-laws of which do not permit admission of any other co-operative society as a member:

Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;

(ccvi) “primary credit society” means a co-operative society, other than a primary agricultural credit society,—

(1) the primary object or principal business of which is the transaction of banking business;

(2) the paid-up share capital and reserves of which are less than one lakh of rupees; and

(3) the bye-laws of which do not permit admission of any other co-operative society as a member;

Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose.

Explanation. —If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final;

(ccvii) “central co-operative bank”, “39[***]”, “primary rural credit society” and “state co-operative bank” shall have the meaning respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981;]

2[(ii) clauses (ff), (h) and (nb) shall be omitted;]

(d) for section 5A, the following section shall be substituted, namely:—

“5A. Act to override bye-laws, etc.—(1) The provisions of 3[this Act] shall have effect, notwithstanding anything to the contrary contained in the bye-laws of a co-operative society, or in any agreement executed by it, or in any resolution passed by it in general meeting, or by its Board of Directors or other body entrusted with the management of its affairs, whether the same be registered, executed or passed; as the case may be before or after the commencement of the Banking Laws (Application to Co-operative Societies Act, 1965 (23 of 1965).

(2) Any provision contained in the bye-laws, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of 2[this Act,] become or be void, as the case may be.”;

(e) in section 6, in sub-section (1),—

(i) in clause (b), the words, “but excluding the business of a managing agent or secretary and treasurer of company” shall be omitted;

(ii) in clause (d), after the word “company”, the words “co-operative society” shall be inserted;

(iii) in clause (m), after the word “company”, the words “or co-operative society” shall be inserted;

4[(f) for section 7, the following section shall be substituted, namely: —

“7. Use of words “bank”, “banker” or “banking”. —(1)No co-operative society other than a co-operative bank shall use as part of its name or in connection with its business any of the words “bank”, “banker” or “banking”, and no co-operative society shall carry on the business of banking in India unless it uses as part of its name at least of such words.

(2) Nothing in this section apply to—

(a) a primary credit society, or

(b) a co-operative society formed for the protection of the mutual interest of co-operative banks or co-operative land mortgage banks, or

(c) any co-operative society, not being a primary credit society, formed by the employees of—

(i) a banking company or the State Bank of India or a corresponding new bank or a subsidiary bank of such banking company, State Bank of India or a corresponding new bank, or

(ii) a co-operative bank or a primary credit society or a co-operative land mortgage bank, insofar as the word “bank”, “banker” or “banking” appears as part of the name of the employer bank, or as the case may be, of the bank whose subsidiary the employer bank is.”];

5[(fi) in section 8, for the proviso, the following proviso shall be substituted, namely:

“Provided that this section shall not apply—

(a) to any such business as aforesaid which was in the course of being transacted on the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983, so, however, that the said business shall be completed before the expiry of one year from such commencement; or

(b) to any business as is specified in pursuance of clause (o) of sub-section (1) of section 6;”;

(fii) in section 9, for the second proviso, the following provisos shall be substituted, namely:—

“Provided further that in the case of a primary credit society which becomes a primary co-operative bank after the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983, the period of seven years shall commence from the day it so becomes a primary co-operative bank:

Provided also that the Reserve Bank may, in any particular case, extend the aforesaid period of seven years by such period as it may consider necessary where it is satisfied that such extension would be in the interests of the depositors of the co-operative bank.”];

(g) 6[sections 10, 10A, 7[10B, 10BB, 10C], and 10D] shall be omitted;

(h) for section 11, the following section shall be substituted, namely:—

“11. Requirement as to minimum paid-up capital and reserves. — (1) Notwithstanding any law relating to co-operative societies for the time being in force, no co-operative bank shall commence or carry on the business of banking in India unless the aggregate value of its paid-up capital and reserves is not less than one lakh of rupees:

Provided that nothing in this sub-section shall apply to—

(a) any such bank which is carrying on such business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of three years from such commencement; or

(b) to a primary credit society which becomes a primary co-operative bank after such commencement, for a period of two years from the date it so becomes a primary co-operative bank or for such further period not exceeding one year, the Reserve Bank, having regard to the interests of the depositors of the primary co-operative bank, may think fit in any particular case to allow.

(2) For the purpose of this section, “value” means the real or exchangeable value and not the nominal value which may be shown in the books of the co-operative bank concerned.

(3) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any co-operative bank, a determination thereof by the Reserve Bank shall be final for the purposes of this section;]

(i) sections 12, !2A, 13 and 15 to 17 shall be omitted;

6[(j)) For section 18, the following section shall be substituted, namely: —

18. Cash reserve. —(1) Every co-operative bank, not being a State cooperative bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (hereinafter referred to as a “scheduled State Co-operative Bank”), shall maintain in India by way of cash reserve with itself or by way of balance in a current account with the Reserve Bank or the State co-operative bank of the State concerned or by way of net balance in current accounts, or, in the case of a primary co-operative bank, with the central cooperative bank of the district concerned, or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the fifteenth day of every month a return showing the amount so held on alternate Fridays during a month with particulars of its demand and time liabilities in India on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881) at the close of business on the preceding working day.

Explanation. —In this section and in section 24—

(a) “liabilities in India” shall not include—

(i) the paid-up capital or the reserves or any credit balance in the profit and loss account of the co-operative bank;

(ii) any advance taken from a State Government, the Reserve Bank, the Development Bank, the Exim Bank, 7[the Reconstruction Bank,] 8[the National Housing Bank] the National Bank 9[the Small Industries Bank] or from the National Co-operative Development Corporation established under section 3 of the National Co-operative Development Corporation Act, 1962 (26 of 1962), by the bank;

(iii) in the case of a State or Central co-operative bank, also any deposit of money with it representing the reserves fund or any part thereof maintained with it by any other co-operative society within its area of operation, and in the case a Central co-operative bank, also an advance taken by it from the State co-operative bank of the State concerned;

(iv) in the case of a primary co-operative bank, also any advance taken by it from the State co-operative bank of the State concerned or the Central cooperative bank of the district concerned;

(v) in the case of any co-operative bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance; and

(vi) in the case of any co-operative bank, the amount of any advance or other credit arrangement drawn and availed of against approved securities;

(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;

(c) “net balance in current accounts” shall, in relation to a co-operative bank, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that co-operative bank with the State Bank of India or a subsidiary bank or a corresponding new bank, over the aggregate of the credit balances in current accounts held by the said banks with such co-operative bank;

(d) for the purpose of computation of liabilities, the aggregate of the liabilities of a co-operative bank to the State Bank of India, a subsidiary bank, a corresponding new bank, a Regional Rural bank, a banking company or any other financial institution notified by the Central Government in this behalf shall be reduced by the aggregate of the liabilities of all such banks and institutions to the cooperative bank;

(e) any cash with a co-operative bank or any balance held by a co-operative bank with another bank, shall not, to the extent such cash or such balances represents the balance in, or investment of, Agricultural Credit Stabilisation Fund of such co-operative bank, be deemed to be cash maintained in India.

(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of transactions, that such transaction or transactions shall be regarded as liability in India of a co-operative bank, and, if any question arises to whether any transaction or class of transactions shall be regarded for the purposes of this section and section24, as liability in India of a co-operative bank, the decision of the Reserve Bank thereon, shall be final.”];

(k) for section 19, the following section shall be substituted, namely:—

“19. Restriction on holding shares in other co-operative societies. —No co-operative bank shall hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf:

Provided that nothing contained in this section shall apply to—

(i) shares acquired through funds provided by the State Government for that purpose;

(ii) in the case of a Central co-operative bank, the holding of shares in the State co-operative bank to which it is affiliated;

(iii) in the case of a primary co-operative bank, the holding of shares in the Central co-perative bank to which it is affiliated or in the State cooperative bank of the State in which it is registered:

Provided further that where any shares are held by a co-operative bank in contravention of this section at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), the co-operative bank shall without delay report the matter to the Reserve Bank and shall, notwithstanding anything contained in this section, be entitled to hold the shares for such period and on such conditions as the Reserve Bank may specify”

10[(1) for section 20 of the principal Act, the following section shall be substituted, namely:

“20. Restrictions on loans and advances. — (1) No co-operative bank shall—

(a) make any loans or advances on the security of its own shares; or

(b) grant unsecured loans or advances—

(i) to any of its directors; or

(ii) to firms or private companies in which any of its directors is interested as partner of managing agent or guarantor or to individuals in cases where any of its directors is a guarantor; or

(iii) to any company in which the chairman of the Board of directors of the co-operative bank (where the appointment of a chairman is for a fixed term) is interested as its managing agent, or where there is no managing agent, as its chairman or managing director:

Provided that nothing in clause (b) shall apply to the grant of unsecured loans or advances—

(a) made by a co-operative bank—

(i) against bills for supplies or services made or rendered to government or bills of exchange arising out of bona fide commercial or trade transactions, or

(ii) in respect whereof trust-receipts are furnished to the co-operative bank;

(b) made by a primary co-operative bank to any of its directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf.

(2) Every co-operative bank shall, before the close of the month succeeding that to which the return relates, submit to the Reserve Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases [other than those in which the co-operative bank is prohibited under sub-section (1) to make unsecured loans and advances] in which any of its directors is interested as director or managing agent or guarantor.

(3) If, on examination of any return submitted under sub-section (2), it appears to the Reserve Bank that any loans or advances referred to in that subsection are being granted to the detriment of the interests of the depositors of the co-operative bank, the Reserve Bank may, by order in writing prohibit the co-operative bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may by like order direct the co-operative bank to secure the re-payment of such loans or advance within such time as may be specified in the order”;

11[(m) in section 20A, in sub-section (1). —

(i) the words and figures “Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956),” shall be omitted;

(ii) in clause (a), for the words “any of its directors”, the words “any of its past or present directors” shall be substituted;]

(n) in section 21, in sub-section (2), in clauses (c) and (d), for the words “any one company, firm, association of persons or individuals”, the words “any one party” shall be substituted;

(o) in section 22,—

(i) for sub-sections(1) and (2) the following sub-sections shall be substituted, namely:—

“(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless—

(a) it is a primary credit society, or

(b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, to such conditions, if any, as the Reserve Bank may deem fit to impose:

Provided that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a co-operative bank carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from such commencement.

12[(2) Every co-operative society carrying on business as a co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) shall before the expiry of three months from the commencement, every co-operative bank which comes into existence as a result of the division of any other co-operative society carrying on business as a co-operative bank, or the amalgamation of two or more co-operative societies carrying on banking business shall, before the expiry of three months from its so coming into existence, every primary credit society which becomes a primary co-operative bank after such commencement shall before the expiry of three months from the date on which it so becomes a primary co-operative bank and every co-operative society other than a primary credit society shall before commencing banking Business in India, apply in writing to the Reserve Bank for a licence under this section:

Provided that nothing in clause (b) of sub-section (1) shall be deemed to prohibit—

(i) a co-operative society carrying on business as a co-operative bank at the commencement of the Banking Law (Application to Co-operative Societies) Act, 1965 (23 of 1965); or

(ii) a co-operative bank which has come into existence as a result of the division of any other co-operative society carrying on business as a cooperative bank, or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) or at any time thereafter; or

(iii) a primary credit society which becomes a primary Co-operative bank after such commencement,

from carrying on banking business until it is granted a licence in pursuance of this section or is, by a notice in writing notified by the Reserve Bank that the licence cannot be granted to it.]”

13[(ii) sub-section (3A) shall be omitted;

(iii) in sub-section (4) in clause (iii)the words, brackets, figures and letter “and sub-section (3A)” shall be omitted;]

22A Validation of licences granted by Reserve Bank to multi-State co-operative societies.– Notwithstanding anything contained in any law or, judgment delivered or decree or order of any court made,–

(a) no licence, granted to a multi-

14[(p) in section 23, —

(i) for sub-section (1), the following sub-section shall be substituted, namely:—]

“(1) Without obtaining the prior permission of the Reserve Bank, no co-operative bank shall open a new place of business or change otherwise than within the same city, town or village, the location of an existing place of business:

Provided that nothing in this sub-section shall apply to—

(a) the opening for a period not exceeding one month of temporary place of business within a city, town or village or the environs thereof within which the co-operative bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any like occasion;

(b) the 15[opening or changing the location of branches] by a Central cooperative bank within the area of its operation”;

16(ii) after sub-section (4), the following sub-section shall be inserted, namely:—

“(4A) Any co-operative bank other than a primary co-operative bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank through the National Bank which shall give its comments on the merits of the application and sent it to the Reserve Bank:

Provided that the co-operative bank shall also send an advance copy of the application directly to the Reserve Bank.”];

17[(q) in section 24, —

(i) in sub-section (1) the words “After the expiry of two years from the commencement of this Act” shall be omitted;

(ii) for sub-section (2) and (2A), the following sub-sections shall be substituted, namely:—

“(2) In computing the amount for the purposes of sub-section (1),—

(a) any balances maintained in India by a co-operative bank in current account with the Reserve Bank or by way of net balance in current accounts, and in the case of a scheduled State Co-operative Bank, also the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), to be so maintained,

(b) any balances maintained by a Central co-operative bank with the State co-operative bank of the State concerned, and

(c) any balances maintained by a primary co-operative bank with Central co-operative bank of the district concerned or with the State cooperative bank of the State concerned,

shall be deemed to be cash maintained in India.

(2A)(a) Notwithstanding anything contained in sub-section (1) or in sub-section (2), after the expiry of two years from the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965(23 of 1965), or of such further period not exceeding one year as the Reserve Bank, having regard to the interests of the co-operative bank concerned, may think fit in any particular case to allow: —

(i) a scheduled State co-operative bank, in addition to the average daily balance which it is or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), and

(ii) every other co-operative bank, in addition to the cash reserve which is required to maintain under section 18,

shall maintain in India, in cash, or in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination of, the following methods of valuation namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the Reserve Bank from time to time, an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding four per cent as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight.

(b) In computing the amount for the purpose of clause (a), the following shall be deemed to be cash maintained in India, namely: —

(i) any balance maintained by scheduled State co-operative bank with the Reserve Bank in excess of the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934);

(ii) any cash or balances maintained in India by a co-operative bank, other than a scheduled State co-operative bank, with itself or with the State co-operative bank of the State concerned, or in current account with the Reserve Bank or by way of net balance in current accounts and, in the case of a primary co-operative bank, also any balances maintained with the Central co-operative bank of he district concerned, in excess of the aggregate of the cash or balances required to be maintained under section 18;

(iii) any net balance in current accounts.

Explanation. —For the purposes of this sub-section—

(a) approved securities or a portion thereof, representing investment of monies of Agricultural Credit Stabilisation Fund of a co-perative bank shall not be deemed to be unencumber approved securities;

(b) in case a co-operative bank has taken an advance against any balance maintained with the State co-operative bank of the State concerned or with the Central co-operative bank of the district concerned, such balance to the extent to which it has been drawn against or availed of shall not be deemed to be cash maintained in India.

(c) for the purpose of clause (a), the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities;”

(iii) in sub-section (3) for the proviso, the following proviso shall be substituted, namely:—

“Provided that every co-operative bank, other than a primary cooperative bank, shall also furnish within the said period, a copy of the said return to the National Bank.”;

(iv) in sub-section (6), in clause (a), for the words “fourteen days”, the words “the thirty days” shall be substituted;]

18[(qq) after section 24, the following section shall be inserted, namely: —

“24A. Power to exempt. —Without prejudice to the provisions of section 53, the Reserve Bank may, by notification in the Official Gazette, declare that, for such period and subject to such conditions as may be specified in such notification the whole or any part of the provisions of section 18 or section 24, as may be specified therein, shall not apply to any co-operative bank or class of co-operative banks, with reference to all or any of the offices of such co-operative bank or banks, or with reference to the whole or any part of the assets and liabilities of such co-operative bank or banks.”]

(r) section 25 shall be omitted;

19[(ri) in the second proviso to section 26, for the expression “regional rural Bank” the expression “co-operative bank, other than a primary co-operative bank” shall be substituted;

(rii) in section 27, for sub-section (3)the following sub-section shall be substituted, namely:—

“(3) Every co-operative bank, other than a primary co-operative bank, shall submit a copy of the return which it submits to the Reserve Banks, under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may also be exercised by the National Bank in relation to co-operative banks, other than primary co-operative banks.]

(s) for sections 29 and 30, the following section shall be substituted namely:—

“29. Accounts and Balance Sheet. —(1) At the expiration of each year ending with the 30th days of June, 20[or at the expiration of a period of twelve months ending with such date as the Central Government may, by notification in the Official Gazette, specify in this behalf] every co-operative bank, in respect of all business transacted by it, shall prepare with reference to that year 20[or the period] a balance sheet and profit and loss account as on the last working day of the year 20[or the period] in the Forms set out in the Third Schedule as near there to as circumstances admit:

20[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for me preparation of, or for other matters relating to, the balance-sheet or profit and loss account in respect of the concerned year or period, as the case may be].

(2) The balance-sheet and profit and loss account shall be signed by the manager or the principal officer of the bank and where there are more than three directors of the bank, by at least three of those directors, or where there are not more than three directors, by all the directors.

(3) The Central Government, after giving not less than there months’ notice of its intention so to do by a notification in the Official Gazette, may from time to time by a like notification amend the Forms set out in the Third Schedule.”

21[(t) in section 31, —

(i) for the words “within three months” and “of three months’, the words “within six months” and “of six months” shall, respectively, be substituted;

(ii) for the second proviso, the following proviso shall be substituted, namely:

“Provided further that a co-operative bank, other than a primary cooperative bank, shall furnish such returns also to the National Bank.”;]

(u) sections 32 to 34 shall be omitted;

(v) in section 34A, sub-section (3) shall be omitted;

(w) in section 35,—

(i) in sub-section (1),—

(a) for the words and figures “section 235 of the Companies Act, 1956(1 of 1956)”, the words “any law relating to co-operative societies for the time being in force” shall be substituted;

22[(b) the following proviso shall be inserted at the end, namely: —

“Provided that the Reserve Bank may, if it considers it necessary or expedient so to do, cause an inspection to be made of a primary co-operative bank under this sub-section by one or more officers of a State co-operative bank in the State in which such primary cooperative bank is registered.”];

(ii) in sub-section (4), clause (b) shall be omitted.

23[(iii) after sub-section (4), the following sub-section shall be inserted, namely:—

“(4A) Without prejudice to the provisions of sub-section (4), the Reserve Bank may, if it considers it necessary or expedient so to do supply a copy of the report on any inspection or scrutiny to the State co-operative bank and the Registrar of co-operative societies of the State in which the bank which has been inspected or whose affairs have been scrutinised is registered.”];

24[(iv) in sub-section (6), for the expressions “regional rural banks’ and “regional rural bank”, wherever they occur, the expressions “co-operative banks other than primary cooperative bank” shall, respectively, be substituted.]

25[(v)] the Explanation shall be omitted;

(x) in section 35A, in sub-section (1), in clause (c), for the words “any banking company”, the words “the banking business of any co-operative bank” shall be substituted;

(y) section 35B shall be omitted;

26[(z) in section 36, in sub-section (1), —

(a) clause (b) shall be omitted;

(b) for clause (d), the following clause shall be substituted, namely:—

(d) at any time, if it is satisfied that for the reorganisation or expansion of co-operative credit on sound lines it is necessary so to do by an order in writing and on such terms and conditions as may be specified therein,—

(i) depute one or more of its officers to watch the proceedings at any meeting of the Board of directors of the co-operative bank or of any other body constituted by it and require the co-operative bank to give an opportunity to the officer so deputed to be heard at such meetings and to offer such advice on such matters as the officer may consider necessary or proper for the reorganisation and expansion of co-operative credit on sound lines, and also require such officer to send a report of such proceedings to the Reserve Bank;

(ii) appoint one or more of its officers to observe the manner in which the affairs of the co-operative bank or its offices or branches are being conducted and make a report thereon;”];

(za) in section 36A,—

(i) for sub-section (1), the following sub-section shall be substituted, namely:—

“(1) The provisions of section 11, section 18 and section 24 shall not apply to a co-operative bank which has been refused a licence under section 22 of whose licence has been cancelled under that section or which is or has been prohibited or precluded from accepting deposits by virtue of any order made under this Act or of any alteration made in its bye-laws.”;

(ii) after sub-section (2), the following sub-section shall be inserted, namely:—

“(3) Subject to the provisions of sub-sections (1) and (2), a co- operative society carrying on business as a primary co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or a co-operative society which becomes a primary co-operative bank after such commencement shall, notwithstanding that it does not at any time thereafter satisfy the requirements of the definition of primary co-operative bank 27[in clause (ccv) of section 5], continue to be a primary co-operative bank within the meaning of this Act, and may, with the approval of the Reserve Bank and subject to such terms and conditions as the Reserve Bank may specify in that behalf, continue to carry on the business of banking.”;

28[(zaa)in section 35AD, sub-section (3) shall be omitted;”]

(zb)

40[Part II A except sections 36AAA, 36AAB and 36AAC], 29[Part IIC], Part III, except sub-sections (1), (2) and (3) of section 45,and Part IIIA except section 45W shall be omitted;

30[(zc) in section 46, —

(i) in sub-section (4) the word “or” occurring at the end of clause (i) and clause (ii) shall be omitted;

(ii) in clause (a) of the Explanation, after the words “includes a”, the words “co- operative society” shall be inserted;]

(zd) in section 47, the words brackets, figures and letters “sub-section (5) of section 36AA or” shall be omitted;

(ze) section 49 shall be omitted;

(zf) in section 49A, for the proviso, the following proviso shall be substituted, namely:—

“Provided that nothing contained in this section shall apply to—

(a) a primary credit society—

(b) any other co-operative society accepting such deposits at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from the date of such commencement; and

(c) any savings bank scheme run by the Government”;

(zg) sections 49B and 49C shall be omitted;

(zh) in section 50, the figures and letters “10,12A, 16″, “35B”, and “43A” shall be omitted;

(zi) section 51 shall be omitted;

(zj) in section 52,—

(i) in sub-section (2) the words, figures and letter “and the form in which official liquidator may file lists of debtors to the court jurisdiction under Part III or Part IIIA and the particulars which such lists may contain” shall be omitted;

(ii) sub-section (4) shall be omitted;

31[(zji) in section 54, after the expression “Reserve Bank”, wherever it occurs, the expression “or the National Bank” shall be inserted;]

(zk) For section 65 and the First Schedule, the following section shall be substituted, namely:—

“55, Act 18 of 1891 and Act 46 of 1949 to apply in relation to co-operative banks.—(1) The Bankers’ Books Evidence Act, 1891 shall apply in relation to a co-operative bank as it applies in relation to a bank as defined in section 2 of that Act.

(2) The Banking Companies (Legal Practitioners’ Clients’ Accounts) Act, 1949 shall apply in relation to a co-operative bank as it applies in relation to a banking company as defined in section 2 of that Act.”;

(zl) for the third Schedule and the Fourth Schedule, the following Schedule shall be substituted, namely:—

Schedules

The First Schedule

(See section 55)

AMENDMENTS

 The Second Schedule

Repeals.—[Rep. by Repealing and Amending Act, 1957 (36 of 1957), Section 52 and Schedule 1]

The Third Schedule

(see section 29)

FORM A

Form of Balance-sheet

FORM B

Form of Profit and Loss Account

Profit and Loss Account for the year ended—

2. Salaries and allowances and provident fund

3. Directors and local committee members’ fees

and allowances

4. Rent, taxes, insurance, lighting, etc.

5. Law charges

6. Postage, telegrams and telephonic charges

7. Auditor’s fees

8. Depreciation on and repairs in property

1. Interest and discount

2. Commission, exchange and brokerage

3. Subsidies and donations

4. Income from non-banking assets and profit from

sale of or dealing with such assets

5. Other receipts

6. Loss (if any)9. Stationery, printing and advertisement, etc.

10. Loss from sale of or dealing with non-banking

assets

11. Other expenditure

12. Balance of profit ___________

Total ___________

____________
Total ____________

The Third Schedule A

(See section 29)
33[Form A

Form of Balance Sheet

Borrowings

Other liabilities and provisions1
23

4

5

__________ __________
Total __________ __________ASSETS
Cash and Balances with ReserveBank of India

Balances with Banks and money at

call and short notice

Investments

Advances

Fixed Assets

Other Assets

Total

Contingent liabilities 12 Bill for collection

6

7

8

9

10

11

__________ ___________

__________ ___________

SCHEDULE I

Capital

II. For Banks incorporated outside India

Capital

(i) (The amount brought in by banks

by way of Start-up capital as prescribed

by RBI should be shown under this head)

(ii) Amount of deposit kept with the RBI

Under section 11(2) of the Banking

Regulation Act, 1949.

__________ __________

Total ____________ ___________

III. For other BanksAuthorised Capital (Shares of Rs…..

each)

Issued Capital (Shares of Rs….. each)

Subscribed Capital (Shares of Rs….. each)

Called-up Capital (Shares of Rs….. each)

Less : Calls unpaid

Add : Forfeited shares

Schedule 3A – I.

SCHEDULE I

Capital

II. For Banks incorporated outside India

Capital

(i) (The amount brought in by banks

by way of Start-up capital as prescribed

by RBI should be shown under this head)

(ii) Amount of deposit kept with the RBI

Under section 11(2) of the Banking

Regulation Act, 1949.

__________ __________

Total ____________ ___________

III. For other BanksAuthorised Capital (Shares of Rs…..

each)

Issued Capital (Shares of Rs….. each)

Subscribed Capital (Shares of Rs….. each)

Called-up Capital (Shares of Rs….. each)

Less : Calls unpaid

Add : Forfeited shares

Schedule 3A – II.

SCHEDULE 2

Reserves and Surplus

Additions during the year

Deductions during the year

II. Capital Reserves

Opening Balance

Additions during the year

Deductions during the year

III. Share premium

Opening Balance

Additions during the year

Deductions during the year

IV. Revenue and other Reserves

Opening Balance

Additions during the year

Deductions during the year

V. Balance of Profit and Loss Account
__________ __________

Total (I, II, III, IV and V) __________ __________

Schedule 3A – III.

SCHEDULE 3

Deposits

(ii) From others

II. Savings Bank Deposits

III. Term Deposits

(i) From Banks

(ii) From others

___________ ___________

Total (I, II, III) ___________ ___________

B. (i) Deposits of branches in India

(ii) Deposits of branches outside India

___________ ___________

Total ___________ ___________

Schedule 3A – IV.

SCHEDULE 4

Borrowings

(ii) Other Banks

(iii) Other institutions and agencies

II. Borrowings outside India

___________ ___________

Total: (I and II) ___________ ___________

Secured borrowings included in 1 and

II above—Rs.

Schedule 3A – IX.

SCHEDULE 9

Advances

repayable on demand

(iii) Term loans

___________ ___________

Total: ___________ ___________

B. (i) Secured by tangible assets

(ii) Covered by Bank/Government

Guarantees

(iii) Unsecured

Total: ___________ ___________

C.I. Advances in India

(i) Priority sectors

(ii) Public sector

(iii) Banks

(iv) Others

Total: ___________ ___________

II. Advances Outside India

(i) Due from banks

(ii) Due from others

(a) Bills purchased and discounted

(b) Syndicated loans

(c) Others

Total: ___________ ___________
___________ ___________

Grand Total; (C.I. & C.II) ___________ ___________

Schedule 3A – V.

SCHEDULE 5

Other Liabilities and Provisions

II. Inter-office adjustments (net)

III. Interests accrued

IV. Others (Including provisions)

___________ ___________

Total: ___________ ___________

Schedule 3A – VI.

SCHEDULE 6

Cash and Balances with Reserve Bank of India

II. Balance with Reserve Bank of India

(i) in Current Account

(ii) in other Accounts

___________ ___________

Total: ___________ ___________

(I and II)

Schedule 3A – VII.

SCHEDULE 7

Balances with banks and Money at Call and short Notice

(a) In Current Accounts

(b) In Other Deposit Accounts

(ii) Money at call and short notice

(a) With banks

(b) With other institutions

___________ ___________

Total: ___________ ___________

(I and II)

II. Outside India

(i) in Current Accounts

(ii) in Other Deposit Accounts

(iii) Money at call and short notice

___________ ___________
Total: ___________ ___________

(I, II and III)

___________ ___________
Grant Total: ___________ ___________
(I and II)

Schedule 3A – VIII.

SCHEDULE 8

Investments

(i) Government Securities

(ii) Other approved securities

(iii) Shares

(iv) Debentures and Bonds

(v) Subsidiaries and/or joint ventures

(vi) Others (to be specified)

_____________ _____________

Total: _____________ _____________

II. Investments outside India in

(i) Government securities (Including local
authorities)

(ii) Subsidiaries and/or joint ventures abroad

(iii) Other investments (to be specified)

___________ ___________

Total: ___________ ___________

Grand Total (I and II)

Schedule 3A – X.

SCHEDULE 10

Fixed Assets

Additions during the year

Deductions during the year

Depreciation to date

II. Other Fixed Assets (including furniture and
fixtures)

At cost as on 31st March of the preceding year

Additions during the year

Deductions during the year

Depreciation to date

___________ ___________
Total: (I and II) ___________ ___________

Schedule 3A – XI.

SCHEDULE 11

Other Assets

II. Interest accrued

III. Tax paid in advance/tax deducted at source

IV. Stationery and stamps

V. Non-banking assets acquired
in satisfaction of claims

VI. Others*
_____________ _____________

Total: ___________ ___________

Schedule 3A – XII.

SCHEDULE 12

Contingent Liabilities

II. Liability for partly paid investments

III. Liability on account of outstanding forward exchange contracts

IV. Guarantees given on behalf of constituents

(a) In India

(b) Outside India

V. Acceptances, endorsements and other obligations

VI. Other items for which the bank is contingently liable

___________ ___________

Total: ___________ ___________

FORM ‘B’
Form of Profit and Loss Account for the year ended 31st March (year)

Other Income 14

___________ ___________

Total: ___________ ___________

II. Expenditure

Interest expended 15

Operating expenses 16 Provisions and contingencies

___________ ___________
Total: ___________ ___________

III. Profit/Loss

Net Profit/Loss (-) for the year

Profit/Loss (-) brought forward
___________ ___________

Total: ___________ ___________

IV. Appropriations

Transfer to statutory reserves

Transfer to other reserves

Transfer to Government/proposed dividend

Balance carried over to balance sheet

___________ ___________

Total: ___________ ___________

Schedule 3A – XIII.

SCHEDULE 13

Interest Earned

II. Income on investments

III. Interest on balances with Reserve Bank
of India and other inter-bank funds

IV. Others

___________ ___________

Total: ___________ __________

Schedule 3A – XIV.

SCHEDULE 14

Other Income

Less : Loss on sale of investments

III. Profit on revaluation of investments

Less : Loss on revaluation of investments

IV. Profit on sale of land, buildings and other assets

Less : Loss on sale of land, buildings and other assets

V. Profit on exchange transactions

Less : Loss on exchange transactions

VI. Income earned by way of dividends etc.

from subsidiaries/companies and/or joint

ventures abroad/in India

VII. Miscellaneous Income

___________ ___________

Total: ___________ ___________

Schedule 3A – XV.

SCHEDULE 15

Interest Expended

II. Interest on Reserve Bank of India/

Inter-back borrowings

III. Others

___________ ___________

Total: ___________ ___________

Schedule 3A – XVI.

SCHEDULE 16

Operating Expenses

II. Rent, taxes and lighting

III. Printing and stationery

IV. Advertisement and publicity

V. Depreciation on Bank’s property

VI. Director’s fees, allowances and expenses

VII. Auditors’ fees and expenses (Including branch auditors)

VIII. Law charges

IX. Postages. Telegrams, Telephones, etc.

X. Repairs and maintenance

XI. Insurance

XII. Other expenditure

___________ ___________

Total: ___________ ___________

The Fourth Schedule

¹[THE FOURTH SCHEDULE

[See section 45D(2)]

List of Debtors

1. The official liquidator shall from time to time submit list of debtors to the High Court, each list being verified by an affidavit.

2. Every such list shall contain the following particulars:

(a) names and addresses of the debtors;

(b) amount of debt due to the banking company by each debtor;

(c) rate of interest, if any, and the date up to which such interest has been calculated in the case of each debtor;

(d) description of papers, writings, and documents, if any, relating to each debt;

(e) relief or reliefs claimed against each debtor.

3. (a) In every such list, the official liquidator shall distinguish between the debts for which the banking company holds and security other than a personal security and the debts for which no security or only a personal security is given;

(b) In the case of secured debts, particulars of the securities claimed by the ban king company, and whenever possible their estimated value, and the names and addresses of person or persons, if any, having an interest in the securities or the right of redemption therein;

(c) In case the debt is guaranteed by any person or persons, the name and address of the guarantor or guarantors with particulars as to the extent to which the debt is guaranteed and description of documents, papers or writings in support of such guarantee.

4. If the debtor is adjudged insolvent either before or after he has been included in any such list, but before such list is settled, the name and address of the assignee or the receiver of his estate, as the case may be, should be stated in, or added to, the list.

5. If the original debtor dies either before or after he has been included in any such list, but before such list is settled, there shall be substituted in his place the names and addresses of his legal representatives as far as the official liquidator is able to ascertain.]

——————–

1. Inserted by Act 58 of 1968, Section 22 w.e.f. 1-2-1969.

The Fifth Schedule

¹[THE FIFTH SCHEDULE

(See section 36AG)

Principles of Compensation

1. The compensation to be given under section 36AG shall be an amount equal to the value of the assets of the acquired bank as on the day immediately before the appointed day, computed in accordance with the provisions of Part I of this Schedule less the total amount of liabilities thereof computed in accordance with the provisions of Part II of this Schedule.

Part I-Assets

For the purposes of this Part “assets” means the total of the following: —

(a) the amount of cash in hand and with the Reserve Bank and the State Bank of India (including foreign currency notes which shall be converted at the market rate of exchange);

(b) the amount of balances with any bank, whether on deposit or current account, and money at call and short notice, balance held outside India being converted at the market rate of exchange:

Provided that any balance which are not realisable in full shall be deemed to be debts and valued accordingly; –

(c) the market value, as on the day immediately before the appointed day, of any securities, shares debentures, bonds and other investments, held by the bank concerned.

Explanation.—For the purposes of this clause,—

(i) securities of the Central and State Governments [other than the securities specified in sub-clauses (ii) and (iii) of this Explanation] maturing for redemption, within five years from the appointed day shall be valued at the face value or the market value, whichever is higher;

(ii) securities of the Central Government, such as Post Office Certificates and Treasury Savings Deposit Certificates and any other securities or certificates issued or to be issued under the Small Savings Scheme of the Central Government, shall be valued at their face value or the encashable value of the market value, as on the day immediately before the appointed day, whichever is higher;

(iii) where the market value of any Government security such as the zamindari abolition bonds or other similar security in respect of which the principal is payable in instalment, is not ascertain able or is, for any reason, not considered as reflecting the fair value thereof or as otherwise appropriate, the security shall be valued at such an amount as is considered reasonable having ‘ regard to the instalments of principal and interest remaining to be paid, the period during which such instalments are payable, the yield of any security, issued by the Government to which the security pertains and having the same or approximately the same maturity, and other relevant factors;

(iv) where the market value of any security, share, debenture, bond or other investment is not considered reasonable by reason of its having been affected by abnormal factors, the investment may be valued on the basis of its average market value over any reasonable period;

(v) where the market value of any security, share, debenture, bond or other investment is not ascertainable, only such value, if any, shall be taken into account as is considered reasonable having regard to the financial position of the issuing concern, the dividend paid by it during the preceding five years and other relevant factors;

(d) the amount of advances (including loans, cash, credits, overdrafts, bills purchased and discounted), and other debts, whether secured or unsecured, to the extent to which they are reasonably considered recoverable, having regard to the value of the security, if any, the operations on the account, the reported worth and respectability of the borrower, the prospects of realisation and other relevant considerations;

(e) the value of any land or buildings;

(f) the total amount of premia paid, in respect of all leasehold properties, reduced in the case of each such premium by an amount which bears to such premium the same proportion as the expired term of the lease in respect of which such premium shall have been paid bears to the total term of the lease;

(g) the written down value as per books, or the realisable value, as may be considered reasonable, of all furniture, fixture and fittings;

(h) the market or realisable value, as may be a appropriate, of the other assets appearing on the books of the bank, no value being allowed for capitalised expenses, such as share selling commission, organisational expenses and brokerage, losses incurred and similar other items.

Part II—Liabilities

For the purpose of the Part “liabilities” means the total amount of all outside liabilities existing on the appointed day, and all contingent liabilities which the Central Government or the transferee bank may reasonably be expected to be required to be out of its own resources on or after the appointed day and where the acquired bank is a banking company incorporated outside India, includes the liabilities of the offices and branches in India of the acquired bank to its offices and branches outside India.

2. If the acquired bank is not incorporated in India, the assets or, as the case may be, the liabilities of the bank shall be, for the purposes of Part 1 and Part 11, and subject to the other provisions therein, the assets and liabilities of the offices of the bank situated in India.

COMPENSATION PAYABLE TO SHAREHOLDERS

3. Every shareholder of the acquired bank to whom the compensation is payable, shall be given such amount as compensation, as bears to the total compensation, calculated in accordance with the provisions of paragraph 1, the same proportion as the amount of paid-up capital of the shares held by the shareholder bears to the total-up capital of the acquired bank.

CERTAIN DIVIDENDS NOT TO BE TAKEN INTO ACCOUNT

4. No separate compensation shall be payable for any profits or any dividends in respect of any period immediately preceding the appointed day, for which, in the ordinary course, profits would have been transferred or dividend declared after the appointed day.]

——————–

1. Inserted by Act 58 of 1968, Section 22 w.e.f. 1-2-1969.

Information Technology Act

November 30, 2014

Section 1. Short title, extent, commencement and application. 

An Act to provide legal recognition for transactions carried out by means of electronic date interchange and other means of electronic communication, commonly referred to as “electronic commerce”, which involve the use of alternative to paper-based methods of communication and storage of information to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the India Evidence Act, 1872, the Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto;

WHEREAS the General Assembly of the United Nations by resolution A/RES/ 51/162, date 30th January 1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law;

AND WHREAS the said resolution recommends, inter alia, that all States give favourable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper based methods of communication and storage of information;

AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records;

BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:-

(1) This Act may be called the Information Technology Act, 2000.

(2) It shall extend to the whole of India and, save as otherwise provided in this Act, it applies also to any or contravention thereunder committed outside India by any person.

(3) It shall come into force on such date as the Central Government may, by notification, appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.

(4) Nothing in this Act shall apply to-

(a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881 (26 of 1881);

(b) a power-of-attorney as defined in section 1A of the Powers-of-Attorney Act, 1882 (7 of 1882);

(c) a trust as defined in section 3 of the Indian Trusts Act, 1882 (2 of 1882);

(d) a will as defined in clause (h) of section (2) of the Indian Succession Act, 1925 (39 of 1925), including any testamentary disposition by whatever name called;

(e) any contract for the sale or conveyance of immovable property or any interest in such property;

(f) any such class of documents or transactions as may be notified by the Central Government in the Official Gazette.

Section 2. Definitions. 

(1) In this Act, unless the context otherwise requires,- (a) “access”, with its grammatical variation and cognate expressions, means gaining entry into, instructing or communicating with the logical, arithmetical or memory function resources of a computer, computer system or computer network;

(b) “addressee” means a person who is intended by the originator to receive the electronic record but does not include any intermediary;

(c) “adjudicating officer” means an adjudicating officer appointed under sub-section (1) of section 46;

“affixing digital signature”, with its grammatical variations and cognate expressions means adoption of any methodology or procedure by a person for the purpose of authenticating an electronic record by means of digital signature;

“appropriate Government ” means as respects any matter- enumerated in List II of the Seventh Schedule to the Constitution;

relating to any State law enacted under List III of the Seventh Schedule to the Constitution,

the State Government and in any other case, the Central Government;

“asymmetric crypto system” means a system of a secure key pair consisting of a private key for creating a digital signature and a public key to verify the digital signature;

“Certifying Authority” means a person who has been granted a licence to issue a Digital Signature Certificate under section 24;

“certification practice statement” issued by a Certifying Authority to specify the practices that the Certifying Authority employs in issuing Digital Signature Certificates;

“computer” means electronic, magnetic, optical or other high-speed date processing device or system which performs logical, arithmetic and memory functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software or communication facilities which are connected or relates to the computer in a computer system or computer network;

“computer network” means the inter-connection of one or more computers through-

(i) the use of satellite, microwave, terrestrial lime or other communication media; and

(ii) terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained;

“computer resources” means computer, computer system, computer network, data, computer database or software;

“computer system” means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable being used in conjunction with external files which contain computer programmes, electronic instructions, input data and output data that performs logic, arithmetic, data storage and retrieval, communication control and other functions;

“Controller” means the Controller of Certifying Authorities appointed under sub-section (1) of section 17’

“Cyber Appellate Tribunal” means the cyber Regulations Appellate Tribunal established under sub-section (1) of section 48;

“data” means a representation of information, knowledge, facts, concepts or instruction which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer.

“digital signature” means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3;

“Digital Signature Certificate ” means a Digital Signature Certificate issued under sub-section (4) of section 35;

“electronic from”, with reference to information. Means, any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;

“Electronic Gazette” means Official Gazette published in the electronic form;”electronic record” means date, record or date generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;

“function”, in relation to a computer, includes logic, control, arithmetical process, deletion, storage and retrieval and retrieval and communication or telecommunication from or within a computer;

“information’ includes data, taxt, images, sound, voice, codes, computer programmes, software and databases or micro film or computer generated micro fiche;

“intermediary” with respect to any particular electronic message, means any person who on behalf of another person receives, stores or transmits that message or provides any service with respect to that message;

“key pair”, in an asymmetric crypto system, means a private key and its mathematically related public key., which are so related that the public key can verify a digital signature created by the private key;

“law” includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the President under article 240, Bills enacted as President’s Act under sub-clause (a) of clause (1) of article 375 of the Constitution and includes rules, regulations, bye-laws and order issued or made thereunder;

“licence” means a licence granted to a Certifying Authority under section 24;

(za) “originator” means a licence granted to a Certifying Aauthority under section 24;

(zb) “prescribed” means prescribed by rules made under the Act;

(zc) “private key” means the key of a key pair used to create a digital signature;

(zd) “public key” means the key of a key pair used to verify a digital

signature and listed in the Digital Signature Certificate;

(ze) “secure system” means computer hardware, software and procedure that-

(a) are reasonably secure from unauthorised access and misuses;

(b) provide a reasonable level of reliability and correct operation;

(c) are reasonably suited to performing the intended functions; and

(d) adhere to generally accepted security procedures;

(zf) “security procedure” means the security procedure prescribed under section 16 by the Central Government;

(zg) “subscriber” means a person in whose name the Digital Signature Certificate is issued;

(zh) “verify”, in relation to a digital signature, electronic record or public key, with its grammatical variations and cognate expressions, means to determine whether- (a) the initial electronic record was affixed with the digital signature by the sue of private key corresponding to the public key of the subscriber;

(b) the initial electronic record is retained intact or has been altered since such electronic record was so affixed with the digital signature.

(2) Any reference in this Act to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provision of the corresponding law, if any, in force in that area.

Chapter II Digital Signature

Section 3. Authentication of electronic records. 

(1) Subject to the provisions of this section, any subscriber may authenticate an electronic record by affixing his digital signature.

(2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and hash function which envelop and transform the initial electronic record into another electronic record.

Explanation.- For the purposes of this sub-section, “hash function” means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible-

(a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm;

(b) that two electronic records can produce the same hash result using algorithm.

(3) Any person by the use of a public key of the subscriber can verify the electronic record.

(4) The private key and the public key are unique to the subscriber and constitute a functioning key pair.

Chapter III – Electronic Governance

Section 4. Legal recognition of electronic records 

Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is-

(a) rendered or made available in an electronic form; and

(b) accessible so as to be usable for a subsequent reference.

Section 5. Legal recognition of digital signatures. 

Where any lay provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is authenticated by means of digital signature affixed in such manner as may be prescribed by the Central Government.

Explanation.- For the purposes of this section, “signed”, with its

grammatical variations and cognate expressions, shall, with reference to a person, means affixing of his hand written signature or any mark on any document and the expression “signature” shall be construed accordingly.

Section 6. Use of electronic records and digital signatures in Government and its agencies. – (1) Where any law provides for

(a) the filing of any form, application or any other document with any office authority, body for agency owned or controlled by the appropriate Government in a particular manner;

(b) the issue or grant of any licence, permit. Sanction or approval by whatever name called in a particular manner;

(c) the receipt or payment of money in a particular manner, the, notwithstanding anything contained in any other law for the time being in force, such requirement shall be deemed to have been satisfied if such filing, issue, grant, receipt or payment, as the case be, is effected by means of such electronic form as may be prescribed by the appropriate Government.

(2) The appropriate Government may, for the purposes of sub-section (1), by rules, prescribe-

(a) the manner and format in which such electronic records shall be filed, created or issued;

(b) the manner or method of payment of any fee or charges for filing, creation or issue any electronic record clause (a).

Section 7. Retention of electronic records.

(1) Where any law provides that documents, records or information shall be retained for any specific period, the, that requirement shall be deemed to have been satisfied if such documents, records or information are retained in the electronic form, if-

(a) the manner and format therein remains accessible so as to be usable for a subsequent reference;

(b) the electronic record is retained in the format in which it was originally generated, sent or received or in a format which can be demonstrated to represent accurately the information originally generated, sent or received;

(c) the details which will facilitate the identification of the origin,

destination, date and time of dispatch or receipt of such electronic record:

Provided that this clause does not apply to any information which is automatically generated solely for the purpose of enabling a record to be dispatched or received.

(2) Nothing in this section shall apply to any law that expressly provides for the retention of documents, records or information in the form of electronic records.

Section 8. Publication of rule, regulation, etc., in Electronic Gazette.

Where any law provides that any rule, regulation, order, bye-law, notification or any6 other matte shall be published in the Official Gazette, then, such requirement shall be deemed to have been satisfied if such rule, regulation, order bye-law, notification or any other matter is published in the Official Gazette or Electronic Gazette:

Provided that where any rule, regulation, order, by-law, notification or any other matter is published in the Official Gazette or Electronic Gazette, the date of publication shall be deemed to be the date of the Gazette which was first published in any form.

Section 9. Section 6, 7 and 8 not to confer right to insist document should be accepted in electronic form.

Nothing contained in section 6, 7 and 8 shall be confer a right upon any person to insist that any Ministry or Department of the Central Government or the State Government or any authority or body established by or under any law or controlled or funded by the Central or State Government should accept, issue, create, retain and preserve any document in the form of electronic records or effect any monetary transaction in the electronic form.

Section 10. Power to make rules by Central Government in respect of digital signature.

The Central Government may, for the purposes of this Act, by rules, prescribe-

(a) the type of digital signature;

(b) the manner and format in which the digital signature shall be affixed;

(c) the manner or procedure which facilitates identification of the person

affixing the digital signature;

(d) control processes and procedures to ensure adequate integrity, security and confidentiality of electronic records or payments; and

(e) any other matter which is necessary to give legal effect to digital signatures.

Chapter IV – Attribution, Acknowledgement and Despatch of Electronic records

Section 11. Attribution of electronic records.

An electronic record shall be attributed to the originator,-

(a) if it was sent by the originator himself;

(b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or

(c) by an information system programmed by or on behalf of the originator to operate automatically.

Section 12. Acknowledge of receipt.

(1) Where the originator has not agreed with the addressee that the acknowledgement of receipt of electronic record be given in a particular form or by a particular method, an acknowledgement may be given by-

(a) any communication by the addressee, automated or otherwise; or

(b) any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received.

Where the originator has stipulated that the electronic record shall be binding only on receipt of an acknowledgement of such electronic record by him, then, unless acknowledgement has been so received, the electronic record shall be deemed to have been never sent by the originator.

Where the originator has not stipulated that the electronic record shall be binding only on receipt of such acknowledgment, and the acknowledgement has not been received by the originator within the time specified or agreed or, if no time has been specified or agreed to within a reasonable time, then, the originator may give notice to the addressee stating that no acknowledgement has been received by him and specifying a reasonable time by which he acknowledgement must be received by him and if no acknowledgement is received within the aforesaid time limit he may after giving notice to the addressee, treat the electronic record as tough it has never been sent.

Section 13. Time and place of despatch and receipt of electronic record. 

(1) Save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resources outside the control of the originator.;

Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:- the addressee has designated a computer resource for the purpose of receiving electronic record,- receipt occurs at the time when the electronic record enters the designated computer resources; or

if the electronic record is spent to a computer resources of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;

if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee.

Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be received at the place where the addressee has his place of business.

The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3).

For the purpose of this section.- if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business;

if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business;

“usual place of residence “, in relation to a body corporate, means the place where it is registered.

Chapter V – Secure Electronic records and secure digital signatures

Section 14. Secure electronic record.

Where any security procedure has been applied to an electronic record at a specific point of time, then such record shall be deemed to be a secure electronic record from such point of time to the time of verification.

Section 15. Secure digital signature.

If, by application of a security procedure agreed to by the parties concerned, it can be verified that a digital signature, at the time it was affixed, was –

(a) unique to the subscriber affixing it;

(b) capable of identifying such subscriber;

(c) created in a manner or using a means under the exclusive control of the subscriber and is linked to the electronic record to which related in such a manner that if the electronic record was altered the digital signature would be invalidated, then such digital signature shall be deemed to be a secure digital signature.

Section 16. Security procedure.

The Central Government shall, for the purpose of this Act, prescribe the security procedure having regard to commercial circumstances prevailing at the time when the procedure was used, including-

(a) the nature of the transaction;

(b) the level of sophistication of the parties with reference to their technological capacity;

(c) the volume of similar transactions engaged in by other parties;

(d) the availability of alternatives offered to but rejected by any party;

(e) the cost of alternative procedures; and

(f) the procedures in general use for similar types of transaction or communications.

Chapter VI – Regulation of Certifying Authorities

Section 17. Appointment of Controller and other officers. 

(1) The Central Government may, by notification in the Official Gazette, appoint a Controller of Certifying Authorities for the purposes of this Act and may, also by the same or subsequent notification, appoint such number of Deputy Controllers and Assistant Controllers as it deems fit.

(2) The Controller shall discharge his functions under this Act subject to the general control and directions of the Central Government.

(3) The Deputy Controllers and Assistant Controllers shall perform functions assigned to them by the Controller under the general superintendence and control of the Controller.

(4) The qualifications, experience and terms and conditions of service of Controller, Deputy Controllers and Assistant Controller shall be such as may be prescribed by the Central Government.

(5) The Head Office and Branch Officer of the officer of the Controller shall be at such places as the Central Government may specify, and these may be established at such places as the Central Government may think fit.

(6) There shall be a seal of the Office of the Controller.

Section 18. Functions of Controller. 

The Controller may perform all or any of the following function, namely:-

(a) exercising supervision over the activities of Certifying Authorities;

(b) certifying public keys of the Certifying Authorities;

(c) laying down the standards to be maintained by Certifying Authorities;

(d) specifying the qualifications and experience which employees of the Certifying Authorities should possess;

(e) specifying the conditions subject to which the Certifying Authority shall conduct their business;

(f) specifying the contents of written, printed or visual materials and advertisements that may be distributed or used in respect of a Digital Signature Certificate and the public key;

(g) specifying the form and content of a Digital Signature Certificate and the key;

(h) specifying the form the manner in which accounts shall be maintained by the Certifying Authorities;

(i) specifying the terms and conditions subject to which auditors may be appointed and the remuneration to be paid to them;

(j) facilitating the establishment of any electronic system by a Certifying Authority either solely or jointly with other Certifying Authorities and regulation of such system;

(k) specifying the manner in which the Certifying Authorities shall conduct their dealings with the subscribers;

(l) resolving any conflict of interests between the Certifying Authorities and the subscribers;

(m) laying down the duties of the Certifying Authorities;

(n) maintaining a data-base containing the disclosure record of ever Certifying Authority containing such particulars as may be specified by regulations which shall be accessible to public.

Section 19. Recognition of foreign Certifying Authorities. 

(1) Subject to such conditions and restrictions as may be specified, by regulations, the Controller may, with the previous approval of the Central Government, and by notification in the Official Gazette, recognise any Certifying Authority as a Certifying Authority for the purposes of this Act.

(2) Where any Certifying Authority is recognised under sub-section (1), the Digital Signature Certificate issued by such Certifying Authority shall be valid for the purposes of this Act.

(3) The Controller may if he is satisfied that any Certifying Authority has contravened any of the conditions and restrictions subject to which it was granted recognition under sub-section (1), he may, for reasons to be recorded in writing, by notification in the Official Gazette, revoke such recognition.

Section 20. Controller to act as repository. 

(1) The Controller shall be the repository of all Digital Signature Certificates issued under this Act.

(2) The Counter shall- (a) make use of hardware, software and procedures that are secure from intrusion and misuse;

(b) observe such other standards as may be prescribed by the Central Government.

To ensure that the secrecy and security of the digital signatures are assured.

(3) The Controller shall maintain a computerised data-base of all public keys in such a manner that such database and the public keys are available to any member of the public.

Section 21. Licence tissue Digital Signature Certificates. 

(1) Subject to the provisions of sub-section (2), any person may make an application to the Controller for a licence to issue Digital Signature Certificates.

(2) No licence shall be issued under sub-section (1), unless the applicant fulfills such requirements with respect to qualification, expertise, manpower, financial resources and other infrastructure facilities, which are necessary to issue Digital Signature Certificates as may be prescribed by the Central Government.

(3) A licence granted under this section shall- (a) be valid for such period as may be prescribed by the Central Government;

(b) not be transferable or heritable;

(c) be subject to such terms and conditions as may be specified by the regulations.

Section 22. Application for licence. 

(1) Every application for issue of a licence shall be in such form as may be prescribed by the Central Government.

(2) Every application for issue of a licence shall be accompanied by- (a) a certification practice statement;

(b) a statement including the procedures with respect to identification of the applicant;

(c) payment of such fees, not exceeding twenty-five thousand rupees as may be prescribed by the Central Government;

(d) such other documents, as may be prescribed by the Central Government.

Section 23. Renewal of licence 

An application for renewal of a licence shall be- (a) in such form;

(b) accompanied by such fees, not exceeding five thousand rupees, as may be prescribed by the Central Government and shall be made not less than forty-five days before the date of expiry of the period of validity of the licence.

Section 24. Procedure for grant or rejection of licence.

The Controller may, on receipt of an application under sub-section (1) of section 21, after considering the documents accompanying the application and such other factor, as he deems fit, grant the licence or reject the application:

Provided that no application shall be rejected under this section unless the applicant has been given a reasonable opportunity of presenting his case.

Section 25. Suspension of licence. 

(1) The Controller may, if he is satisfied after making such inquiry, as he may think fit, that a Certifying Authority has-

(a) made a statement in, or in relation to, the application for the issue or renewal of the licence, which is incorrect or false in material particulars;

(b) failed to comply with the terms and conditions subject to which the licence was granted;

(c) failed to maintain the standards specified under clause (b) of sub-section (2) of section 20;

(d) contravened any provisions of this Act, rule, regulations or order made revoke the licence;

Provided that no licence shall be revoked unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed revocation.

(2) The Controller may, if he has reasonable cause to believe that there is any ground for revoking a licence pending the completion of any enquiry ordered by him:

Provided that no licence shall be suspended for a period exceeding ten days unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed suspension:

Section 26. Notice of suspension revocation of licence.

(1) Where the licence of the Certifying Authority is suspended or revoked, the Controller shall publish notice of such suspension or revocation, as the case may be, in the database maintained by him.

(2) Where one or more repositories are specified, the Controller shall publish notices of such repositories:

Provided that the database containing the notice of such suspension or revocation, as the case may be, shall be made available through a web site which shall be accessible round the clock:

Provided further that the Controller may, if he considers necessary, publicise the contents of database in such electronic or other media, as the may consider appropriate.

Section 27. Power to delegate 

The Controller may, in writing, authorise the Deputy Controller, Assistant Controller or any officer to Controller may, in writing, authorise the Deputy Controller, Assistant Controller or any officer to exercise any of the provisions of this Act, rules or regulations made thereunder.

Section 28. Power to investigate contraventions. 

(1) The Controller or any officer authrised by him in this behalf shall take up for investigation any contravention of the provisions of this Act, rules or regulations made thereunder.

(2) The controller or any officer authorised by him in this behalf shall exercise the like powers which are conferred on Income-tax authorities under Chapter XIII of the Income-tax Act, 1961, (43 of 1961), and shall exercise such powers, subject to such limitations laid down under that Act.

Section 29. Access to computers and data. 

(1) Without prejudice to the provisions of sub-section (1) of section 68, the Controller or any person authorised by him shall, if he has reasonable cause to suspect that any contravention of the provisions of this Act, rules or regulations made thereunder their has been committed, have access to any computer system, any apparatus, data or any other material connected with such system, for the purpose of searching or causing a search to be made for obtaining any information or data contained in or data contained in or available to such computer system.

(2) For the purposes of sub-section (1), the Controller or any person authorised by him may, by order, direct any person in charge of, or otherwise concerned with the operation of, the computer system, data apparatus or material, to provide him with such reasonable technical and other assistance as he may consider necessary.

Section 30. Certifying Authority to follow certain procedures.

Every Certifying Authority shall,-

(a) make use of hardware, software, and procedures that the secure from intrusion and misuse;

(b) provide a reasonable level of reliability in its services which are reasonably suited to the performance of intended functions;

(c) adhere to security procedures to ensure that the secrecy and privacy of the digital signatures are assured; and

(d) observe such other standards as may be specified by regulations.

Section 31. Certifying Authority to ensure compliance of the Act, etc.

Every Certifying Authority shall ensure that every person employed or otherwise engaged by it complies in the course of his employment or engagement, with the provisions of this Act, rules regulations or orders made thereunder.

Section 32. Display of licence.

Every Certifying Authority shall display its licence at a conspicuous place of the premises in which it carries on its business.

Section 33. Surrender of licence. 

(1) Every Certifying Authority whose licence is suspended or revoked shall immediately after such suspension or revocation, surrender the licence to the Controller.

(2) Where any certifying authority fails to surrender a licence under sub-section (1), the person in whose favour a licence is issued, shall be guilty of an offences and shall be punished with imprisonment which may extend upto six months or a fire which may extend upto ten thousand rupees or with both

Section 34. Disclosure. 

(1) Every Certifying Authority shall disclose in the manner specified by regulations.-

(a) Its Digital Signature Certificate which contains the public key corresponding to the private key used by that Certifying Authority to digitally sign another Digital Signature Certificate;

(b) and certification practice statement relevant thereto;

(c) notice of the revocation or suspension of its Certifying Authority certificate if any; and

(d) any other fact that materially and adversely affects either the reliability of a Digital Signature Certificate, which that Authority has issued, or the Authority’s ability to perform its services.

(2) Where in the opinion of the Certifying Authority any event has occurred or any situation has arisen which may materially and adversely affect the integrity of its computer system or the conditions subject to which a Digital Signature Certificate was granted, then, the Certifying Authority shall-

(a) use reasonable efforts to notify any person who is likely to be affected by that occurrence: or

(b) act in accordance with the procedure specified in its certification practice statement to deal with such event or situation.

Chapter VII – Digital Signature Certificates

Section 35. Certifying authority to issue Digital Signature Certificate. 

(1) Any person may make an application to the Certifying Authority for the issue of a Digital Signature Certificate in such form as may be prescribed by the Central Government.

(2) Every such application shall be accompanied by such fee not exceeding twenty-five thousand rupees as may be prescribed by the Central Government, to be paid to the Certifying Authority:

Provided that while prescribing fees under sub-section (2) different fees may be prescribed for different classes of applicants.

Every such application shall be accompanied by a certification practice statement or where there is no such statement, a statement containing such particulars, as may be specified by regulations.

On receipt of an application under sub-section (1), the Certifying Authority may, after consideration of the certification practice statement or the other statement under sub-section (3) and after making such enquiries as it may deem fit, grant the Digital Signature Certificate or for reasons to be recorded in writing, reject the application:

Provided that no Digital Signature Certificate shall be granted unless the Certifying Authority is satisfied that-

the applicant holds the private key corresponding to the public key to be listed in the Digital Signature Certificate;

the applicant holds a private key, which is capable of creating a digital signature;

the public key to be listed in the certificate can be used to verify a digital signature affixed by the private key held by the applicant:

Provided further that no application shall be rejected unless the applicant has been given a reasonable opportunity of showing cause against the proposed rejection.

Section 36. Representations upon issuance Digital Signature Certificate. 

A Certifying Authority while issuing a Digital Signature Certificate shall certify that- it has complied with the provisions of this Act and the rules and regulations made there under;

it has published the Digital Signature Certificate or otherwise made it available to such person relying on it and the subscriber has accepted it;

the subscriber holds the private key corresponding to the public key, listed in the Digital Signature Certificate;

the subscriber’s public key and private key constitute a functioning key pair;

the information contained in the Digital Signature Certificate is accurate; and

it has no knowledge of any6 material fact, which if it had been included in the Digital Signature Certificate would adversely affect the reliability of the representations in clauses (a) to (d).

Section 37. Suspension of Digital Signature Certificate. 

(1) Subject to the provisions of sub-section (2), the Certifying Authority which has issued a Digital Signature Certificate may suspend such Digital Signature Certificate.- on receipt of a request to that effect from-

the subscriber listed in the Digital signature Certificate; or

any person duly authorised to act on behalf of that subscriber;

if it is of opinion that the Digital Signature Certificate should be suspended in public interest.

A Digital Signature Certificate shall not be suspended for a period exceeding fifteen days unless the subscriber has been given an opportunity of being heard in the matter.

On suspension of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.’

Section 38. Revocation of Digital Signature Certificate. 

(1) A Certifying Authority may revoke a Digital Signature Certificate issued by it-

where the subscriber or any other person authorised by him makes a request to that effect; or

upon the death of the subscriber; or

upon the dissolution of the firm or winding up of the company where the subscriber is a firm or a company.

Subject to the provisions of sub-section (3) and without prejudice to the provisions of sub-section (1), a Certifying Authority may revoke a Digital Signature Certificate which has been issued by it at any time, if it is of opinion that-

a material fact represent in the Digital Signature Certificate is false or had been concealed;

a requirement for issuance of the Digital Signature Certificate was not satisfied;

the Certifying Authority’s private key of security system was compromised in a manner materially affecting the Digital Signature Certificate’s reliability;

the subscriber has been declared insolvent or dead or where a subscriber is a firm or a company, which has been dissolved, wound-up or otherwise ceased to exist.

A Digital Signature Certificate shall not be revoked unless the subscriber has been given an opportunity of being heard in the matter.

On revocation of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.

Section 39. Notice of suspension or revocation. 

(1) Where a Digital Signature Certificate is suspended or revoked under section 37 or section 38, the Certifying Authority shall publish a notice of such suspension or revocation, as the case may be, in the repository specified in the Digital Signature Certificate for publication of such notice.

Where one or more repositories are specified the Certifying Authority shall publish notices of such suspension or revocation, as the case may be, in all such repositories.

Chapter VIII – Duties of Subscribers

Section 40. Generating key pair.

Where any Digital Signature Certificate the public key of which corresponds to the private key of that subscriber which is to be listed in the Digital Signature Certificate has been accepted by a subscriber, the, the subscriber shall generate the key pair by applying the security procedure.

Section 41. Acceptance of Digital Signature Certificate. 

(1) A subscriber shall deemed to have accepted a Digital Signature Certificate is the publishes or authorises the publication of a Digital Signature Certificate- to one or more person;

in a repository; or otherwise demonstrates his approval of the Digital Signature Certificate in any manner.

By accepting a Digital Signature Certificate the subscriber certifies to all who reasonable rely on the information contained in the Digital Signature Certificate that—

the subscriber holds the private key corresponding to the public key listed in the Digital Signature Certificate and is entitled to h old the same;

all representations made by the subscriber to the Certifying Authority and all material relevant to the information contained in the Digital Signature Certificate are true;

all information in the Digital Signature Certificate that is writing the knowledge of the subscriber is true.

Section 42. Control of private key. 

(1) Every subscriber shall exercise reasonable care to retain control of the private key corresponding to the public key listed in his Digital Signature Certificate and take all steps to prevent its disclosure to a person not authorised to affix the digital signature of the subscriber.

If the private key corresponding to the public key listed in the Digital Signature Certificate has been compromised, then, the subscriber shall communicate the same without any delay to the Certifying Authority in such manner as may be specified by the regulations.

Explanation:- For removal of doubts, it is hereby declared that the subscriber shall be liable till he has informed the certifying Authority that the private key has been compromised.

Chapter IX – Penalties and Adjudication

Section 43. Penalty for damage to computer, computer system, etc.

If any person without permission of the owner or any other person who is in charge of a computer, computer system or computer network,- accesses or secures access to such computer, computer system or computer network downloads, copies or extracts any data, computer data base information from such computer, computer system or computer network including information or data held or stored in any removable storage medium.

Introduces or causes to be introduced any computer contaminant or computer virus into any computer, computer system or computer network;

damages or causes to be damaged and computer, computer system or computer network, data, computer database or any other programmes residing in such computer, computer system or computer network;

disrupts or causes disruption of any computer, computer system or computer network;

denies or causes the denial of access to any person authorised to access any computer, computer system or computer network by any means;

provides any assistance to any person to facilitate access to a computer, computer system or computer network in contravention of the provisions of this Act, rules or regulations made thereunder;

charges the services availed of by a person to the account of another person by tampering with or manipulating any computer, computer system or compute network he shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person so affected.

Explanation.-For the purposes of this section.- (i) “computer contaminant” means any set of computer instructions that are designed –

(a) to modify, destroy, record, transmit date or programme residing within a computer, computer system or computer network; or

(b) by any means to usurp the normal operation of the computer, compute system, or computer network;

(ii) “computer database” means a representation of information,

knowledge, facts, concepts or instructions in text, image, audio, video that are being prepared or have been prepare in a formalised manner or have been produced by a computer, computer system or computer network and are intended for use in a computer, computer system or computer network;

(iii) “computer virus” means any computer instruction, information, data or programme that destroys, damages, degrades adversely affects the performance of a computer resources or attaches itself to another itself to another computer resources and operates when a programme, date or instruction is executed or some other even takes place in that computer resource;

(iv) “damage” means to destroy, alter, delete, add, modify or re-arrange any computer resource by any means.

Section 44. Penalty for failure to furnish information, return, etc.

If any person who is required under this Act or any rules or regulations made thereunder to- (a) furnish any document, return or report to the Controller or the Certifying Authority fails to furnish the same, he shall be liable to a penalty not exceeding one lakh and fifty thousand rupees for each such failure;

(b) file any return or furnish any information, books or other documents within the time specified therefor in the regulations fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to a penalty not exceeding five thousand rupees for every day during which such failure continues;

(c) maintain books of account or records fails to maintain the same, he shall be liable to a penalty no exceeding ten thousand rupees for every day during which the failure continues.

Section 45. Residuary penalty.

Whoever contravenes any rules or regulations made under this Act, for the contravention of which no penalty has been separately provided, shall be liable to pay a compensation not exceeding twenty-five thousand rupees to the person affected by such contravention or a penalty not exceeding twenty-five thousand rupees.

Section 46. Power to adjudicate. 

(1) For the purpose of adjudging under this Chapter whether any person has committed a contravention of any of the provisions of this Act or of any rule, regulation, direction or order made thereunder the Central

Government shall, subject to the provisions of sub section (3), appoint any officer not below the rank of a Director to the Government of India or an equivalent officer of a State Government to be an adjudicating officer for holding an inquiry in the manner prescribed by the Central Government .

(2) The adjudicating officer shall, after giving the person referred to in sub-section (1) a reasonable opportunity for making representation in the matter and if, on such inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty or award such compensation as he thinks fit in accordance with the provisions of that section.

(3) No person shall be appointed as an adjudicating officer unless he possesses such experience in the filed of Information Technology and legal or judicial experience as may be prescribed by the Central Government.

(4) Where more than one adjudicating officers are appointed, the Central Government shall specify by order the matters and places with respect to which such officers shall exercise their jurisdiction.

(5) Every adjudicating officer shall have the powers of a civil court which are conferred on the Cyber Appellate Tribunal under sub-section (2) of section (2) of section 58, and-

(a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of section 193 and 228 of the Indian Penal Code (45 of 1860);

(b) shall be deemed to be a civil court for the purpose of section 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).

Section 47. Factors to be taken into account by the adjudicating officer. 

While adjudging the quantum of compensation under this Chapter, the adjudicating officer shall have due regard to the following factors, namely:-

(a) the amount of gain of unfair advantage, whenever quantifiable, made as a result of the default;

(b) the amount of loss caused to any person as a result of the default;

(c) the repetitive nature of the default.

Chapter X – The Cyber Regulations Appellate Tribunal

Section 48. Establishment of Cyber Appellate Tribunal. 

(1) The Central Government shall, by notification, establish one or more appellate tribunals to be known as the Cyber Regulations Appellate Tribunal.

(2) The Central Government shall also specify, in the notification referred to in sub-section (1), the matters and places in relation to which the Cyber Appellate Tribunal may exercise jurisdiction.

Section 49. Composition of Cyber Appellate Tribunal.

A cyber Appellate Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer of the Cyber Appellate Tribunal) to be appointed, by notification, by the Central Government.

Section 50. Qualifications for appointment as Presiding Officer of the Cyber Appellate Tribunal. 

A person shall not be qualified for appointment as the Presiding Officer of a Cyber Appellate Tribunal unless he-

(a) is, or has been, or is qualified to be, a Judge of a High Court; or

(b) is, or has been, a member of the Indian Legal Service and is holding or has held a post in Grade I of that Service for at least three years.

Section 51. Term of office. 

The Presiding Officer of a Cyber Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of sixty-five years whichever is earlier.

Section 52. Salary , allowance and other terms conditions of service of Presiding Officer.

The salary and allowances payable to, and the other terms and conditions of service including pension, gratuity and other retirement benefits of, the Presiding Officer of a Cyber Appellate Tribunal shall be such as may be prescribed:

Provided that neither the salary and allowances nor the other terms and conditions of service of the Presiding Officers shall be varied to his disadvantage after appointment.

Section 53. Filling up of vacancies. 

If, for reason other than temporary absence, any vacancy occurs in the office of the Presiding Officer of a Cyber Appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Cyber appellate Tribunal from the state at which the vacancy is filled.

Section 54. Resignation and removal. 

(1) The Presiding Officer of a Cyber Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office:

Provided that the said Presiding Officer shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(2) The Presiding Officer of a Cyber Appellate Tribunal shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which the Presiding Officer concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.

(3) the Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the aforesaid Presiding Officer.

Section 55. Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings. 

No order of the Central Government appointing any person as the Presiding Officer of a Cyber Appellate Tribunal shall be called in question in any manner and no act or proceeding before a Cyber Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of Cyber Appellate Tribunal.

Section 56. Staff of the Cyber Appellate Tribunal. 

(1) The Central Government shall provide the Cyber Appellate Tribunal with such officers and employees as that Government may think fit.

(2) The officers and employees of the Cyber Appellate Tribunal shall discharge their functions under general superintendence of the Presiding Officer.

(3) The salaries any allowances and other conditions of service of the officers and employees of the Cyber Appellate Tribunal shall be such as may be prescribed by the Central Government.

Section 57. Appeal to Cyber Regulations Appellate Tribunal. 

(1) Save as provided in sub-section (2), any person aggrieved by an order made by controller or an adjudicating officer under this Act may prefer an appeal to a Cyber Appellate Tribunal having jurisdiction in the matter.

(2) No appeal shall lie to the Cyber Appellate Tribunal from an order made by an adjudicating officer with the consent of the parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Controller or the adjudicating officer is received by the person aggrieved and it shall be in such form and be accompanied by such fee as may be prescribed;

Provided that the Cyber Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.

(4) On receipt of an appeal under sub-section (1), the Cyber Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

(5) the Cyber Appellate Tribunal shall send a copy of every order made by it to the parties tot he appeal and to the concerned controller or adjudicating officer.

(6) The appeal filed before the Cyber Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within sic months from the date of receipt of the appeal.

Section 58. Procedure and powers of the Cyber Appellate Tribunal. 

(1) The Cyber Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Cyber Appellate Tribunal shall have powers to regulate its own procedure including the place at which it shall have its sittings.

(2) The Cyber Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents or other electronic records;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses or documents;

(e) reviewing its decisions;

(f) dismissing an application for default or deciding it ex parte;

(g) any other matter which may be prescribed.

(3) Every proceeding before the Cyber Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of section 193 and 228, and for the purposes of section 196 of the Indian Penal Code(45 of 1860) and the Cyber Appellate Tribunal shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

Section 59. Right to legal representation. 

The appellant may either appear in person or authorise one or more legal practitioners or any of its officers to present his or its case before the Cyber Appellate Tribunal.

Section 60. Limitation. 

The provisions of the Limitation Act, 12963f (36 of 1963), shall, as far as may be, apply to an appeal made to the Cyber Appellate Tribunal.

Section 61. Civil court not to have jurisdiction. 

No court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or the Cyber Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

Section 62. Appeal to High Court. 

Any person aggrieved by any decision or order of the Cyber Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Cyber Appellate Tribunal to him on any question of fact or law arising out of such order:

Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to filed within a further period not exceeding sixty days.

Section 63. Compounding of contraventions. 

(1) Any contravention under this Chapter may, either before or after the institution of adjudication proceedings, be compounded by the Controller or such other officer as may be specially authorised by him in this behalf or by the adjudicating officer, as the case may be, subject to such conditions as the Controller or such other officer or the adjudicating officer, as the case may be, subject to such conditions as the Controller or such other officer or the adjudicating officer may specify.

Provided that such sum shall not, in any case, exceed the maximum amount of the penalty which may be imposed under this Act for the contravention so compounded.

(2) Nothing in sub-section (1) shall apply to a person who commits the same or similar contravention within a period of three years form the date on which the first contravention, committed, by him, was compounded.

Explanation:- For the purposes of this sub-section, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.

(3) Where any contravention has been compounded under sub-section(I), no proceeding or further proceeding, or further proceeding, as the case may be, shall be taken against the person guilty of such contravention in respect of the contravention so compounded.

Section 64. Recovery of penalty. 

A penalty imposed under this Act, if it is not paid shall be recovered as an arrear of land revenue and the licence or the Digital Signature Certificate, as the case may be, shall be suspended till the penalty is paid.

Chapter XI – Offences

Section 5. Tampering with computer source documents. 

Whoever knowingly or intentionally conceals, destroy, or alter any computer source code used for a computer, computer programme, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force, shall be punishable with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both.

Explanation – For the purposes of this section, “computer source code” means the listing of programmes, compute commands, design and layout and programme analysis of computer resource in any form.

Section 66. Hacking with Computer System. 

(1) Whoever with the intent of cause or knowing that is likely to cause wrongful loss or damage to the public or any person destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.

(2) Whoever commits hacking shall be punished with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both.

[ Section 66 A Punishment for sending offensive messages through communication service, etc.

( Introduced vide ITAA 2008)
Any person who sends, by means of a computer resource or a communication device,
–
a) any information that is grossly offensive or has menacing character; or
b) any information which he knows to be false, but for the purpose of causing annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred, or ill will, persistently makes by making use of such computer resource or a communication device,
c) any electronic mail or electronic mail message for the purpose of causing annoyance or inconvenience or to deceive or to mislead the addressee or recipient about the or igin of such messages (Inserted vide ITAA 2008) shall be punishable with imprisonment for a term which may extend to two three years and with fine.
Explanation: For the purposes of this section, terms “Electronic mail” and “Electronic Mail Message” means a message or information created or transmitted or received on a computer, computer system, computer resource or communication device including attachments in text, image, audio, video and any other electronic record, which may be transmitted with the message]

[ Section 66 B Punishment for dishonestly receiving stolen computer resource or communication device (Inserted Vide ITA 2008)

Section 67. Publishing of information which is obscene in electronic form.

Whoever publishes or transmits or causes to be published in the electronic form, any material which is lascivious or appeal to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished on first conviction with imprisonment of either description for a term which may extend to five years and with fine which may extend to one lakh rupees and in the event of a second or subsequent conviction with imprisonment of either description for a term which may extend to ten years and also with fine which may extend to two lakh rupees.

Section 68. Power of the Controller to give directions. 

(1) The Controller may, by order, direct a Certifying Authority or any employee of such Authority to take such measures or cease carrying on such activities as specified in the order if those are necessary to ensure compliance with the provisions of this Act, rules or any regulations made thereunder.

(2) Any person who fails to comply with any order under sub-section (1) shall be guilty of an offence and shall be liable on conviction to imprisonment for a term not exceeding three years or to a fine not exceeding two lakh rupees or to both.

Section 69. Directions of Controller to a subscriber to extend facilities to decrypt information. 

(1) If the Controller is satisfied that it is necessry or expedient so to do in the interest of the sovereignty or integrity of India, the security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence, for reasons to be recorded in writing, by order, direct any agency of the Government to intercept any information transmitted through any computer resource.

(2) The subscriber or any person in charge of the computer resource shall, when called upon by any agency which has been directed under sub-section (1), extend all facilities and technical assistance to decrypt the information.

(3) The subscriber or any person who fails to assist the agency referred to in sub-section (2) shall be punished with an imprisonment for a term which may extend to seven years.

Section 70. Protected system.

(1) The appropriate Government may, by notification in the Official Gazette, declare that any computer, computer system or computer network to be a protected system.

(2) The appropriate Government may, by order in writing, authorise the persons who are authorised to access protected systems notified under sub-section.

(3) Any person who secures access or attempts to secure access to a protected system in contravention of the provisions of this section shall be punished with imprisonment of either description for a term which may extend to ten years and shall also be liable to fine.

Section 71. Penalty for misrepresentation.

Whoever makes any misrepresentation, to, or suppresses any material fact from, the Controller or the Certifying Authority for obtaining any licennce or Digital Signature Certificate, as the case may be, shall be punished with imprisonment for a terms which may extend to two years, or with fine which may extend to one lakh rupees, or with both.

Section 72. Breach of confidentiality and privacy.

Save as otherwise provided in this Act or any other law for the time being in force, if any person who, in pursuance of any of the powers conferred under this Act, rules or regulations made thereunder, has secured access to any electronic record, book, register, correspondence, information, document or other material without the consent of the person concerned discloses such electronic record, book, register, correspondence, information, document or other material to any other person shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.

Section 73. Penalty for publishing Digital Signature Certificate false in certain particulars. 

(1) No person shall publish a Digital Signature Certificate or otherwise make it available to any other person with the knowledge that-

(a) the Certifying Authority listed in the certificate has not issued it; or

(b) the subscriber listed in the certificate has not accepted it; or

(c) the certificate has been revoked or suspended, unless such publication is for the purposes of verifying a digital signature created prior to such suspension or revocation.

(2) Any person who contravenes the provisions of sub-section (1) shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.

Section 74. Publication for fraudulent purpose. 

Whoever knowingly creates, publishes or otherwise makes available a Digital Signature Certificate for any fraudulent or unlawful purpose shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.

Section 75. Act to apply for offence or contravention committed outside India. 

(1) Subject to the provision of sub-section (2), the provisions of this Act shall apply also to any offence or contravention committed outside India by any person irrespective of his nationality.

(2) For the purposes of sub-section(1), this act shall apply to an offence or contravention committed outside India by any person if the act or conduct constituting located in India.

Section 76. Confiscation. 

Any computer, computer system, floppies, compact disks, tape drives or nay other accessories related thereto, in respect of the if which any provision of this Act, rule, orders or regulations made thereunder has been or is being contravened, shall be liable to confiscation:

Provided that where it is established to the satisfaction of the court adjudicating the confiscation that the person in whose possession, power or control of any such computer, computer system, floppies, compact disks, tape drives or any other accessories relating thereto is found is not responsible for the contravention of the provisions of this Act, rules, orders or regulations made thereunder, the court may, instead of making an order for confiscation of such computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, make such other order authorised by this Act against the person contravening of the provisions of this Act, rules, orders or regulations made thereunder as it may think fit.

Section 77. Penalties and confiscation not to interfere with other punishments. 

No penalty imposed or confiscation made under this Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force.

Section 78. Power to investigate offence. 

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), a police officer not below the rank of Deputy Superintendent of Police shall investigate any offence under this Act.

Chapter XII – Network service providers not to be liable in certain cases

Section 79. Network service providers not to be liable in certain cases. 

For the removal of doubts, it is hereby declared that no person providing any service as a network service provider shall be liable under this Act, rules or regulations made thereunder for any third party information or data made available by him if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence for contravention.

Explanation- For the purposes of this section,- (a) “network service provider” means an intermediary;

(b) “third party information” means any information dealt with by a network service provider in his capacity as an intermediary.

Chapter XIII – Miscellaneous

Section 80. Power of police officer and other officers to enter, search, etc. 

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 any police officer, not below the rank of a Deputy Superintendent of Police or any other officer of the Central Government or a State

Government auithorised by the Central Government in this behalf may enter any public place and search and the Central Government in this behalf may enter any public place and search and arrest without warrant any person found therein who is reasonably suspected of having committed or of committing or of being about to commit any offence under this Act.

Explanation:- For the purposes of this sub-section, the expression “public place” includes any public conveyance, any hotel, any shop or any other place intended for use by, or accessible to the public.

(2) Where any person is arrested under sub-section (1) by an officer other than a police officer, such officer shall, without unnecessary delay, take or sent the person arrest before a magistrate having jurisdiction in the case or before the officer-in-charge of a police station.

(3) The provisions of the Code of Criminal Procedure, 1973 shall, subject to the provisions of this section, apply, so far as may be, in relation to any entry, search or arrest, made under this section.

Section 81. Act to have overriding effect. 

The provisions of this Act shall have effect notwithstanding anything consistent therewith contained in any other law for the time being in force.

Section 82. Controller, Deputy Controller and Assistant Controllers to be public servants. 

The Presiding Officer and other officer and employees of a Cyber appellate Tribunal, the Controller, the Deputy Controller and the Assistant Controllers shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).

Section 83. Power to give directions.

The Central Government may give directions to any State Government as to the carrying into execution in the State of any of the provisions of this Act or of any rule, regulation or order made thereunder.

Section 84. Protection of action taken in good faith. 

No suit, prosecution or other legal proceeding shall lie against the Central Government, the State government, the Controller or any person acting on behalf of him, the Presiding Officer , adjudicating officers and the staff of the Cyber Appellate Tribunal for anything which is in good faith done or intended to be done in pursuance of this Act or any rule, regulation or order made thereunder.

Section 85. Offences by companies. 

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

Explanation.-For the purposes of this section- (a) “company” means and body corporate and includes a firm or other association of individuals; and

(b) “directors”, in relation to a firm, means a partner in the firm.

Section 86. Removal of difficulties. 

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty;

Provide that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

Section 87. Power of Central Government to make rules. 

(1) The Central Government may, by notification in the Official Gazette and in the Electronic Gazette, make rules to carry out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matter, namely:-

(a) the manner in which any information or matter may be authenticated by means of digital signature under section 5;

(b) the electronic form in which filing, issue, grant or payment shall be effected under sub-section (1) of section 6

(c) the manner and format in which electronic records shall be filed, or issued and the method of payment under sub-section (2) of section 6;

(d) the matters relating to the type of digital signature, manner and format in which it may be affixed under section 10;

(e) the security procedure for the purpose of creating secure electronic record and secure digital signature under section 16;

(f) the qualifications, experience and terms and conditions of service of controller, Deputy Controllers and Assistant Controller under section 17;

(g) other standards to be observed by the Controller under clause (b) of sub-section (2) of section 20;

(h) the requirements which an applicant must fulfil under sub-section (2) of section 21;

(i) the period of validity of licence granted under clause (a) of sub-section (3) of section 21;

(j) the form in which an application for licence may be made under sub-section 22;

(k) the amount of fees payable under clause (c)of sub-section (2)o of section 22;

(l) such other documents which shall accompany an application for licence under clause (d) of sub-section (2) of section 22;

(m) the form and the fee for renewal of a licence and the fee payable thereof under section 23;

(n) the amount of late fee payable under the proviso to section 23;

(o) the form in which application for issue of a Digital Signature Certificate my be made under sub-section (1) of section35;

(p) the fee to be paid to the Certifying Authority for issue of a Digital Signature Certificate under sub-section (2) of section 35;

(q) the manner in which the adjudicating officer shall hold inquiry under sub-section (1) of section 46;

(r) the qualification and experience which the adjudicating officer shall possess under sub-section (2) of section 46;

(s) the salary, allowances and the other terms and conditions of service of the Presiding Officer under section 52;

(t) the procedure for investigation of misbehaviour or incapacity of the Presiding Officer under sub-section (3) of section 54;

(u) the salary and allowances and other conditions of service of other officers and employees under sub-section (3) of section 56;

(v) the form in which appeal may be filed and the fee thereof under sub-section (3) of section 57;

(w) any other power of a civil court required to be prescribed under clause (g) of sub-section (2) of section 58; and

(x) any other matter which is required to be, or may be, prescribed.

(3) Every notification made by the Central Government under clause (f) of sub-section (4) of section 1 and every rule made by it shall be laid, as soon as may be after it is made, before each House of Parliament , while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or the rule or both Houses agree that the notification or the rule should not be made, the notification or the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Section 88. Constitution of Advisory Committee. 

(1) The Central Government shall, as soon as may be after the commencement of this Act, constitute a Committee called the Cyber Regulations Advisory Committee.

(2) The Cyber Regulations Advisory Committee shall consist of a Chairperson and such number of other official and non-official members representing the interests principal affected or having special knowledge of the subject-matter as the Central Government may deem fit.

(3) The Cyber Regulations Advisory Committee shall advise-

(a) the Central Government either generally as regards any rules or for any other purpose connected with this Act.

(4) There shall be paid to the non-official members of such Committee such traveling and other allowances as the Central Government may fix.

Section 89. Power of Controller to make regulations. 

(1) The Controller may, after consultation with the Cyber Regulations Advisory Committee and with the previous approval of the Central Government, by notification in the Official Gazette, make regulations consistent with this Act and the rules made thereunder to carry out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:-

(a) the particulars relating to maintenance of data-base containing the disclosure record of every Certifying Authority under clause (m) of section 18;

(b) the conditions and restrictions subject to which the Controller may recoginse any foreign Certifying Authority under sub-section (1) of section 19;

(c) the terms and conditions subject to which a licence may be granted under clause (c) of sub-section (3) of section 21;

(d) other standards to be observed by a Certifying Authority under clause (d) of section 30;

(e) the manner in which the Certifying shall disclose the matters specified in sub-section (1) of section 34;

(f) the particulars of statement which shall accompany an application under sub-section (3) of section 35.

(g) the manner by which the subscriber communicate the compromise of private key to the Certifying Authority under sub-section (2) of section 42.

(3) Every regulations made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.

Section 90. Power of State Government to make rules. 

(1) The State Government may, by notification in the Official Gazette, make rules to carry out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

(a) the electronic form in which filing, issue, grant, receipt or payment shall be effected under sub-section (1) of section 6;

(b) for matters specified in sub-section (2) of section 6;

(c) any other matter which is required to be provided by rules by the State Government.

(3) Every rule made by the State Government under this section shall be laid , as soon as may be after it is made, before each House of the State Legislature where it consists of two Houses, or where such Legislature consists of one House, before that House.

Section 91. Amendment of Act 45 of 1860.

The Indian Penal Code shall be amended in the manner specified in the First Schedule to this Act.

Section 92. Amendment of Act 1 of 1872. 

The Indian Evidence Act, 1872 shall be amended in the manner specified in the Second Schedule to this Act.

Section 93. Amendment of Act 18 of 1891.

The Bankers’ Books Evidence Act, 1891 shall be amended in the manner specified in the Third Schedule to this Act.

Section 94. Amendment of Act 2 of 1934.

The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the Fourth Schedule to this Act.

THE FIRST SCHEDULE

AMENDMENTS TO THE INDIAN PENAL CODE

1. After section 29, the following section shall be inserted, namely:- “29 A. Electronic record.- The words “electronic record” shall have the meaning assigned to them in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000″.

2. In section 167, for the words “such public servant, charged with the preparation or translation of any document, frames or translates that document”, the words “such public servant, charged with the preparation or translation of any document or electronic record, frames, prepares or translates that document or electronic record” shall be substituted.

3. In section 172, for the words “produce a document in a Court of Justice”, the words “produce a document or an electronic record in a court of Justice” shall be substituted.

4. In section 173, for the words “to produce a document in a Court of Justice” , the words “to produce a document or electronic record in Court of Justice” shall be substituted.

5. In section 175, for the word “document” at both the places where it occurs, the words “document or electronic record” shall be substituted.

6. In section 192, for the words “makes any false entry in any book or record, or makes any document containing a false statement”, the words “makes any false entry in any book or record, or electronic record or makes any document or electronic recording containing a false statement ” shall be substituted.

7. In section 204, for the word “document” at both the places where it occurs, the words “document or electronic record” shall be substituted.

8. In section 463, for the words “Whoever makes any false documents or part of a document with intent to cause damage or injury”, the words “Whoever makes any false documents or false electronic record or party of a document or electronic record, with intent to cause damage or injury” shall be substituted.

9. In section 464,- (a) for the portion beginning with the words “A person is said to make a false document” and ending with the words “by reason of deception practised upon him, he does not know the contents of the documents or the nature of the alteration”, the following shall be substituted, namely:-

(a) makes, sign, seals or executes a document or part of a document;

(b) makes or transmits any electronic record or part of any electronic record;

(c) affixes any digital signature on any electronic record;

(d) makes any mark denoting the execution of a document or the authenticity of the digital signature, with the intention of causing it to be believed that such document or part of document, electronic record or digital signature was made, signed, sealed, executed, transmitted or affixed by or by the authority or a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed; or

Secondly-who, without lawful authority, dishonestly or fraudulently, by cancellation or otherwise, alters a document or an electronic record in any material part thereof, after it has been made, executed or affixed with digital signature either by himself or by any other person, whether such person be living or dead at the time of such alteration; or

Thirdly:- Who dishonestly or fraudulently causes any person, sign, seal, execute or alter a document or an electronic record or to affix his digital signature on any electronic record knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of deception practised upon him, he does not know the contents of the document or electronic record or the nature of the alteration”.

(b) after Explanation 2, the following Explanation shall be inserted at the end, namely:-

‘Explantion 3.- For the purposes of this section, the expression “affixing digital signature’ shall have the meaning assigned to it in clause (d) of sub-section (1) of section 2 of the Information Technology Act, 2000.

10. In section 466,-

(a) for the words “Whoever forges a document”, the words “Whoever forges a document or an electronic record” shall be substituted.

(b) the following Explanation shall be inserted at the end, namely:-

Explanation-For the purposes of this section, “register” includes any list, data or record of nay entries maintained in the electronic for as defined in clause ( r) of sub-section (1) of section2 of the Information Technology Act, 2000.

11. In section 468, for the words “document forged” , the words “document or electronic record forged” shall be substituted.

12. In section 469, for the words “intending that the document forged”, the words “intending that the document or electronic record forge” shall be substituted.

13. In section 470, for the word “document” in both the places where it occurs, the words “document or electronic record” shall be substituted.

14. In section 471, for the word “document” whenever it occurs, the words “document or electronic record” shall be substituted

15. In section 474, for the portion beginning with the words “Whoever has in his possession any document” and ending with the words ” if the document is one of the description mentioned in section 466 of this Code” the following shall be substitute, namely:-

“Whoever has in his possession any document or electronic record, knowing the same to be forged and intending that the same shall fraudulently or dishonestly be used as a genuine, shall, if the document or electronic record is one of the description mentioned in section 466 of this Code.”

16. In section 476, for the words ” any document”, the words “any document or electronic record” shall be substituted.

17. In section 477a, for the words “book, paper, writing” at both the places where they occur, the words “book, electronic record, paper, writing ” shall be substituted.

THE SECOND SCHEDULE

AMENDMENTS TO THE INDIAN EVIDENCE ACT, 1872

1. In section 3,-

(a) in the definition of “Evidence’, for the words “all document produced for the inspection of the Court”, the words “all documents including electronic records produced for the inspection of the Court” shall be substituted ;

(b) after the definition of “India, the following shall be inserted, namely:-

‘the expressions “Certifying Authority”, digital signature”, “Digital Signature Certificate”, “electronic form”, “electronic records”, “information”, “secure electronic record”, “secure digital signature” and “subscriber’ shall have the meanings respectively assigned to them in the Information Technology Act, 2000.

2. IN section 17, for the words “oral or documentary,” words “oral or documentary or contained in electronic form’ shall be substituted.

3. After section 22, the following section shall be inserted, namely:- “22A”. When oral admission as to contents of electronic records are relevant.-

Oral admission as to contents of electronic records are not relevant, unless the genuineness of the electronic record produced is in question”.

4. In section 34, for the words “Entries in the books of account”, the words “Entries in the books of account, including those maintained in an electronic form” shall be substituted.

5. In section 35, for the word “record”, in both the places where it occurs, the words “record or an electronic record” shall be substituted.

6. For section 39, the following section shall be substituted, namely:- “39. What evidence to be given when statement forms part of a conversation, documents, electronic record, book or series of letters or papers.-When any statement of which evidence is given forms part of longer statement, or of a conversation or part of an isolated documents, or is contained in a document which forms part of a book, or is contained in part of electronic record or of a connected series of letters or papers, evidence shall be given of so much and no more of the statement, conversation, document, electronic record, book or series of letters or papers as the Court considers necessary in that particular case to the full understanding of the nature and effect of the statement, and of the circumstances under which it was made.”

7. After section 47, the following section shall be inserted, namely:- “47A. Opinion as to digital signature when relevant.- When the court has to form an opinion as to the digital signature of any person, the opinion of the Certifying Authority which has issued the digital signature Certificate is a relevant fact”

8. In section 59, for the words “contents of documents “the words” contents of documents or electronic records” shall be substituted.

9. After section 65, the following shall be inserted, namely:- “65A. Special provisions as to evidence relating to electronic record.-the contents of electronic records may be proved in accordance with the provisions of section 65B.

65B. Admissibility of electronic records.-(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copies in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.

(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely:- (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;

(c) throughout the material part of the said period, the computer was operating properly or, if not; then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents;

(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.

(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that the period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or

(b) by different computer operating in succession over that period; or

(c) by different combinations of computers operating in succession over that period; or

(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting single computer, and references in this section to a computer shall be construed accordingly.

(4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say-

(a) identifying the electronic record containing the statement and describing the manner in which it was produced;

(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;

(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter sufficient for a matter to be stated to the best of knowledge and belief of the person stating it.

(5) For the purposes of this section,-

(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without intervention) by means of any appropriate equipment;

(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, in duly supplied to that computer shall be taken to be supplied to it those activities;

(c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.

Explanation.-For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process;

10. After section 67, the following section shall be inserted , namely:- “67. Proof as to digital signature.- Except in the case of a secure digital signature, if the digital signature of any subscriber is alleged to have been affixed to an electronic record the fact that such digital signature is the digital signature of the subscriber must be proved.’

11. After section 73, the following section shall be inserted, namely:- “73A. Proof as to verification of digital signature.-In order to ascertain whether a digital signature is that of the person by whom it purports to have been affixed, the Court may direct-

(a) that person or the Controller or the Certifying Authority to produce the Digital Signature Certificate;

(b) any other person to apply the public key listed in the Digital Signature Certificate and verify the digital signature purported to have been affixed by that person.”

Explanation .-For the purposes of this section, “Controller” means the Controller appointed under sub-section (1) of section 17 of the Information Technology Act, 2000.”

12. After section 81, the following section shall be inserted, namely:- “81A. Presumption as to Gazettes in electronic forms.-The Court shall presume the genuineness of every electronic record purporting to be the Official Gazette, or purporting to be electronic record directed by any law to be kept by person, if such electronic record is kept substantially in the form required by law and is produced from proper custody.”

13. After section 85, the following sections shall be inserted, namely:- “85A. Presumption as to electronic agreements.- The court shall presume that every electronic record purporting to be an agreement containing the digital signatures of the parties was so concluded by affixing the digital signature of the parties.

“85B. Presumption as to electronic records and digital signatures.-(1) IN any proceedings involving a secure digital signature, the Court shall presume unless the contrary is proved that-

(a) the secure digital signature is affixed by subscriber with the intention of signing or approving the electronic record;

(b) except in the case of a secure electronic record or a secure digital signature, nothing in this section shall create any presumption relating to authenticity and integrity of the electronic record or any digital signature.

85C. Presumption as to Digital Signature Certificates.-The Court shall presume, unless contrary is proved, that the information listed in a Digital Signature Certificate is correct, except for information specified as subscriber information which has not been verified, if the certificate was accepted by the subscriber .”

14. After section 88, the following section shall be inserted, namely:- “88A. Presumption as to electronic messages.- The Court may presume that b electronic message forwarded by the originator through an electronic mail server to the addresses to whom the message purports to be addressed corresponds with the message as fed into his computer for transmission; but the Court shall not make any presumption as to the person by whom such message was sent.”

Explanation.-for the purposes of this section, the expression “addressee’ and “originator” shall have the same meanings respectively assigned to them in clauses (b) and (za) of sub-section (1) of section 2 of the information Technology Act, 2000.”

15. After section 90, the following section shall be inserted, namely:- “90 A. . Presumption as to electronic records five years old.-where any electronic record, purporting or proved to be five years old, is produced from any custody which the court in the particular case considers proper, the Court may presume that the digital signature which purports to be the digital signature of any particular person was so affixed by him or any person authorised by him this behalf.

Explanation.-Electronic records are said to be in proper custody if they are in the place in which, and under the care of the person with whom, they naturally be; but no custody is improper if it is proved to have had a legitimate origin, or the circumstances of the particular case are such as to render such and origin probable.

16. For section 131 the following section shall be substituted, namely:-

131. Production of documents or electronic records which another person, having possession, could refuse to produce.- No one shall be compelled to produce documents in his possession or electronic records under his control, which any other person would be entitled to refuse to produce if they wer in his possessions or control, unless such last-mentioned person consents to their production.”

THE THIRD SCHEDULE

AMENDMENTS TO THE BANKERS’ BOOKS EVIDENCE ACT,1891

1. In section2,- (a) for clause (3), the following clause shall be substituted, namely:- (3) “bankers” books “include ledgers, day-books, accounts-books and all other books used in the ordinary business of a bank whether kept in the written form or as printouts of date stored in floppy, disc, tape or any other form of electro-magnetic data storage device:

(b) for clause (8), the following clause shall be substituted, namely:- (8) “certified copy” means when the books of a bank,-

(a) are maintained in written form, a copy of any entry in such books together with a certificate written at the foot of such copy that it is true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book is still in the custody of the bank, and where copy was obtained by a mechanical or other process which in itself ensured the accuracy of the copy, a further certificate to that effect, but where the book from which the copy had been so prepared, a further certificate to that effect, each such certificate being dated and subscriber by the principal accountant or manger of the bank with his name and official title; and

(b) consist of printouts of data stored in a floppy, disc, tape or any other electro-magnetic data storage device, a printout of such entry or a copy of such entry or a copy of such printout together with such statements certified in accordance with the provisions of section 2A;

2. After section 2, the following section shall be inserted, namely:- “2A”.Conditions in the printout.-A printout of entry or a copy of printout referred to in sub-section (8) of section 2 shall be accompanied by the following, namely:-

(a) a certificate to the effect that it is a printout of such entry or a copy of such printout by the principal accountant or branch manager; and

(b) a certificate by a person in-charge of computer system containing a brief description of the computer system and the particulars of-

(A) the safeguards adopted by the system to ensure that data is entered or any other operation performed only by authorised person;

(B) the safeguards adopted to prevent and detect unauthorised change of data;

(C) the safeguards available to retrieve data that is lost due to systemic failure or any other reasons;

(D) the manner in which data is transferred from the system to removable media like floppies, discs, tapes or other electro-magnetic data storage devices;

(E) the mode of verification in order to ensure that data has been accurately transferred to such removable media;

(F) the mode of identification of such data storage devices;

(G) the arrangements for the storage and custody of such storage devices;

(H) the safeguards to prevent and detect any tampering with the system; and

(I) any other factor which will vouch for the integrity and accuracy of the system.

(c) a further certificate from the person in-charge of the computer system to the effect that to the best of his knowledge and belief, such computer system operated properly at the material time, he was provided with all the relevant data and the printout in question represents correctly, or is appropriately derived from, the relevant data.”

THE FOURTH SCHEDULE

AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934

In the Reserve Bank of India Act, 1934 in section 58, in sub-section (2), after clause (p), the following clause shall be inserted, namely:- “(pp) the regulation of fund transfer through electronic means between the banks or between the banks and other financial institution referred to in clause (c) of section 45-I, including the laying down of the conditions subject to which banks and other financial institutions shall participate in such fund transfers, the manner of such fund transfers and the rights and obligations of the participants in such fund transfers.

Notaries Act

November 30, 2014

Preamble

[9th August, 1952]

“An Act to regulate the profession of notaries.”

Be it enacted by Parliament as follows:

Section 1. Short title, extent and commencement.

[9th August, 1952]

“An Act to regulate the profession of notaries.”

Be it enacted by Parliament as follows:

(1) This Act may be called The Notaries Act, 1952

(2) It extends to the whole of India (3) It shall come into force on such date as the central government may, by notification in the official gazette, appoint.

Section 2. Definitions In this Act unless the context otherwise requires.

(a) Omitted by Act 25 of 1968 (b) “Instrument” includes every document by which any right or liability is, or purpose to be, created, transferred, modified, limited, extended, suspended, extinguished or recorded. (c) “Legal Practitioner” means any advocate or agent of the supreme court to any advocate, vakil or attorney of any high court or any pleader authorised under any law for the time being in force to practice in any court of law (d) “Notary” means a person appointed as such under this act:

Provided that for a period of two years from the commencement of this Act it shall include also a person who, before such commencement, was appointed a notary public under the negotiable instruments in 1881 and is, immediately before such commencement, in practice in any part of India.

Provided further that in relation to the sat of Jammu and Kashmir the said period of two years shall be computed from the date on which this act comes into force in that State.

(e) “Prescribed” means prescribed by rules made under this act. (f) “Register” means a register of notaries maintained by the government under section 4

(g) “State Government”, in relation to a Union Territory, means the administrator thereof.

Section 3. Power to appoint Notaries.

The Central Government, for the whole or any part of India, and any such State Government, for the whole or any part of State, may appoint as notaries, any legal practitioners or other persons who possess such qualifications as may be prescribed.

Section 4. Registers.

(1) The Central Government and every State Government shall maintain, in such form as may be prescribed, a register of the notaries appointed by that Government and entitled to practice as such under this act.

(2) Every such Register shall include the following particulars about the notary is entered therein, namely:-

(a) his full name, date of birth, residential and professional address.

(b) the date on which his name is entered in the register.

(c) his qualification , and

(d) any other particulars which may be prescribed.

Section 5. Entry of names in the Register and issue or renewal of certificates of practices.

(1) Every Notary who in ends to practice as such shall, on payment to the government appointing him of the prescribed fee, if any, be entitled.-

(a) to have his name entered in the Register maintained by that government under section 4, and

(b) to a certificate authorizing him to practice for a period of three years from the date on which the certificate is issued to him.

(2) Every such notary who wishes to continue to practice after the expiry of the period for which his certificate of practice has been issued under this section shall, on application made to the Government appointing him and payment of the prescribed fee, if any, be entitled to have his certificate renewed for three years at a time.

Section 6. Annual publication of lists of notaries.

The Central Government and, every State Government shall, during the month of January each year, publish in the Official Gazzette a list of notaries appointed by that Government and in practice at the beginning of that year together with such details pertaining to them as may be prescribed.

Section 7. seal of Notaries.

every Notary shall have and use, as occasion may arise, seal of such form and design as may be prescribed.

Section 8. Function of Notaries.

(1) A notary may do all or any of the following acts by virtue of his office , namely:-

(a) verify, authenticate, certify or attest the execution of any instrument.

(b) Present any promissory note, hundi or bill of exchange for acceptance or payment or demand better security.

(c) note to protest the dishonour by non acceptance or non payment of any promissory note, hundi, bill of exchange or protest for better security or prepare acts of honour under the Negotiable Instruments Act, 1881, or serve notice of such note or protest.

(d) note and draw up ship’s protest, boat’s protest or protest relating to de moorage and other commercial matters.

(e) administer oath to, or take affidavit from, any person,

(f) prepare bottom and respondent bonds, charter parties and other mercantile documents.

(g) prepare, attest or authenticate any instrument intended to take effect in any country or place outside India in such form and language as many conform to the law of the place where such deed is intended to operate.

(h) translate, and verify the translation of, any document from one language to another.

(i) any other act which may be prescribed.

(2) No act specified in sub-section (1) shall be deemed to be a notaries act except when it is done by a notary under his signature and official seal.

Section 9. Bar of practice without certificate.

(1) Subject to the provision of this section, no person shall practice as a notary or do any notaries act under the official seal of notary unless he holds a certificate of practice in force issued to him under section 5.

Provided that nothing in this sub-section shall apply to the presentation of any promissory note, hundi or bill of exchange for acceptance or payment by the clerk of a notary acting on behalf of such notary.

(2) Nothing contained in sub-section (1) shall, until the expiry of two years from the commencement of this Act, apply to any such person as is referred to in the provision to clause (d) of section 2.

Provided that in relation to Jammu and Kashmir the said period of two years shall be computed from the date on which this act comes in to force in that state.

Section 10. Removal of names from the Register.

The Government appointing any notary may, by order, remove from the Register maintained by it under section 4, the names of the notary if he:-

(a) makes a request to that effect; or

(b) has not paid any prescribed fee required to be paid by him; or

(c) is an undischarged solvent; or

(d) has been found, upon inquiry in the prescribed manner, to be guilty of such professional or other misconduct as, in the opinion of the government, renders him unfit to practice as a notary.

Section 11. Construction of references to notaries public in other laws.

Any reference to a notary public in any other law shall be construed as a reference to a notary entitled to practice under this act.

Section 12. Penalty for falsely representing to be Notary, etc.

Any person who -

(a) falsely represents that he is a notary without being appointed as such, or

(b) practices as a notary or does any notaries act in contravention of section 9, shall be punishable with imprisonment for a term which may extend to three months, or with fine, or with both.

Section 13. Cognizance of Offence.

(1) No court shall take cognizance of any offence committed by a notary in the exercise or purported exercise of his function under this act save upon complaint in writing made by an officer authorised by the Central Government or State Government by general or special order in this behalf.

(2) No Magistrate other than a Presidency Magistrate or a Magistrate of the first class shall try an offence punishable under this act.

Section 14. Reciprocal arrangements for recognition of notaries acts done by foreign notaries.

If the Central Government is satisfied that by law or practice of any country or place outside India, the notaries act done by notaries within India are recognised for all or any limited purposes in that country or place, the Central Government may, by notification in the Official Gazette, declare the notorial acts lawfully done by notaries within such country or place shall be recogniseed within India for all purposes or, as the case may be, for such limited purposes as may be notified in the notification.

Section 15. Power to make rules.

(1) The Central Government may, by notification in the Official Gazette, make rules to carry out the purposes of this act.

(2) In particular, and without prejudice to the generality of the forgoing power, such rules may provide for all or any of the following matters, namely:-

(a) the qualification of a notary, the form and manner in which applications for the appointment as a notary may be made and the disposal of such applications;

(b) the certificates, testimonials or proofs as to character, integrity, ability and competence which any person applying for appointment as a notary may be required to furnish;

(c) the fee payable for appointment as a notary and for the issue and renewal of sa certificate of practice, and exemption , whether wholly or in part, from such fees in specified classes of cases;

(d) the fees payable to a notary for doing any notarial act;

(e) the form of registers and the particulars to be entered therein;

(f) the form and design of the seal of notary;

(g) the manner in which inquiries into allegations of professional or other misconduct of notaries may be made;

(h) the acts which a notary may do in addition to those specified in section 8 and the manner in which a notary may perform his functions;

(i) any other matter which has to be, or may be prescribed.

(3) Every rule made by the central government under this act shall be laid as soon as may be after it is made, before each house of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Section 16. Amendment of Act 26 of 1881.

Repealed by the repealing and Amending Act, 1957 (36 of 1957), section 2 and schedule I.

Gift Tax Act

November 30, 2014

Section 1. SHORT TITLE, EXTENT AND COMMENCEMENT.

(1) This Act may be called the Gift-tax Act, 1958.

(2) 1 It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall be deemed to have come into force on the 1st day of April, 1958.

Section 2. DEFINITIONS.

In this Act, unless the context otherwise requires,—

¹[***]

²[(ii) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252 of the Income-tax Act;]

²[(iii) “assessee” means a person by whom gift-tax or any other sum of money is payable under this Act, and includes—

(a) every person in respect of whom any proceeding under this Act has been taken for the determination of gift-tax payable by him or by any other person or the amount of refund due to him or such other person;

(b) every person who is deemed to be an assessee under this Act;

(c) every person who is deemed to be an assessee in default under this Act;]

³[(iiia) “Assessing Officer” means the Assistant Commissioner or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of the Income-tax Act which apply for the purposes of gift-tax under section 7 of this Act, and also the Deputy Commissioner who is directed under clause (b) of sub-section (4) of the said section 120 to exercise or perform all or any of the powers and functions conferred on or assigned to the Assessing Officer under that Act;]

²[(iv) “assessment” includes re-assessment;

(iva) “ assessment year” means the period of twelve months commencing on the 1st day of April, every year;]

(v) “Board” means the ⁴[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963))];

⁵[(va) “charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility ⁶[***];]

⁷[***]

⁸[***]

⁹[(vii) the experessions “company”, “Indian company” and “company in which the public are substantially interested” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act;]

¹⁰[***]

(viii) “donee” means any person who acquires any property under a gift, and, where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary;

(ix) “donor” means any person who makes a gift;

(x) “executor” means an executor or adiminstrator of the estate of a deceased person;

¹¹[(xi) the expressions “firm”, “partner” and “partnership” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act;]

(xii) “gift” means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth, and ¹²[includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section];

¹³[Explanation.—A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act, by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money’s worth, shall be deemed to be a gift made by such person;]

¹⁴[***]

¹⁵[(xiv) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961);]

¹⁶[***]

¹⁷[(xvib) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908);]

¹⁸[***]

(xviii) “person” includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not;

(xix) “prescribed” means prescribed by rules made under this Act;

(xx) “previous year”, in relation to any assessment year—

(a) in the case of an assessee ¹⁹[having no source of income, profits or gains or] having a source of income, profits or gains in respect of which there is no previous year under the Income-tax Act, means the twelve months ending on the 31st day of March immediately preceding the assessment year;

²⁰[***]

(c) in the case of any other assessee, means the previous year as defined in ²¹[section 3] of the Income-tax Act if an assessment were to be made under that Act for that year:

²²[Provided that where a person who has not been assessed under this Act for any assessment year makes a gift on a date which does not fall within a previous year as defined in sub-clause (a) ²³[***] or sub-clause (c), the previous year shall be the twelve months ending on the 31st day of March immediately preceding the assessment;

²⁴[***]]

(xxi) “principal officer”, used with reference to a company or any association of persons, means—

(a) the secretary and treasurer, manager, managing agent, managing director or agent of the company or association; or

(b) any person connected with the management of the affairs of the company or association upon whom the ²⁵[Assesssing Officer] has served a notice of his intention of treating him as the principal officer thereof;

(xxii) “property” includes any interest in property, movable or immovable;

(xxiii) “taxable gifts” means gifts chargeable to gift-tax under this Act;

²⁶[(xxiiia) territories to which this Act extends shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry—

(a) as respects any period for the purposes of section 5; and

(b) as respects any period included in the previous year, for the purposes of making any assessment for the assessment year commencing on the 1st day of April, 1963, or for any subsequent year;]

(xxiv) “transfer of property” means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes—

(a) the creation of a trust in property;

(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property;

(c) the exercise of a power of appointment ²⁷[(whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made)] of property vested in any person; not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and

(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person;

²⁸[(xxv) the expressions “Chief Commissioner”, “Director-General”, “Commissioner”, “Commissioner (Appeals)”, “Director”, ²⁹[“Additional Director of Income-tax”, “Additional Commissioner of Income-tax”, “Additional Commissioner of Income-tax (Appeals)”, “Deputy Director”,] “Deputy Commissioner”, “Deputy Commissioner (Appeals)”, “Assistant Commsissioner”, “Income-tax Officer”, “Tax Recovery Officer” and “Inspector of Income-tax” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act.]

—————

1. Clause (i) omitted by Act 4 of 1988, sec. 162(a) as amanded by Act 26 of 1988, sec. 88 (j) (i) (w.e.f. 1-4-1988).

2. Subs. by Act 53 of 1962, sec. 2(a) (w.e.f. 1-4-1963).

3. Ins. by Act 4 of 1988, Sec. 162 (b) as amended by Act 26 of 1988, sec. 88(j)(i) (w.e.f. 1-4-1988).

4. Subs. by Act 54 of 1963, sec. 5, for “Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (4 of 1924)” (w.e.f. 1-4-1963).

5. Ins. by Act 53 of 1962, sec. 2(b) (w.e.f. 1-4-1963).

6. The words “not involving the carrying on of any activity for profit” omitted by Act 67 of 1984, sec. 71(w.e.f. 1-4-1984).

7. Clause (vi) omitted by Act 4 of 1988, sec. 162 (c)(i) as amended by Act 26 of 1988, sec. 88 (j) (iii) (w.e.f. 1-4-1988).

8. Clause (via) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act 26 of 1988, sec. 88 (j) (iii) (w.e.f. 1-4-1988). Earlier clause (via) was ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).

9. Subs. by Act 4 of 1988, sec. 162 (d) (w.e.f. 1-4-1989).

10. Clause (viia) omitted by Act 4 of 1988 sec. 162 (c)(i) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1988). Earlier clause (viia) was ins. by Act 53 of 1962, sec. 2 (c) (w.e.f. 1-4-1963).

11. Subs. by Act 4 of 1988, sec. 162 (e) (w.e.f. 1-4-1989).

12. Subs. by Act 32 of 1971, sec. 37 (a), for “includes the transfer of any property deemed to be a gift under section 4 (w.e.f. 1-4-1972).

13. Ins. by Act 11 of 1987, sec. 90 (w.e.f. 1-4-1988).

14. Clause (xiii) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act, 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1988).

15. Subs. by Act 53 of 1962, sec. 2(d) (w.e.f 1-4-1963).

16. Clauses (xv), (xvi) and (xvia) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f 1-4-1988). Earlier clause (xvia) was ins. by Act 53 of 1962, sec. 2 (e) (w.e.f. 1-4-1963).

17. Ins. by Act 53 of 1962, sec. 2(e).

18. Clause (xvii) Omitted by Act 4 of 1988, sec. 162 (c) (ii) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1989)

19. Ins. by Act 12 of 1959, sec. 27 (i) (w.e.f. 1-4-1959).

20. Sub-clause (b) omitted by Act 4 of 1988, sec. 162(f) (i) (w.e.f. 1-4-1989).

21. Subs. by Act 53 of 1962, sec. 2(f) (ii), for “Clause (ii) of section 2” (w.e.f. 1-4-1963).

22. Two provisons were ins. by Act 12 of 1959, sec. 27(ii) (w.e.f. 1-4-1959).

23. The words “or sub-clause (b)” omitted by Act 4 of 1988, sec. 162 (f) (ii) (w.e.f. 1-4-1989).

24. Second Proviso omitted by Act 4 of 1988, sec. 162(f) (iii) (w.e.f. 1-4-1989).

25. Subs by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

26. Ins. by Taxation Laws (Extension to Union Territories) Regulation, 1963 (w.e.f. 1-4-1963).

27. Ins. by Act 44 of 1980, sec. 42(a) (w.e.f. 1-4-1980).

28. Ins. by Act 4 of 1988, sec. 162 (g) as amended by Act 26 of 1988, sec. 88(j)(iv) (w.e.f. 1-4-1988).

29. Ins. by Act 32 of 1994, sec. 54 (w.e.f. 1-6-1994).

Section 3. CHARGE OF GIFT-TAX.

¹[(1)] Subject to the other provisions contained in this Act, there shall be charged for every ²[assessment year] commencing on and from the 1st day of April, 1958, 3[but before the 1st day of April, 1987,] a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957) at the rate or rates specified in 4[Schedule I].

²[(2) ⁶[Subject to the other provisions (including provisions for the levy of additional gift-tax) contained in this Act], there shall be charged for every assessment year commencing on and from the 1st day of April, 1987, gift-tax in respect of the gifts, if any, made by a person during the previous year, at the rate of thirty per cent. on the value of all taxable gifts.]

\⁷[(3) Notwithstanding anything contained in sub-section (2), the provisions of this Act shall cease to apply and shall have no effect whatsoever in respect of any gift made on or after the 1st day of October, 1998.]

—————

1. Section 3 re-numbered as sub-section (1) thereof by Act 23 of 1986, sec. 41 (w.e.f. 1-4-1987).

2. Subs. by Act 53 of 1962, sec. 3, for “financial year” (w.e.f. 1-4-1963).

3. Ins. by Act 23 of 1986, sec. 41 (a) (w.e.f. 1-4-1987).

4. Subs. by Act 3 of 1989, sec. 79, for “Schedule” (w.e.f. 1-4-1989).

5. Ins by Act 23 of 1986, sec. 41 (b) (w.e.f. 1-4-1987).

6. Subs. by Act 4 of 1988, sec. 163, for “Subject to the other

provisions contained in this Act”, (w.e.f. 1-4-1989).

7. Ins. by Act 21 of 1998, sec. 75 (w.e.f. 1-10-1998).

Section 4. GIFTS TO INCLUDE CERTAIN TRANSFERS.

¹(1) For the purposes of this Act, -

(a) where property is transferred otherwise than for adequate consideration, the amount by which the ²value of the property as on the date of the transfer and determined in the manner laid down in Schedule II exceeds the value of the consideration shall be deemed to be a gift made by the transferor :

³Provided that nothing contained in this clause shall apply in any case where the property is transferred to the Government or where the value of the consideration for the transfer is determined or approved by the Central Government or the Reserve Bank of India;

(b) where property is transferred for a consideration which, having regard to the circumstances of the case, has not passed or is not intended to pass either in full or in part from the transferee to the transferor, the amount of the consideration which has not passed or is not intended to pass shall be deemed to be a gift made by the transferor;

(c) 38 where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the ⁴Assessing Officer to have been bona fide, shall be deemed to be a gift made by the person, responsible for the release, discharge, surrender, forfeiture or abandonment;

(d) where a person absolutely entitled to property causes or has caused the same to be vested in whatever manner in himself and any other person jointly without adequate consideration and such other person makes an appropriation from or out of the said property, the amount of the appropriation used for the benefit of the person making the appropriation or for the benefit of any other person shall be deemed to be a gift made in his favour by the person who causes or has caused the property to be so vested;

⁵(e) where a person who has an interest in property as a tenant for a term or for life or a remainderman surrenders or relinquishes his interest in the property or otherwise allows his interest to be terminated without consideration or for a consideration which is not adequate, the value of the interest so surrendered, relinquished or allowed to be terminated or, as the case may be, the amount by which such value exceeds the consideration received, shall be deemed to be a gift made by such person.

⁶(2) where in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family (such property being hereafter in this sub-section referred to as the converted property), then, notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, for the purpose of computation of the taxable gifts made by the individual, the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of the converted property had taken place immediately after such conversion.

—————

1. Section 4 re-numbered as sub-section (1) thereof by Act 32 of 1971, sec. 37 (b) (w.e.f. 1-4-1972).

2. Subs. by Act 49 of 1991, sec. 84, for “market value of the property at the date of the transfer”. (w.e.f. 1-4-1992).

3. Ins. by Act 25 of 1975, sec. 29 (w.r.e.f. 1-4-1974).

4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

5. Ins. by Act 44 of 1980, sec. 42 (b) (w.e.f. 1-4-1980).

6. Ins. by Act 32 of 1971, sec. 37 (b) (w.e.f. 1-4-1972).

Section 5. EXEMPTION IN RESPECT OF CERTAIN GIFTS.

(1) Gift-tax shall not be charged under this Act in respect of gifts made by any person-

(i) of immovable property situate outside the territories to which this Act extends;

(ii) of movable property situate outside the said territories unless the person -

(a) being an individual, is a citizen of India and is ordinarily resident in the said territories; or

(b) not being an individual, is resident in the said territories, during the previous year in which the gift is made;

¹[(iia) being an individual who is not resident in India, to any person resident in India, of foreign currency or other foreign exchange [as defined, respectively, in clause (c) and clause (d) of section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947)] remitted from a country outside India in accordance with the provisions of the said Act, and any rules made thereunder, during the period commencing on the 26th day of October, 1965, and ending on the 28th day of February, 1966 or such later date as the Central Government may, by notification in Official Gazette, specify in this behalf.

Explanation.—For the purposes of this clause, the expression “resident in India” shall have the meaning assigned to it in the Income-tax Act;]

²[(iib) being a person resident outside India, out of the moneys standing to his credit in a Non-resident (External) Account in any bank in India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.

Explanation—For the purposes of this clause, “person resident outside India” has the meaning assinged to it in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);

(iic) being a citizen of India, or a person of Indian origin, who is not resident in India, to any relative of such person in India, of convertible foreign exchange remitted from a country outside India in accordance with the provisisons of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.

Explanation.—For the purposes of this clause and clause (iid),—

(a) a person shall be deemed to be of Indian origin if he or either of his parents or any of his grand-parents was born in undivided India;

(b) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;

(c) “relative” has the meaning assigned to it in clause (41) of section 2 of the Income-tax Act;

(d) “resident in India” shall have the meaning assigned to it in the Income-tax Act;

(iid) being a citizen of India or a person of Indian origin, who is not resident in India, to any relative of such person in India of property in the form of ³[any foreign exchange asset as defined in clause (b) of section 115C of the Income-tax Act];]

4[(iie) being an individual who is a non-resident Indian, once out of the moneys standing to his credit in an account opened and operated in accordance with the Non-resident (Non-repatriable) Rupee Deposit Scheme, 1992.

1. —For the purposes of this clause, “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C of the Income-tax Act;]

(iii) of property in the form of savings certificates issued by the Central Government, which that Government, by notification in the Official Gazette, exempts from gift-tax;

⁵[***]

⁶[(iiib) of property in the form of Special Bearer Bonds, 1991;]

⁷[(iiic) ⁸[being an individual or a Hindu undivided family, of property in the form of such Capital Investment Bonds] as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees ten lakhs in value in the aggregate in one or more previous years:

Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]

⁹[(iiid) being an individual or a Hindu undivided family, of property in the form of such Relief Bonds, as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees five lakhs in value in the aggregate in one or more previous years:

Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]

¹⁰[(iiie) being an individual who is a non-resident Indian, ¹¹[of property in the form of the bonds specified under sub-clause (iid) of clause (15) of section 10 of the Income-tax Act:

Provided that] where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this clause shall apply in respect of the gifts of property referred to in this clause in such subsequent year or any year thereafter.

Explanation.—For the purposes of this clause, the expressions—

¹²[***]

(b) “non-resident Indian” shall have the meaning assigned to it clause (e) of section 115C of the Income-tax Act;]

(iv) to the Government or any local authority ¹³[or any authority referred to in clause (20A) of section 10 of the Income-tax Act];

(v) to any institution or fund established ¹⁴[or deemed to be established] for a charitable purpose to which the provisions of ¹⁵[section 80G] of the Income-tax Act apply;

¹⁶[(va) (i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of ¹⁷[clause (b) of sub-section (2) of section 80G of the Income-tax Act]; or

(ii) by way of settlement on trust, of property the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid;]

¹⁸[***]

(vii) to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees 19[one hundred thousand] in value in respect of the marriage of each such relative;

²⁰[***]

(x) under a will;

(xi) in contemplation of death;

(xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the ²¹[Assessing Officer] as being reasonable having regard to the circumstances of the case;

(xiii) being an employer, to any employee by way of bonus, gratuity or pension or to the dependents of a deceased employee, to the extent to which the payment of such bonus, gratuity or pension is proved to the satisfaction of the ²⁷[Assessing Officer] as being reasonable having regard to the circumstances of the case and is made solely in recognition of the services rendered by the employee;

²¹[***]

(xv) to any person in charge of any such Bhoodan or Sampattidan movement as the Central Government may, by notification in the Official Gazette, specify;

²³[***]

²⁴[(1A) Any reference in clause (v) ²⁵[***] of sub-section (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.]

(2) Without prejudice to the provisions contained in sub-section (1), gift-tax shall not be charged under this Act in respect of gifts made by any person during the previous year, subject to a maximum of rupees ²⁶[thirty thousand] in value.

²⁷[***]

Explanation.—For the purposes of this section,—

(a) an individual shall be deemed to be ordinarily resident in the territories to which this Act extends during the previous year in which the gift is made if during that year he is regarded as a resident but not as not ordinarily resident 28[within the meaning of section 6 of the Income-tax Act, subject to the modification that references in that section to India shall be construed as references to the territories to which this Act extends];

(b) a Hindu undivided family firm or other association of persons shall be deemed to be resident in the territories to which this Act extends during any previous year unless, during that year, the control and management of its affairs was situated wholly outside the said territories;

(c) a company shall be deemed to be resident in the territories to which this Act extends during the previous year, if—

(i) it is a company formed and registered under the Companies Act, 1956 (1 of 1956), or is an existing company within the meaning of that Act; or

(ii) during that year, the control and management of that company was situated wholly in the said territories;

(d) “gifts made in contemplation of death” has the same meaning as in section 191 of the Indian Succession Act, 1925 (39 of 1925).

—————

1. Ins. by Act 13 of 1966, sec. 41 (a)(i) (w.e.f. 1-4-1966).

2. Ins. by Act 14 of 1982, sec. 38 (a) (w.e.f. 1-4-1983).

3. Subs. by Act 11 of 1983, sec. 42 (a) (w.e.f. 1-4-1984).

4. Ins. by Act 38 of 1993, sec. 41 (a)(i) (w.e.f. 1-4-1993).

5. Clause (iiia) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (iiia) was ins. by Act 41 of 1975, sec. 7 (w.e.f. 4-12-1965).

6. Ins. by Act 7 of 1981, sec. 7 (w.e.f. 12-1-1981).

7. Ins. by Act 14 of 1982, sec. 38(b) (w.e.f 1-4-1983).

8. Subs. by Act 11 of 1983, sec. 42(b), for “of property in the form of such Capital Investment Bonds”, (w.e.f. 1-4-1983).

9. Ins. by Act 26 of 1988, sec. 67 (w.e.f. 1-4-1988).

10. Ins. by Act 3 of 1989, sec. 80 (w.e.f. 1-4-1989).

11. Subs. by Act 49 of 1991, sec. 85 (a) (w.e.f. 1-4-1991).

12. Clause (a) omitted by Act 49 of 1991, sec. 85(b) (w.e.f. 1-4-1991).

13. Ins. by Act 66 of 1976, sec. 28 (w.e.f. 1-4-1977).

14. Ins. by Act 21 of 1973, sec. 21(w.e.f. 1-4-1974).

15. Subs. by Act 32 of 1971, sec. 37 (c)(i) for “section 88”(w.r.e.f. 1-4-1968).

16. Ins. by Act 10 of 1965, sec. 71 (i) (w.e.f. 1-4-1965).

17. Subs. by Act 32 of 1971, sec. 37 (c) (ii), for “sub-section (6) of section 88 of the Income-tax Act” (w.r.e.f. 1-4-1968).

18. Clause (vi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).

19. Subs. by Act 32 of 1994, sec. 55, for “thirty thousand” (w.e.f. 1-4-1995). Earlier the words “thirty thousand” were subs. by Act 38 of 1993, sec. 41(a) (ii), for “ten thousand” (w.e.f. 1-4-1994).

20. Clauses (viii) and (ix) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).

21. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988)

22. Clause (xiv) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f 1-4-1987).

23. Clause (xvi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (xvi) was omitted by Act 54 of 1972, sec. 6 (w.e.f. 1-4-1973) and was ins. by Act 67 of 1984, sec. 72 (w.e.f. 1-4-1985).

24. Ins. by Act 15 of 1965, sec. 21 (i) (w.e.f. 1-4-1964).

25. The words “or clause (vi)” omitted by Act 23 of 1986, sec. 42 (b) (w.e.f. 1-4-1987).

26. Subs. by Act 38 of 1993, sec. 41(b), for “twenty thousand” (w.e.f. 1-4-1994). Earlier the words “twenty thousand” were subs. by Act 23 of 1986, sec. 42(c), for “five thousand” (w.e.f. 1-4-1987) and the words “five thousand” were subs. by Act 19 of 1970, sec. 27(a), for “ten thousand” (w.e.f. 1-4-1971), and still earlier the words “ten thousand” were subs. by Act 13 of 1966, sec. 41(a) (ii) (w.e.f. 1-4-1966). Prior to this the words “five thousand” were subs. by Act 5 of 1964, sec. 52 (a) (ii), for “ten thousand”(w.e.f. 1-4-1964).

27. Sub-section (3) omitted by Act 23 of 1986, sec. 42 (d) (w.e.f. 1-4-1987).

28. Subs. by Act 53 of 1962, sec. 4 (ii), for “in the taxable territories within the meaning of the Income-tax Act” (w.e.f. 1-4-1963).

Section 6. VALUE OF GIFTS, HOW DETERMINED.

¹[6. Value of gifts, how determined.— (1) Subject to the provisions of sub-section (2), the value of any property, other than cash, transferred by way of gift shall, for the purpose of this Act, be its value as on the date on which the gift was made and shall be determined in the manner laid down in Schedule II.

(2) Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable.

—————

1.  Subs. by Act 3 of 1989, sec. 81 (w.e.f. 1-4-1989).

Section 6A.

¹[***]

—————

1. Section 6A omitted by Act 23 of 1986, sec. 43 (w.e.f. 1-4-1987). Earlier Section 6A was ins. by Act 5 of 1964, sec. 52(b) (w.e.f. 1-4-1964) and was omitted by Act 13 of 1966, sec. 41 (b) (w.e.f. 1-4-1966) and was again ins. by Act 41 of 1975, sec. 106 (w.e.f. 1-4-1976).

Section 7. GIFT-TAX AUTHORITIES AND THEIR JURISDICTION.

¹[7. Gift-tax authorities and their jurisdiction.—The income-tax authorities specified in section 116 the Income-tax Act shall be the gift-tax authorities for the purposes of this Act and every such authority shall exercise the powers and perform the functions of a gift-tax authority under this Act in respect of any person within his jurisdiction, and for this purpose his jurisdiction under this Act shall be the same as he has under the Income-tax Act by virtue of orders or directions issued under section 120 of that Act (including orders or directions assigning concurrent jurisdiction) or under any other provision of that Act.

Explanation : For the purposes of this section, the gift-tax authority having jurisdiction in relation to a person who has no income assessable to income-tax under the Income-tax Act shall be the gift-tax authority having jurisdiction in respect of the area in which that person resides.

—————

1.  Subs. by Act 4 of 1988, sec. 164 (w.e.f.1-4-1988).

Section 7A.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 7A omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7A was ins. by Act 53 of 1962, sec. 5 (w.e.f. 1-4-1963) and was subs. by Act 20 of 1967, sec. 35 (b) (w.e.f. 1-4-1967) and again subs. by Act 67 of 1984), sec. 78 (w.e.f. 1-10-1984).

Section 7AA.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 7AA omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7AA was ins. by Act 41 of 1975, sec. 108 (w.e.f. 1-10-1975) and was subs. by Act 29 of 1977), sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

Section 7B.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 7B omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7B was subs. along with section 7A by Act 20 of 1967. sec. 35 (b) (w.e.f. 1-4-1967).

Section 8. CONTROL OF GIFT-TAX AUTHORITIES.

¹[8. Control of gift-tax authorities. Section 118 of the Income-tax Act and any notification issued thereunder shall apply in relation to the control of gift-tax authorities as they apply in relation to the control of the corresponding income-tax authorities, except to the extent to which the Board may, by notification in the Official Gazette, otherwise direct in respect of any gift-tax authority.

—————

1.  Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).

Section 8A.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

Section 9. INSTRUCTIONS TO SUBORDINATE AUTHORITIES.

¹[9. Instructions to subordinate authorities. —(1) The Board may, from time to time, issue such orders, instructions and directions to other gift-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :

Provided that no such orders, instructions or directions shall be issued -

(a) so as to require any gift-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Deputy Commissioner (Appeals) or Commissioner (Appeals) in the exercise of his appellate functions.

(2) Without prejudice to the generality of the foregoing power, -

(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of provisions of sections ²13, 14, 15, 16B, 17 and 34 or otherwise), general or special orders in respect of any class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by the gift-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any gift-tax authority, not being a Deputy Commissioner (Appeals) or Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.

—————

1.  Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).

2.  Subs. by Act 12 of 1990, sec. 59, for “15, 16” (w.e.f. 1-4-1990).

Section 9A.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 9A omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 9A was ins. by Act 53 of 1962, sec.6 (w.e.f. 1-4-1963).

Section 10. JURISDICTION OF ASSESSING OFFICERS AND POWER TO TRANSFER CASES.

¹[10. Jurisdiction of Assessing Officers and power to transfer cases.—(1) The provisions of sections 124 and 127 of the Income-tax Act shall, so far as may be, apply for the purposes of this Act as they apply for the purposes of the Income-tax Act, subject to the modifications specified in sub-section (2).

(2) The modifications referred to in sub-section (1) shall be the following namely :-

(a) in section 124 of the Income-tax Act, – (i) in sub-section (3), references to the provisions of the Income-tax Act shall be construed as references to the corresponding provisions of the Gift-tax Act; (ii) sub-section(5) shall be omitted;

(b) in section 127 of the Income-tax Act, in the Explanation below sub-section ²[(4)], references to proceedings under the Income-tax Act shall be construed as including references to proceedings under the Gift-tax Act.]

—————

1. Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).

2. Subs. by Act 3 of 1989, sec. 82, for “(5)” (w.r.e.f. 1-4-1988).

Section 11.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1. Section 11 omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11 was subs. by Act 53 of 1962, sec. 7 (w.e.f. 1-4-1963) and was again subs. by Act 20 of 1967, sec. 35 (c) (w.e.f. 1-4-1967).

Section 11A.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 11A omitted by Act 4 of 1988,sec. 165 (w.e.f. 1-4-1988). Earlier section 11A was ins. by Act 19 of 1970, sec. 27 (b) after renumbering the then section 11A as section 11AA (w.e.f. 1-4-1970)and the original section 11A was ins. by Act 20 of 1967, sec. 35 (f) (w.e.f.1-4-1967).

Section 11AA.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 11AA omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11AA was ins. as section 11A by Act 20 of 1967, sec. 35 (f) (w.e.f. 1-4-1967) and the original section 11A was re-numbered as section 11AA by Act 19 of 1970, sec. 27 (b) (w.e.f. 1-4-1970).

Section 11B.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 11B omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11A was subs. along with section 11 by Act 53 of 1962, sec. 7 (w.e.f. 1-4-1963), and section 11A was renumbered as section 11B by Act 20 of 1967, sec. 35 (7) (w.e.f. 1-4-1967).

Section 12.

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]

¹[***]

—————

1.  Section 12 omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988).

Section 13. RETURN OF GIFTS.

¹(1) Every person who during a previous year has made any taxable gifts, or is assessable in respect of the taxable gifts made by any other person under this Act, which, in either case, exceeded the maximum amount not chargeable to gift-tax, shall, on or before the 30th day of June of the corresponding assessment year, furnish a return of such gifts in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

(2) Notwithstanding anything contained in any other provision of this Act, a return which shows the amount of taxable gifts below the maximum amount which is not chargeable to tax shall be deemed never to have been furnished :

Provided that this sub-section shall not apply to a return furnished in response to notice under section 16.

²[***]

—————

1.  Subs. by Act 4 of 1988, sec. 166(a) (w.e.f.1-4-1989).

2.  Sub-section (3) omitted by Act 4 of 1988, sec. 166(b) (w.e.f. 1-4-1989).

Section 14. RETURN AFTER DUE DATE AND AMENDMENT OF RETURN.

¹ RETURN AFTER DUE DATE AND AMENDMENT OF RETURN. – If any person has not furnished a return within the time allowed under sub-section (1) of section 13 or by a notice issued under clause (i) of sub-section (4) of section 15, or having furnished a return discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :

Provided that -

(a) where such return or revised return relates to the assessment year commencing on the 1st day of April, 1987, or any earlier assessment year, it may be furnished at any time up to and inclusive of the 31st day of March, 1990 or before the completion of the assessment, whichever is earlier;

(b) where such return or revised return relates to the assessment year commencing on the 1st day of April, 1988, it may be furnished at any time up to and inclusive of the 31st day of March, 1991 or before the completion of the assessment, whichever is earlier.

—————

1.  Subs. by Act 4 of 1988, sec. 167 (w.e.f. 1-4-1989).

Section 14A. RETURN BY WHOM TO BE SIGNED.

¹ RETURN BY WHOM TO BE SIGNED. The return made under section 13 or section 14 shall be signed and verified -

² (a) in the case of an individual, – (i) by the individual himself;

(ii) where he is absent from India, by the individual or by some person duly authorised by him in this behalf;

(iii) where he is mentally incapacitated from attending to his affairs, by his guardian or any other person competent to act on his behalf; and

(iv) where, for any other reason, it is not possible for the individual to sign the return, by any person duly authorised by him in this behalf :

Provided that in a case referred to in sub-clause (ii) or sub-clause (iv), the person signing the return holds a valid power of attorney from the individual to do so, which shall be attached to the return;

(b) in the case of a Hindu undivided family, by the Karta, and, where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family;

(c) in the case of a company, by the managing director thereof or where for any unavoidable reason such managing director is not able to sign and verify the return, or where there is no managing director, by any director thereof :

Provided that where the company is not resident in India, the return may be signed and verified by a person who holds a valid power of attorney from such company to do so, which shall be attached to the return :

Provided further that, -

(a) where the company is being wound up, whether under the orders of the Court or otherwise, or where any person has been appointed as the receiver of any assets of the company, the return shall be signed and verified by the liquidator referred to in sub-section (1) of section 178 of the Income-tax Act;

(b) where the management of the company has been taken over by the Central Government or any State Government under any law, the return of the company shall be signed and verified by the principal officer thereof.

(d) in the case of a firm, by the managing partner thereof or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor;

(e) in the case of any other association, by any member of the association or the principal officer thereof; and

(f) in the case of any other person, by that person or by some person

competent to act on his behalf.

————

1.  Ins. by Act 53 of 1962, sec. 11 (w.e.f. 1-4-1963).

2.  Subs. by Act 4 of 1988, sec. 168 (i) (w.e.f.1-4-1989).

3.  Clauses (c) and (d) subs. by Act 41 of 1975, sec. (111) (w.e.f. 1-4-1976).

4.  Two provisions by Act 4 of 1988, sec. 168 (ii) (w.e.f. 1-4-1989).

Section 14B. SELF-ASSESSMENT.

¹SELF-ASSESSMENT. (1) Where any tax is payable on the basis of any return furnished under section 13 or under section 14 or in response to a notice under clause (i) of sub-section (4) of section 15 or under section 16, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax, together with interest payable under any provision of this Act for any delay in furnishing the return, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.

Explanation : Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable.

(2) After the regular assessment under section 15 has been made, any amount paid under sub-section (1) shall be deemed to have been paid towards such regular assessment.

(3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance with the provisions of sub-section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid and all the provisions of this Act shall apply accordingly.

(4) The provisions of this section shall apply in respect of assessment for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.

²[(4)The provisions of this section shall apply in respect of assessment for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]

—————

1.  Ins. by Act 4 of 1988, sec. 169 (w.e.f. 1-4-1989).

2.  Ins. by Act 36 of 1989, sec. 31 (w.e.f. 1-4-1989).

Section 15. ASSESSMENT.

¹[15. Assessment.—(1) (a) Where a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4),—

(i) if any tax or interest is found due on the basis of such return after adjustment of any amount paid by way of tax or interest, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice issued under section 31 and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee;

Provided that in computing the tax or interest payable by, or refundable to the assessee, the following adjustments shall be made in the taxable gifts declared in the return, namely:—

i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;

(ii) any exemption or deduction, which on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed or made in the return, shall be allowed;

(iii) any exemption or deduction claimed or made in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed:

²[Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments:]

³[4[Provided also] that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the gifts were first assessable.]

(b) Where, as a result of an order made under 5[sub-section (3) or sub-section (5) of this section or section 16 or section 22 or section 23 or section 24 or section 26 or section 28 or section 34 relating to any earlier assessment year and passed subsequent to the filing of the return referred to in clause (a) there is any variation in the exemption or deduction claimed or made in the return, and as a result of which,—

(i) if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due, it shall be granted to the assessee:

Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such order was passed.

⁶[(1A) (a) Where in the case of any person, the taxable gift, as a result of the adjustments made under 7[the first proviso] to clause (a) of sub-section (1), exceeds the taxable gift declared in the return by any amount, the Assessing Officer shall,—

(i) further increase the amount of tax payable under sub-section (1) by an additional gift-tax calculated at the rate of twenty per cent. of the tax payable on such excess amount and specify the additional gift-tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1);

(ii) where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional gift-tax calculated under sub-clause (i).

(b) Where as a result of an order under section 22 or section 23 or section 24 or section 26 or section 28 or section 34, the amount on which additional gift-tax is payable under clause (a) has been increased or reduced, as the case may be, the additional gift-tax shall be increased or reduced accordingly, and,—

(i) in a case where the additional gift-tax is increased, the Assessing Officer shall serve on the assessee a notice of demand under section 31;

(ii) in a case where the additional gift-tax is reduced, the excess amount paid, if any, shall be refunded.

Explanation.—For the purposes of this sub-section, “tax payable on such excess amount” means the difference between the tax on the taxable gift and the tax that would have been chargeable had such taxable gift been reduced by the amount of adjustments.]

⁸[(1B) Where an assessee furnishes a revised return under section 14 after the issue of an intimation, or the grant of refund, if any, under sub-section (1) of this section, the provisions of sub-sections (1) and (1A) of this section shall apply in relation to such revised return and—

(i) the intimation already sent for any gift-tax, additional gift-tax or interest shall be amended on the basis of the said revised return and where any amount payable by way of gift-tax, additional gift-tax or interest specified in the said intimation has already been paid by the assessee then, if any such amendment has the effect of—

(a) enhancing the amount already paid, the intimation amended under this clause shall be sent to the assessee specifying the excess amount payable by him and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act, shall apply accordingly;

(b) reducing the amount already paid, the excess amount paid shall be refunded to the assessee;

(ii) the amount of the refund already granted shall be enhanced or reduced on the basis of the said revised return and where the amount of refund already granted is—

(a) enhanced, only the excess amount of refund due to the assessee shall be paid to him;

(b) reduced, the excess amount so refunded shall be deemed to be the tax payable by the assessee and an intimation shall be sent to the assessee specifying the amount so payable, and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act shall apply accordingly:

Provided that an assessee, who has furnished a revised return under section 14 after the service upon him of the intimation under sub-section (1) of this section, shall be liable to pay additional gift-tax in relation to the adjustments made under the first proviso to clause (a) of sub-section (1) and specified in the said intimation, whether or not he has made the said adjustments in the revised return.]

(2) ⁹[Where a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4) of this section, the Assessing Officer shall, if he] considers it necessary or expedient to ensure that the assessee has not omitted to disclose any taxable gift or has not understated the amount or value of any such gift or has not under-paid the tax in any manner 10[serve on the assessee] a notice requiring him, on a date to be specified therein, either to attend at the office of the Assessing Officer or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:

¹¹[Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.]

(3) On the date specified in the notice issued under sub-section (2) or, as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by order in writing, assess the value of taxable gifts made by the assessee and determine the sum payable by him on the basis of such assessment.

(4) For the purposes of making an assessment under this Act, the Assessing Officer may serve, on any person who has made a return under section 13 or section 14 or in whose case the time allowed under sub-section (1) of section 13 for furnishing the return has expired, a notice requiring him, on a date to be specified therein,—

(i) where such person has not made a return ¹²[within the time allowed under sub-section (1) of section 13], to furnish a return of the taxable gifts made by him or of the taxable gifts made by any other person in respect of which he is assessable under this Act during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or

(ii) to produce or cause to be produced such accounts, records or other documents as the Assessing Officer may require.

(5) If any person—

(a) fails to make the return required under sub-section (1) of section 13 and has not made a return or a revised return under section 14, or

(b) fails to comply with all the terms of a notice issued under sub-section (2) or sub-section (4), the Assessing Officer, after taking into account all relevant material which he has gathered, shall, after giving such person an opportunity of being heard, estimate the vlaue of taxable gifts to the best of his judgment and determine the sum payble by such person on the basis of such assessment:

Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the person to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:

Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (4) has been issued prior to the making of the assessment under this sub-section.

(6) Notwithstanding anything contained in section 6, for the purpose of making an assessment under this Act, 13[where under the provisions of section 6 read with Schedule II, the fair market value of any property transferred by way of gift is to be taken into account in such assessment,] the Assessing Officer may refer the valuation of such property to the Valuation Officer,—

(a) in a case where the value of the property as returned is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so returned is less than its fair market value;

(b) in any other case, if the Assessing Officer is of opinion—

(i) that the fair market value of the property exceeds the value of the property as returned by more than such percentage of the value of the property as returned or by more than such amount as may be prescribed in this behalf; or

(ii) that having regard to the nature of the property and other relevant circumstances, it is necessary so to do,and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

Explanation.—In this sub-section, “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957)].

¹⁴[(7) Where a regular assessment under sub-section (3) or sub-section (5) is made,—

(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessments;

(b) in no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.

(8) The provisions of this section, except those of sub-section (6), as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]

¹⁵[Explanation.—An intimation sent to the assessee under sub-section (1) or sub-section (IB) shall be deemed to be an order for the purposes of sub-section (1) of section 24.]

—————

1. Subs. by Act 4 of 1988, sec. 170 (w.e.f. 1-4-1989).

2. Ins. by Act 36 of 1989, sec. 32 (a)(i)(1) (w.e.f. 1-4-1989).

3. Ins. by Act 3 of 1989, sec. 83 (a) (w.e.f. 1-4-1989).

4. Subs. by Act 36 of 1989, for “Provided further” (w.e.f. 1-4-1989).

5. Ins. by Act 36 of 1989, sec. 32 (a)(ii)(w.e.f. 1-4-1989).

6. Ins. by Act 3 of 1989, sec. 83 (b) (w.e.f. 1-4-1989).

7. Subs. by Act 36 of 1989, sec. 32 (b) for “ the proviso” (w.e.f. 1-4-1989).

8. Ins. by Act 12 of 1990, sec. 60(a) (w.r.e.f. 1-4-1989).

9. Subs. by Act 36 of 1989, sec. 32 (c)(i), for “In a case referred to in sub-section (1) if the Assessing Officer” (w.e.f. 1-4-1989).

10. Subs. by Act 36 of 1989, sec. 32 (c) (ii), for “he shall serve on the assessee” (w.e.f. 1-4-1989).

11. Subs. by Act 49 of 1991, sec. 86 (a) (w.e.f. 1-10-1991).

12. Subs. by Act 12 of 1990, sec. 60 (b), for “before the end of the relevant assessment year”(w.e.f. 1-4-1990).

13. Ins. by Act 3 of 1989, sec. 83 (c) (w.e.f. 1-4-1989).

14. Sub-sections (7) and (8) ins. by Act 36 of 1989, sec. 32 (d) (w.e.f. 1-4-1989).

15. Ins. by Act 49 of 1991, sec. 86 (b) (w.e.f. 1-10-1991).

Section 16. GIFT ESCAPING ASSESSMENT.

¹(1) If the Assessing Officer ²has, reasons to believe] that the taxable gifts in respect of which any person is assessable under this Act (whether made by him or by any other person) have escaped assessment for any assessment year (whether by reason of under-assessment or assessment at too low a rate or otherwise), he may, subject to the other provisions of this section and section 16A, serve on such person a notice requiring him to furnish within such period, ³[***], as may be specified in the notice, a return in the prescribed form and verfied in the prescribed manner, setting forth the taxable gifts made by him or by such other person during the previous year mentioned in the notice, in respect of which he is assessable, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such gifts and also any other taxable gifts in respect of which such person is assessable, which have escaped assessment and which come to his notice subsequently in the course of the proceedings under this section for the assessment year concerned (hereafter in this section referred to as the relevant assessment year); and the provisions of this Act shall, so far as may be apply as if the return were a return required under section 13:

Provided that where an assessment under sub-section (3) of section 15 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any taxable gift chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 13 or section 14 or in response to a notice issued under sub-section (4) of section 15 or this section or to disclose fully and truly all material facts necessary for his assessment for that assessment year :

⁴Provided further that the Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so.

Explanation : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

(1A) No notice under sub-section (1) shall be issued for the relevant assessment year, – (a) in a case where an assessment under sub-section (3) of section 15 or sub-section (1) of this section has been made for such assessment year, -

(i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii) or sub-clause (iii);

(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year;

(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees one lakh or more for that year;

(b) in any other case, – (i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii) or sub-clause (iii);

(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees twenty-five thousand or more for that year;

(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year.

Explanation : For the purposes of sub-section (1) and sub-section (1A), the following shall also be deemed to be cases where taxable gifts chargeable to tax have escaped assessment, namely :-

(a) where no return of taxable gifts has been furnished by the assessee although the taxable gifts made by him or the taxable gifts made by any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to gift-tax;

(b) where a return of taxable gifts has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the amount or value of the taxable gifts or has claimed excessive exemption or deduction in the return.

(1B)(a) In a case where an assessment under sub-section (3) of section 15 or sub-section (1) of this section has been made for the relevant assessment year, no notice shall be issued under sub-section (1) ⁵by an Assessing Officer who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Deputy Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice :

Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.

(b) In a case, other than a case falling under clause (a), no notice shall be

issued under sub-section (1) by an Assessing Officer, who is below the rank of Deputy Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Deputy Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.

(2) Nothing contained in this section limiting the time within which any proceedings for assessment or reassessment may be commenced shall apply to an assessment or reassessment to be made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 22, section 23, section 24, section 26 or section 28, ⁶or by a court in any proceedings under any other law.

—————

1.  Sub-sections (1), (lA) and (1B) subs. by Act 4 of 1988, sec. 171 (a), for sub-section (1) (w.e.f. 1-4-1989).

2.  Subs. by Act 3 of 1989, sec. 84 (a), for “for, reasons to be recorded by him in writing, is of the opinion”.

3.  The words “not being less than thirty days”, omited by the Finance Act, 2003, sec. 101 (w.r.e.f. 1-4-1989).

4.  Ins. by Act 3 of 1989, sec. 84 (b) (w.e.f. 1-4-1989).

5.  Subs. by Act 12 of 1990, sec. 61 (w.e.f. 1-4-1990)

6.  Ins. by Act 4 of 1988, sec. 171(b) (w.e.f. 1-4-1989).

Section 16A. TIME LIMIT FOR COMPLETION OF ASSESSMENT AND REASSESSMENT.

¹[16A. Time-limit for completion of assessment and reassessment.—²[(1) No order of assessment shall be made under section 15 at any time after the expiry of ³[two years] from the end of the assessment year in which the gifts were first assessable:

⁴[Provided that,—

(a) where the gifts were first assessable in the assessment year commencing on the 1st day of April, 1987, or any ealier assessment year, such assessment may be made on or before the 31st day of March, 1991;

(b) where the gifts were first assessable in the assessment year commencing on the 1st day of April, 1988, such assessment may be made on or before the 31st day of March, 1992].

(2) No order of assessment or reassessment shall be made under section 16 after the expiry of two years from the end of the financial year in which the notice under sub-section (1) of that section was served:

Provided that,—

(i) where the notice under clause (a) of sub-section (1) of section 16 was served during the financial year commencing on the 1st day of April, 1985, or the 1st day of April, 1986 such assessment or reassessment may be completed on or before the 31st day of March,1990;

(ii) where the notice under clause (b) of sub-section (1) of section 16 relates to the assessment for the assessment year commencing on the 1st day of April, 1985, or the 1st day of April, 1986, such assessment or reassessment may be completed on or before the 31st day of March, 1990 or the expiry of two years from the end of the financial year in which such notice was served, whichever is later.

Explanation.—References to section 16 in the proviso shall be construed as references to that section as it stood before its amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988).]

(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order passed on or after the 1st day of April, 1975, under section 22, section 23 or section 24, setting aside or cancelling an assessment, may be made at any time before the expiry of ⁵[two years] from the end of the financial year in which the order under section 22 or section 23 is received by the ⁶[Chief Commissioner or Commissioner] or, as the case may be, the order under section 24 is passed by the Commissioner:

⁷[Provided that where the order setting aside or cancelling the assessment was passed during the financial year commencing on the 1st day of April, 1985 or the 1st day of April, 1986, the order of fresh assessment may be made on or before the 31st day of March, 1990.]

(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or reassessment made on the assessee in consequence of, or to give effect to, any finding or direction contained in an order under section 22, section 23, section 24, section 26, or section 28 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act and such assessment or reassessment may, subject to the provisions of sub-section (3), be completed at any time.

Explanation 1.—In computing the period of limitation for the purposes of this section—

(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be reheard under the proviso to section 38, or

(ii) the period during which the assessment proceeding is stayed by an order or injunction of any Court,shall be excluded:

⁸[Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), (2) and (3) available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.]

Explanation 2.—Where, by an order referred to in sub-section (4), any gift is excluded from the taxable gifts for an assessment year in respect of an assessee, then, an assessment of such gift for another assessment year shall, for the purposes of sub-section (2) of section 16 and this section, be deemed to be one made in consequence of, or to give effect to, any finding or direction contained in the said order.]

—————

1. Ins. by Act 41 of 1975, sec. 112 (w.e.f. 1-10-1975).

2. Subs. by Act 4 of 1988, sec. 172 (a) (w.e.f. 1-4-1989).

3. Subs. by Act 13 of 1989, sec. 31(a), for “one year” (w.e.f. 1-4-1989).

4. Subs. by Act 13 of 1989, sec. 31(b) (w.e.f. 1-4-1989).

5. Subs. by Act 4 of 1988, sec. 172 (b) (i), for “four years” (w.e.f. 1-4-1989).

6. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

7. Ins. by Act 4 of 1988, sec. 172 (b) (ii) (w.e.f. 1-4-1989).

8. Ins. by Act 49 of 1991, sec. 87 (w.e.f. 27-9-1991).

Section 16B. INTEREST FOR DEFAULTS IN FURNISHING RETURN OF GIFTS.

¹[16B. Interest for defaults in furnishing return of gifts.—(1) Where a return of gifts for any assessment year under sub-section (1) of section 13 or section 14, or in response to a notice under clause (i) of sub-section (4) of section 15, is furnished after the 30th day of June of such year, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period commencing on the 1st day of July of the assessment year, and,—

(a) where the return is furnished after the 30th day of June ending on the date of furnishing of the return; or

(b) where no return has been furnished, ending on the date of completion of the assessment under sub-section (5) of section 15, on the amount of tax payable on the taxable gifts as determined 2[under sub-section (1) of section 15 or] on regular assessment.

³[Explanation 1.—In this sub-section, “tax payable on the taxable gifts as determined under sub-section (1) of section 15” shall not include the additional gift-tax, if any payable under section 15.]

Explanation 2.—Where in relation to an assessment year the assessment is made for the first time under section 16, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

⁴[Explanation 3.—In this sub-section, “tax payable on the taxable gifts as determined under sub-section (1) of section 15 or on regular assessment” shall, for the purposes of computing the interest payable under section 14B, be deemed to be tax payable on the taxable gifts as declared in the return.]

(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 14B towards the interest chargeable under this section.

(3) Where return of gifts for any assessment year, required by a notice under sub-section (1) of section 16 issued 5[after the determination of taxable gifts under sub-section (1) of section 15 or] after the completion of an assessment under sub-section (3) or sub-section (5) of section 15 or section 16, is furnished after the expiry of the time allowed under such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time allowed as aforesaid, and,—

(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or

(b) where no return has been furnished, ending on the date of completion of the reassessment under section 16,

on the amount by which the tax on the taxable gifts determined on the basis of such reassessment exceeds the tax on the taxable gifts as determined ⁶[under sub-section (1) of section 15 or] on the basis of the earlier assessment aforesaid.

⁷[***]

(4) where, as a result of an order under section 22 or section 23 or section 24 or section 26 or section 28 or section 34, the amount of tax on which interest was payable under this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and,—

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 31 and the provisions of this Act shall apply accordingly, and

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]

—————

1. Ins. by Act 4 of 1988, sec. 173 (w.e.f. 1-4-1989).

2. Ins. by Act 3 of 1989, sec. 85 (a) (i) (w.e.f. 1-4-1989).

3. Subs. by Act 3 of 1989, sec. 85 (a) (ii) (w.e.f. 1-4-1989).

4. Ins. by Act 3 of 1989, sec. 85(a)(iii) (w.e.f. 1-4-1989).

5. Ins. by Act 3 of 1989, sec. 85 (b) (i) (w.e.f. 1-4-1989.)

6. Ins. by Act 3 of 1989, sec. 85(b) (ii) (w.e.f. 1-4-1989).

7. Explanation omitted by Act 3 of 1989, sec. 85 (b) (iii) (w.e.f. 1-4-1989).

Section 17. PENALTY FOR FAILURE TO FURNISH RETURNS, TO COMPLY WITH NOTICES AND CONCEALMENT OF GIFTS, ETC.

¹[17. Penalty for failure to furnish returns, to comply with notices and concealment of gifts, etc.—(1) If the ²[Assessing Officer], ³[Deputy Commissioner (Appeals)], ⁴[Commissioner(Appeals)], ⁵[Chief Commissioner or Commissioner] or Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person—

⁶[***]

(b) has ⁷[***] failed to comply with a notice under sub-section (2) or sub-section (4) of section 15; or

(c) has concealed the particulars of any gift or deliberately furnished inaccurate particulars thereof,he or it may, by order in writing, direct that such person shall pay by way of penalty—

⁸[***]

⁹[(ii) in the cases referred to in clause (b), in addition to the amount of gift-tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees, for each such failure;]

(iii) in the cases referred to in clause (c), in addition to any gift-tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and half times the amount of the tax, if any, which would have been avoided if the return made by such person had been accepted as correct:

¹⁰[Provided that in cases referred to in clause (b), no penalty shall be imposable if the person proves that there was a reasonable cause for the failure referred to in that clause.]

¹¹[Explanation.—Where any adjustment is made in the taxable gifts declared in the return under the proviso to clause (a) of sub-section (1) of section 15 and additional gift-tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustments so made.]

(2) No order imposing a penalty under sub-section (1) shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.

¹²[(3) No order imposing a penalty under sub-section (1) shall be made,—

(i) by the Income-tax Officer, where the penalty exceeds ten thousand rupees;

(ii) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees,except with the prior approval of the Deputy Commissioner,]

(4) ¹³[A Deputy Commissioner (Appeals)] ¹⁴[a Commissioner (Appeals)], a ¹⁵[Chief Commissioner or Commissioner] or the Appellate Tribunal] on making an order under this section imposing a penalty, shall forthwith send a copy of the same to the ¹⁶[Assessing Officer].

¹⁷[(5) No order imposing a penalty under this section shall be passed—

(i) in a case where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or Commissioner (Appeals) under section 22 or an appeal to the Appellate Tribunal under sub-section (2) of section 23, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later;

(ii) in a case where the relevant assessment is the subject-matter of revision under sub-section (2) of section 24, after the expiry of six months from the end of the month in which such order of revision is passed;

(iii) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

1. —In computing the period of limitation for the purposes of this section,—

(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 38; and

(ii) any period during which a proceeding under this section for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.

(6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989, shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]—————

1. Subs. by Act 53 of 1962, sec. 14 (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

3. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

4. Ins. by Act 29 of 1977, sec. 39 and Sch. v (w.e.f. 10-7-1978).

5. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

6. Clause (a) omitted by Act 3 of 1989, sec. 86 (a) (i) (w.e.f. 1-4-1989).

7. The words “without reasonable cause” omitted by Act 46 of 1986, sec. 40 (i) (w.e.f. 10-9-1986).

8. Clause (i) omitted by Act 3 of 1989, sec. 86 (a) (ii) (w.e.f. 1-4-1989).

9. Subs. by Act 3 of 1989, sec. 86 (a) (iii) (w.e.f. 1-4-1989).

10. Subs. by Act 3 of 1989, sec 86 (a)(iv) (w.e.f. 1-4-1989). Earlier it was ins. by Act 46 of 1986, sec. 40 (ii) (w.e.f. 10-9-1986)

11. Ins. by Act 3 of 1989, sec. 86 (a) (v) (w.e.f. 1-4-1989).

12. Subs. by Act 3 of 1989, sec. 86 (b) (w.e.f. 1-4-1989).

13. Subs. by Act 4 of 1988, sec. 161 for “An Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

14. Ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).

15. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

16. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

17. Ins. by Act 3 of 1989, sec. 86(c) (w.e.f. 1-4-1989).

Section 17A. PENALTY FOR FAILURE TO ANSWER QUESTIONS, SIGN STATEMENTS, FURNISH INFORMATION, ALLOW INSPECTION, ETC.

¹ [17A. Penalty for failure to answer questions, sign statements, furnish information, allow inspection, etc.—(1) If a person, -

(a) being legally bound to state the truth of any matter touching the subject of his assessment, refuses to answer any question put to him by a gift-tax authority in the exercise of his powers under this Act; or

(b) refuses to sign any statement made by him in the course of any proceedings under this Act, which a gift-tax authority may legally require him to sign; or

(c) to whom a summons is issued under sub-section (1) of section 36, either to attend to give evidence or produce books of account or other documents at a certain place and time, omits to attend or produce the books of account or documents at the place and time, he shall pay, by way of penalty, a sum which shall not be less than five hundred rupees but which may extend to ten thousand rupees for each such default or failure :

Provided that no penalty shall be imposable under clause (c) if the person proves that there was reasonable cause for the said failure.

(2) If a person fails to furnish in due time any statement or information which such person is bound to furnish to the Assessing Officer under section 37, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues :

Provided that no penalty shall be imposable under this sub-section if the person proves that there was a reasonable cause for the said failure.

(3) Any penalty imposable under sub-section (1) or sub-section (2) shall be imposed, -

(a) in a case where the contravention, failure or default in respect of which such penalty is imposable occurs in the course of any proceeding before a gift-tax authority not lower in rank than a Joint Director or a Joint Commissioner, by such gift-tax authority;

(b) in any other case, by the Joint Director or the Joint Commissioner.

(4) No order under this section shall be passed by any gift-tax authority referred to in sub-section (3) unless the person on whom penalty is proposed to be imposed has been heard or has been given a reasonable opportunity of being heard in the matter by such authority.

Explanation : In this section “gift-tax authority” includes a Director General, Director, Joint Director, Assistant Director or Valuation Officer while exercising the powers vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the matters specified in sub-section (1) of section 36.

————

1.  Section 17A Subs. by Act 3 of 1989, sec. 87 (w.e.f. 1-4-1989). Earlier it was ins. by Act 41 of 1975, sec. 114 (w.e.f. 1-4-1976) and was subs. by Act 4 of 1988, sec. 174 (w.e.f. 1-4-1989).

Section 18. REBATE ON ADVANCE PAYMENTS.

¹ [18. Rebate on advance payments.—It a person making a taxable gift pays into the treasury within fifteen days of his making the gift any part of the amount of tax due on the gift calculated at the rates specified in the Schedule ²[or at the rate specified in sub-section (2) of section 3], he shall, at the time of assessment under section 15, be given credit—

(i) for the amount so paid; and

(ii) for a sum equal to one-ninth of the amount so paid, so however, that such sum shall in no case exceed one-tenth of the tax due on the gift.

Explanation.—If a person makes more than one taxable gift in the course of a previous year, the amount of tax due on any one of such gifts shall be the difference between the total amount of tax due on the aggregate value of all the taxable gifts so far made, including the taxable gift in respect of which tax has to be paid, calculated at the rates specified in the schedule or, as the case may be, ³[at the rate specified in sub-section (2) or section 3], and the total amount of tax on the aggregate value of all the gifts made during that year, excluding the taxable gift in respect of which tax has to be paid, calculated at the rates specified in the Schedule or, as the case may be, ⁴[at the rate specified in sub-section (2) of section 3].]

—————

1. Section 18 subs. by Act 41 of 1975, sec. 15 (w.e.f. 1-4-1976). Earlier it was subs. by Act 13 of 1960, sec. 17 (w.e.f. 1-4-1960).

2. Subs. by Act 23 of 1986, sec. 44(a) for “or, in a case where the provisions of section 6A are applicable to a gift, in the manner specified in that section” (w.e.f. 1-4-1987).

3. Subs. by Act 23 of 1986, sec. 44(b) for “in the manner specified in section 6A” (w.e.f. 1-4-1987).

4. Subs. by Act 23 of 1986, sec. 44(b) for “in the manner specified in section 6A” (w.e.f. 1-4-1987).

Section 18A. CREDIT FOR STAMP DUTY PAID ON INSTRUMENT OF GIFT.

¹[18A. Credit for stamp duty paid on instrument of gift.—Where any stamp duty has been paid under any law relating to stamp duty in force in any State on an instrument of gift of property, the assessee shall be entitled to a deduction from the gift-tax payable by him of an amount equal to the stamp duty so paid or one-half of the gift-tax payable, before making the deduction under this section, whichever is less.

————

1.  Section 18A subs. by Act 14 of 1982, sec. 39 (w.e.f. 1-4-1983). Earlier it was ins. by Act 10 of 1965, sec. 71 (ii) (w.e.f. 1-4-1965).

Section 18B.

¹ [***]

—————

1.  Chapter IVA containing section 18B omitted by Act 3 of 1989, sec. 95 (P) (w.e.f. 1-4-1989). Earlier it was ins. by Act 4 of 1988, sec. 175 (w.e.f. 1-4-1989).

Section 19. TAX OF DECEASED PERSON PAYABLE BY LEGAL REPRESENTATIVE.

(1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of estate of the deceased person, to the extent to which the estate is capable of meeting the charge, the gift-tax determined as payable by such person, or any sum which would have been payable by him under this Act, if he had not died.

(2) Where a person dies without having furnished a return under section 13, or after having furnished a return which the ¹Assessing Officer has reason to believe to be incorrect or incomplete, the Assessing Officer may make an assessment of the value of the taxable gifts made by such person and determine the gift-tax payable by him, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person if he had survived, require from the executor, administrator, or other legal representative of the deceased person any accounts, documents or other evidence which might, under the provisions of section 15, have been required from the deceased person.

(3) The provisions of sections 13, 14 and 16 shall apply to an executor, administrator or other legal representative as they apply to any person referred to in ²those sections.

—————

1.  Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

2.  Subs. by Act 58 of 1960, sec. 3 and Sch. II, for “that section” (w.e.f. 26-12-1960).

Section 19A. ASSESSMENT OF PERSONS LEAVING INDIA.

¹[19A. Assessment of persons leaving India.—(1) Notwithstanding anything contained in section 3, when it appears to the ²[Assessing Officer] that any individual may leave India during the current assessment year or shortly after its expiry and that he has no present intention of returning to India, the gifts made by such individual during the period from the expiry of the previous year for that assessment year up to the probable date of his departure from India, shall be chargeable to gift-tax in that assessment year.

(2) The taxable gifts made in each completed previous year or part of any previous year included in such period shall be chargeable to gift-tax at the rate or rates specified in the Schedule ³[or, as the case may be, at the rate specified in sub-section (2) of section 3], and separate assessments shall be made in respect of each such completed previous year or part of any previous year.

(3) The ²[Assessing Officer] may estimate the value of the gifts made by such individual during such period or any part thereof, where it cannot be readily determined in the manner provided in this Act.

(4) For the purpose of making an assessment under sub-section (1), the ¹[Assessing Officer] may serve a notice upon such individual requiring him to furnish, within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as ⁴[a return under sub-section (1) of section 13], giving particulars of the gifts made by him during each completed previous year comprised in the period referred to in sub-section (1) and during any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply ⁵[as if the notice were a notice issued under clause (i) of sub-section (4) of section 15].

(5) The gift-tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.

(6) Where the provisions of sub-section (1) are applicable, any notice issued by the ⁶[Assessing Officer] under ⁷[clause (i) of sub-section (4) of section 15] or under section 16 in respect of any gift-tax chargeable under any other provisions of this Act may, notwithstanding anything contained in ⁷[clause (i) of sub-section (4) of section 15] or section 16, as the case may be, required the furnishing of the return by such individual within such period, not being less than seven days, as the ⁶[Assessing Officer] may think proper.]

—————

1. Ins by Act 53 of 1962, sec. 15 (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

3. Ins. by Act 23 of 1986, sec. 45 (w.e.f. 1-4-1987).

4. Subs. by Act 4 of 1988, sec. 186(1)(a)(i), for “a return under sub-section (2) of section 13”(w.e.f. 1-4-1989).

5. Subs. by Act 4 of 1988, sec. 186 (1)(a)(ii), for “as if the notice were a notice issued under sub-section (2) of section 13” (w.e.f. 1-4-1989).

6. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

7. Subs. by Act 4 of 1988, sec. 186 (1)(b), for “sub-section (2) of Section 13” (w.e.f. 1-4-1988).

Section 20. ASSESSMENT AFTER PARTITION OF A HINDU UNDIVIDED FAMILY.

(1) Where, at the time of making an assessment, it is brought to the notice of the ¹Assessing Officer that a partition has taken place among the members of a Hindu undivided family, and the ¹Assessing Officer, after enquiry, is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions, he shall record an order to that effect and he shall make assessments ²on the value of the taxable gifts made by the family as such as if no partition had taken place and each member or group of members shall be liable jointly and severally for the tax assessed on the value of the taxable gifts made by the joint family as such.

(2) Where the ¹[Assessing Officer] is not so satisfied, he may, by order, declare that such family shall be deemed for the purposes of this Act to continue to be a Hindu undivided family.

—————

1.  Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

2.  Subs. by Act 58 of 1960, sec. 3 and Sch. II, for “on the amount of taxable gifts” (w.e.f. 26-12-1960).

Section 21. LIABILITY IN CASE OF DISCONTINUED FIRM OR ASSOCIATION OF PERSONS.

(1) Where a firm or association of persons liable to pay gift-tax has been discontinued or dissolved the Assessing Officer shall determine the gift-tax payable by the firm or association of persons as such as if no such discontinuance or dissolution had taken place.

(2) If the ¹[Assessing Officer], the ²[Deputy Commissioner (Appeals)] ³[the Commissioner (Appeals)] or the Appellate Tribunal in the course of any proceedings under this Act in respect of any such firm or other association of persons as is referred to in sub-section (1) is satisfied that the firm or association is guilty of any of the acts specified in clause (a) or clause (b) or clause (c) of sub-section (1) of section 17, he or it may impose or direct the imposition of a penalty in accordance with the provisions of that section.

(3) Every person who was at the time of such discontinuance or dissolution a partner of the firm or a member of the association, as the case may be, shall be jointly and severally liable for the amount of tax or penalty payable, and all the provisions of Chapter VII, so far as may be, shall apply to any such assessment or imposition of penalty.

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1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

Section 21A. ASSESSMENT OF DONEE WHEN DONOR CANNOT BE FOUND.

¹[21A. Assessment of donee when the donor connot be found.—(1) Where an ²Assessing Officer after using all due and reasonable diligence cannot find the donor who had made any taxable gifts, for the purpose of service of notice under sub-section (2) of section 13, or under section 16, the Assessing Officer may make an assessment of the value of all such taxable gifts made by him and determine the gift-tax payable by him and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the donor, require from the donee or donees any accounts, documents or other evidence which might, under the provisions of section 15, have been required from the donor.

(2) Where any assessment in respect of the taxable gifts made by the donor has been made under sub-section (1), every donee shall be liable for the gift-tax so assessed :

Provided that where the donees are more than one, they shall be jointly and severally liable for the amount of the gift-tax so assessed :

Provided further that the amount of the gift-tax which may be recovered from each donee shall not exceed the value of the gift made to him as on the date of the gift.

(3) The provisions of sections 13, 14 and 16 shall apply to a donee as they apply to any person referred to in those sections.

—————

1.  Ins. by Act 53 of 1962, sec. 16 (w.e.f. 1-4-1963).

2.  Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

Section 22. APPEAL TO THE DEPUTY COMMISSIONER (APPEALS) FROM ORDERS OF ASSESSING OFFICER.

22. Appeal to the ¹[Deputy Commissioner (Appeals)] from orders of ²[Assessing Officer].—(1) ³[Subject to the provisions of sub-section (1A), any person],—

(a) objecting to the value of ⁴[***] taxable gifts determined under this Act; or

(b) objecting to the amount of gift-tax determined as payable by him under this Act; or

(c) denying his liability to be assessed under this Act; or

⁵[(d) objecting to any penalty imposed by the Assessing Officer under section 17 ⁶[***];]; or

(e) objecting to any order of the ⁷[Assessing Officer] under sub-section (2) of section 20;or

(f) objecting to any penalty imposed by the ⁸[Assessing Officer] under ⁹[sub-section (1) of section 221] of the Income-tax Act] as applied under section 33 for the purposes of gifts-tax; ¹⁰[or]

¹¹[(g) objecting to an order of the ⁸[Assessing Officer] under section 34 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under that section; or

(h) ¹²[***]] may appeal to the ¹³[Deputy Commissioner (Appeals)] against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner:

Provided that no appeal shall lie under clause (f) unless the tax has been paid before the appeal is filed.

¹⁴[(1A) Notwithstanding anything contained in sub-section (1), any person—

(a) objecting to the value of taxable gifts determined under this Act or objecting to the amount of gift-tax determined as payable by him or denying his liability to be assessed under this Act where the value of taxable gifts determined on assessment exceeds two lakh rupees; or

¹⁵[(b) objecting to any assessment or order referred to in clauses (a) to (g) (both inclusive) of sub-section (1), where such assessment or order has been made by the Deputy Commissioner in exercise of the powers or functions conferred on or assigned to him under section 7 or section 10; or

¹⁶[(c) objecting to any penalty imposed under sub-section (1) of section 17 with the previous approval of the Deputy Commissioner as specified in sub-section (3) of that section;]

(d) objecting to any penalty imposed by the Deputy Director or the Deputy Commissioner under section 17A;]

(e) objecting to any order made by ¹⁷[an Assessing Officer] in the case of such persons or classes of persons as the Board may, having regard to the nature of the cases, the complexities involved and other relevant considerations, direct, may appeal to the Commissioner (Appeals) against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner:

Provided that no appeal shall lie under clause (b) of this sub-section against any order referred to in clause (f) of sub-section (1) unless the tax has been paid before the appeal is filed.]

¹⁸[(1B) Notwithstanding anything contained in sub-section (1), the Board or the Director-General or the Chief Commissioner or the Commissioner, if so authorised by the Board, may, by order in writing, transfer any appeal which is pending before a Deputy Commissioner (Appeals) and any matter arising out of or connected with such appeal and which is so pending, to the Commissioner (Appeals), if the Board or, as the case may be, the Director-General, the Chief Commissioner or the Commissioner (at the request of the appellant or otherwise) is satisfied that it is necessary or expedient so to do having regard to the nature of the case, the complexities involved and other relevant considerations and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was before it was so transferred:

Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be reheard.]

(2) An appeal shall be presented within thirty days of the receipt of the notice of demand relating to the assessment or penalty objecting to, or the date on which any order objected to, is communicated to him, but the ¹⁹[Deputy Commissioner (Appeals)] 20[or, as the case may be, the Commissioner (Appeals)] may admit an appeal after the expiration of the period aforesaid if he is satisfied that the appellant had sufficient cause for not presenting the appeal within that period.

(3) The ¹⁹[Deputy Commissioner (Appeals)] ²⁰[or, as the case may be, the Commissioner (Appeals)] shall fix a day and place for the hearing of the appeal and may from time to time adjourn the hearing.

(4) The ²¹[Deputy Commissioner (Appeals)] ²⁰[or, as the case may be, the Commissioner (Appeals)] may,—

(a) at the hearing of an appeal, allow an appellant to go into any ground of appeal, not specified in the grounds of appeal;

(b) before disposing of an appeal, make such further inquiry as he thinks fit or cause further inquiry to be made by the ²¹[Assessing Officer].

(5) In disposing of an appeal, the ¹⁹[Deputy Commissioner (Appeals)] ²⁰[or, as the case may be, the Commissioner (Appeals)] may pass such order as he thinks fit which may include or order enhancing the amount of gift-tax determined or penalty imposed:

Provided that no order enchaning the amount of gift-tax determined or penalty imposed shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.

²²[(5A) In disposing of an appeal, the ²³[Deputy Commissioner (Appeals)] ²³[or, as the case may be, the Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the ²²[Deputy Commissioner (Appeals)] 23[or, as the case may be, the Commissioner (Appeals)] by the appellant.

(5B) The order of the ²³[Deputy Commissioner (Appeals)] ²⁴[or, as the case may be, the Commissioner (Appeals)] disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.]

(6) A copy of every order passed by the ²³[Deputy Commissioner (Appeals)] ²⁴[or, as the case may be, the Commissioner (Appeals)] under this section shall be forwarded to the appellant and the ²⁵[Chief Commissioner or Commissioner].

—————

1. Subs. by Act 4 of 1988, sec. 161, for “Gifts-tax Officer” (w.e.f. 1-4-1988).

2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

3. Subs. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III, for “any person” (w.e.f. 10-7-1978).

4. The word “his” omitted by Act 53 of 1962, sec. 17(i)(a) (w.e.f. 1-4-1963).

5. Subs. by Act 4 of 1988, sec. 176 (a)(i) (w.e.f. 1-4-1989).

6. Certain words omitted by Act 3 of 1989, sec. 88(i) (w.e.f. 1-4-1989).

7. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

8. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

9. Subs. by Act 53 of 1962, sec. 17 (i)(b)(1), for “Sub-section (1) of section 46 of the Income-tax Act” (w.e.f. 1-4-1963).

10. Ins. by Act 53 of 1962, sec. 17(i) (b)(2)(w.e.f. 1-4-1963).

11. Clauses (g) and (h) ins. by Act 53 of 1962, sec. 17(i) (c) (w.e.f. 1-4-1963).

12. Clause (h) omitted by Act 4 of 1988, sec. 176 (a) (ii) (w.e.f. 1-4-1989).

13. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

14. Sub-sections (1A), (1B) and (1C) by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

15. Clauses (b), (c) and (d) subs. by Act 4 of 1988, sec. 176(b) (w.e.f. 1-4-1989).

16. Clause (c) Subs. by Act 3 of 1989, sec. 88 (ii) (w.e.f. 1-4-1989).

17. Subs. by Act 4 of 1988, sec. 161, for “a Gift-tax Officer” (1-4-1988).

18. Subs. by Act 4 of 1988, sec. 176 (c), for sub-sections (1B) and (1C) (w.e.f. 1-4-1989).

19. Subs. by Act 4 of 1988, sec. 161 for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

20. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

21. Subs. by Act 4 of 1988, sec. 161 for “Gift-tax Officer” (w.e.f. 1-4-1988).

22. Ins. by Act 53 of 1962, sec. 17(ii) (w.e.f. 1-4-1963).

23. Subs. by Act 4 of 1986 sec. 161, for, “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

24. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. IV (w.e.f. 10-7-1978).

25. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

Section 23. APPEAL TO THE APPELLATE TRIBUNAL.

¹[(1) An assessee, objecting to an order passed by the ²[Deputy Commissioner (Appeals)] ³[or the Commissioner (Appeals)] ⁴[under section 17 or section 17A] of section 22 ⁵[***] or sub-section (2) of section 36 ⁶[***] may appeal to the Appellate Tribunal within sixty days of the date on which the order is communicated to him.]

(2) The Commissioner may, if he is not satisfied as to the correctness of any order passed by ⁷[a Deputy Commissioner (Appeals)] ³[or a Commissioner (Appeals) under section 22 direct the ⁸[Assessing Officer] to appeal to the Appellate Tribunal against such order, and such appeal may be made at any time before the expiry of sixty days of the date on which the order is communicated to the Commissioner.

⁹[(2A) The ⁸[Assessing Officer] or the assessee, as the case may be, on receipt of the notice that an appeal against the order of the ¹⁰[Deputy Commissioner (Appeals)] ³[or the Commissioner (Appeals)] has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner against any part of the order of the ¹¹[Deputy Commissioner (Appeals)] ¹²[or the Commissioner (Appeals)] and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (1) or sub-section (2).]

¹³[(3) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (1) or sub-section (2) or sub-section (2A), if it is satisfied that there was sufficient cause for not presenting it within that period.]

(4) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, except in the case of an appeal referred to in sub-section (2), be accompanied by ¹⁴[a fee of ¹⁵[two hundred rupees]].

(5) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and any such orders may include an order enhancing the amount of gift-tax determined or penalty imposed:

Provided that no order enhancing the amount of gift-tax determined or penalty imposed shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.

¹⁶[***]

(9) A copy of every order passed by the Appellate Tribunal under this section shall be forwarded to the assessee and the Commissioner.

(10) Save as provided in section 26, any order passed by the Appellate Tribunal on appeal shall be final.

(11) The provisions of 17[sub-sections (1), (4) and (5) of section 255 of the Income-tax Act] shall apply to the Appellate Tribunal in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Income-tax Act.

—————

1. Subs. by Act 53 of 1962, sec. 18(i) (w.e.f. 1-4-1962).

2. Ins. by Act 53 of 1962, sec. 17(ii) (w.e.f. 1-4-1963).

3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f 10-7-1978).

4. Subs. by Act 41 of 1975, sec. 116(i), for “under section 17” (w.e.f. 1-4-1976).

5. The words “or section 22A” omitted by Act 3 of 1989, sec. 95 (u) (w.e.f. 1-4-1989). Earlier they were ins. by Act 4 of 1988, sec. 186(2) (w.e.f. 1-4-1989).

6. The words “or to an order passed by the Inspecing Assistant Commissioner under section 17A”, omitted by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

7. Subs. by Act 4 of 1988. sec. 161, for” an Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

8. Subs. by Act 4 of 1988, sec. 161, for “Gift-Tax Officer” (w.e.f. 14-1988).

9. Ins. by Act 53 of 1962, sec. 18 (ii) (w.e.f. 1-4-1963).

10. Subs. by Act 4 of 1986 sec. 161, for, “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

11. Subs. by Act 4 of 1988. sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

12. Ins. by Act 29 of 1977, 539 and Sch. V, Pt. III (w.e.f. 10-7-1978).

13. Subs. by Act 53 of 1962, sec. 18(iii) (w.e.f. 1-4-1963).

14. The words ”a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 67 for “a fee of rupees one hundred” (w.e.f. 1-4-1971).

15. Subs. by Act 16 of 1981, sec. 32, for “one hundred and twenty-five rupees” (w.e.f 1-6-1981).

16. Sub-sections (6), (7) and (8) omitted by Act 45 of 1972, sec. 22, (w.e.f 1-1-1973).

17. Subs. by Act 53 of 1962, sec. 18(iv), for “sub-sections (5), (7) and (8) of section 5A of the Income-tax Act” (w.e.f. 1-4-1963).

Section 24. POWERS OF COMMISSIONER TO REVISE ORDERS OF SUBORDINATE AUTHORITIES.

(1) The Commissioner may, either on his own motion or on application made by an assessee in this behalf, call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him, and may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, pass such order thereon not being an order prejudicial to the assessee, as the Commissioner thinks fit:

Provided that the Commissioner shall not revise any order under this sub-section in any case—

(a) where an appeal against the order lies to the ¹[Deputy Commissioner (Appeals)] ²[or to the Commissioner (Appeals)] or to the Appellate Tribu nal and the time within which such appeal can be made has not expired or, ³[in the case, of an appeal to the Commissoner (Appeals) or to the Appellate Tribunal], the assessee has not waived his right of appeal;

(b) where the order is pending in appeal before the ¹[Deputy Commissioner (Appeals) or has been the subject of an appeal 2[to the Commissioner (Appeals) or] to the Appellate Tribunal;

(c) where the application is made by the assessee for such revision unless—

(i) the application is accompanied by a fee of rupees twenty-five; and

(ii) the application is made within one year from the date of the order sought to be revised or within such further period as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period; and

(d) where the order is sought to be revised by the Commissioner of his own motion, if such order is made more than one year previously.

Explanation.—For the purposes of this sub-section,—

(a) the ¹[Deputy Commissioner (Appeals)] shall be deemed to be an authority subordinate to the Commissioner, and

(b) an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee.

(2) Without prejudice to the provisions contained in sub-section (1), the Commissioner may call for and examine the record of any proceeding under this Act, and, if he considers that any order passed therein by 4[an Assessing Officer] is erroneous in so far as it is prejudicial to the interests of revenue, he may, after giving the assessee an opportunity of being heard, and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment.

⁵[Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—

(a) an order passed 6[on or before or after the 1st day of June,1988,] by the Assessing Officer shall include an order passed by the Deputy Commissioner in exercise of the powers or in performance of the functions of an Assessing Officer conferred on or assigned to him under orders or directions issued by the Board or by the Chief Commissioner or Director-General or Commissioner authorised by the Board in this behalf under section 120 of the Income-tax Act read with section 7 of this Act;

(b) “record”⁷[shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the Commissioner;

(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal ⁸[filed on or before or after the 1st day of June,1988], the powers of the Commissioner under this sub-section shall extend 8[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]

(3) No order shall be made under sub-section (2) after the expiry of two years ⁹[from the end of the financial year in which the order sought to be revised was passed].

¹⁰[Explanation.—In computing the period of limitation for purposes of this sub-section, the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 38 and any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded.]

—————

1. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

2. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

3. Subs. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III for “in the case of the Appellate Tribunal” (w.e.f. 10-7-1978).

4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer”. (w.e.f. 1-4-1988).

5. Subs. by Act 26 of 1988, sec. 68 (w.e.f. 1-6-1988). Earlier it was ins. by Act 67 of 1984, sec. 74, (a) (w.e.f. 1-10-1984).

6. Ins. by Act 13 of 1989, sec. 32(i) (w.r.e.f. 1-6-1988).

7. Subs. by Act 13 of 1989, sec. 32 (ii), for “includes” (w.r.e.f. 1-6-1988).

8. Ins. by Act 13 of 1989, sec. 32 (iii) (w.r.e.f. 1-6-1988).

9. Subs. by Act 67 of 1984, sec. 74(b), for “from the date of the order sought to be revised” (w.e.f. 1-10-1984).

10. Ins. by Act 53 of 1962, sec. 19 (w.e.f. 1-4-1963).

Section 25. APPEAL TO THE APPELLATE TRIBUNAL FROM ORDERS OF ENHANCEMENT BY CHIEF COMMISSIONER OR COMMISSIONER.

25. Appeal to the Appellate Tribunal from orders of enhancement by ¹[Chief Commissioner or Commissioner]—²[(1) An assessee objecting to an order passed by the ¹[Chief Commissioner or Commissioner] ³[under section 17 or section 17A] or to an order of enhancement passed by him under section 24 ⁴[or an order passed by the Director-General or Director under section 17A] may appeal to the Appellate Tribunal within sixty days of the date on which the order is communicated to him.]

(2) An appeal to the Appellate Tribunal under sub-section (1) shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by ⁵[a fee of ⁶[two hundred rupees]].

(3) The provisions of ⁷[sub-sections (3),(5),(9) and (10) of section 23 shall apply in relation to any appeal under this section as they apply in relation to any appeal under that section.

—————

1. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

2. Subs. by Act 53 of 1962, sec. 20 (w.e.f. 1-4-1963)

3. Subs. by Act 41 of 1975, sec. 117, for “under section 17” (w.e.f. 1-4-1976).

4. Ins. by Act 3 of 1989, sec. 89 (w.e.f. 1-4-1989).

5. The words “a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 68, for “a fee of rupees one hundred” (w.e.f. (1-4-1971).

6. Subs. by Act 16 of 1981, sec. 33, for “one hundered and twenty-five rupees” (w.e.f. 1-6-1981).

7. Subs. by Act 45 of 1972, sec. 23 for “sub-sections (3) and (5) to 10” (w.e.f. 1-1-1973).

Section 26. REFERENCE TO HIGH COURT.

¹[(1) The assessee or the ²[Chief Commissioner or Commissioner] may, within sixty days of the date upon which he is served with notice of an order under section 23 or section 25 ³[or clause (e) of sub-section (1) of section 34], by application in the prescribed form, accompanied, where the application is made by the assessee, by ⁴[a fee of 5[two hundred rupees]], require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court.

(2) The Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period specified in sub-section (1), allow it to be presented within a further period not exceeding thirty days.]

(3) If, on an application made under sub-section (1), the Appellate Tribunal,—

(a) refuses to state a case on the ground that no question of law arises, or

(b) rejects it on the ground that it is time-barred,

the applicant may, within ninety days from the date on which he is served with a notice of refusal or rejection, as the case may be, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case to the High Court, and on receipt of such requisition the Appellate Tribunal shall state the case:

Provided that, if in any case where the Appellate Tribunal has been required by an assessee to state a case the Appellate Tribunal refuses to do so on the ground that no question of law arises, the assessee may, within thirty days from the date on which he receives notice of refusal to state the case, withdraw his application, and if he does so, the fee paid by him under sub-section (1) shall be refunded to him.

⁶[(3A) If, on an application made under this section, the Appellate Tribunal is of the opinion that on account of a conflict in the decisions of High Courts in respect of any particular question of law, it is expedient that a reference should be made direct to the Supreme Court, the Appellate Tribunal may draw up a statement of the case and refer it through its President direct to the Supreme Court.]

(4) The statement to the High Court ⁷[or the Supreme court] shall set forth the facts, the determination of the Appellate Tribunal and the question of law which arises out of this case.

(5) If the High Court ⁸[or the Supreme Court] is not satisfied that the case as stated is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modification therein as it may direct.

(6) The High Court ⁸[or the Supreme Court], upon hearing any such case, shall decide the question of law raised therein, and in doing so, may, if it thinks fit, alter the form of the question of law and shall deliver judgment thereon containing the grounds on which such decision is founded and shall send a copy of the judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal and the Appellate Tribunal shall pass such orders as are necessary to dispose of the case conformably to such judgment.

⁹[(7) The costs of any reference to the High Court or the Supreme Court which shall not include the fee for making the reference shall be in the discretion of the Court.]

—————

1. Subs. by Act 53 of 1962, sec. 21(i) (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

3. Ins. by Act 49 of 1991, sec. 88 (w.e.f. 27-9-1991).

4. The words “a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 69, for” a fee of one hundred rupees” (w.e.f. 1-4-1971).

5. Subs. by Act 16 of 1981, sec. 34 for “one hundred and twenty-five rupees”(w.e.f. 1-6-1981).

6. Ins. by Act 53 of 1962, sec. 21 (ii). (w.e.f. 1-4-1963).

7. Ins. by Act 53 of 1962, sec. 21 (iii) (w.e.f. 1-4-1963).

8. Ins. by Act 53 of 1962, sec. 21 (iii) (w.e.f. 1-4-1963).

9. Subs. by Act 53 of 1962, sec. 27 (iv) (w.e.f. 1-4-1963).

Section 27. HEARING BY HIGH COURT.

When a case has been stated to the High Court under section 26, it shall be heard by a Bench of not less than two Judges of the High Court and shall be decided in accordance with the opinion of such Judges or of the majority of such judges, if any :

Provided that where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall then be heard upon that point only by one or more of the Judges of the High Court, and such point shall be decided according to the opinion of the majority of the Judges who have heard the case, including those who first heard it.

Section 28. APPEAL TO THE SUPREME COURT.

(1) An appeal shall lie to the Supreme Court from any judgment of the High Court delivered on a case stated under section 26 in any case which the High Court certifies as a fit case for appeal to the Supreme Court.

(2) Where the judgment of the High Court is varied or reversed on appeal under this section, effect shall be given to the order of the Supreme Court in the manner provided in sub-section (6) of section 26.

(3) The High Court may, on application made to it for the execution of any order of the Supreme Court in respect of any costs awarded by it, transmit the order for execution to any court subordinate to the High Court.

Section 28A. TAX TO BE PAID NOTWITHSTANDING REFERENCE, ETC.

¹ Notwithstanding that a reference has been made to the High Court or the Supreme Court, or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case.

—————

1.  Ins. by Act 53 of 1962, sec. 22 (w.e.f. 1-4-1963).

Section 28B. DEFINITION OF HIGH COURT.

In this Chapter, “High Court” means -

(i) in relation to any State, the High Court of that State;

¹[(ii) in relation to the Union territory of Delhi, the High Court of Delhi;

²[(iia) [***]]

³[(iii) in relation to the Union Territories of Arunachal Pradesh *and Mizoram, the Gauhati High Court (the High Court of Assam, Nagaland, Meghalaya, Manipur and Tripura);]

(iv) in relation to the Union territory of Andaman and Nicobar Islands, the High Court at Calcutta;

(v) in relation to the Union territory of ⁴[Lakshadweep], the High Court of Kerala;

⁵[(va) in relation to the Union territory of Chandigarh, the High Court of Punjab and Haryana;]

⁶[(vi) in relation to the Union territories of Dadra and Nagar Haveli and Goa**, Daman and Diu, the High Court at Bombay;

(vii) in relation to the Union territory of Pondicherry, the High Court at Madras.]]

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Section 29. GIFT-TAX BY WHOM PAYABLE.

¹[29. Gift-tax by whom payable.—Subject to the provisions of this Act, gift-tax shall be payable by the donor but when in the opinion of the ²[Assessing Officer] the tax cannot be recovered from the donor, it may be recovered from the donee:

Provided that where the donees are more than one, they shall be jointly and severally liable for the amount of tax determined to be payable by the donor :

Provided further that the amount of tax which may be recovered from each donee shall not exceed the value of the gift made to him as on the date of the gift.

———

1.  Subs. by Act, 53 of 1962, sec. 23 (w.e.f. 1-4-1963).

2.  Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

Section 30. GIFT-TAX TO BE CHARGED ON PROPERTY GIFTED.

Gift-tax payable in respect of any gift comprising immovable property shall be a first charge on that property but any such charge shall not affect the title of a bona fide purchaser for valuable consideration without notice of the charge.

Section 31. NOTICE OF DEMAND.

¹[31. Notice of demand.—When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the ²[Assessing Officer] shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.]

—————

1. Subs. by Act 53 of 1962, sec. 24 (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

Section 32. RECOVERY OF TAX AND PENALTIES.

(1) Any amount specified as payable in a notice of demand under section 31 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice :

Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand.

(2) If the amount specified in any notice of demand under section 31 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one and one-half per cent, for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid ;

Provided that where as a result of an order under section 22, or section 23, or section 24, or section 25, or section 26 or section 28, or section 34, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.

Provided further that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.

(3) Without prejudice to the provisions contained in sub-section (2), on an

application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by installments subject to such conditions as he may think fit to impose in the circumstances of the case.

(4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice, the assessee shall be deemed to be in default.

(5) If, in a case where payment by installments is allowed under sub-section (3), the assessee commits default in paying any one of the installments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other installment or installments shall be deemed to have been due on the same date as the installment actually in default.

(6) Where the assessee has presented an appeal under section 22, the Assessing Officer may in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired as long as such appeal remains undisposed of.

Section 33. MODE OF RECOVERY.

¹The provisions contained in ²sections 221 to 227, 228A, 229, 231 and 232 of the Income-tax Act and the Second and Third Schedules to that Act and any rules made thereunder shall, so far as may be, apply as if the said provisions were provisions of this Act and referred to gift-tax and sums imposed by way of penalty, fine and interest under this Act instead of to income-tax and sums imposed by way of penalty fine and interest under that Act ³and to the corresponding gift-tax authorities instead of to the income-tax authorities specified therein.

Explanation I : Any reference to sub-section (2) or sub-section (6) of section 220 of the Income-tax Act in the said provisions of that Act or the rules made thereunder shall be construed as references to sub-sections (2) and (6) respectively of section 32 of this Act.

⁴Explanation II : The Chief Commissioner or Commissioner and the Tax Recovery Officer referred to in the Income-tax Act shall be deemed to be the corresponding gift-tax authorities for the purpose of recovery of gift-tax and sums imposed by way of penalty, fine and interest under this Act.

—————

1.  Subs. by Act 53 of 1962, sec. 24 (w.e.f. 1-4-1963).

2.  Subs. by Act 16 of 1972, sec. 53, for “sections 221 to 227” (w.e.f. 1-4-1972).

3.  Subs. by Act 4 of 1988, sec. 179(a), for certain words (w.e.f. 1-4-1989).

4.  Subs. by Act 4 of 1988, sec. 179 (b) (w.e.f. 1-4-1989).

Section 33A. REFUNDS.

(1) Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the ¹[Assessing Officer] shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make claim in that behalf:

²[Provided that where, by the order aforesaid.—

(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;

(b)the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the ³[taxable gifts] returned by the assessee.]

⁴(2) Where refund of any amount becomes due to the assessee as a result of an order under this Act or under the provisions of sub-section (1) of section 15 after a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4) of section 15 and the Assessing Officer is of the opinion, having regard to the fact that,—

(i) a notice has been issued, or is likely to be issued, under sub-section (2) of section 15 in respect of the said return; or

(ii) the order is the subject-matter of an appeal or further proceeding; or

(iii) any other proceeding under this Act is pending; that the grant of the refund is likely to adversely affect the revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissoner, withhold the refund till such time as the Chief Commissioner or Commissioner may determine.]

(3) Where a refund is due to the assessee in pursuance of an order referred to in sub-section (1) and the ¹[Assessing Officer] does not grant the refund within a period of six months from the date of such order, the Central Government shall pay to the assessee simple interest at ⁵[fifteen per cent.] per annum on the amount of refund due from the date immediately following the expiry of the period of six months aforesaid to the date on which the refund is granted.

⁶[(3A) Where the whole or any part of the refund referred to in sub-section (3) is due to an assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (3) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:

Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalments or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:

Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding:

Provided also that, where interest is payable to an assessee under this sub-section, no interest under sub-section (3) shall be payable to him in respect of the amount so found to be in excess.]

(4) Where a refund is withheld under the provisions of sub-section (2), the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceedings for a period commencing after the expiry of six months from the date of the order referred to in that sub-section to the date the refund is granted.

⁷[(4A) The provisions of sub-sections (3), (3A) and (4) shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year.

(4B) (a) ⁸[Where refund of any amount becomes due to the assessee under this Act,] he shall, subject to the provisions of this sub-section, be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one ⁹[***] per cent. for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted .

Explanation.—For the purposes of this clause, “date of payment of the tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 31 is paid in excess of such demand.

(b) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, period of the delay so attribuatable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.

(c) Where as a result of an order under ¹⁰[sub-section (3) or sub-section (5) of section 15 or] section 16 or section 22 or section 23 or section 24 or section 26 or section 28 or section 34 the amount on which the interest was payable under clause (a) has been increased or reduced, as the case may be, interest shall be increased or reduced accordingly, and, in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 31 and the provisions of this Act shall apply accordingly.

(d) The provisions of this sub-section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]

(5) Where under any of the provisions of this Act, a refund is found to be due to any person, the ¹¹[Assessing Officer], ¹²[Deputy Commissioner (Appeals)], ¹³[Commissioner (Appeals)] or ¹⁴[Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.]

—————

1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

2. Ins. by Act 4 of 1988, sec. 180(i) (w.e.f. 1-4-1989).

3. Subs. by Act 3 of 1989, sec. 90(a), for “total income” (w.e.f. 1-4-1989).

4. Subs. by Act 36 of 1989, sec. 33 (w.e.f. 1-4-1989).

5. Subs. by Act 67 of 1984 sec. 75, for “twelve per cent.” (w.e.f. 1-10-1984). Earlier the words “twelve per cent.” were subs. by Act 16 of 1972, sec. 52, for “nine per cent.” (w.e.f. 1-4-1972). Prior to that the words “nine per cent.” were subs. by Act 27 of 1967 sec. 3, for “six per cent.” (w.e.f. 1-10-1967). Still earlier, the words “six per cent.” were subs. by Act 15 of 1965, sec. 21 (ii), for “four per cent.” (w.e.f. 1-4-1965).

6. Ins. by Act 41 of 1975, sec. 118 (w.e.f. 1-10-1975).

7. Ins. by Act 4 of 1988, sec. 180 (ii) (w.e.f. 1-4-1989).

8. Subs. by Act 3 of 1989, sec. 9(b) (i) for “where, in pursuance of any order passed under this Act, the refund of any amount becomes due to the assessee”. (w.e.f. 1-4-1989).

9. The words “and a half” omitted by Act 49 of 1991, sec. 89 (w.e.f. 1-10-1991).

10. Ins. by Act 3 of 1989, sec. 90 (b) (ii) (w.e.f. 1-4-1989).

11. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

12. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

13. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

14. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

Section 34. RECTIFICATION OF MISTAKES.

¹[34. Rectification of mistakes.—(1) With a view to rectifying any mistake apparent from the record—

(a) The ²[Assessing Officer] may amend any order of assessment or of refund or any other order passed by him;

³[(aa) a gift-tax authority may amend any intimation sent by it under sub-section (1) of section 15 or enhance or reduce the amount of refund granted by it under that sub-section;]

⁴[(b) the Deputy Director or Deputy Commissioner or Director or Commissioner or Deputy Commissioner (Appeals) or Commissioner (Appeals) may amend any order passed by him under section 17A;

(c) the Deputy Commissioner (Appeals) or Commissioner (Appeals) may amend any order passed by him under Section 22 ⁵[***];

(d) the Commissioner may amend any order passed by him under section 24;

(e) the Appellate Tribunal may amend any order passed by it under section 23 or section 25.]

(2) Subject to the other provisions of this section, the authority concerned—

(a) may make an amendment under sub-section (1) of its own motion; and

(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the ⁶[Deputy Commissioner (Appeals)] ⁷[or the Commissioner (Appeals)] or the Appellate Tribunal by the ⁸[Assessing Officer] also.

(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

(4) Where an amendment is made under this section, an order shall be passed in writing by the gift-tax authority concerned.

(5) Subject to the provisions of sub-section (2) of ⁹[section 33A], where any such amendment has the effect of reducing the assessment, the ⁸[Assessing Officer] shall make any refund which may be due to such assessee.

(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the ⁸[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 31 and the provisions of this Act shall apply accordingly.

(7) No amendment under this section shall be made after the expiry of four years ¹⁰[from the end of the financial year in which the order sought to be amended was passed].]

—————

1. Subs. by Act 53 of 1962, sec. 26 (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

3. Ins. by Act 4 of 1988, sec. 181 (w.e.f. 1-4-1989).

4. Subs. by Act 4 of 1988, sec. 186 (3) (w.e.f. 1-4-1989).

5. The words “or section 22A” omitted by Act 3 of 1989, sec. 91 (w.e.f. 1-4-1989).

6. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

7. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

8. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

9. Subs. by Act 5 of 1964, sec. 52 (c), for “section 33” (w.e.f. 1-4-1963).

10. Subs. by Act 67 of 1984, sec. 76, for “from the date of the order sought to be amended” (w.e.f. 1-10-1984).

Section 35. PROSECUTION.

(1) If any person fails without reasonable cause, -

(a) to furnish in time any return of gifts under this Act;

(b) to produce, cause to be produced, on or before the date mentioned in any notice under ¹[***] sub-section (4) of section 15, such accounts, records and documents as are referred to in the notice;

²[***]

he shall, on conviction before a magistrate, be punishable with fine which may extend to rupees ten for every day during which the default continues.

(2) If a person makes a statement in a verification in any return of gifts furnished under this Act or in a verification mentioned in section 22, 23 or 25 which is false, and which he either knows or believes to be false, or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to one year, or with fine which may extend to rupees one thousand, or with both.

³[(2A) If a person abets or induces in any manner another person to make and deliver an account, statement or declaration relating to any gifts chargeable to tax which is false and which he either knows to be false or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to six months or with fine which may extend to one thousand rupees or with both.]

⁴[(3) A person shall not be proceeded against for an offence under this Act except with the previous sanction of the Commissioner or Commissioner (Appeals):

Provided that the Chief Commissioner or, as the case may be, Director General may issue such instructions or directions to the aforesaid gift-tax authorites as he may deem fit for institution of proceedings under this sub-section.

(4) Any such offence may, either before or after the institution of proceedings, be compounded by the Chief Commissioner or Director-General.]

⁵[⁶[Explanation 1].—For the purposes of this section, “Magistrate” means a Presidency magistrate or a Magistrate of the first class.]

⁷[Explanation 2.—For the removal of doubts, it is hereby declared that the powers of the Board to issue orders, instructions or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other gift-tax authorities for the proper composition of offences under this section.]

—————

1. The words “sub-section (2) or” omitted by Act 41 of 1975, sec. 119(i) (w.e.f. 1-4-1976).

2. Clause (c) omitted by Act 41 of 1975, sec. 119(ii) (w.e.f. 11-4-1976).

3. Ins. by Act 53 of 1962, sec. 27 (ii) (w.e.f. 1-4-1963).

4. Subs. by Act 49 of 1991, sec. 90(a) (w.e.f. 1-10-1991).

5. Subs. by Act 53 of 1962, sec. 27(ii) (w.e.f. 1-4-1963).

6. Explanation re-numbered as explanation 1 by Act 49 of 1991, sec. 90(b) (w.r.e.f. 1-4-1963).

7. Ins. by Act 49 of 1991, sec. 90(b) (w.r.e.f. 1-4-1958).

Section 35A. OFFENCES BY COMPANIES.

¹[35A. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation : For the purposes of this section, – (a) “company” means a body corporate, and includes – (i) a firm, and

(ii) an association of persons or a body of individuals, whether incorporated or not; and

(b) “director”, in relation to -

(i) a firm, means a partner in the firm,

(ii) an association of persons or a body of individuals, means any member controlling the affairs thereof.

—————

1.  Ins. by Act 41 of 1975, sec. 120 (w.e.f. 1-10-1975).

Section 35B. OFFENCES BY HINDU UNDIVIDED FAMILIES.

(1) Where an offence under this Act has been committed by a Hindu undivided family, the Karta thereof shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render the Karta liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a Hindu undivided family and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any member of the Hindu undivided family, such member shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Section 35C. SECTION 360 OF THE CODE OF CRIMINAL PROCEDURE, 1973 AND THE PROBATION OF OFFENDERS ACT, 1958, NOT TO APPLY.

Nothing contained in section 360 of the Code of Criminal Procedure, 1973 (2 of 1974), or in the Probation of Offenders Act, 1958 (20 of 1958), shall apply to a person convicted of an offence under this Act unless that person is under eighteen years of age.

Section 35D. PRESUMPTION AS TO CULPABLE MENTAL STATE.

¹[35D. Presumption as to culpable mental state.—(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

Explanation : In this sub-section “culpable mental state” includes intention, motive or knowledge of a fact, or belief in, or reason to believe, a fact.

(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.

—————

1.  Ins. by Act 46 of 1986, sec. 41 (w.e.f. 10-9-1986).

Section 35E. PROOF OF ENTRIES IN RECORDS OR DOCUMENTS.

¹[35E. Proof of entries in records or documents.—Entries in the records or other documents in the custody of a gift-tax authority shall be admitted in evidence in any proceedings for the prosecution of any person for an offence under this Act, and all such entries may be proved either by the production of the records or other documents in the custody of the gift-tax authority containing such entries, or by the production of a copy of the entries certified by the gift-tax authority having custody of the records or other documents under its signature and stating that it is a true copy of the original entries and that such original entries are contained in the records or other documents in its custody.

—————

1.  Ins. by Act 3 of 1989, sec. 92 (w.e.f. 1-4-1989).

Section 36. POWER REGARDING DISCOVERY, PRODUCTION OF EVIDENCE, ETC.

¹[36. Power regarding discovery, production of evidence, etc.—(1) The ²[Assessing Officer], the ³[Deputy Commissioner (Appeals)], 4[the Commissioner (Appeals),] the ⁵[Chief Commissioner or Commissioner] and the Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:—

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company and examinaing him on oath;

(c) compelling the production of books of account and other documents; and

(d) issuing commissions.

⁶[(1A) If the Director-General or Director or Deputy Director or Assistant Director has reason to suspect that any gifts chargeable to tax under this Act have been concealed, or are likely to be concealed, by any person or class of persons within his jurisdiction, then for the purposes of making any inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the gifts-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other gift-tax authority.]

⁷[***]

—————

1. Subs. by Act 53 of 1962, sec. 28 (w.e.f. 1-4-1963).

2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

3. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

4. Ins. by Act 29 of 1977, sec. 39 and Schedule V, Pt. III (w.e.f. 10-7-1978).

5. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

6. Ins. by Act 26 of 1988, sec. 70 (w.e.f. 1-6-1988).

7. Sub-section (2) omitted by Act 4 of 1988, sec. 182(b) (w.e.f. 1-4-1989).

Section 37. POWER TO CALL FOR INFORMATION.

¹[Where, for the purposes of this Act, it appears necessary for any gift-tax authority to obtain any statement or information from any person or banking company,] ²[such gift-tax authority] may serve a notice requiring such person, on or before a date to be therein specified, to furnish such statement or information on the points specified in the notice, and that person shall, notwithstanding anything in any law to the contrary, be bound to furnish such statement or information to such gift-tax authority

Provided that no legal practitioner shall be bound to furnish any statement or information under this section based on any professional communication made to him otherwise than as permitted by section 126 of the Indian Evidence Act, 1872 (1 of 1872).

—————

1.  Subs. by Act 4 of 1988, sec. 183 (a), for certain words (w.e.f. 1-4-1989).

2.  Subs. by Act 4 of 1988, sec. 183 (b), for “the Gift-tax Officer” (w.e.f. 1-4-1989).

Section 38. EFFECT OF TRANSFER OF AUTHORITIES ON PENDING PROCEEDINGS.

Whenever in respect of any proceeding under this Act, any gift-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises such jurisdiction, the authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor :

¹[Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.]

—————

Section 39. COMPUTATION OF PERIOD OF LIMITATION.

¹ COMPUTATION OF PERIOD OF LIMITATION. In computing the period of limitation prescribed for an appeal or an application under this Act, the day on which the order complained of was served and if the assessee was not furnished with a copy of the order when the notice of the order was served upon him, the time requisite for obtaining a copy of such order shall be excluded.

—————

Section 40. SERVICE OF NOTICE.

(1) A notice or a requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908).

(2) Any such notice or requisition may, in the case of a firm or a Hindu undivided family, be addressed to any member of the firm or to the manager or any adult male member of the family, and in the case of a company or association of persons be addressed to the principal officer thereof.

¹[(3) After a finding of total partition has been recorded by the ²[Assessing Officer] under section 20 in respect of any Hindu family, notices under this Act in respect of the gifts made by the family shall be served on the person who was the last manager of the Hindu family, or if such person is dead, then on all surviving adults who were members of the Hindu family immediately before the partition.

(4) Where a firm or other association of persons is dissolved, notice under this Act in respect of the gifts made by the firm or association may be served on any person who was a partner (not being a minor) or member of the association, as the case may be, immediately before its dissolution.

—————

1.  Ins. by Act 53 of 1962, sec. 31 (w.e.f. 1-4-1963).

2.  Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

Section 41.

¹[***]

—————

1.  Section 41 omitted by Act 5 of 1964, sec. 52 (e) (w.e.f. 1-4-1964). Earlier it was subs. by Act 53 of 1962, sec. 32 (w.e.f. 1-4-1963).

Section 41A. PUBLICATION OF INFORMATION RESPECTING ASSESSEES.

¹[41A. Publication of information respecting assessees.—(1) If the Central Government is of opinion that it is necessary or expedient in the public interest to publish the names of any assessees and any other particulars relating to any proceedings ²or prosecutions under this Act in respect of such assessees, it may cause to be published such names and particulars in such manner as it thinks fit.

³[(2) No publication under this section shall be made in relation to any penalty imposed under this Act until the time for presenting an appeal to the ⁴[Deputy Commissioner (Appeals)] ⁵[or, as case may be, the Commissioner (Appeals)] has expired without an appeal having been presented or the appeal, if presented, has been disposed of.]

Explanation : In the case of a firm, company or other association of persons, the names of the partners of the firm, directors, managing agents, secretaries and treasurers, or managers of the company, or the members of the association, as the case may be, may also be published if, in the opinion of the Central Government the circumstance of the case justify it.

—————

1. Section 41A subs. by Act 5 of 1964, sec. 52 (f) (w.e.f. 1-4-1964). Earlier it was ins. by Act 28 of 1960 sec. 13 (w.e.f. 1-4-1960) and was amended by Act 53 of 1962, sec. 33 (w.e.f. 1-4-1963).

2. Ins. by Act 41 of 1975, sec. 121 (i) (w.e.f. 1-10-1975).

3. Subs. by Act 41 of 1975, sec. 121 (ii) (w.e.f. 1-10-1975).

4. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

5. Ins by Act 29 of 1977, sec. 39 and Schedule V, Pt. III (w.e.f. 10-7-1978).

Section 41B. DISCLOSURE OF INFORMATION RESPECTING ASSESSEES.

¹[41B. Disclosure of information respecting assessees.—Where a person makes an application to the ²[Chief Commissioner or Commissioner] in the prescribed form for any information relating to any assessee in respect of any assessment made under this Act, the Chief Commissioner or Commissioner may, if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for in respect of that assessment only and his decision in this behalf shall be final and shall not be called in question in any court of law.

—————

1.  Section 41B subs. by Act 5 of 1964, sec. 52 (f) (w.e.f. 1-4-1964). Earlier it was ins. by Act 28 of 1960, sec. 13 (w.e.f. 1-4-1960).

2.  Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).

Section 41C. RETURN OF GIFTS, ETC., NOT TO BE INVALID ON CERTAIN GROUNDS.

¹[41C. Return of gifts etc., not to be invalid on certain grounds.—No return of gifts, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of gifts, assessment, notice, summons or other proceeding, if such return of gifts, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

—————

1.  Ins. by Act 41 of 1975, sec. 122 (w.e.f. 1-10-1975).

Section 42. BAR OF SUITS IN CIVIL COURT.

No suit shall lie in any civil court to set aside or modify ¹any proceeding taken or order made under this Act, and no prosecution, suit or other legal proceeding shall lie against ²the Government or any officer of the Government for anything in good faith done or intended to be done under this Act.

—————

1.  Subs. by Act 26 of 1988, sec. 71, for “any order made” (w.e.f. 1-3-1988). Earlier the words “any order made” were subs. by Act 11 of 1987, sec. 91 (w.e.f. 1-3-1987).

2.  Ins. by Act 5 of 1964, sec. 52 (g) (w.e.f. 1-4-1964).

Section 43. APPEARANCE BEFORE GIFT-TAX AUTHORITIES BY AUTHORISED REPRESENTATIVES.

¹[43. Appearance before Gift-tax authorities by authorised representa-tives.—An assessee who is entitled to or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any proceeding under this Act, except where he is required under this Act to attend in person, may attend by a person who would be entitled to represent him before any income-tax authority or the Appellate Tribunal under section 288 of the Income-tax Act.

—————

1.  Subs. by Act 53 of 1962, sec. 34 (w.e.f. 1-4-1963).

Section 43A. APPEARANCE BY REGISTERED VALUER IN CERTAIN MATTERS.

¹[43A. Appearance by registered valuer in certain matters.—Any assessee who is entitled or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any matter relating to the valuation of any asset, except where he is required under this Act to attend in person, may attend by a registered valuer.

Explanation : In this section, “registered valuer” has the same meaning as in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

—————

1.  Ins. by Act 45 of 1972, sec. 24 (w.e.f. 1-1-1973).

Section 44. AGREEMENT FOR AVOIDANCE OR RELIEF OF DOUBLE TAXATION WITH RESPECT TO GIFT-TAX.

¹The Central Government may enter into an agreement with the Government of any reciprocating country -

(a) for the avoidance or relief of double taxation with respect to gift-tax payable under this Act and under the corresponding law in force in the reciprocating country, or

(b) for exchange of information for the prevention of evasion or avoidance of gift-tax chargeable under this Act or under the corresponding law in force in that country or investigation of cases of such evasion or avoidance, or

(c) for recovery of tax under this Act and under the corresponding law in force in that country, and may, by notification in the Official Gazette, make such provision as may be necessary for implementing the agreement.

Explanation : The expression “reciprocating country” for the purposes of this Act means any country which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating country.

—————

1.  Subs. by Act 16 of 1972, sec. 54 (w.e.f. 1-4-1972).

Section 44A. ROUNDING OFF OF TAXABLE GIFTS.

¹[44A. Rounding off of taxable gifts.—The amount assessed in accordance with the foregoing provisions of this Act as being the value of all taxable gifts shall be rounded off to the nearest multiple of ten rupees and, for this purpose, any part of a rupee consisting of paise shall be ignored and thereafter, if such amount is not a multiple of ten rupees, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and, if the last figure is less than five, the amount shall be reduced to the next lower amount which is a multiple of ten; and the amount so rounded off shall be deemed to be the value of all taxable gifts of the assessee for the purposes of this Act.

————

1.  Ins. by Act 42 of 1970, sec. 70 (w.e.f. 1-4-1971).

Section 44B. ROUNDING OFF OF TAX, ETC.

The amount of gift-tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act, shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee, and if such part is less than fifty paise, it shall be ignored.

—————

1.  Ins. by Act 42 of 1970, sec. 70 (w.e.f. 1-4-1971).

Section 45. ACT NOT TO APPLY IN CERTAIN CASES.

¹[No tax shall be levied under this Act in respect of gifts made by]—

²[(a) a company in which the public are substantially interested;

(b) any company to an Indian company in a scheme of amalgamation;]

(e) any institution or fund the income whereof is exempt from income-tax under ³[section 11 or section 12] of Income-tax Act.

⁴[Explanation 1.—For the purposes of clause (b) the term “amalgamation” shall have the meaning assigned to it in clause (1B) of section 2 of the Income-tax Act.]

⁵[Explanation 3.—For the removal of doubts, it is hereby declared that the exemption admissible under clause (e) in relation to gifts made by an institution or fund referred to in that clause shall not be denied merely on either or both of the following grounds, namely:—

(i) that, subsequent to the gift, any part of the income of the institution or fund has become chargeable to tax due to non-compliance with any of the provisions of ⁶[section 11 or section 12 or section 12A] of the Income-tax Act;

(ii) that, under clause (c) of sub-section (1) of section 13 of the Income-tax Act, the exemption under 6[section 11 or section 12] of that Act is denied to the institution or fund in relation to any income arising to it from any investment referred to in clause (h) of sub-section (2) of section 13 of the said Act where the aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed five per cent. of the capital of that concerm.]

—————

1. Subs. by Act 4 of 1988, sec. 184 (a), for “The provisions of this Act shall not apply to gifts made by” (w.e.f. 1-4-1984).

2. Subs. by Act 4 of 1988, sec. 184 (b) (w.e.f. 1-4-1989).

3. Subs. by Act 16 of 1972, sec. 55(a), for ”section 11” (w.e.f. 1-4-1973). Earlier “section 11” was subs. by Act 53 of 1962 sec. 35, for” clause (i) of subs-section 3 of section 4″ (w.e.f. 1-4-1963).

4. Subs. by Act 3 of 1989, sec. 93 (w.e.f. 1-4-1989), for Explanations 1 and 2. Earlier Explanation was remembered as Explanation 1 and Explanation 2 was ins. by Act 20 of 1967, sec. 35 (8) (ii) (w.e.f. 1-4-1967)

5. Ins. by Act 32 of 1971 sec. 37(c) (w.e.f. 1-4-1971).

6. Subs. by Act 16 of 1972, sec. 55(b), for “section 11” (w.e.f. 1-4-1973).

Section 46. POWER TO MAKE RULES.

(1) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power rules made under this section may provide for -

(a) the manner in which the value of any property may be determined;

(b) the form in which returns under this Act shall be made and the manner

in which they shall be verified;

(c) the form in which appeals and applications under this Act may be made, and the manner in which they shall be verified;

¹[(cc) the circumstances in which, the conditions subject to which and the manner in which, the ²[Deputy Commissioner (Appeals)] ³[or the Commissioner (Appeals)] may permit an appellant to produce evidence which he did not produce or which he was not allowed to produce before the ⁴[Assessing Officer];

(d) the form of any notice of demand under this Act;

(e) the refunds of gift-tax paid in respect of gifts which are revoked on the happening of any specified event which does not depend on the will of the donor or of any amount paid under section 18;

⁵[(ee) the procedure to be followed in calculating interest payable by assessees or interest payable by the Government to assessees under any provisions of this Act, including the rounding off of the period for which such interest is to be calculated in cases where such period includes a fraction of a month, and specifying the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored:]

(f) the areas for which lists of valuers may be drawn up;

(g) any other matter which has to be, or may be, prescribed for the purposes of this Act.

⁶[(3) The power to make rules conferred by this section shall include the power to give retrospective effect, from a date not earlier than the date of commencement of this Act, to the rules or any of them and, unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect shall be given to any rule so as to prejudicially affect the interests of assessees.]

⁷[(4) The Central Government shall cause every rule made under this Act to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session ⁸[or in two or more successive sessions], and, if, before the expiry of the session 9[immediately following the session or the successive sessions aforesaid], both Houses agree in making any modifications in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejdice to the validity of anything previously done under that rule.]

————

1. Ins. by Act 16 of 1972, sec. 56 (w.e.f 1-4-1972).

2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).

3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).

4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).

5. Ins. by Act 42 of 1970, sec. 71 (w.e.f. 1-4-1971).

6. Subs. by Act 26 of 1974, sec. 17 (w.e.f. 18-8-1974).

7. Subs. by Act 53 of 1962, sec. 36 (w.e.f. 1-4-1963).

8. Subs. by Act 41 of 1975 , sec. 123 (i), for “or in two successive sessions” (w.e.f. 1-4-1976).

9. Subs. by Act 41 of 1975, sec. 123 (ii), for “in which it is so laid or the session immediately following” (w.e.f. 1-4-1976).

Section 46A. POWER TO MAKE EXEMPTION, ETC., IN RELATION TO CERTAIN UNION TERRITORIES.

¹POWER TO MAKE EXEMPTION, ETC., IN RELATION TO CERTAIN UNION TERRITORIES. – If the Central Government considers it necessary or expedient so to do for avoiding any hardships or anomaly or removing any difficulty that may arise as a result of the application of this Act to the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, or in the case of the Union territory of Pondicherry, for implementing any provision of the Treaty of Cession concluded between France and India on the 28th day of May, 1956, the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of gift-tax in favour of any class of gifts or in regard to the whole or any part of the gifts made by any assessee or class of assessees :

Provided that the power conferred by this section shall not be exercisable after the 31st day of March, 1967, except for the purpose of rescinding an exemption, reduction or modification already made.

—————

1.  Ins. by the Taxation Laws (Extension to Union Territories) Regulation, 1963, sec. 3 and Sch. (w.e.f. 1-4-1963).

Section 47. POWER TO REMOVE DIFFICULTIES.

¹POWER TO REMOVE DIFFICULTIES. – (1) If any difficulty arises in giving effect to the provisions of this Act as amended by the Direct Tax Laws (Amendment) Act, 1987, the Central Government may, by order, do anything not inconsistent with such provisions for the purpose of removing the difficulty :

Provided that no such order shall be made after the expiration of three years from the 1st day of April, 1988.

(2) Every order made under sub-section (1) shall be laid before each House of Parliament.

—————

1.  Ins. by Act 4 of 1988, sec. 185 (w.e.f.1-4-1988).

THE SCHEDULE I

¹[²[THE SCHEDULE I]
³[[See section 3 (1)]]

RATES OF GIFT-TAX

1. Subs. by Act 19 of 1970, sec. 27 (c) (w.e.f. 1-4-1971). Earlier the Schedule was subs. by Act 13 of 1966 sec. 41(c) (w.e.f. 1-4-1966) and still earlier subs. by Act 5 of 1964 sec. 52 (h) (w.e.f. 1-4-1964).
2. The Schedule renumbered as Schedule I by Act 3 of 1989, sec. 94 (w.e.f. 1-4-1989).

3. Subs. by Act 23 of 1986, sec. 46, for “(see section 3)” (w.e.f. 1-4-1987).

THE SCHEDULE II

¹[THE SCHEDULE II]

[See section 6(1)

Rules for Determining the Value of Property Gifted

²[1.Value of gifted property how to determined.—³[Subject to the provisions of rules 2 to 7, the value of any property], other than cash, transferred by way of gift shall, for the purposes of this Act, be determined in accordance with the provisions of Schedule III to ⁴[the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act)], which shall apply subject to the following modifications, namely:—

In the said Schedule,—

(a) references by whatever form of words to the Wealth-tax Act shall be construed as references to this Act;

(b) in rule 5, the reference to the year ending on the valuation date shall be construed as a reference to the previous year as defined in this Act;

(c) save as provided in clause (b), references, to the valuation date shall be construed as references to the date on which the gift was made;

(d) reference to section 7 of the Wealth-tax Act shall be construed as references to section 6 of this Act;

(e) references to section 16A of the Wealth-tax Act shall be construed as references to sub-section (6) of section 15 of this Act.]

⁵[2. Quoted shares and debentures of companies.—The value of an equity share or a preference share in any company or a debenture of any company which is a quoted share or a quoted debenture shall be taken as the value quoted in respect of such share or debenture on the date on which the gift was made or where there is no such quotation on such date, the quotation on the date closest to such date and immediately preceding such date.

Explanation—The words and expressions used in this rule and rules 3 to 7 but not defined and defined in rule 2 of Schedule III of the Wealth-tax Act shall have the meanings respectively assigned to them in rule 2 of that Schedule.

3. Special provision for quoted shares of companies.—Notwithstanding anything in rule 2, the value of an equity share in any company which is a quoted share may, at the option of the assessee or a company, be taken on the basis of the average of the value quoted on the 31st day of March immediately preceding the assessment year and the values quoted in respect of such share on the said dates in relation to each of the immediately preceding nine assessment years, or where there is no such quotation on any of the aforesaid dates, the quotation on the date closest to the said date and immediately preceding such date:

Provided that where for any reason the value of such share is quoted in relation to lesser number of assessment years than the said nine assessment years, then the value or values so quoted shall be taken into account for the purposes of the aforesaid average:

Provided further that where the assessee opts for the average of the values so quoted, he shall get such vlaues certified by an accountant and attach the certificate to the return of gifts in respect of the relevant assessment year.

1. —For the purposes of this rule, “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288 of the Income-tax Act.

4. Unquoted preference shares.—(1) Subject to the provisions of sub-rule (2), the value of an unquoted preference share in any company shall,—

(a) where the preference share is issued before the date on which the gift was made at a rate of dividend of not less than eight per cent., be the paid-up value of such share; and

(b) where the preference share is issued before the said date at a rate of dividend of less than eight per cent., be the adjusted paid-up value of such share.

(2) Where no dividend has been paid in respect of an unquoted preference share by any company continuously for not less than three accounting years ending on the date on which the gift was made or, in a case where the accounting year of the company does not end on that date, for not less than three continuous accounting years ending on a date immediately before the date on which the gift was made, the paid-up value or, as the case may be, the adjusted paid-up value shall be reduced—

(a) in the case of a non-cumulative preference share, as indicated in the Table below:—

(b) in the case of cumulative preference share, by one-half of the rates specified in the aforesaid Table.

Explanation—For the purposes of this rule, “adjusted paid-up value”, in relation to a preference share, means an amoount which bears to the paid-up value of the preference share the same proportion as the stipulated rate of dividend [being the rate of dividend on the preference share specified in the terms of issue of such share, and in a case where such dividend is required to be increases under the provisions of section 3 of the Preference Shares (Regulation of Dividends) Act, 1960 (63 of 1960), the rate of dividend as so increased] on such share bears to the rate of eight per cent.

5. Unquoted equiry shares in companies other than investment companies.—(1) The value of an unquoted equity share in any company, other than an investment company, shall be determined in the manner set out in sub-rule (2).

(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet; the result multiplied by the paid-up value of each equity share shall be the break up value of each unquoted equity share, and an amount equal to eighty per cent. of the break-up value so determined shall be the value of the unquoted equity share for the purposes of this Act.

(3) For the purposes of sub-rule (2),—

(a) the following amounts shown as assets in the balance-sheet shall not be treated as assets, namely:—

(i) any amount paid as advance tax under the Income-tax Act;

(ii) any amount shown in the balance-sheet including the debit balance of the profit and loss account or the profit and loss appropriation account which does not represent the value of any asset;

(b) the following amounts shown as liabilities in the balance-sheet shall not to be treated as liabilities, namely:—

(i) the paid-up capital in respect of equity shares;

(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date on which the gift was made at a general body meeting of the company;

(iii) reserves, by whatever name called, other than those set apart towards depreciation;

(iv) credit balance of the profit and loss account;

(v) any amount representing provision for taxation, other than the amount referred to in sub-clause (i) of clause (a), to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

1. —For the purposes of this rule “balance-sheet”, in relation to any company, means the balance-sheet of such company (including the Notes annexed thereto and forming part of the accounts) as drawn up on the date on which the gift was made and, where there is no such balance-sheet, the balance-sheet drawn up on a date immediately preceding that date, and, in the absence of both, the balance-sheet drawn up on a date immediately after the date on which the gift was made.

6. Unquoted equity shares in investment companies.—(1) Subject to rule 7, the value of an unquoted equity share in an investment company shall be determined in the manner specified in sub-rule (2).

(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total paid-up equity share capital of the company as shown in the balance sheet, and the result multiplied by the paid-up value of each equity share shall be the value of the unquoted equity share in that investment company for the purposes of this Act.

(3) For the purposes of sub-rule (2), the value of an asset disclosed in the balance-sheet of the company shall be taken to be its value determined in accordance with the rules as applicable to that particular asset and, in the absence of any such rule, the value of such asset shall be its value as deter-mined under rule 20 of Schedule III of the Wealth-tax Act.

(4) For the purposes of this rule,—

(a) “balance-sheet” has the same meaining as in rule 5;

(b) the amounts referred to in sub-rule (3) of rule 5 shall not be treated as assets or liabilities.

(5) For the purposes of facilitating the valuation of unquoted equity shares under this rule and rule 7, the company concerned shall have such valuation made by its auditors appointed under section 224 of the Companies Act, 1956 (1 of 1956), and a certificate of the auditors relating to such valuation in the prescribed form shall be furnished to the Assessing Officer and the shareholders of the company; and the valuation made by the auditors shall be taken into account in the assessment of the shareholder of the company.

7. Unquoted equity shares in interlocked companies.—(1) The value of an unquoted equity share in one of the two interlocked companies held by the other interlocked company for the purposes of rule 6 shall be equal to the paid-up value of such share or the value determined under sub-rule (2), whichever is higher.

(2) For the purpose of sub-rule (1), the aggregate value of all the equity shares in an interlocked company shall be arrived at by multiplying the maintainable profits of such company by—

(a) the fraction 100/8.5 in a case where the gross total income of the company consists, to the extent of not less than 51 per cent of income chargeable under the head “Income from house property” under the Income-tax Act; or

(b) the fraction 100/10, in the case of any other interlocked company,and the resultant amount divided by the number of such equity shares shall be the value of such an equity share in such company.

(3) The maintainable profits of the company, for the purpose of sub-rule (2), shall be computed in the following manner, namely:—

(a) the book profits of the company for the five accounting years of the company immediately preceding the date on which the gift was made shall first be ascertained;

(b) adjustments shall be made to the book profits for each of the said five years for all non-recurring and extraordinary items of income and expenditure and losses;

(c) adjustments shall be made to the book profits for expenditure which is not of a revenue nature but is debited in the accounts and for receipts which are in the nature of revenue receipts but are not accounted for in the profit and loss account;

(d) any development rebate or investment allowance debited in the books of account shall be added back to the book profits;

(e) the tax liabilty of the company on the book profits, arrived at after the adjustments at items (a), (b), (c) and (d), shall be deducted from such book profits;

(f) amounts required for paying dividends on preference share or shares with prior rights shall be deducted from such book profits;

(g) the aggregate of the book profits for the accounting years so arrived at, divided by 5, shall be the maintainable profits of the company.

1. —For the purposes of this rule, “interlocked companies” means any two investment companies each of which holds shares in the other company.]

—————

1. Ins by Act 3 of 1989, sec. 94 (w.e.f. 1-4-1989).

2. Numbered by Act 38 of 1993 sec. 42 (w.e.f. 1-4-1993).

3. Subs. by Act 28 of 1993, sec. 42 (a) (i), for “The value of any property”.

4. Subs. by Act 38 of 1993, sec. 42(a)(ii), for “the Wealth-tax Act” (w.e.f. 1-4-1993).

5. Ins. by Act 38 of 1993, sec. 42 (b) (w.e.f. 1-4-1993).

Patents Act

November 30, 2014

Chapter 1 – Preliminary

Section 1. Short title, extent and commencement

(1) This Act may be called the Patents Act, 1970.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

PROVIDED that different dates may be appointed for different provisions of this Act, and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Section 2. Definitions and interpretation

(1) In this Act, unless the context otherwise requires,—

¹[(a) “Appellate Board” means the Appellate Board referred to in section 116;

(ab) “assignee” includes an assignee of the assignee and the legal representative of a deceased assignee and references to the assignee of any person include references to the assignee of the legal representative or assignee of that person;

²[(aba) “Budapest Treaty” means the Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purposes of Patent Procedure done at Budapest on 28th day of April, 1977, as amended and modified from time to time;]

(ac) “capable of industrial application”, in relation to an invention, means that the invention is capable of being made or used in an industry;]

(b) “Controller” means the Controller-General of Patents, Designs and Trade Marks referred to in section 73;

(c) “convention application” means an application for a patent made by virtue of section 135;

³[(d) “convention country” means a country or a country which is member of a group of countries or a union of countries or an Inter-governmental organisation [referred to as a convention country in section 133;]]

(e) “district court” has the meaning assigned to that expression by the CPC, 1908;

(f) “exclusive licence” means a licence from a patentee which confers on the licensee, or on the licensee and persons authorised by him, to the exclusion of all other persons (including the patentee), any right in respect of the patented invention, and “exclusive licensee” shall be construed accordingly;

(g) [Clause (g) omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005]

(h) “government undertaking” means any industrial undertaking carried on—

(i) by a department of the government; or

(ii) by a corporation established by a Central, Provincial or State Act, which is owned or

controlled by the government; or

(iii) by a government company as defined in section 617 of the Companie Act, 1956(1 of

1956) ⁴[;or]

⁴[(iv) by an institution wholly or substantially financed by the Government;] [Certain words omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005]

⁵[(i) “High Court”, in relation to a State or Union territory, means the High Court having territorial jurisdiction in that State or Union territory, as the case may be;]

⁶[(ia) “international application” means an application for patent made in accordance with the Patent Cooperation Treaty;]

⁷[(j) “invention” means a new product or process involving an inventive step and capable of industrial application;

⁵[(ja) “inventive step” means a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art;]

(k) “legal representative” means a person who in law represents the estate of a deceased person;

⁵[(l) “new invention” means any invention or technology which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of patent application with complete specification, i.e. the subject matter has not fallen in public domain or that it does not form part of the state of the art;

(m) “patent” means a patent for any invention granted under this Act;]

⁴[(ia) “pharmaceutical substance” means any new entity involving one or more inventive steps;]

⁵[(la) “Opposition Board” means an Opposition Board constituted under sub-section (4) of section 25;]

(n) “patent agent” means a person for the time being registered under this Act as a patent agent;

(o) “patented article” and “patented process” mean respectively an article or process in respect of which a patent is in force;

⁶[(oa) “Patent Co-operation Treaty” means the Patent Cooperation Treaty done at Washington on the 19th day of June, 1970 as amended and modified from time to time;]

(p) “patentee” means the person for the time being entered on the register as the grantee or proprietor of the patent;

(q) “patent of addition” means a patent granted in accordance with section 54;

(r) “patent office” means the patent office referred to in section 74;

(s) “person” includes the government;

(t) “person interested” includes a person engaged in, or in promoting, research in the same field as that to which the invention relates;

⁸[(u) “prescribed” means,—

(A) in relation to proceedings before a High Court, prescribed by rules made by the High Court;

(B) in relation to proceedings before the Appellate Board, prescribed by rules made by the Appellate Board; and

(C) in other cases, prescribed by rules made under this Act;]

(v) “prescribed manner” includes the payment of the prescribed fee;

(w) “priority date” has the meaning assigned to it by section 11;

(x) “register” means the register of patents referred to in section 67;

(y) “true and first inventor” does not include either the first importer of an invention into India, or a person to whom an invention is first communicated from outside India.

(2) In this Act, unless the context otherwise requires, any reference—

(a) to the Controller shall be construed as including a reference to any officer discharging the functions of the Controller in pursuance of section 73;

(b) to the patent office shall be construed as including a reference to any branch office of the patent office.

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “notified as such under sub-section (1) of section 133″ by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Inserted by Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Substituted, ibid.

6. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide SO 561(E), dt. 20-5-2003.

7. Substituted, ibid.

8. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide SO 561(E), dt. 20-5-2003.

Chapter II – Inventions not Patentable

Section 3. What are not inventions

The following are not inventions within the meaning of this Act,—

(a) an invention which is frivolous or which claims anything obviously contrary to well established natural laws;

¹[(b) an invention the primary or intended use or commercial exploitation of which could be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment;]

(c) the mere discovery of a scientific principle or the formulation of an abstract theory ²[or discovery of any living thing or non-living substance occurring innatur;]

³[(d) the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation : For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy;]

(e) a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance;

(f) the mere arrangement or re-arrangement or duplication of known devices each functioning independently of one another in a known way;

(g) [Omitted by Patents (Amdt.) Ad, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003]

(h) a method of agriculture or horticulture;

(i) any process for the medicinal, surgical, curative, prophylactic ⁴[diagnostic, therapeutic] or other treatment of human beings or any process for a similar treatment of animals ⁵[xxxxx] to render them free of disease or to increase their economic value or that of their products.

⁴[(j) plants and animals in whole or any part thereof other than micro-organisms but including seeds, varieties and species and essentially biological processes for production or propagation of plants and animals;

(k) a mathematical or business method or a computer program per se or algorithms;

(l) a literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever including cinematrographic works and television productions;

(m) a mere scheme or rule or method of performing mental act or method of playing game;

(n) a presentation of information;

(o) topography of integrated circuits;

(p) an invention which, in effect, is traditional knowledge or which is an aggregation or duplication of known properties of traditionally known component or components.] , ,

——————-

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

3. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E),dt. 20-5-2003.

5. Words “or plants” omitted, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 4. Inventions relating to atomic energy not patentable

No patent shall be granted in respect of an invention relating to atomic energy falling within sub-section (1) of section 20 of the Atomic Energy Act, 1962 (33 of 1962).

Section 5. [Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005]

[Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005]

Chapter III – Applications for Patents

Section 6. Persons entitled to apply for patents

(1) Subject to the provisions contained in section 134, an application for a patent for an invention may be made by any of the following persons, that is to say,—

(a) by any person claiming to be the true and first investor of the invention;

(b) by any person being the assignee of the person claiming to be the true and first inventor in respect of the right to make such an application;

(c) by the legal representative of any deceased person who immediately before his death was entitled to make such an application.

(2) An application under sub-section (1) may be made by any of the persons referred to therein either alone or jointly with any other person.

Section 7. Form of application

Every application for a patent shall be for one invention only and shall be made in the prescribed form and filed in the patent office.

¹[(1A) Every international application under the Patent Cooperation Treaty for a patent, as may be filed designating India shall be deemed to be an application under this Act, if a corresponding application has also been filed before the Controller in India.]

²[(1B) The filing date of an application referred to in sub-section (1A) and its complete specification processed by the patent office as designated office or elected office shall be the international filing date accorded under the Patent Cooperation Treaty.]

(2) Where the application is made by virtue of an assignment of the right to apply for a patent for the invention, there shall be furnished with the application, or within such period as may be prescribed after the filing of the application, proof of the right to make the application.

(3) Every application under this section shall state that the applicant is in possession of the invention and shall name the ³[person] claiming to be the true and first inventor; and where the person so claiming is not the applicant or one of the applicants, the application shall contain a declaration that the applicant believes the person so named to be the true and first inventor.

⁴[(4) Every such application (not being a convention application or an application filed under the Patent Cooperation Treaty designating India) shall be accompanied by a provisional or a complete specification.]

——————–

1 Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E),dt. 20-5-2003.

2. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “ownei” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 8. Information and undertaking regarding foreign applications

(1) Where an applicant for a patent under this Act is prosecuting either alone or jointly with any other person an application for a patent in any country outside India in respect of the same or substantially the same invention, or where to his knowledge such an application is being prosecuted by some person through whom he claims or by some person deriving title from him, he shall file along with his application [or subsequently ²[within the prescribed period as the Controller may allow]]—

³[(a) a statement setting out detailed particulars or such application; and]

(b) an undertaking that, ⁴[up to the date of grant of patent in India,] he would keep the Controller informed in writing, from time to time, of ⁵[detailed particulars as required under] clause (a) in respect of every other application – . relating to the same or substantially the same invention, if any, filed in any country outside India subsequently to the filing of the statement referred to in the aforesaid clause, within the prescribed time.

¹[(2) At any time after an application for patent is filed in India and till the grant of a patent or refusal to grant of a patent made thereon, the Controller may also require the applicant to furnish details, as may be prescribed, relating to the processing of the application in a country outside India, and in that event the applicant shall furnish to the Controller information available to him within such period as may be perscribed.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “within such period as the Controller may, for good and sufficient reasons, allow” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

4. Substituted for “up to the date of the acceptance of his complete specification filed in India” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Substituted for “details of the nature referred to in” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E),dt. 20-5-2003.

Section 9. Provisional and complete specifications

¹[(1) Where an application for a patent (not being a convention application or an application filed under the Patent Cooperation Treaty designating India) is accompanied by a provisional specification, a complete specification shall be filed within twelve ‘ months i rum the date of filing of the application, and if the complete specification is not so filed, the application shall be deemed to be abandoned.]

(2) Where two or more applications in the name of the same applicant are accompanied by provisional specifications in respect of inventions which are cognate or of which one is a modification of another and the Controller is of opinion that the whole of such inventions are such as to constitute a single invention and may properly be included in one patent, he may allow one complete specification to be filed in respect of all such provisional specifications:

²[PROVIDED that the period of time specified under sub-section (1) shall be reckoned from the date of filing of the earliest provisional specification.]

¹[(3) Where an application for a patent (not being a convention application or an application filed under the Patent Cooperation Treaty designating India) is accompanied by a specification purporting to be a complete specification, the Controller may, if the applicant so requests at any time within twelve months from the date of filing of the application, direct that such specification shall be treated, for the purposes of this Act, as a provisional specification and proceed with the application accordingly.]

(4) Where a complete specification has been filed in pursuance of an application for a patent accompanied by a provisional specification or by a specification treated by virtue of a direction under sub-section (3) as a provisional specification, the Controller may, if the applicant so requests at any time before ³[grant of patent] cancel the provisional specification and post-date the application to the date of filing of the complete specification.

S

Mere arrangement or rearrangement or duplication of a known device cannot be patented.— Standipack Pvt. Ltd. v. Oswal Trading Co. Ltd. 1999 (19) PTC 479 (Del)

——————-

1. Substituted by the Patents (Amdt.) Act 2005, w.e.f. 1-1-2005.

2. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “the acceptance of the complete specification’ by the Patents (Amdt.) Act, 2005 w.e.f. 1-1-2005.

Section 10. Contents of specifications

(1) Every specification, whether provisional or complete, shall describe the invention and shall begin with a title sufficiently indicating the subject-matter to which the invention relates.

(2) Subject to any rules that may be made in this behalf under this Act, drawings may, and shall, if the Controller so requires, be supplied for the purposes of any specification, whether complete or provisional; and any drawings so supplied shall, unless the Controller otherwise directs, be deemed to form part of the specification, and references in this Act to a specification shall be construed accordingly. –

(3) If, in any particular case, the Controller considers that an application should be further supplemented by a model or sample of anything illustrating the invention or alleged to constitute an invention, such model or sample as he may require shall be furnished ¹[before the application is found in order for grant of a patent] but such model or sample shall not be deemed to form part of the specification.

(4) Every complete specification shall—

(a) fully and particularly describe the invention and its operation or use and the method by which it is to be performed;

(b) disclose the best method of performing the invention which is known to the applicant and for which he is entitled to claim protection; and

(c) end with a claim or claims defining the scope of the invention for which protection is claimed.

²[(d) be accompanied by an abstract to provide technical information on the invention:

PROVIDED that—

(i) the Controller may amend the abstract for providing better information to third parties; and

(ii) if the applicant mentions a biological material in the specification which may not be described in such a way as to satisfy clauses (a) and (b), and if such material is not available to the public, the application shall be com-*” pleted by depositing ³[the material to an international depository authority under the Budapest Treaty] and by fulfilling the following conditions, namely:—

⁴[(A) the deposit of the material shall be made not later than the date of filing the patent application in India and a reference thereof shall be made in the specification within the prescribed period;]

(B) all the available characteristics of the material required for it to be correctly identified or indicated are included in the specification including the name, address of the depository institution and the date and number of the deposit of the material at the institution;

(C) access to the material is available in the depository institution only after the date of the application for patent in India or if a priority is claimed after the date of the priority;

(D) disclose the source and geographical origin of the biological material in the specification, when used in an invention.]

⁴[(4A) In case of an international application designating India, the title, description, drawings, abstract and claims filed with the application shall be taken as the complete specification for the purposes of this Act.]

⁵[(5) The claim or claims of a complete specification shall relate to a single invention, or to a group of inventions linked so as to form a single inventive concept, shall be clear and succinct and shall be fairly based on the matter disclosed in the specification.]

(6) A declaration as to the inventorship of the invention shall, in such cases as may be prescribed be furnished in the prescribed form with the complete specification or within such period as may be prescribed after the filing of that specification.

(7) Subject to the foregoing provisions of this section, a complete specification to the invention which was described in the provisional specification, being developments or additions in respect of which the applicant would be entitled under the provisions of section 6 to make a separate application for a patent.

S

Where the invention has not been properly described and will not function in the way claimed by the applicants, the opponents succeed even when they fail to establish “prior publication” as well as “prior public knowledge” and, therefore, the application for grant of patent is liable to be rejected.—Abid Kagalwala v. Edgar Haddley Co. (P) Ltd. 1984 PTC 234 (PO)

Where the invention claimed by the plaintiff involves nothing which is outside the probable capability of skilled craftsman having regard to what was already known in the country and there being no new manner of manufacture or a distinctive improvement on the old contrivance involving novelty or inventive step, ex parte injunction granted is liable to be vacated.—Surendra Lal Mahendra v. Jain Glazers 1981 PTC 112 (Del)

It is incumbent under section 10(4) to fully and particularly describe the invention and its operation or use and the method by which it is to be performed and disclose the best method of performing the invention which is known to the applicant and for which he is entitled to claim protection ending with a claim or claims defining the scope of the invention for which protection is claimed.—Ram Narain Kher v. Ambassador Industries PTC (Suppl.) (1) 180 (Del).

——————–

1. Subs, for “before the acceptance of the application” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

3. Substituted for “the material to an authorised depository institution as may be notified by the Central Government in the Official Gazette” by the Patents (Amdt) Act, 2005, w.e.f. 1-1-2005.

4. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Substituted by Patents (Amdt.) Act. 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

Section 11. Priority dates of claims of a complete specification

(1) There shall be a priority date for each claim of a complete specification.

(2) Where a complete specification is filed in pursuance of a single application accompanied by—

(a) a provisional specification; or

(b) a specification which is treated by virtue of a direction under sub-section (3) of section 9 as a provisional specification,

and the claim is fairly based on the matter disclosed in the specification referred to in clause (a) or clause (b), the priority date of that claim shall be the date of the filing of the relevant specification.

(3) Where the complete specification is filed or proceeded with in pursuance of two or more applications accompanied by such specifications as are mentioned in sub-section (2) and the claim is fairly based on the matter disclosed—

(a) in one of those specifications, the priority date of that claim shall be the date of filing of the application accompanied by that specification;

(b) partly in one and partly in another, the priority date of that claim shall be the date of the filing of the application accompanied by the specification of the later date.

¹[(3A) Where a complete specification based on a previously filed application in India has been filed within twelve months from the date of that application and the claim is fairly based on the matter disclosed in the previously filed application, the priority date of that claim shall be the date of the previously filed application in which the matter was first disclosed.]

(4) Where the complete specification has been filed in pursuance of a further application made by virtue of sub-section (1) of section 16 and the claim is fairly based on the matter disclosed in any of the earlier specifications, provisional or complete, as the case may be, the priority date of that claim shall be the date of the filing of that specification in which the matter was first disclosed.

(5) Where, under the foregoing provisions of this section, any claim of a complete specification would, but for the provisions of that sub-section, have two or more priority dates, the priority date of that claim shall be the earlier or earliest of those dates.

(6) In any case to which sub-sections (2), (3), H(3A)]; (4) and (5) do not apply, the priority date of a claim shall, subject to the provisions of section 137, be the date of filing of the complete specification.

(7) The reference to the date of. the filing of the application or of the complete specification in this section shall, in cases where there has been a post-dating under section 9 or section 17 or, as the case may be, an ante-dating under section 16, be a reference to the date as so post-dated or ante-dated.

(8) A claim in a complete specification of a patent shall not be invalid by reason only of —

(a) the publication or use of the invention so far as claimed in that claim on or after the priority date of such claim; or

(b) the grant of another patent which claims the invention, so far as claimed in the first mentioned claim, in a claim of the same or a later priority date.

——————–

1. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Chapter IV – [Publication and Examination of Applications]

Section 11 A. Publication of applications

¹[PUBLICATION AND EXAMINATION OF APPLICATIONS]

²[Publication of applications. ³[(1) Save as otherwise provided, no application for patent shall ordinarily be open to the public for such period as may be prescribed.

(2) The applicant may, in the prescribed manner, request the Controller to publish his application at any time before the expiry of the period prescribed under sub-section (1) and subject to the provisions of sub-section (3), the Controller shall publish such application as soon as possible.

(3) Every application for a patent shall, on the expiry of the period specified under subsection (1), be published, except in cases where the application—

(a) in which secrecy direction is imposed under section 35; or

(b) has been abandoned under sub-section (1) of section 9; or

(c) has been withdrawn three months prior to the period specified under sub-section (1).]

(4) In case a secrecy direction has been given in respect of an application under section 35, then it shall be published after the expiry of the period ⁴[prescribed under sub-section (1)] or when the secrecy direction has creased to operate, whichever is later.

(5) The publication of every application under this section shall include the particulars of the date of application, number of application, name and address of the applicant identifying the application and an abstract.

(6) Upon publication of an application for a patent under this section—

(a) the depository institution shall make the biological material mentioned in the specification available to the public;

(b) the patent office may, on payment of such fee as may be prescribed, make the specification and drawings, if any, of such application available to the public.

⁵[(7) On and from the date of publication of the application for patent and until the date of grant of a patent in respect of such application, the applicant shall have the like privileges and rights as if a patent for the invention had been granted on the date of publication of the application:

PROVIDED that the applicant shall not be entitled to institute any proceedings for infringement until the patent has been granted:

PROVIDED FURTHER that the rights of a patentee in respect of applications made under sub-section (2) of section 5 before the 1st day of January, 2005 shall accrue from the date of grant of the patent:

PROVIDED ALSO that after a patent is granted in respect of applications made under sub-section (2) of section 5, the patent-holder shall only be entitled to receive reasonable royalty from such enterprises which have made significant investment and were producing and marketing the concerned product prior to 1-1-2005 and which continue to manufacture the product covered by the patent on the date of grant of the patent and no infringement proceedings shall be instituted against such enterprises.]

——————–

1. Substituted for “Examination of Applications” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E),dt. 20-5-2003.

2. Inserted, ibid.

3. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Substituted for “of eighteen months” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 11 B. Request for examination

¹[(1) No application for a patent shall be examined unless the applicant or any other interested person makes a request in the prescribed manner for such examination within the prescribed period.]

²[(2) xxx]

¹[(3) In case of an application in respect of a claim for a patent filed under sub-section (2) of section 5 before the 1st day of January, 2005 a request for its examination shall be made in the prescribed manner and within the prescribed period by the applicant or any other interested person.]

(4) In case the applicant or any other interested person does not make a request for examination of the application for a patent within the period as specified under sub-section (1) ³[x x x] or sub-section (3), the application shall be treated as withdrawn by the applicant:

¹[PROVIDED that—

(i) the applicant may, at any time after filing the application but before the grant of a patent, withdraw the application by making a request in the prescribed manner; and

(ii) in a case where secrecy direction has been issued under section 35, the request for examination may be made within the prescribed period from the date of revocation of the secrecy direction.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. “or sub-section (2)” omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 12. Examination of application

(1) When a request for examination has been made in respect of an application for a patent in the prescribed manner¹ [under sub-section (1) or sub-section (3) of section 11B, the application and specification and other documents related thereto shall be referred at the earliest by the Controller] to an examiner for making a report to him in respect of the following matters, namely,—

(a) whether the application and the ²[specification and other documents relating thereto] are in accordance with the requirements of this Act and of any rules made thereunder;

(b) whether there is any lawful ground of objection to the grant of the patent under this Act in pursuance of the application;

(c) the result of investigations made under section 13; and

(d) any other matter which may be prescribed.

(2) The examiner to whom the application and the ³[specification and other documents relating thereto] are referred under sub-section (1) shall ordinarily make the report to the Controller within ⁴[such period as may be prescribed].

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “specification relating thereto” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E),dt. 20-5-2003.

3. Substituted for “a period of eighteen months from the date of such reference” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Words “as the Controller may direct” omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E),dt. 20-5-2003.

Section 13. Search for anticipation by previous publication and by prior claim

(1) The examiner to whom an application for a patent is referred under section 12 shall make investigation for the purpose of ascertaining whether the invention so far as claimed in any claim of the complete specification—

(a) has been anticipated by publication before the date of filing of the applicant’s complete specification in any specification filed in pursuance of an application for a patent made in India and dated on or after the 1st day of January, 1912;

(b) is claimed in any claim of any other complete specification published on or after the date of filing of the applicant’s complete specification, being a specification filed in pursuance of an application for a patent made in India and dated before or claiming the priority date earlier than that date.

(2) The examiner shall, in addition, make an investigation [x x x] for the purpose of ascertaining, whether the invention, so far as claimed in any claim of the complete specification, has been anticipated by publication in India or elsewhere in any document other than those mentioned in sub-section (1) before the date of filing of the applicant’s complete specification.

(3) Where a complete specification is amended under the provisions of this Act before ¹[the grant of a patent], the amended specification shall be examined and investigated in like manner as the original specification.

(4) The examination and investigations required under section 12 and this section shall not be deemed in any way to warrant the validity of any patent, and no liability shall be incurred by the Central Government or any officer thereof by reason of, or in connection with, any such examination or investigation or any report or other proceedings consequent thereon.

S

Prior registration of patent in another country prima facie constitutes prior publication and is liable to be rejected.—Lintech Electronics (P) Ltd. v. Marvel Engineering Co. 1995 (35) DRJ 11

——————–

1. Substituted for “it has been accepted” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 14. Consideration of the report of examiner by Controller

¹[Consideration of the report of examiner by Controller. Where, in respect of an application for a patent, the report of the examiner received by the Controller is adverse to the applicant or requires any amendment of the application, the specification or other documents to ensure compliance with the provisions of this Act or of the rules made thereunder, the Controller, before proceeding to dispose of the application in accordance with the provisions hereinafter appearing, shall communicate as expeditiously as possible the gist of the objections to the applicant and shall, if so required by the applicant within the prescribed period, give him an opportunity of being heard.

——————–

1. Substituted for existing sections 14 and 15 by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 15. Power of Controller to refuse or require amended applications, etc., in certain cases

Where the Controller is satisfied that the application or any specification or any other document filed in pursuance thereof does not comply with the requirements of this Act or of any rules made thereunder, the Controller may refuse the application or may require the application, specification or the other documents, as the case may be, to be amended to his satisfaction before he proceeds with the application and refuse the application on failure to do so.]

Section 16. Power of Controller to make orders respecting division of application

(1) A person who has made an application for a patent under this Act may, at any time ¹[before the grant of the patent], if he so desires, or with a view to remedy the objection raised by the Controller on the ground that the claims of the complete specification relate to more than one invention, file a further application in respect of an invention disclosed in the provisional or complete specification already filed in respect of the first-mentioned application.

(2) The further application under sub-section (1) shall be accompanied by a complete specification but such complete specification shall not include any matter not in substance disclosed in the complete specification filed in pursuance of the first-mentioned application.

(3) The Controller may require such amendment of the complete specification filed in pursuance of either the original or the further application as may be necessary to ensure that neither of the said complete specification includes a claim for any matter claimed in the other.

²[Explanation: For the purposes of this Act, the further application and the complete specification accompanying it shall be deemed to have been filed on the date on which the first mentioned application had been filed, and the further application shall be proceeded with as a substantive application and be examined when the request for examination is filed within the prescribed period.]

——————–

1. Substituted for “before the acceptance of the complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by the Patents (Amdt.) Act. 2005, w.e.f. 1-1-2005.

Section 17. Power of Controller to make orders respecting dating of application

(1) Subject to the provisions of section 9, at any time after the filing of an application and ¹[before the grant of the patent] under this Act, the Controller may, at the request of the applicant made in the prescribed manner, direct that the application shall be post-dated to such date as may be specified in the request, and proceed with the application accordingly:

PROVIDED that no application shall be post-dated under this sub-section to a date later than six months from the date on which it was actually made or would, but for the provisions of this sub-section, be deemed to have been made..

²[(2) Where an application or specification (including drawings) or any other document is required to be amended under section 15, the application or specification or other document shall, if the Controller so directs, be deemed to have been made on the date on which the requirement is complied with or where the application or specification or other document is returned to the applicant on the date on which it is re-filed after complying with the requirement.]

——————–

1. Substituted for “before acceptance of the complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

Section 18. Powers of Controller in cases of anticipation

(1) Where it appears to the Controller that the invention so far as claimed in any claim of the complete specification has been anticipated in the manner referred to in clause (a) of subsection (1) or sub-section (2) of section 13, he may refuse ¹[the application] unless the applicant —

(a) shows to the satisfaction of the Controller that the priority date of the claim of his complete specification is not later than the date on which the relevant document was published; or

(b) amends his complete specification to the satisfaction of the Controller.

(2) If it appears to the Controller that the invention is claimed in a claim of any other complete specification referred to in clause (b) of sub-section (1) of section 13, he may, subject to the provisions hereinafter contained, direct that a reference to that other specification shall be inserted by way of notice to the public in the applicant’s complete specification unless within such time as may be prescribed—

(a) the applicant shows to the satisfaction of the Controller that the priority date of his claim is not later than the priority date of the claim of the said other specification; or

(b) the complete specification is amended to the satisfaction of the Controller;

(3) If it appears to the Controller, as a result of an investigation under section 13 or otherwise —

(a) that the invention so far as claimed in any claim of the applicant’s complete specification has been claimed in any other complete specification referred to in clause (a) of sub-section (1) of section 13; and

(b) that such other complete specification was published on or after the priority date of the applicant’s claim, then, unless it is shown to the satisfaction of the Controller that the priority date of the applicant’s claim is not later than the priority date of the claim of that specification, the provisions of sub-section (2) shall apply thereto in the same manner as they apply to a specification published on or after the date of filing of the applicant’s complete specification.

²[(4) xxx]

——————–

1. Substituted for “to accept the complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 19. Powers of Controller in case of potential infringement

(1) If, in consequence of the investigation required ¹[under this Act] it appears to the Controller that an invention in respect of which an application for a patent has been made cannot be performed without substantial risk of infringement of a claim of any other patent, he may direct that a reference to that other patent shall be inserted in the applicant’s complete specification by way of notice to the public, unless within such time as may be prescribed—

(a) the applicant shows to the satisfaction of the Controller that there are reasonable grounds for contesting the validity of the said claim of the other patent; or

(b) the complete specification is amended to the satisfaction of the Controller.

(2) Where, after a reference to another patent has been inserted in a complete specification in pursuance of a direction under sub-section (1)—

(a) that other patent is revoked or otherwise ceases to be in force; or

(b) the specification of that other patent is amended by the deletion of the relevant claim; or

(c) it is found, in proceedings before the court of the Controller, that the relevant claim of that other patent is invalid or is not infringed by any working of the applicant’s invention.

the Controller may, on the application of the applicant, delete the reference to that other patent.

——————–

1. Substituted for “by the foregoing provisions of this Act or of proceedings under section 25″ by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 20. Powers of Controller to make orders regarding substitution of applicants, etc.

(1) If the Controller is satisfied on a claim made in the prescribed manner at any time before a patent has been granted, that by virtue of any assignment or agreement in writing made by the applicant or one of the applicants for the patent or by operation of law, the claimant would, if the patent were then granted, be entitled thereto or to the interest of the applicant therein, or to an undivided share of the patent or of that interest, the Controller may, subject to the provisions of this section, direct that the application shall proceed in the name of the claimant or in the names of the claimants and the applicant or the other joint applicant or applicants, accordingly as the case may require.

(2) No such direction as aforesaid shall be given by virtue of any assignment or agreement made by one of two or more joint applicants for a patent except with the consent of the other joint applicant or applicants.

(3) No such direction as aforesaid shall be given by virtue of any assignment or agreement for the assignment of the benefit of an invention unless—

(a) the invention is identified therein by reference to the number of the application for the patent; or

(b) there is produced to the Controller an acknowledgment by the person by whom the assignment or agreement was made that the assignment or agreement relates to the invention in respect of which that application is made; or

(c) the rights of the claimant in respect of the invention have been finally established by the decision of a court; or

(d) the Controller gives directions for enabling the application to proceed or for regulating the manner in which it should be proceeded with under sub-section (5).

(4) Where one of two or more joint applicants for a patent dies at any time before the patent has been granted, the Controller may, upon a request in that behalf made by the survivor or survivors and with the consent of the legal representative of the deceased, direct that the application shall proceed in the name of the survivor or survivors alone.

(5) If any dispute arises between joint applicants for a patent whether or in what manner the application should be proceeded with, the Controller; may, upon application made to him in the prescribed manner by any of the parties, and after giving to all parties concerned an opportunity to be heard, give such directions as he thinks fit for enabling the application to proceed in the name of one or more of the parties alone or for regulating the manner in which it should be proceeded with, or for both those purposes, as the case may require.

Section 21. Time for putting application in order for grant

¹[Time for putting application in order for grant. (1) An application for a patent shall be deemed to have been abandoned unless, within such period as may be prescribed, the applicant has complied with all the requirements imposed on him by or under this Act, whether in connection with the complete specification or otherwise in relation to the application from the date on which the first statement of objections to the application or complete specification or other documents related thereto is forwarded to the applicant by the Controller.

Explanation : Where the application for a patent or any specification or, in the case of a convention application or an application filed under the Patent Cooperation Treaty designating India any document filed as part of the application has been returned to the applicant by the Controller in the course of the proceedings, the applicant shall not be deemed to have complied with such requirements unless and until he has refiled it or the applicant proves to the satisfaction of the Controller that for the reasons beyond his control such document could not be re-filed.

(2) If at the expiration of the period as prescribed under sub-section (1),—

(a) an appeal to the High Court is pending in respect of the application for the patent for the main invention; or

(b) in the case of an application for a patent of addition, an appeal to the High Court is pending in respect of either that application or the application for the main invention, the time within which the requirements of the Controller shall be complied with shall, on an application made by the applicant before the expiration of the period as prescribed under sub-section (1), be extended until such date as the High Court may determine.

(3) If the time within which the appeal mentioned in sub-section (2) may be instituted has not expired, the Controller may extend the period as prescribed under sub-section (1), to such further period as he may determine:

PROVIDED that if an appeal has been filed during the said further period, and the High Court has granted any extension of time for complying with the requirements of the Controller, then the requirements may be complied with within the time granted by the Court.]

——————-

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 22. OMITTED

¹[xxx]

——————–

1. Sections 22 to 24 omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 23. OMITTED

¹[xxx]

——————–

1. Sections 22 to 24 omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 24. OMITTED

¹[xxx]

——————–

1. Sections 22 to 24 omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Chapter V – [Opposition Proceedings to Grant of Patents]

Section 25. Opposition to the patent

¹[x x x]

²[OPPOSITION PROCEEDINGS TO GRANT OF PATENTS]

³[Opposition to the patent. (1) Where an application for a patent has been published but a patent has not been granted, any person may, in writing, represent by way of opposition to the Controller against the grant of patent on the ground—

(a) that the applicant for the patent or the person under or through whom he’ claims, wrongfully obtained the invention or any part thereof from him or from a person under or through whom he claims;

(b) that the invention so far as claimed in any claim of the complete specification has been published before the priority date of the claim—

(i) in any specification filed in pursuance of an application for a patent made in India on or after the 1st day of January 1912; or

(ii) in India or elsewhere, in any other document:

PROVIDED that the ground specified in sub-clause (ii) shall not be available where such publication does not constitute an anticipation of the invention by virtue of sub-section (2) or sub-section (3) of section 29;

(c) that the invention so far as claimed in any claim of the complete specification is claimed in a claim of a complete specification published on or after the priority date of the applicant’s claim and filed in pursuance of an application for a patent in India, being a claim of which the priority date is earlier than that of the applicant’s claim;

(d) that the invention so far as claimed in any claim of the complete specification was publicly known or publicly used in India before the priority date of that claim.

Explanation : For the purposes of this clause, an invention relating to a process for which a patent is claimed shall be deemed to have been publicly known or publicly used in India before the priority date of the claim if a product made by that process had already been imported into India before }., that date except where such importation has been for the purpose of reasonable trial or experiment only;

(e) that the invention so far as claimed in any claim of the complete specification is obvious and clearly does not involve any inventive step, having regard to the matter published as mentioned in clause (b) or having regard to what : was used in India before the priority date of the applicant’s claim;

(f) that the subject of any claim of the complete specification is not an invention within the meaning of this Act, or is not patentable under this Act; .

(g) that the complete specification does not sufficiently and clearly describe the invention or the method by which it is to be performed;

(h) that the applicant has failed to disclose to the Controller the information required by section 8 or has furnished the information which in any material particular was false to his knowledge;

(i) that in the case of convention application, the application was not made within twelve months from the date of the first application for protection for the invention made in a convention country by the applicant or a person from whom he derives title;

(j) that the complete specification does not disclose or wrongly mentions the source or geographical origin of biological material used for the invention;

(k) that the invention so far as claimed in any claim of the complete specification is anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere, but on no other ground and the Controller shall, if requested by such person for being heard, hear him and dispose of such representation in such manner and within such period as may be prescribed.

(2) At any time after the grant of patent but before the expiry of a period of one year from the date of publication of grant of a patent, any person interested may give notice of opposition to the Controller in the prescribed manner on any of the following grounds, namely:—

(a) that the patentee or the person under or through whom the claims, wrongfully obtained the invention or any part thereof from him or from a person under or through whom he claims;

(b) that the invention so far as claimed in any claim of the complete specification has been published before the priority date of the claim—

(i) in any specification filed in pursuance of an application for a patent made in India on or after the 1st day of January, 1912; or

(ii) in India or elsewhere, in any other document:

PROVIDED that the ground specified in sub-clause (ii) shall not be available where such publication does not constitute an anticipation of the invention by virtue of subsection (2) or sub-section (3) of section 29;

(c) that the invention so far as claimed in any claim of the complete specification is claimed in a claim of a complete specification published on or after the priority date of the claim of the patentee and filed in pursuance of an application for patent in India, being a claim of which the priority date is earlier than that of the claim of the patentee;

(d) that the invention so far as claimed in any claim of the complete specification was publicly known or publicly used in India before the priority date of that claim.

Explanation : For the purposes of this clause, an invention relating to a process for which a patent is granted shall be deemed to have been publicly known or publicly used in India before the priority date of the claim if a product made by that process had already been imported into India before that date except where such importation has been for the purpose of reasonable trial or experiment only;

(e) that the invention so far as claimed in any claim of the complete specification is obvious and clearly does not involve any inventive step, having regard to the matter published as mentioned in clause (b) or having regard to what was used in India before the priority date of the claim;

(f) that the subject of any claim of the complete specification is not an invention within the meaning of this Act, or is not patentable under this Act;

(g) that the complete specification does not sufficiently and clearly describe the invention or the method by which it is to be performed;

(h) that the patentee has failed to disclose to the Controller the information required by section 8 or has furnished the information which in any material particular was false to his knowledge;

(i) that in the case of a patent granted on convention application, the application for patent was not made within twelve months from the date of the first application for protection for the invention made in a convention country or in India by the patentee or a person from whom he derives title;

(j) that the complete specification does not disclose or wrongly mentions the source and geographical origin of biological material used for the invention;

(k) that the invention so far as claimed in any claim of the complete specification was anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere but on no other ground.

(3)(a) Where any such notice of opposition is duly given under sub-section (2), the Controller shall notify the patentee.

(b) On receipt of such notice of opposition, the Controller shall, by order in writing, constitute a Board to be known as the Opposition Board consisting of such officers as he may determine and refer such notice of opposition along with the documents to that Board for examination and submission of its recommendations to the Controller.

(c) Every Opposition Board constituted under clause (b) shall conduct the : examination in accordance with such procedure as may be prescribed.

(4) On receipt of the recommendation of the Opposition Board and after giving the patentee and the opponent an opportunity of being heard, the Controller shall order either to maintain or to amend or to revoke the patent.

(5) While passing an order under sub-section (4) in respect of the ground mentioned in clause (d) or clause (e) of sub-section (2), the Controller shall not take into account any personal document or secret trial or secret use.

(6) In case the Controller issues an order under sub-section (4) that the patent shall be maintained subject to amendment of the specification or any other document, the patent shall stand amended accordingly.

——————–

1. Chapter IVA containing sections 24A to 24F omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “OPPOSITION TO GRANT OF PATENT” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Existing sections 25 and 26 substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 26. In cases of “obtaining” Controller may treat the patent as the patent of opponent

(1) Where in any opposition proceeding under this Act the Controller finds that—

(a) the invention, so far as claimed in any claim of the complete specification, was obtained from the opponent in the manner set out in clause (a) of sub-section (2) of section 25 and revokes the patent on that ground, he may, on request by such opponent made in the prescribed manner, direct that the patent shall stand amended in the name of the opponent;

(b) a part of an invention described in the complete specification was so obtained from the opponent, he may pass an order requiring that the specification be amended by the exclusion of that part of the invention.

(2) Where an opponent has, before the date of the order of the Controller requiring the amendment of a complete specification referred to in clause (b) of sub-section (1), filed an application for a patent for an invention which included the whole or a part of the invention held to have been obtained from him and such application is pending, the Controller may treat such application and specification insofar as they relate to the invention held to have been obtained from him, as having been filed, for the purposes of this Act relating to the priority dates of claims of the complete specification, on the date on which the corresponding document was or was deemed to have been filed by the patentee in the earlier application but for all other purposes the application of the opponent shall be proceeded with as an application for a patent under this Act.]

Section 27. [xxx]

¹[x x x]

——————–

1. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 28. Mention of inventor as such in patent

(1) If the controller is satisfied, upon a request or claim made in accordance with the provisions of this section—

(a) that the person in respect of or by whom the request or claim is made is the’ inventor of an invention in respect of which application for a patent has been made, or of a substantial part of that invention; and

(b) that the application for the patent is a direct consequence of his being the inventor, the Controller shall, subject to the provisions of this section, cause him to be mentioned as inventor in any patent granted in pursuance of the application in the complete specification and in the register of patents:

PROVIDED that the mention of any person as inventor under this section shall not confer or derogate from any rights under the patent.

(2) A request that any person shall be mentioned as aforesaid may be made in the prescribed manner by the applicant for the patent or (where the person alleged to be the inventor is not the applicant or one of the applicants) by the applicant and that person.

(3) If any person [other than a person in respect of whom a request in relation to the application in question has been made under sub-section (2),] desires to be mentioned as aforesaid, he may make a claim in the prescribed manner in that behalf.

²[(4) A request or claim under the foregoing provisions of this section shall be made before the grant of patent.]

¹[(5) xxx]

(6) ³[Where] a claim is made under sub-section (3), the Controller shall give notice of the claim to every applicant for the patent (not being the claimant) and to any other person whom the Controller may consider to be interested; and before deciding upon any request or claim made under sub-section (2) or sub-section (3), the Controller shall, if required, hear the person in respect of or by whom the request or claim is made, and, in the case of a claim under sub-section (3), any person to whom notice of the claim has been given as aforesaid.

(7) Where any person has been mentioned as inventor in pursuance of this section, any other person who alleges that he ought not to have been so mentioned may at any time apply to the Controller for a certificate to that effect, and the Controller may, after hearing, if required, any person whom he may consider to be interested, issue such a certificate, and if he does so, he shall rectify the specification and the register accordingly.

——————–

1. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “Subject to the provisions of sub-section (5), where” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Chapter VI – Anticipation

Section 29. Anticipation by previous publication

(1) An invention claimed in a complete specification shall not be deemed to have been ant.; cipated by reason only that the invention was published in a specification filed in pursuance of an application for a patent made in India and dated before the 1st day of January, 1912.

(2) Subject as hereinafter provided, an invention claimed in a complete specification shall not be deemed to have been anticipated by reason only that the invention was published before the priority date of the relevant claim of the specification, if the patentee or the applicant for the patent proves—

(a) that the matter published was obtained from him, or (where he is not himself the true and first inventor) from any person from whom he derives title and was published without his consent or the consent of any such person; and

(b) where the patentee or the applicant for the patent or any person from whom he derives title learned of the publication before the date of the application for the patent, or in the case of a convention application, before the date of the application for protection in a convention country, that the application or the application in the convention country, as the case may be, was made as soon, as reasonably practicable thereafter:

PROVIDED that this sub-section shall not apply if the invention was before the priority date of the claim commercially worked in India, otherwise than for the purpose of reasonable trial, either by the patentee or the applicant for the patent or any person from whom he derives title or by any other person with the consent of the patentee or the applicant for the patent or any person from whom he derives title.

(3) Where a complete specification is filed in pursuance of an application for a patent made by a person being the true and first inventor or deriving title from him, an invention claimed in that specification shall not be deemed to have been anticipated by reason only of any other application for a patent in respect of the same invention made in contravention of the rights of that person, or by reason only that after the date of filing of that other application the invention was used or published, without the consent of that person, by the applicant in respect of that other application, or by any other person in consequence of any disclosure of any invention by that applicant.

Section 30. Anticipation by previous communication to government

An invention claimed in a complete specification shall not be deemed to have been anticipated by reason only of the communication of the invention to the government or to any person authorised by the government to investigate the invention or its merits, or of anything done, in consequence of such a communication, for the purpose of the investigation.

Section 31. Anticipation by public display, etc.

An invention claimed in a complete specification shall not be deemed to have been anticipated by reason only of—

(a) the display of the invention with the consent of the true and first inventor or a person deriving title from him at an industrial or other exhibition to which the provisions of this section have been extended by the Central Government by notification, in the Official Gazette, or the use thereof with his consent for the purpose of such an exhibition in the place where it is held; or

(b) the publication of any description of the invention in consequence of the display or use of the invention at any such exhibition as aforesaid; or

(c) the use of the invention, after it has been displayed or used at any such exhibition as aforesaid and during the period of the exhibition, by any person without the consent of the true and first inventor or a person deriving title from him; or

(d) the description of the invention in a paper read by the true and first inventor before a learned society or published with his consent in the transactions of such a society, if the application for the patent is made by the true and first inventor or a person deriving title from him ¹[not later than twelve months] after the opening of the exhibition or the reading or publication of the paper, as the case may be.

———————

1. Substituted for “not later than six months” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 32. Anticipation by public working

An invention claimed in a complete specification shall not be deemed to have been anticipated by reason only that at any time within one year before the priority date of the relevant claim of the specification, the invention was publicly worked in India—

(a) by the patentee or applicant for the patent or any person from whom he derives title; or

(b) by any other person with the consent of the patentee or applicant for the patent or any person from whom he derives title, if the working was effected for the purpose of reasonable trial only and if it was reasonably necessary, having regard to the nature of the invention, that the working for that purpose should be effected in public.

Section 33. Anticipation by use and publication after provisional specification

(1) Where a complete specification is filed or proceeded with in pursuance of an application which was accompanied by a provisional specification or where a complete specification filed along with an application is treated by virtue of a direction under sub-section (3) of section 9 as a provisional specification, then, notwithstanding anything contained in this Act, the Controller shall not refuse to grant the patent, and the patent shall not be revoked or invalidated, by reason only that any matter described in the provisional specification or in the specification treated as aforesaid as a provisional specification was used in India or published in India or elsewhere at any time after the date of the filing of that specification.

(2) Where a complete specification is filed in pursuance of a convention application, then, notwithstanding anything contained in this Act, the Controller shall not refuse to grant the patent, and the patent shall not be revoked or invalidated, by reason only that any matter disclosed in any application for protection in a convention country upon which the convention application is founded was used in India or published in India or elsewhere at any time after the date of that application for protection.

Section 34. No anticipation if circumstances are only as described in sections 29, 30, 31 and 32

Notwithstanding anything contained in this Act, the Controller shall not refuse ¹[x x x] to grant a patent, and a patent shall not be revoked or invalidated by reason only of any circumstances which, by virtue of section 29 or section 30 or section 31 or section 32 do not constitute an anticipation of the invention claimed in the specification.

——————–

1. Words “to accept complete specification for a patent or” omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Chapter VII – Provisions for Secrecy of Certain Inventions

Section 35. Secrecy directions relating to inventions relevant for defence purposes

(1) Where, in respect of an application made before or after the commencement of this Act for a patent, it appears to the Controller that the invention is one of a class notified to him by the Central Government as relevant for defence purposes, or, where otherwise the invention appears to him to be so relevant, he may give directions for prohibiting or restricting the publication of information with respect to the invention or the communication of such information ¹[xxx].

(2) Where the Controller gives any such directions as are referred to in sub-section (1), he shall give notice of the application and of the directions to the Central Government, and the Central Government shall, upon receipt of such notice, consider whether the publication of the invention would be prejudicial to the defence of India, and if upon such consideration, it appears to it that the publication of the invention would not so prejudice, give notice to the Controller to that effect, who shall thereupon revoke the directions and notify the applicant accordingly.

(3) Without prejudice to the provisions contained in sub-section (1), where the Central Government is of opinion that an invention in respect of which the Controller has not given any directions under sub-section (1), is relevant for defence purposes, it may at any time before ²[grant of patent] notify the Controller to that effect, and thereupon the provisions of that subsection shall apply as if the invention were one of the class notified by the Central Government of the directions issued by him.

——————–

1. Words “to any person or class of persons specified in the directions” omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

2. Substituted for “acceptance of the complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 36. Secrecy directions to be periodically reviewed

¹[(1) The question whether an invention in respect of which directions have been given under section 35 continues to be relevant for defence purposes shall be re-considered by the Central Government at intervals of ²[six] months or on a request made by the applicant which is found to be reasonable by the Controller, and if, on such re-consideration, it appears to the Central Government that the publication of the invention would no longer be prejudicial to the defence of India or in case of an application filed by a foreign applicant it is found that the invention is published outside India it shall forthwith give notice to the Controller to revoke the direction and the Controller shall thereupon revoke the directions previously given by him.]

(2) The result of every re-consideration under sub-section (1), shall be communicated to the applicant within such time and in such manner as may be prescribed.

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

2. Substituted for “twelve” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 37. Consequences of secrecy directions

(1) So long as any directions under section 35 are in force in respect of an application—

(a) the Controller shall not pass an order refusing ¹[to grant] the same; and

(b) notwithstanding anything contained in this Act, no appeal shall lie from any order of the Controller passed in respect thereof:

²[PROVIDED that the application may, subject to the directions, proceed upto the stage of grant of the patent, but the application and the specification found to be in order for grant of the patent shall not be published, and no patent shall be granted in pursuance of that application.]

(2) Where a complete specification filed in pursuance of an application for a patent for an invention in respect of which directions have been given under section 35 ³[is found to be in order for grant of the patent] during the continuance in force of the directions, then—

(a) if, during the continuance in force of the directions; any use of the invention is made by or on behalf of, or to the order of the government, the provisions of sections 100,101 and 103 shall apply in relation to that use as if the patent had been granted for the invention; and

(b) if it appears to the Central Government that the applicant for the patent has suffered hardship by reason of the continuance in force of the directions the Central Government may make to him such payment (if any) by way of solatium as appears to the Central Government to be reasonable having regard to the novelty and utility of the invention and the purpose for which it is designed, and to any other relevant circumstances.

(3) Where a patent is granted in pursuance of an application in respect of which directions have been given under section 35, no renewal fee shall be payable in respect of any period during which those directions were in force.

——————–

1. Substituted for “to accept” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “is accepted” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 38. Revocation of secrecy directions and extension of time

When any direction given under section 35 is revoked by the Controller, then, notwithstanding any provisions of this Act specifying the time within which any step should be taken or any act done in connection with an application for the patent, the Controller may, subject to such conditions, if any, as he thinks fit to impose, extend the time for doing anything required to be done by or under this Act in connection with the application, whether or not that time has previously expired.

Section 39. Residents not to apply for patents outside India without prior permission

¹[Residents not to apply for patents outside India without prior permission. (1) No person resident in India shall, except under the authority of a written permit sought in the manner prescribed and granted by or on behalf of the Controller, make or cause to be made any application outside India for the grant of a patent for an invention unless—

(a) an application for a patent for the same invention has been made in India, not less than six weeks before the application outside India; and

(b) either no direction has been given under sub-section (1) of section 35 in relation to the application in India, or all such directions have been revoked.

(2) The Controller shall dispose of every such application within such period as may be prescribed:

PROVIDED that if the invention is relevant for defence purpose or atomic energy, the Controller shall not grant permit without the prior consent of the Central Government.

(3) This section shall not apply in relation to an invention for which an application for protection has first been filed in a country outside India by a person resident outside India.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 40. Liability for contravention of section 35 or section 39

Without prejudice to the provisions contained in Chapter XX, if in respect of an application for a patent any person contravenes any direction as to secrecy given by the Controller under section 35, or makes or causes to be made an application for grant of a patent outside India in contravention of section 39 the application for patent under this Act shall be deemed to have been abandoned and the patent granted, if any, shall be liable to be revoked under section 64.

Section 41. Finality of orders of Controller and Central Government

All orders of the Controller giving directions as to secrecy as well as all orders of the Central Government under this Chapter shall be final and shall not be called in question in any court on any ground whatsoever.

Section 42. Saving respecting disclosure to government

Nothing in this Act shall be held to prevent the disclosure by the Controller of information concerning an application for a patent or a specification filed in pursuance thereof to the Central Government for the purpose of the application or specification being examined for considering whether an order under this Chapter should be made or whether an order so made should be revoked.

Chapter VIII – [Grant of Patents and Rights Conferred Thereby]

Section 43. Grant of patents

¹[GRANT OF PATENTS AND RIGHTS CONFERRED THEREBY]

²[Grant of patents. (1) Where an application for a patent has been found to be in order for grant of the patent and either—

(a) the application has not been refused by the Controller by virtue of any power vested in him by this Act; or

(b) the application has not been found to be in contravention of any of the provisions of this Act,the patent shall be granted as expeditiously as possible to the applicant or, in the case of a joint application, to the applicants jointly, with the seal of the patent office and the date on which the patent is granted shall be entered in the register.

(2) On the grant of patent, the Controller shall publish the fact that the patent has been granted and thereupon the application, specification and other documents related thereto shall be open for public inspection.]

——————–

1. Substituted for “GRANT AND SEALING OF PATENTS AND RIGHTS CONFERRED THEREBY” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 44. Amendment of patent granted to deceased applicant

Where, at any time after a patent has been ¹[granted] in pursuance of an application under this Act, the Controller is satisfied that the person to whom the patent was granted had died, or, in the case of a body corporate, had ceased to exist, before the patent was ¹[granted], the Controller may amend the patent by substituting for the name of that person the name of the person to whom the patent ought to have been granted, and the patent shall be deemed always to have had effect, accordingly.

——————–

1. Substituted for “sealed” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 45. Date of patent

¹[(1) Subject to the other provisions contained in this Act, every patent shall be dated as of the date on which the application for patent was filed.]

(2) The date of every patent be entered in the register.

(3) Notwithstanding anything contained in this section, no suit or other proceeding shall be commenced or prosecuted in respect of an infringement committed before ²[the date of publication of the application].

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted for “the date of advertisement of the acceptance of the complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 46. Form, extent and effect of patent

(1) Every patent shall be in the prescribed form and shall have effect throughout India.

(2) A patent shall be granted for one invention only:

PROVIDED that it shall not be competent for any person in a suit or other proceeding to take any objection to a patent on the ground that it has been granted for more than one invention.

Section 47. Grant of patents to be subject to certain conditions

The grant of a patent under this Act shall be subject to the condition that—

(1) any machine, apparatus or other article in respect of which the patent is granted or any article made by using a process in respect of which the patent is granted, may be imported or made by or on behalf of the government for the purpose merely of its own use;

(2) any process in respect of which the patent is granted may be used by or on behalf of the government for the purpose merely of its own use;

(3) any machine, apparatus or other article in respect of which the patent is granted or any article made by the use of the process in respect of which the patent is granted, may be made or used, and any process in respect of which the patent is granted may be used, by any person, for the purpose merely of experiment or research including the imparting of instructions to pupils; and

(4) in the case of a patent in respect of any medicine or drug, the medicine or drug may be imported by the government for the purpose merely of its own use or for distribution in any dispensary, hospital or other medical institution maintained by or on behalf of the government or any other dispensary, hospital or medical institution which the Central Government may, having regard to the public service that such dispensary, hospital or medical institution renders, specify in this behalf by notification in the Official Gazette.

Section 48. Rights of patentees

¹[Rights of patentees. Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted under this Act shall confer upon the patentee—

(a) where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India:

(b) where the subject matter of the patent is a process the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that process in India:

²[x x x]

——————–

1. Substituted by the Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide SO 561(E), dt. 20-5-2003.

2. Proviso omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 49. Patent rights not infringed when used on foreign vessels, etc. temporarily or accidentally in India

Patent rights not infringed when used on foreign vessels, etc. temporarily or accidentally in India. (1) Where a vessel or aircraft registered in a foreign country or a land vehicle owned by a person ordinarily resident in such country comes into India (including the territorial waters thereof) temporarily or accidentally only, the rights conferred by a patent for an invention shall not be deemed to be infringed by the use of the invention—

(a) in the body of the vessel or in the machinery, tackle, apparatus or other – accessories thereof, so far as the invention is used on board the vessel and for its actual needs only; or

(b) in the construction or working of the aircraft or land vehicle or of the accessories thereof, as the case may be.

(2) This section shall not extend to vessels, aircraft or land vehicles owned by persons ordinarily resident in a foreign country the law of which do not confer corresponding rights with respect to the use of inventions in vessels, aircraft or land vehicles owned by persons ordinarily resident in India while in the ports or within the territorial waters of that foreign country or otherwise within the jurisdiction of its courts.

Section 50. Rights of co-owners of patents

(1) Where a patent is granted to two or more persons, each of those persons shall, unless an agreement to the contrary is in force, be entitled to an equal undivided share in the patent.

(2) Subject to the provisions contained in this section and in section 51, where two or more persons are registered as grantee or proprietor of a patent, then, unless an agreement to the contrary is in force, each of those persons shall be entitled, by himself or his agents, to ¹[the rights conferred by section 48] for his own benefit without accounting to the other person or persons.

(3) Subject to the provisions contained in this section and in section 51 and to any agreement for the time being in force, where two or more persons are registered as grantee or proprietor of a patent, then, a licence under the patent shall not be granted and a share in the patent shall not be assigned by one of such persons except with the consent of the other person or persons.

(4) Where a patented article is sold by one of two or more persons registered as grantee or proprietor of a patent, the purchaser and any person claiming through him shall be entitled to deal with the article in the same manner as if the article had been sold by a sole patentee.

(5) Subject to the provisions contained in this section, the rules of law applicable to the ownership and devolution of movable property generally shall apply in relation to patents, and nothing contained in sub-section (1) or sub-section (2) shall affect the mutual rights or obligations of trustees or of the legal representatives of a deceased person or their rights or obligations as such.

(6) Nothing in this section shall affect the rights of the assignees of a partial interest in a patent created before the commencement of this Act.

——————–

1. Substituted for “make, use, exercise and sell the patented invention” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003.

Section 51. Power of Controller to give directions to co-owners

(1) Where two or more persons are registered as grantee or proprietor of a patent, the Controller may, upon application made to him in the prescribed manner by any of those persons, give such directions in accordance with the application as to the sale or lease of the patent or any interest therein, the grant of licence under the patent, or the exercise of any right under section 50 in relation thereto, as he thinks fit.

(2) If any person registered as grantee or proprietor of a patent fails to execute any instrument or to do any other thing required for the carrying out of any direction given under this section within fourteen days after being requested in writing so to do by any of the other persons so registered, the Controller may upon application made.to him in the prescribed manner by any such other person give directions empowering any person to execute that instrument or to do that in the name and on behalf of the person in default.

(3) Before giving any directions in pursuance of an application under this section, the Controller shall give an opportunity to be heard—

(a) in the case of an application under sub-section (1), to the other person or persons registered as grantee or proprietor of the patent;

(b) in the case of an application under sub-section (2), to the person in default.

(4) No direction shall be given under this section so as to affect the mutual rights or obligations of trustees or of the legal representatives of a deceased person or of their rights or obligations as such, or which is inconsistent with the terms of any agreement between persons registered as grantee or proprietor of the patent.

Section 52. Grant of patent to true and first inventor where it has been obtained by another in fraud of him

(1) ¹[Where the patent has been revoked under section 64] on the ground that the patent was obtained wrongfully and in contravention of the rights of the petitioner or any person under or through whom he claims, or, where in a petition for revocation, the ²[Appellate Board or court], instead of revoking the patent, directs the complete specification to be amended by the exclusion of a claim or claims in consequence of a finding that the invention covered by such claim or claims had been obtained from the petitioner, the ²[Appellate Board or court] may, by order passed in the same proceeding, permit the grant to the petitioner of the whole or such part of the invention which the court finds has been wrongfully obtained by the patentee, in lieu of the patent so revoked or is excluded by amendment.

(2) Where any such order is passed, the Controller shall, on request by the petitioner made in the prescribed manner grant to him—

(i) in cases where the ³[Appellate Board or court] permits the whole of the patent to be granted, a new patent bearing the same date and number as the patent revoked;

(ii) in cases where the ³[Appellate Board or court] permits a part only of the patent to be granted, a new patent for such part bearing the same date as the patent revoked and numbered in such manner as may be prescribed:

PROVIDED that the Controller may, as a condition of such grant, require the petitioner to file a new and complete specification to the satisfaction of the Controller describing and claiming that part of the invention for which the patent is to be granted.

(3) No suit shall be brought for any infringement of a patent granted under this section committed before the actual date on which such patent was granted.

——————-

1. Substituted for “Where a patent has been revoked” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “court” by the Patents (Amdt.) Act, 2005, effective date to be notified.

3. Substituted for “court” by the Patents (Amdt.) Act, 2005, effective date to be notified.

Section 53. Term of patent

¹[(1) Subject to the provisions of this Act, the term of every patent granted, after the commencement of the Patents (Amendment) Act, 2002, and the term of every patent which has not expired and has not ceased to have effect, on the date of such commencement, under this Act, shall be twenty years from the date of filing of the application for the patent.]

²[Explanation : For the purposes of this sub-section, the term of patent in case of International applications filed under the Patent Cooperation Treaty designating India, shall be twenty years from the international filing date accorded under the Patent Cooperation Treaty.]

(2) A patent shall cease to have effect notwithstanding anything therein or in this Act on the expiration of the period prescribed for the payment of any renewal fee, if that fee is not paid within the prescribed period ³[or within such extended period as may be prescribed].

⁴[(3) xxx]

⁵[(4) Notwithstanding anything contained in any other law for the time being in force, on cessation of the patent right due to non-payment of renewal fee or on the expiry of the term of patent, the subject matter covered by the said patent shall not be entitled to any protection.]

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “or within that period as extended under this section” by the Patents (Amdt) Act, 2005, w.e.f. 1-1-2005.

4. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Chapter IX – Patents of Addition

Section 54. Patents of addition

(1) Subject to the provisions contained in this section, where an application is made for a patent in respect of any improvement in or modification of an invention described or disclosed in the complete specification filed therefor (in this Act referred to as the “main invention”) and the applicant also applies or has applied for a patent for that invention or is the patentee in respect thereof, the Controller may, if the applicant so requests, grant the patent for the improvement or modification as a patent of addition.

(2) Subject to the provisions contained in this section, when an invention, being an improvement in or modification of another invention, is the subject of an independent patent and the patentee in respect of that patent is also the patentee in respect of the patent for the main invention, the Controller may, if the patentee so requests, by order, revoke the patent for the improvement or modification and grant to the patentee a patent of addition in respect thereof, bearing the same date as the date of the patent so revoked.

(3) A patent shall not be granted as a patent of addition unless the date of filing of the ¹[application] was the same as or later than the date of filing of the ¹[application] in respect of the main invention.

²[(4) A patent of addition shall not be granted before grant of the patent for the main invention.]

——————–

1. Substituted for “complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 55. Term of patents of addition

(1) A patent of addition shall be granted for a term equal to that of the patent for the main invention, or so much thereof as has not expired, and shall remain in force during that term or until the previous cesser of the patent for the main invention and no longer:

PROVIDED that if the patent for the main invention is revoked under this Act, the court, or, as the case may be, the Controller, on request made to him by the patentee in the prescribed manner, may order that the patent of addition shall become an independent patent for the remainder of the term for the patent for the main invention and thereupon the patent shall continue in force as an independent patent accordingly.

(2) No renewal fees shall be payable in respect of a patent of addition, but if any such patent becomes an independent patent under sub-section (1), the same fees shall thereafter be payable, upon the same dates, as if the patent had been originally granted as an independent patent.

Section 56. Validity of patents of addition

(1) The grant of a patent of addition shall not be refused, and a patent granted as a patent of addition shall not be revoked or invalidated, on the ground only that the invention claimed in the complete specification does not involve any inventive step having regard to any publication or use of—

(a) the main invention described in the complete specification relating thereto; or .

(b) any improvement in or modification of the main invention described in the complete specification of a patent of addition to the patent for the main invention or of an application for such a patent of addition, and the validity of a patent of addition shall not be questioned on the ground that the invention ought to have been the subject of an independent patent.

(2) For the removal of doubts it is hereby declared that in determining the novelty of the invention claimed in the complete specification filed in pursuance of an application for a patent of addition regard shall be had also to the complete specification in which the main invention is described.

Chapter X – Amendment of Applications and Specifications

Section 57. Amendment of application and specification before Controller

(1) Subject to the provisions of section 59, the Controller may, upon application made under this section in the prescribed manner by an applicant for a patent or by a patentee, allow the application for the patent or the complete specification ¹[or any document relating thereto] to be amended subject to such conditions, if any, as the Controller thinks fit:

PROVIDED that the Controller shall not pass any order allowing or refusing an application to amend an application for a patent or a specification ¹[or any document relating thereto] under this section while any suit before a court for the infringement of the patent or any proceeding before the High Court for the revocation of the patent is pending, whether the suit or proceeding commenced before or after the filing of the application to amend.

(2) Every application for leave to amend an application for a patent ²[or a complete specification or any document relating thereto] under this section shall state the nature of the proposed amendment, and shall give full particulars of the reasons for which the application is made.

³[(3) Any application for leave to amend an application for a patent or a complete specification or a document related thereto under this section made after the grant of patent and the nature of the proposed amendment may be published.]

(4) Where an application is ⁴[published] under sub-section (3), any person interested may, within the prescribed period after the ⁵[publication] thereof, give notice to the Controller of opposition thereto; and where such a notice is given within the period aforesaid, the Controller shall notify the person by whom the application under this section is made and shall give to the person and to the opponent an opportunity to be heard before he decides the case.

(5) An amendment under this section of a complete specification may be, or include, an amendment of the priority date of a claim.

³[(6) The provisions of this section shall be without prejudice to the right of an applicant for a patent to amend his specification or any other document related thereto to comply with the directions of the Controller issued before the grant of a patent.]

——————-

1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted for “or a specification”, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

3. Substituted by the Patents (Amdt.) Act, 200S, w.e.f. 1-1-2005.

4. Substituted for “advertised” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

5. Substituted for “advertisement” by the Patent (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 58. Amendment of specification before Appellate Board or High Court

¹[Amendment of specification before Appellate Board or High Court. (1) In any proceeding before the Appellate Board or the High Court for the revocation of a patent, the Appellate Board or the High Court, as the case may be, may, subject to the provisions contained in section 59, allow the patentee to amend his complete specification in such manner and subject to such terms as to costs, advertisement or otherwise, as the Appellate Board or the High Court may think fit, and if, in any proceedings for revocation, the Appellate Board or the High Court decides that the patent is invalid, it may allow the specification to be amended under this section instead of revoking the patent.

(2) Where an application for an order under this section is made to the Appellate Board or the High Court, the applicant shall give notice of the application to the Controller, and the Controller shall be entitled to appear and be heard, and shall appear if so directed by the Appellate Board or the High Court.

(3) Copies of all orders of the Appellate Board or the High Court allowing the patentee to amend the specification shall be transmitted by the Appellate Board or the High Court to the Controller who shall, on receipt thereof, cause an entry thereof and reference thereto to be made in the register.]

——————–

1. Substituted, ibid, w.e.f. the date to be notified.

Section 59. Supplementary provisions as to amendment of application or specification

¹[(l) No amendment of an application for a patent or a complete specification or any document relating thereto shall be made except by way of disclaimer, correction or explanation, and no amendment thereof shall be allowed, except for the purpose of incorporation of actual fact, and no amendment of a complete specification shall be allowed, the effect of which would be that the specification as amended would claim or describe matter not in substance disclosed or shown in the specification before the amendment, or that any claim of the specification as amended would not fall wholly within the scope of a claim of the specification before the amendment.]

²[(2) Where after the date of grant of patent any amendment of the specification or any other documents related thereto is allowed by the Controller or by the Appellate Board or the High Court, as the case may be,—

(a) the amendment shall for all purposes be deemed to form part of the specification along with other documents related thereto;

(b) the fact that the specification or any other documents related thereto has been amended shall be published as expeditiously as possible; and

(c) the right of the applicant or patentee to make amendment shall not be called in question except on the ground of fraud.]

(3) In construing the specification as amended, reference may be made to the specification as originally accepted.

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Chapter XI – Restoration of Lapsed Patents

Section 60. Applications for restoration of lapsed patents

(1) Where a patent has ceased to have effect by reason of failure to pay any renewal fee within the ¹[period prescribed under section 53 or within such period as may be allowed under sub-section (4) of section 142], the patentee or his legal representative, and where the patent was held by two or more persons jointly, then, with the leave of the Controller, one or more of them without joining the others, may, within ²[eighteen months] from the date on which the patent ceased to have effect, make an application for the restoration of the patent.

[Omitted by Patents (Arndt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003]

(3) An application under this section shall contain a statement, verified in the prescribed manner, fully setting out the circumstances which led to the failure to pay the prescribed fee, and the Controller may require from the applicant such further evidence as he may think necessary.

——————–

1. Substituted for “prescribed period or within that period as extended under sub-section (3) of section53″ by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “one year” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 61. Procedure for disposal of applications for restoration of lapsed patents

(1) If, alter hearing the applicant in cases where the applicant so desires or the Controller thinks fit, the Controller is prima facie satisfied that the failure to pay the renewal fee was unintentional and that there has been no undue delay in the making of the application, he shall ¹[ublish] the application in the prescribed manner; and within the prescribed period any person interested may give notice to the Controller of opposition thereto on either or both of the following grounds, that is to say—

(a) that the failure to pay the renewal fee was not unintentional; or ;

(b) that there has been undue delay in the making of the application.

(2) If notice of opposition is given within the period aforesaid, the Controller shall notify the applicant and shall give to him and to the opponent an opportunity to be heard before he decides the case.

(3) If no notice of opposition is given within the period aforesaid or if in the case of opposition, the decision of the Controller is in favour of the applicant, the Controller shall, upon payment of any unpaid renewal fee and such additional fee as may be prescribed, restore the patent and any patent of addition specified in the application which has ceased to have effect on the cesser, of that patent.

(4) The Controller may, if he thinks fit, as a condition of restoring the patent, require that an entry shall be made in the register of any document or matter which, under the provisions of this Act, has to be entered in the register but which has not been so entered.

——————–

1. Substituted for “advertise” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 62. Rights of patentees of lapsed patents which have been restored

(1) Where a patent is restored, the rights of the patentee shall be subject to such provisions as may be prescribed and to such other provisions as the Controller thinks fit to impose for the protection or compensation of persons who may have begun to avail themselves of, or have taken definite steps by contract or otherwise to avail themselves of, the patented invention between the date when the patent ceased to have effect and the date of the ¹[publication] of the application for restoration of the patent under this chapter.

(2) No suit or other proceeding shall be commenced or prosecuted in respect of an infringement of a patent committed between the date on which the patent ceased to have effect and the date of ¹[publication] of the application for restoration of the patent.

——————–

1. Substituted for “advertisement” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Chapter XII – Surrender and Revocation of Patents

Section 63. Surrender of patents

(1) A patentee may, at any time by giving notice in the prescribed manner to the Controller, offer to surrender his patent.

(2) Where such an offer is made, the Controller shall ¹[publish] the offer in the prescribed manner, and also notify every person other than the patentee whose name appears in the register as having an interest in the patent.

(3) Any person interested may, within the prescribed period after such ²[publi-cation], give notice to the Controller of opposition to the surrender, and where any such notice is given the Controller shall notify the patentee.

(4) If the Controller is satisfied after hearing the patentee and any opponent, if desirous of being heard, that the patent may properly be surrendered, he may accept the offer and, by order, revoke the patent.

——————–

1. Substituted for “advertise” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “advertisement” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 64. Revocation of patents

(1) Subject to the provisions contained in this Act, a patent, whether granted before or after the commencement of this Act, may, ¹[be revoked on a petition of any person interested or of the Central Government by the Appellate Board or on a counterclaim in a suit for infringement of the patent by the High Court] on any of the following grounds, that is to say—

(a) that the invention, so far as claimed in any claim of the complete specification, was claimed in a valid claim of earlier priority date contained in the complete specification of another patent granted in India;

(b) that the pa tent was granted on the application of a person not entitled under the provisions of this Act to apply therefor: ²[xxxx]

(c) that the patent was obtained wrongfully in contravention of the rights of the petitioner or any person under or through whom he claims;

(d) that the subject of any claim of the complete specification is not an invention within the meaning of this Act;

(e) that the invention so far as claimed in any claim of the complete specification is not new, having regard to what was publicly known or publicly used in India before the priority date of the claim or to what was published in India or elsewhere in any of the documents referred to in section 13 : ²[xxxx]

(f) that the invention so far as claimed in any claim of the complete specification is obvious or does not involve any inventive step, having regard to what was publicly known or publicly used in India or what was published in India or elsewhere before the priority date of the claim; ²[xxx]

(g) that the invention, so far as claimed in any claim of the complete specification, is not useful;

(h) that the complete specification does not sufficiently and fairly describe the invention and the method by which it is to be performed, that is to say, that the description of the method or the instructions for the working of the invention, as contained in the complete specification are not by themselves sufficient to enable a person in India possessing average skill in, and average knowledge of, the art to which the invention relates, to work the invention, or that it does not disclose the best method of performing it which was known to the applicant for the patent and for which he was entitled to claim protection;

(i) that the scope of any claim of the complete specification is not sufficiently and clearly defined or that any claim of the complete specification is not fairly, based on the matter disclosed in the specification;

(j) that the patent was obtained on a false suggestion or representation;

(k) that the subject of any claim of the complete specification is not patentable under this Act;

(l) that the invention so far as claimed in any claim of the complete specification was secretly used in India, otherwise than as mentioned in sub-section (3), before the priority date of the claim;

(m) that the applicant for the patent has failed to disclose to the Controller the information required by section 8 or has furnished information which in any material particular was false to his knowledge;

(n) that the applicant contravened any direction for secrecy passed under section 35 ³[or made or caused to be made an application for the grant of a patent outside India in contravention of section 39;]

(o) that leave to amend the complete specification under section 57 or section 58 was obtained by fraud.

³[(p) that the complete specification does not disclose or wrongly mentions the source or geographical origin of biological material used for the invention;

(q) that the invention so far as claimed in any claim of the complete specification was anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere.]’

(2) For the purposes of clauses (e) and (f) of sub-section (1),—

(a) no account shall be taken of ⁴[personal document or secret trial or secret use]; and

(b) where the patent is for a process or for a product as made by a process described or claimed, the importation into India of the product made abroad by that process shall constitute knowledge or use in India of the invention on the date of the importation, except where such importation has been for the purpose of reasonable trial or experiment only.

(3) For the purpose of clause (1) of sub-section (1), no account shall be taken of any use of the invention—

(a) for the purpose of reasonable trial or experiment only; or

(b) by the government or by any person authorised by the government or by a government undertaking, in consequence of the applicant for the patent or any person from whom he derives title having communicated or disclosed the invention directly or indirectly to the government or person authorized as aforesaid or to the government undertakings; or

(c) by any other person, in consequence of the applicant for the patent or any person from whom he derives title having communicated or disclosed the , invention, and without the consent or acquiescence of the applicant or of any person from whom he derives title.

(4) Without prejudice to the provisions contained in sub-section (1), a patent may be revoked by the High Court on the petition of the Central Government, if the High Court is satisfied that the patentee has without reasonable cause failed to comply with the request of the Central Government to make, use or exercise the patented invention for the purposes of government within the meaning of section 99 upon reasonable terms.

(5) A notice of any petition for revocation of a patent under this section shall be served on all persons appearing from the register to be proprietors of that patent or to have shares or interest therein and it shall not be necessary to serve a notice on any other person.

S

To be entitled to the grant of an ad interim injunction, the plaintiff has to show existence of a prima facie case, balance of convenience in his favour, and irreparable injury. Sec. 107 of the Act clearly provides that in any suit for injunction, every ground on which it may be revoked shall be available as a ground of defence.—Franz Zaver Huemer v. New Yesh Engineers 1996 PTC (16) (Del) 164

To satisfy the requirement of being publicly known as used in clauses (e) and (f) of s. 64(1), it is not necessary that it should be widely used to the knowledge of the consumer public. It is sufficient if it is known to the persons who are engaged in the pursuit of the knowledge of the patented product or process either as men of science or men of commerce or consumers.— Monsanto Company v. Coramandal Indag Products (P) Ltd. AIR 1986 SC 712

There is a distinction maintained as between the defence raised to a suit for infringement of a patent (vide s. 107) on the one hand and the revocation sought of a patent on the other (vide s. 64). The grounds may be the same, but still there is no inconsistency on account of the suit being defended as liable to dismissal in a particular case and a case where the defendant seeks also that the patent asserted by the plaintiff be revoked. It is only when there is a counterclaim seeking revocation of the patent that the jurisdiction of the District Court is ousted. The proviso to s. 104 being in the nature of an exception to the general rule, it has to be strictly construed. There is no express claim on the part of the defendant for revocation whereof infringement is alleged by the plaintiff. That the defendant pleads that the patent set up by the plaintiff is invalid amounts only to the defendant raising a ground for the relief sought by the plaintiff being declined; it does not follow necessarily that the defendant also seeks by way of a counterclaim that the patent be revoked. The defendant has not asserted in the pleadings anywhere that they are the patentee or that they are entitled to be registered as such. The grounds raised are cumulatively and also individually by way of defence to the plaintiff’s action.— Fabcon Corporation v. Industrial Engineering Corporation AIR 1987 All 338

In Ram Narain Kher v. Ambassador Industries PTC (Suppl.) (1) 180 (Del), the defendant pleaded that the invention and the advantages claimed by the plaintiff had not been adequately described in the patent and adequately claimed in the claim to bring it within the ambit of the term “invention” within the meaning of the Act. The High Court held that the defendants having specifically raised the ground that claims made by the plaintiff in the patent were vague and did not describe the invention clearly and properly, are competent to claim revocation of the patent on that ground in the terms of section 64(1) of the Act.

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1. Substituted for “on the petition of any person interested or of the Central Government or on a counter-claim in a suit for infringement of the patent, be revoked by the High Court” by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

2. Proviso omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003.

3. Inserted by Patents (Amdt) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003.

4. Substituted for “secret use”, ibid.

Section 65. Revocation of patent or amendment of complete specification on directions from Government in cases relating to atomic energy

¹[Revocation of patent or amendment of complete specification on directions from Government in cases relating to atomic energy. (1) Where at any time after grant of a patent, the Central Government is satisfied that a patent is for an invention relating to atomic energy for which no patent can be granted under sub-section (1) of section 20 of the Atomic Energy Act, 1962 (33 of 1962), it may direct the Controller to revoke the patent, and thereupon the Controller, after giving notice, to the patentee and every other person whose name has been entered in the register as having an interest in the patent, and after giving them an opportunity of being heard, may revoke the patent.

(2) In any proceedings under sub-section (1), the Controller may allow the patentee to amend the complete specification in such manner as he considers necessary instead of revoking the patent.]

——————–

1. Substituted for existing sub-sec. (4) by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 66. Revocation of patent in public interest

Where the Central Government is of opinion that a patent or the mode in which it is exercised is mischievous to the State or generally prejudicial to the public, it may, after giving the patentee an opportunity to be heard, make a declaration to that effect in the Official Gazette and thereupon the patent shall be deemed to be revoked.

Chapter XIII – Register of Patents

Section 67. Register of patents and particulars to be entered therein

(1) There shall be kept at the patent office a register of patents, wherein shall be entered —

(a) the names and addresses of grantees of patents;

(b) notifications of assignments and of transmissions of patents, of-licences under patents, and of amendments, and revocations of patents; and

(c) particulars of such other matters affecting the validity or proprietorship of patents as may be prescribed.

(2) No notice of any trust, whether express, implied or constructive, shall be entered in the register, and the Controller shall not be affected by any such notice.

(3) Subject to the superintendence and direction of the Central Government, the register shall be kept under the control and management of the Controller.

¹[(4) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Controller to keep the register of patents or any part thereof in computer floppies, diskettes or any other electronic form subject to such safeguards as may be prescribed.

(5) Notwithstanding anything contained in the Indian Evidence Act, 1872, a copy of, or extracts from, the register of patents, certified to be a true copy under the hand of the Controller or any officer duly authorised by the Controller in this behalf shall, in all legal proceedings, be admissible in evidence.

(6) In the event the register is kept wholly or partly in computer floppies, diskettes or any other electronic form,—

(a) reference in this Act to an entry in the register shall be deemed to include reference to a record of particulars kept in computer floppies, diskettes or c. any other electronic form and comprising the register or part of the register;

(b) references in this Act to particulars being registered or entered in the register shall be deemed to include references to the keeping of record of those particulars comprising the register or part of the register in computer floppies, diskettes or any other electronic form; and

(c) references in this Act to the rectification of the register are to be read as including references to the rectification of the record of particulars kept in computer floppies, diskettes or any other electronic form and comprising the register or part of the register.]

——————–

1. Substituted for existing sub-sec. (4) by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 68. Assignments, etc. not to be valid unless in writing and duly executed

¹[Assignments, etc. not to be valid unless in writing and duly executed. An assignment of a patent or of a share in a patent, a mortage, licence or the creation of any other interest in a patent shall not be valid unless the same were in writing and the agreement between the parties concerned is reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and duly executed.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 69. Registration of assignments, transmissions, etc.

(1) Where any person becomes entitled by assignment, transmission or operation of law to a patent or to a share in a patent or becomes entitled as a mortgagee, licensee or otherwise to any other interest in a patent, he shall apply in writing in the prescribed manner to the Controller for the registration of his title or, as the case may be of notice of his interest in the register.

(2) Without prejudice to the provisions of sub-section (1), an application for the registration of the title of any person becoming entitled by assignment to a patent or a share in a patent or becoming entitled by virtue of a mortgage, licence or other instrument to any other interest in a patent may be made in the prescribed manner by the assignor, mortgagor, licensor or other party to that instrument, as the case may be.

(3) Where an application is made under this section for the registration of the title of any person, the Controller shall, upon proof of title to his satisfaction,—

(a) where that person is entitled to a patent or a share in a patent, register him in the register as proprietor or co-proprietor of the patent, and enter in the register particulars of the instrument or event by which he derives title; or ,

(b) where that person is entitled to any other interest in the patent, enter in the register notice of his interest, with particulars of the instrument, if any, creating it:

PROVIDED that if there is any dispute between the parties whether the assignment, mortgage, licence, transmission, operation of law or any other such transaction has validly vested in such person a title to the patent or any share or interest therein, the Controller may refuse to take any action under clause (a), or, as the case may be, under clause (b), until the rights of the parties have been determined by a competent court.

(4) There shall be supplied to the Controller in the prescribed manner for being filed in the patent office copies of all agreements, licences and other documents affecting the title to any patent of any licence thereunder authenticated in the prescribed manner and also such other documents as may be prescribed relevant to the subject-matter:

PROVIDED that in the case of a licence granted under a patent, the Controller shall, if so requested by the patentee or licensee, take steps for securing that the terms of the licence are not disclosed to any person except under the order of a court.

(5) Except for the purposes of an application under sub-section (1) or of an application to rectify the register, a document in respect of which no entry has been made in the register under sub-section (3) shall not be admitted by the Controller or by any court as evidence of the title of any person to a patent or to a share or interest therein unless the Controller or the court, for reasons to be recorded in writing, otherwise directs.

Section 70. Power of registered grantee or proprietor to deal with patent

Subject to the provisions contained in this Act relating to co-ownership of patents and subject also to any rights vested in any other person of which notice is entered in the register, the person or persons registered as grantee or proprietor of patent shall have power to assign, grant licences under, or otherwise deal with the patent and to give effectual receipts for consideration for any such assignment, licence or dealing:

PROVIDED that any equities in respect of the patent may be enforced in like manner as in respect of any other movable property.

Section 71. Rectification of register by [Appellate Board]

Rectification of register by ¹[Appellate Board]. (1) The ¹[Appellate Board] may, on the application of any person aggrieved—

(a)- by the absence or omission from the register of any entry; or

(b) by any entry made in the register without sufficient cause; or

(c) by any entry wrongly remaining on the register; or

(d) by any error or defect in any entry in the register, make such order for the making, variation or deletion, of any entry therein as it may think fit.

(2) In any proceeding under this section the ¹[Appellate Board] may decide any question that may be necessary or expedient to decide in connection with the rectification of the register.

(3) Notice of any application to the ¹[Appellate Board] under this section shall be given in the prescribed manner to the Controller who shall be entitled to appear and be heard on the application, and shall appear if so directed by the ²[Board].

(4) Any order of the ¹[Appellate Board] under this section rectifying the register shall direct that notice of the rectification shall be served upon the Controller in the prescribed manner who shall upon receipt of such notice rectify the register accordingly.

——————–

1. Substituted for “High Court” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted for “Court”, ibid.

Section 72. Register to be open for inspection

(1) Subject to the provisions contained in this Act and any rules made thereunder, the register shall at all convenient times be open to inspection by the public; and certified copies, sealed with the seal of the patent office, of any entry in the register shall be given to any person requiring them on payment of the prescribed fee.

(2) The register shall be prima facie evidence of any matters required or authorised by or under this Act to be entered therein.

¹[(3) If the record or particulars is kept in computer floppies or diskettes or in any other electronic form, sub-sections (1) and (2) shall be deemed to have been complied with if the public is given access to such computer floppies, diskettes or any other electronic form or printouts of such record of particulars for inspection.]

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1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Chapter XIV – Patent Office and its Establishment

Section 73. Controller and other officers

(1) The Controller General of Patents, Designs and Trade Marks appointed under subsection (1) of ¹[section 3 of the Trade Marks Act, 1999] shall be the Controller of Patents for the purposes of this Act.

(2) For the purposes of this Act the Central Government may appoint as many examiners and other officers and with such designations as it thinks fit.

(3) Subject to the provisions of this Act, the officers appointed under sub-section (2) shall discharge under the superintendence and directions of the Controller such functions of the Controller under this Act as he may, from time to time, by general or special order in writing, authorise them to discharge.

(4) Without prejudice to the generality of the provisions of sub-section (3), the Controller may, by order in writing and for reasons to be recorded therein withdraw any matter pending before an officer appointed under sub-section (2) and deal with such matter himself either de novo or from the stage it was so withdrawn or transfer the same to another officer appointed under sub-section (2) who may, subject to special directions in the order of transfer, proceed with the matter either de novo or from the stage it was so transferred.

——————–

1. Substituted for “section 4 of the Trade and Merchandise Marks Act, 1958″, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O.561(E), dt. 20-5-2003.

Section 74. Patent office and its branches

(1) For the purposes of this Act, there shall be an office which shall be known as the patent office.

¹[(2) The Central Government may, by notification in the Official Gazette, specify the name of the Patent Office.]

(3) The head office of the patent office shall be at such place as the Central Government may specify, and for the purpose of facilitating the registration of patents there may be established, at such other places as the Central Government may think fit, branch offices of the patent office.

(4) There shall be a seal of the patent office.

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 75. Restriction on employees of patent office as to right or interest in patents

All officers and employees of the patent office shall be incapable, during the period for which they hold their appointments, to acquire or take, directly or indirectly, except by inheritance or bequest, any right or interest in any patent issued by that office.

Section 76. Officers and employees not to furnish information, etc.

An officer or employee in the patent office shall not, except when required or authorised by this Act or under a direction in writing of the ¹[Central Government or Appellate Board] or the Controller or by order of a court—

(a) furnish information on a matter which is being, or has been, dealt with under this Act ²[x x x]; or

(b) prepare to assist in the preparation of a document required or permitted by or under this Act +[x x x] to be lodged in the patent office; or

(c) conduct a search in the records of the patent office.

———————

1. Substituted for “Central Government” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

2. Words “or under the Indian Patents and Designs Act, 1911″ omitted, ibid.

Chapter XV – Powers of Controller Generally

Section 77. Controller to have certain powers of a civil court

(1) Subject to any rules made in this behalf, the Controller in any proceedings before him under this Act have the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908 (5 of 1908) in respect of the following matters, namely,—

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of any document;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses of documents;

(e) awarding costs;

(f) reviewing his own decision on application made within the prescribed time and in the prescribed manner;

(g) setting aside an order passed ex parte on application made within the prescribed time and in the prescribed manner;

(h) any other matter which may be prescribed.

(2) Any order for costs awarded by the Controller in exercise of the powers conferred upon him under sub-section (1) shall be executable as a decree of a civil court.

Section 78. Power of Controller to correct clerical errors, etc.

(1) Without prejudice to the provisions contained in sections 57 and 59 as regards amendment of applications for patents or complete specifications ¹[or other documents relating thereto] and subject to the provisions of section 44, the Controller may, in accordance with the provisions of this section, correct any clerical error in any patent or in any specification or other document filed in pursuance of such application or in any application for a patent or any clerical error in any matter which is entered in the register.

(2) A correction may be made in pursuance of this section either upon a request in writing made by any person interested and accompanied by the prescribed fee, or without such a request.

(3) Where” the Controller proposes to make any such correction as aforesaid otherwise than in pursuance of a request made under this section, he shall give notice of the proposal to the patentee or the applicant for the patent, as the case may be, and to any other person who appears to him to be concerned, and shall give them an opportunity to be heard before making the correction.

(4) Where a request is made under this section for the correction of any error in a patent or application for a patent or any document filed in pursuance of such an application, and it appears to the Controller that the correction would materially alter the meaning or scope of the document to which the request relates and ought not to be made without notice to persons affected thereby, he shall require notice of the nature of the proposed correction to be ²[published] in the prescribed manner.

(5) Within the prescribed time after any such ³[publication] as aforesaid any person interested may give notice to the Controller of opposition to the request, and, where such notice of opposition is given, the Controller shall give notice thereof to the person by whom the request was made, and shall give to him and to the opponent an opportunity to be heard before he decides the case.

——————-

1. Inserted, ibid.

2. Substituted for “advertised” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “advertisement” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 79. Evidence how to be given and powers of Controller in respect thereof

Subject to any rules made in this behalf, in any proceeding under this Act before the Controller, evidence shall be given by affidavit in the absence of directions by the Controller to the contrary, but in any case in which the Controller thinks it right so to do, he may take oral evidence in lieu of, or in addition to, evidence by affidavit, or may allow any party to be crossexamined on the contents of his affidavit.

Section 80. Exercise of discretionary powers by Controller

Without prejudice to any provision contained in this Act requiring the Controller to hear any party to the proceedings thereunder or to give any such party an opportunity to be heard, the Controller shall give to any applicant for a patent, or for amendment of a specification (if within the prescribed time the applicant so requires) an opportunity to be heard before exercising adversely to the applicant any discretion vested in the Controller by or under this Act:

¹[PROVIDED that the party desiring a hearing makes the request for such hearing to the Controller at least ten days in advance of the expiry of the time-limit specified in respect of the proceeding.]

——————–

1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561 (E), dt. 20-5-2003.

Section 81. Disposal by Controller of applications for extension of time

Where under the provisions of this Act or the rules made thereunder the Controller may extend the time for doing any act, nothing in this Act shall be deemed to require him to give notice to or hear the party interested in opposing the extension, nor shall any appeal lie from any order of the Controller granting such extension.

Chapter XVI – Working of Patents, Compulsory Licences and Revocation

Section 82. Definitions of “patented articles” and “patentee”

¹[CHAPTER XVI

WORKING OF PATENTS, COMPULSORY LICENCES AND REVOCATION

In this Chapter, unless the context otherwise requires,—

(a) “patented article” includes any article made by a patented process; and

(b) “patentee” includes an exclusive licensee.

——————–

1. As amended by Section 39 of “The Patents (Amendment) Act, 2002″. (No. 38 of 2002).

Section 83. General principles applicable to working of patented inventions

Without prejudice to the other provisions contained in this Act, in exercising the powers conferred by this Chapter, regard shall be had to the following general considerations, namely,—

(a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;

(b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;

(c) that the protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;

(d) that patents granted do not impede protection of public health and nutrition and should act as instrument to promote public interest specially in sectors of vital importance for socio-economic and technological development of India;

(e) that patents granted do not in any way prohibit Central Government in taking measures to protect public health;

(f) that the patent right is not abused by the patentee or person deriving title or interest on patent from the patentee, and the patentee or a person deriving title or interest on patent from the patentee does not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology; and

(g) that patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public.

Section 84. Compulsory licences

(1) At any time after the expiration of three years from the date of the ¹[grant] of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of the following grounds, namely:—

(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or

(b) that the patented invention is not available to the public at a reasonably affordable price, or

(c) that the patented invention is not worked in the territory of India.

(2) An application under this section may be made by any person notwithstanding that he is already the holder of a licence under the patent and no person shall be estopped from alleging that the reasonable requirements of the public with respect to the patended invention are not satisfied or that the patented invention is not worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price by reason of any admission made by him, whether in such a licence or otherwise or by reason of his having accepted such a licence.

(3) Every application under sub-section (1) shall contain a statement setting out the nature of the applicant’s interest together with such particulars as may be prescribed and the facts upon which the application is based.

(4) The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not worked in the territory of India or that the patented invention is not available to the public at a reasonably price, may grant a licence upon such terms as he may deem fit.

(5) Where the Controller directs the patentee to grant a licence he may, as incidental thereto, exercise the powers set out in section 88.

(6) In considering the application filed under this section, the Controller shall take into account,—

(i) the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention;

(jj) the ability of the applicant to work the invention to the public advantage;

(iii) the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted;

(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit: PROVIDED that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anti-competitive practices adopted by the patentee,

but shall not be required to take into account matters subsequent to the making of the application.

²[Explanation : For the purposes of clause (iv), “reasonable period” shall be construed as a period not ordinarily exceeding a period of six months.]

(7) For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied—

(a) if, by reason of the refusal of the patentee to grant a licence or licences on reasonable terms,—

(i) an existing trade or industry or the development thereof or the establishment of any new trade or industry in India or the trade or industry in India or the trade or industry of any person or class of persons trading or manufacturing in India is prejudiced; or

(ii) the demand for the patented article has not been met to an adequate extent or on reasonable terms; or

(iii) a market for export of the patented article manufactured in India is not being supplied or developed; or

(iv) the establishment or development of commercial activities in India is prejudiced; or

(b) if, by reason of conditions imposed by the patentee upon the grant of licences under the patent or upon the purchase, hire or use of the patented article or process, the manufacture, use or sale of materials not protected by the patent, or the establishment or development of any trade or industry in India, is prejudiced; or

(c) if the patentee imposes a condition upon the grant of licences under the patent to provide exclusive grant back, prevention to challenges to the validity of patent or coercive package licensing; or

(d) if the patented invention is not being worked in the territory of India on a commercial scale to an adequate extent or is not being so worked to the fullest extent that is reasonably practicable; or

(e) if the working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article by—

(i) the patentee or persons claiming under him; or

(ii) persons directly or indirectly purchasing from him; or

(iii) other persons against whom the patentee is not taking or has not taken proceedingsfor infringement.

——————–

1. Substituted for “sealing” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 85. Revocation of patents by the Controller for non-working

(1) Where, in respect of a patent, a compulsory licence has been granted, the Central Government or any person interested may, after the expiration of two years from the date of the order granting the first compulsory licence, apply to the Controller for an order revoking the patent on the ground that the patented invention has not been worked in the territory of India or that reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not available to the public at a reasonably affordable price.

(2) Every application under sub-section (1) shall contain such particulars as may be prescribed, the facts upon which the application is based, and, in the case of an application other than by the Central Government, shall also set out the nature of the applicant’s interest.

(3) The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that patented invention has not been worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price, may make an order revoking the patent.

(4) Every application under sub-section (1) shall ordinarily be decided within one year of its being presented to the Controller.

Section 86. Power of Controller to adjourn applications for compulsory licences, etc., in certain cases

(1) Where an application under section 84 or section 85, as the case may be, is made on the grounds that the patented invention has not been worked in the territory of India or on the ground mentioned in clause (d) of sub-section (7) of section 84 and the Controller is satisfied that the time which has elapsed since the sealing of the patent has for any reason been insufficient to enable the invention to be worked on a commercial scale to an adequate extent or to enable the invention to be so worked to the fullest extent that is reasonably practicable, he may, by order, adjourn the further hearing of the application for such period not exceeding twelve months in the aggregate as appears to him to be sufficient for the invention to be so worked:

PROVIDED that in any case where the patentee establishes that the reason why a patented invention could not be worked as aforesaid before the date of the application was due to any State or Central Act or any rule or regulation made thereunder or any order of the Government imposed otherwise than by way of a condition for the working of the invention in the territory of India or for the disposal of the patented articles or of the articles made by the process or by the use of the patented plant, machinery, or apparatus, then, the period of adjournment ordered under this sub-section shall be reckoned from the date on which the period during which the working of the invention was prevented by such Act, rule or regulation or order of Government as computed from the date of the application, expires.

(2) No adjournment under sub-section (1) shall be ordered unless the Controller is satisfied that the patentee has taken with promptitude adequate or reasonable steps to start the working of the invention in the territory of India on a commercial scale and to an adequate extent.

Section 87. Procedure for dealing with applications under sections 84 and 85

(1) Where the Controller is satisfied, upon consideration of an application under section 84, or section 85, that a prima facie case has been made out for the making of an order, he shall direct the applicant to serve copies of the application upon the patentee and any other person appearing from the register to be interested in the patent in respect of which the application is made, and ¹[shall publish the application in the Official journal].

(2) The patentee or any other person desiring to oppose the application may, within such time as may be prescribed or within such further time as the Controller may on application (made either before or after the expiration of the prescribed time) allow, give to the Controller notice of opposition.

(3) Any such notice of opposition shall contain a statement setting out the grounds on which the application is opposed.

(4) Where any such notice of opposition is duly given, the Controller shall notify the applicant, and shall give to the applicant and the opponent an opportunity to be heard before deciding the case.

——————–

1. Substituted for “shall advertise the application in the Official Gazette” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 88. Powers of Controller in granting compulsory licences

(1) Where the Controller is satisfied on an application made under section 84 that the manufacture, use or sale of materials not protected by the patent is prejudiced by reason of conditions imposed by the patentee upon the grant of licences under the patent, or upon the purchase, hire or use of the patented article or process, he may, subject to the provisions of that section, order the grant of licences under the patent to such customers of the applicant as he thinks fit as well as to the applicant.

(2) Where an application under section 84 is made by a person being the holder of a licence under the patent, the Controller may, if he makes an order for the grant of a licence to the applicant, order the existing licence to be cancelled, or may, if the thinks fit, instead of making an order for the grant of a licence to the applicant, order the existing licence to be amended.

(3) Where two or more patents are held by the same patentee and an applicant for a compulsory licence establishes that the reasonable requirements of the public have not been satisfied with respect to some only of the said patents, then, if the Controller is satisfied that the applicant cannot efficiently or satisfactorily work the licence granted to him under those patents without infringing the other patents held by the patentee and if those patents involve important technical advancement or considerable economic significance in relation to the other patents, he may, by order, direct the grant of a licence in respect of the other patents also to enable the licensee to work the patent or patents in regard to which a licence is granted under section 84.

(4) Where the terms and conditions of a licence have been settled by the Controller, the licensee may, at any time after he has worked the invention on a commercial scale for a period of not less than twelve months, make an application to the Controller for the revision of the terms and conditions on the ground that the terms and conditions settled have proved to be more onerous than originally expected and that in consequence thereof the licensee is unable to work the invention except at a loss:

PROVIDED that no such application shall be entertained a second time.

Chapter XVII – Use of Inventions for Purposes of Government and Acquisition of Inventions by Central Government

Section 89. General purposes for granting compulsory licences

The powers of the Controller upon an application made under section 84 shall be exercised with a view to securing the following general purposes, that is to say,—

(a) that patented inventions are worked on a commercial scale in the territory of India without undue delay and to the fullest extent that is reasonably practicable;

(b) that the interests of any person for the time being working or developing an invention in the territory of India under the protection of a patent are not unfairly prejudiced.

Section 90. Terms and conditions of compulsory licences

(1) In settling the terms and conditions of a licence under section 84, the Controller shall endeavour to secure—

(i) that the royalty and other remuneration, if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors;

(ii) that the patented invention is worked to the fullest extent by the person to whom the licence is granted and with reasonable profit to him;

(iii) that the patented articles are made available to the public at reasonably affordable prices;

(iv) that the licence granted is a non-exclusive licence;

(v) that the right of the licensee is non-assignable;

(vi) that the licence is for the balance term of the patent unless a shorter term is consistent with public interest;

¹[(vii) that the licence is granted with a predominant purpose of supply in the Indian market and that the licensee may also export the patented product, if need be in accordance with the provisions of sub-clause (iii) of clause (a) of sub-section (7) of section 84;

(viii) that in the case of semi-conductor technology, the licence granted is to work the invention for public non-commercial use;

(ix) that in case the licence is granted to remedy a practice determined after judicial or administrative process to be anti-competitive, the licensee shall be permitted to export the patented product, if need be.]

(2) No licence granted by the Controller shall authorise the licensee to import the patented article or an article or substance made by a patented process from abroad where such importation would, but for such authorisation, constitute an infringement of the rights of the patentee.

(3) Notwithstanding anything contained in sub-section (2), the Central Government may, if in its opinion it is necessary so to do, in the public interest, direct the Controller at any time to authorise any licensee in respect of a patent to import the patented article or an article or substance made by a patented process from abroad (subject to such conditions as it considers necessary to impose relating among other matters to the royalty and other remuneration, if any, payable to the patentee, the quantum of import, the sale price of the imported article and the period of importation), and thereupon the Controller shall give effect to the directions.

——————–

1. Substituted for the existing clause (vii) by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 91. Licensing of related patents

(1) Notwithstanding anything contained in the other provisions of this Chapter, at any time after the sealing of a patent, any person who has the right to work any other patented invention either as patentee or as licensee thereof, exclusive or otherwise, may apply to the Controller for the grant of a licence of the first mentioned patent on the ground that he is prevented or hindered without such licence from working the other invention efficiently or to the best advantage possible.

(2) No order under sub-section (1) shall be made unless the Controller is satisfied—

(i) that the applicant is able and willing to grant, or procure the grant to the ; patentee and his licensees if they so desire, of a licence in respect of the other invention on reasonable terms; and

(ii) that the other invention has made a substantial contribution to the establishment or development of commercial or industrial activities in the territory of India.

(3) When the Controller is satisfied that the conditions mentioned in sub-section (1) have been established by the applicant, he may make an order on such terms as he thinks fit granting a licence under the first mentioned patent and a similar order under the other patent if so requested by the proprietor of the first mentioned patent or his licensee:

PROVIDED that the licence granted by the Controller shall be non-assignable except with the assignment of the respective patents.

(4) The provisions of sections 87, 88, 89 and 90 shall apply to licences granted under this section as they apply to licences granted under section 84.

Section 92. Special provision for compulsory licences on notifications by Central Government

(1) If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use, that it is necessary that compulsory licenses should be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect, by notification in the Official Gazette, and thereupon the following provisions shall have effect, that is to say—

(i) the Controller shall, on application made at any time after the notification by any person interested, grant to the applicant a licence under the patent on such terms and conditions as he thinks fit;

(ii) in settling the terms and conditions of a licence granted under this section, the Controller shall endeavour to secure that the articles manufactured under the patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights.

(2) The provisions of sees. 83,87,88,89 and 90 shall apply in relation to the grant of licences under this section as they apply in relation to the grant of licences under sec. 84.

(3) Notwithstanding anything contained in sub-section (2), where the Controller is satisfied on consideration of the application referred to in clause (i) of sub-section (1) that it is necessary in—

(i) a circumstance of national emergency; or

(ii) a circumstance of extreme urgency; or

(iii) a case of public non-commercial use,

which may arise or is required, as the case may be, including public health crises, relating to Acquired Immuno Deficiency Syndrome, human immunodeficiencyvirus, tuberculosis, malaria or other epidemics, he shall not apply any procedure specified in section 87 in relation to that application for grant of licence under this section:

PROVIDED that the Controller shall, as soon as may be practicable, inform the patentee of the patent relating to the application for such non-application of section 87.

Section 92 A. Compulsory licence for export of patented pharmaceutical products in certain exceptional circumstances

¹[Compulsory licence for export of patented pharmaceutical products in certain exceptional circumstances. (1) Compulsory licence shall be available for manufacture and export of patented pharmaceutical product to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed importation of the patented pharmaceutical products from India.

(2) The Controller shall, on receipt of an application in the prescribed manner, grant a compulsory licence solely for manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him.

(3) The provisions of sub-sections (1) and (2) shall be without prejudice to the extent to which pharmaceutical products produced under a compulsory licence can be exported under any other provision of this Act.

Explanation: For the purposes of this section, ‘pharmaceutical products’ means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address public health problems and shall be inclusive of ingredients necessary for their manufacture and diagnostic kits required for their use.]

——————–

1. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 93. Order for licence to operate as a deed between parties concerned

Any order for the grant of a licence under this Chapter shall operate as if it were a deed granting a licence executed by the patentee and all other necessary parties embodying the terms and conditions, if any, settled by the Controller.

Section 94. Termination of compulsory licence

(1) On an application made by the patentee or any other person deriving title or interest in the patent, a compulsory licence granted under section 84 may be terminated by the Controller, if and when the circumstances that gave rise to the grant thereof no longer exist and such circumstances are unlikely to recur:

PROVIDED that the holder of the compulsory licence shall have the right to object to such termination.

(2) While considering an application under sub-section (1), the Controller shall take into account that the interest of the person who had previously been granted the licence is not unduly prejudiced.]

Section 95. [xxx]

Omitted by Section 39 of “The Patents (Amendment) Act, 2002”.

(No. 38 of 2002).

Section 96. [xxx]

Omitted by Section 39 of “The Patents (Amendment) Act, 2002”.

(No. 38 of 2002).

Section 97. [xxx]

Omitted by Section 39 of “The Patents (Amendment) Act, 2002”.

(No. 38 of 2002).

Section 98. [xxx]

Omitted by Section 39 of “The Patents (Amendment) Act, 2002”.

(No. 38 of 2002).

Section 99. Meaning of use of invention for purposes of government

(1) For the purposes of this chapter, an invention is said to be used for the purposes of government if it is made, used, exercised or vended for the purposes of the Central Government, a State Government or a government undertaking.

¹[(2) xxx]

(3) Nothing contained in this Chapter shall apply in respect of any such importation making or using of any machine, apparatus, or other article or of any such using of any process or of any such importation, using or distribution of any medicine or drug, as may be made by virtue of one or more of the conditions specified in section 47.

——————–

1. Omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 100. Power of Central Government to use inventions for purposes of government

(1) Notwithstanding anything contained in this Act, at any time after an application for a patent has been filed at the patent office or a patent has been granted, the Central Government and any person authorised in writing by it may use the invention for the purposes of government in accordance with the provisions of this chapter.

(2) Where an invention has, before the priority date of the relevant claim of the complete specification, been duly recorded in a document, or tested or tried, by or on behalf of the government or a government undertaking, otherwise than in consequence of the communication of the invention directly or indirectly, by the patentee or by a person from whom he derives title, any use of the invention by the Central Government or any person authorised in writing by it for the purposes of government may be made free of any royalty or other remuneration to the patentee.

(3) If and so far as the invention has not been so recorded or tried or tested as aforesaid, any use of the invention made by the Central Government of any person authorised by it under sub-section (1), at any time after ¹[grant of the patent] or in consequence of any such communication as aforesaid, shall be made upon terms as may be agreed upon either before or after the use, between the Central Government or any person authorised under sub-section (1) and the patentee, or, as may in default of agreement be determined by the High Court on a reference under section 103:

²[PROVIDED that in case of any such use of any patent, the patentee shall be paid not more than adequate remuneration in the circumstances of each case, taking into account the economic value of the use of the patent.]

(4) The authorisation by the Central Government in respect of an invention may be given under this section, either before or after the patent is granted and either before or after the acts in respect of which such authorisation is given or done, and may be given to any person, whether or not he is authorised directly or indirectly by the applicant or the patentee to make, use, exercise or vend the invention or import the machine, apparatus or other article or medicine or drug covered by such patent.

(5) Where an invention has been used by or with the authority of the Central Government for the purposes of government under this section, then ³[except in case of national emergency or other circumstances of extreme urgency or for non-commercial use], the government shall notify the patentee as soon as practicable of the fact and furnish him with such information as to the extent of the use of the invention as he may, from time to time, reasonably require; and where the invention has been for the purposes of a government undertaking, the Central Government may call for such information as may be necessary for this purpose from such undertaking.

(6) The right to make, use, exercise and vend an invention for the purposes of government under sub-section (1) shall include the ⁴[right to sell on non-commercial basis, the goods] which have been made in exercise of that right, and a purchaser of goods so sold, and a person claiming through him, shall have the power to deal with the goods as if the Central Government or the person authorised under sub-section (1) were the patentee of the invention.

(7) Where in respect of a patent which has been the subject of an authorisation under this section, there is an exclusive licensee as is referred to in sub-section (3) of section (3) of section 101, or where such patent has been assigned to the patentee in consideration of royalties or other benefits determined by reference to the use of the invention (including payments by way of minimum royalty), the notice directed to be given under sub-section (5) shall also be given to such exclusive licensee or assignor, as the case may be, and the reference to the patentee in sub-section (3) shall be deemed to include a reference to such assignor or exclusive licensee.

——————–

1. Substituted for “the acceptance of the complete specification in respect of the patent” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

3. Substituted for “unless it appears to the Govt. that it would be contrary to the public interest so to do” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

4. Substituted for “right to sell the goods”, ibid.

Section 101. Right of third parties in respect of use of invention for purposes of government

(1) In relation to any use of a patented invention, or an invention in respect of which an application for a patent is pending, made for the purposes of government

(a) by the Central Government or any person authorised by the Central Government under section 100; or

(b) by the patentee or applicant for the patent to the order made by the Central Government,

the provisions of any licence, assignment or agreement pranted or made, ¹[xxx] between the patentee or applicant for the patent (or any person who derives title from him or from whom he derives title) and any person other than the Central Government shall be of no effect so far as those provisions—

(i) restrict or regulate the use for the purposes of government of the invention, or of any model, document or information relating thereto, or

(ii) provide for the making of payments in respect of any use of the invention or of the model, document or information relating thereto for the purposes of government ²[x x x], and the reproduction or publication of any model or document in connection with the said use for the purposes of government shall not been deemed to be an infringement of any copyright subsisting in the model or document.

(2) Where the patent, or the right to apply for or obtain the patent, has been assigned to the patentee in consideration of royalties or other benefits determined by reference to the use of the invention ³[x x x] then, in relation to any use of the invention made for the purposes of government by the patentee to the order of the Central Government, sub-section (3) of section 100 shall have effect as if that use were made by virtue of an authority given under that section, and any use of the invention for the purposes of government by virtue of sub-section (3) of that section shall have effect as if the reference to the patentee included a reference to the assignor of the patent, and any sum payable by virtue of that sub-section shall be divided between the patentee and the assignor in such proportion as may be agreed upon between them or as may in default of agreement be determined by the High Court on a reference under section 103.

(3) Where by virtue of sub-section (3) of section 100, payments are required to be made by the Central Government or persons authorised under sub-section (1) of that section in respect of the use of an invention for the purposes of government, and where in respect of such patent there is an exclusive licensee authorised under his licence to use the invention for the purposes of government, such sum shall be shared by the patentee and such licensee in such proportions, if any, as may be agreed upon between them or as may in default of agreement be determined by the High Court on a reference under section 103 to be just, having regard to any expenditure incurred by the licensee—

(a) in developing the said invention; or

(b) in making payments to the patentees other than royalties or other benefits determined by reference to the use of the invention ¹[x x x] in consideration of the licence.

——————–

1. Words “whether before or after the commencement of this Act” omitted, ibid.

2. Bracket and words “(including payments by way of minimum royalty)” omitted, ibid.

3. Brackets and words “(including payments by way of minimum royalty)” omitted, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 102. Acquisition of inventions and patents by the Central Government

(1) The Central Government may, if satisfied that it is necessary that an invention which is the subject of an application for a patent or a patent should be acquired from the applicant or the patentee for a public purpose, publish a notification to that effect in the Official Gazette, and thereupon the invention or patent and all rights in respect of the invention or patent shall, by force of this section, stand transferred to and be vested in the Central Government.

(2) Notice of the acquisition shall be given to the applicant, and, where a patent has been granted, to the patentee and other persons, if any, appearing in the register as having an interest in the patent.

(3) The Central Government shall pay to the applicant, or as the case may be, the patentee and other persons appearing on the register as having an interest in the patent such other compensation as may be agreed upon between the Central Government and the applicant or the patentee and other persons; or, as may, in default of agreement, be determined by the High Court on a reference under section 103 to be just having regard to the expenditure incurred in connection with the invention and, in the case of a patent, the term thereof, the period during which and the manner in which it has already been worked (including the profits made during such period by the patentee or by his licensee whether exclusive or otherwise) and other relevant factors.

Section 103. Reference to High Court of disputes as to use for purposes of government

(1) Any dispute as to the exercise by the Central Government or a person authorised by it of the powers conferred by section 100, or as to terms for the use of an invention for the purposes of government thereunder or as to the right of any person to receive any part of a payment made in pursuance of sub-section (3) of that section or as to the amount of compensation payable for the acquisition of an invention or a patent under section 102, may be referred to the High Court by either party to the dispute in such manner as may be prescribed by the rules of the High Court.

(2) In any proceedings under this section to which the Central Government is a party, the Central Government may—

(a) if the patentee is a party to the proceedings, petition by way of counter-claim for revocation of the patent on any ground upon which a patent may be revoked under section 64; and

(b) whether a patentee is or is not a party to the proceedings, put in issue the validity of the patent without petitioning for its revocation.

(3) If in such proceedings as aforesaid any question arises whether an invention has been recorded, tested or tried as is mentioned in section 100, and the disclosure of any document regarding the invention, or of any evidence of the test or trial thereof, would, in the opinion of the Central Government, be prejudicial to the public interest, the disclosure may be made confidentially to the advocate of the other party or to an independent expert mutually agreed upon.

(4) In determining under this section any dispute between the Central Government and any person as to terms for the use of an invention for the purposes of government, the High Court shall have regard to any benefit or compensation which that person or any person from whom he derives title, may have received, or may be entitled to receive, directly or indirectly in respect of the use of the invention in question for the purposes of government.

(5) In any proceedings under this section, the High Court may at any time order the whole proceedings or any question or issue of fact arising therein to be referred to an official referee, commissioner or an arbitrator on such terms as the High Court may direct, and references to the High Court in the foregoing provisions of this section shall be construed accordingly.

(6) Where the invention claimed in a patent was made by a person who at time it was made was in the service of the Central Government or of a State Government or was an employee of a government undertaking and the subject-matter of the invention is certified by the relevant government or the principal officer of the government undertaking to be connected with the work done in the course of the normal duties of the government servant or employee of the government undertaking, then, notwithstanding anything contained in this section, any dispute of the nature referred to in sub-section (1) relating to the invention shall be disposed of by the Central Government conformably to the provisions of this section so far as may be applicable, but before doing so the Central Government shall give an opportunity to the patentee and such other parties as it considers have an interest in the matter to be heard.

Chapter XVIII – Suits Concerning Infringement of Patents

Section 104. Jurisdiction

No suit for a declaration under section 105 or for any relief under section 106 or for infringement of a patent shall be instituted in any court inferior to a district court having jurisdiction to try the suit:

PROVIDED that where a counter-claim for revocation of the patent is made by the defendant, the suit, along with the counter-claim, shall be transferred to the High Court for decision.

S

There is a distinction maintained as between the defence raised to a suit for infringement of a patent (vide s. 107) on the one hand and the revocation sought of a patent on the other (vide s. 64). The grounds may be the same, but still there is no inconsistency on account of the suit being defended as liable to dismissal in a particular case and a case where the defendant seeks also that the patent asserted by the plaintiff be revoked. It is only when there is a counter claim seeking revocation of the patent that the jurisdiction of the District Court is ousted. The proviso to s. 104 being in the nature of an exception to the general rule, it has to be strictly construed. There is no express claim on the part of the defendant for revocation of the patent whereof infringement is alleged by the plaintiff. That the defendant pleads that the patent set up by the plaintiff is invalid amounts only to the defendant raising a ground for the relief sought by the plaintiff being declined; it does not follow necessarily that the defendant also seeks by way of a counterclaim that the patent be revoked. The defendant has not asserted in the pleadings anywhere that they are the patentee or that they are entitled to be registered as such. The grounds raised are cumulatively and also individually by way of defence to the plaintiff’s action.—Fabcon Corporation v. Industrial Engineering Corporation AIR 1987 All 338

Section 104 A. Burden of proof in case of suits concerning infringement

¹[Burden of proof in case of suits concerning infringement. (1) In any suit for infringement of a patent, where the subject matter of patent is a process for obtaining a product, the court may direct the defendant to prove that the process used by him to obtain the product, identical to the product of the patented process, is different from the patented process if,—

(a) the subject matter of the patent is a process for obtaining a new product; or

(b) there is a substantial likelihood that the identical product is made by the process, and the patentee or a person deriving title or interest in the patent from him, has been unable through reasonable efforts to determine the process actually used:

PROVIDED that the patentee or a person deriving title or interest in the patent from him, first proves that the product is identical to the product directly obtained by the patented process.

(2) In considering whether a party has discharged the burden imposed upon him by subsection (1), the court shall not require him to disclose any manufacturing or commercial secrets, if it appears to the court that it would be unreasonable to do so.]

——————–

1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O.561(E), dt. 20-5-2003.

Section 105. Power of court to make declaration as to non-infringement

(1) Notwithstanding anything contained in section 34 of the Specific Relief Act, 1963, (47 of 1963), any person may institute a suit for a declaration that the use by him of any process, or the making, use or sale of any article by him does not, or would not, constitute an infringement of a claim of a patent against the patentee or the holder of an exclusive licence under the patent, notwithstanding that no assertion to the contrary has been made by the patentee or the licensee, if it is shown—

(a) that the plaintiff has applied in writing to the patentee or exclusive licensee for a written acknowledgment to the effect of the declaration claimed and has furnished him with full particulars in writing of the process or article in question; and

(b) that the patentee or licensee has refused or neglected to give such an acknowledgment.

(2) The costs of all parties in a suit for a declaration brought by virtue of this section shall, unless for special reasons the court thinks fit to order otherwise, be paid by the plaintiff.

(3) The validity of a claim of the specification of a patent shall not be called in question in a suit for declaration brought by virtue of this section, and accordingly the making or refusal of such a declaration in the case of a patent shall not be deemed to imply that the patent is valid or invalid.

(4) A suit for a declaration may be brought by virtue of this section at any time 1[after the publication of grant of a patent], and references in this section to the patentee shall be construed accordingly.

——————–

1. Substituted for “after the date of advertisement of acceptance of the complete specification of a patent” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 106. Power of court to grant relief in cases of groundless threats of infringement proceedings

(1) Where any person (whether entitled to or interested in a patent or an application for a patent or not) threatens any other person by circulars or advertisements or by communications, oral or in writing addressed to that or any other person, with proceedings for infringement of a patent, any person aggrieved thereby may bring a suit against him praying for the following reliefs, that is to say—

(a) a declaration to the effect that the threats are unjustifiable;

(b) an injunction against the continuance of the threats; and

(c) such damages, if any, as he has sustained thereby.

(2) Unless in such suit the defendant proves that the acts in respect of which the proceedings were threatened constitute or, if done, would constitute, an infringement of a patent or of rights arising from the publication of a complete specification in respect of a claim of the specification not shown by the plaintiff to be invalid, the court may grant to the plaintiff all or any of the reliefs prayed for.

Explanation: A mere notification of the existence of a patent does not constitute a threat of proceeding within the meaning of this section.

Section 107. Defences, etc. in suits for infringement

(1) In any suit for infringement of a patent, every ground on which it may be revoked under section 64 shall be available as a ground for-defence.

(2) In any suit for infringement of a patent by the making, using or importation of any machine, apparatus or other article or by the using of any process or by the importation, use or distribution of any medicine or drug, it shall be a ground for defence that such making, using, importation or distribution is in accordance with any one or more of the conditions specified in section 47.

S

There is a distinction maintained as between the defence raised to a suit for infringement of a patent (vide s. 107) on the one hand and the revocation sought of a patent on the other (vide s. 64). The grounds may be the same, but still there is no inconsistency on account of the suit being defended as liable to dismissal in a particular case and a case where the defendant seeks also that the patent asserted by the plaintiff be revoked. It is only when there is a counter claim seeking revocation of the patent that the jurisdiction of the District Court is ousted. The proviso to s. 104 being in the nature of an exception to the general rule, it has to be strictly construed. There is no express claim on the part of the defendant for revocation of the patent whereof infringement is alleged by the plaintiff. That the defendant pleads that the patent set up by the plaintiff is invalid amounts only to the defendant raising a ground for the relief sought by the plaintiff being declined; it does not follow necessarily that the defendant also seeks by way of a counterclaim that the patent be revoked. The defendant has not asserted in the pleadings anywhere that they are the patentee or that they are entitled to be registered as such. The grounds raised are cumulatively and also individually by way of defence to the plaintiff’s action.—Fabcon Corporation v. Industrial Engineering Corporation AIR 1987 All 338

Where the defendant neither claims to be the owner of the patent nor has it filed any petition or counter-claim, it cannot plead that the plaintiff has no locus standi to institute proceeding for infringement of patent, merely raising the plea that the plaintiff’s registration is improper.—Schnie-der Electric Industries SA v. Telemecanique and Controls (I) Ltd. (IA No. 8522) 2000 (20) PTC 620 (Del).

Section 107 A. Certain acts not to be considered as infringement

¹[Certain acts not to be considered as infringement. For the purposes of this Act,—

(a) any art of making, constructing, ²[using, selling or importing] a patented invention solely for uses reasonably relating to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, ³[use, sale or import] of any product;

(b) importation of patented products by any person from a person ⁴ [who is duly authorised under the law to produce and sell or distribute the product], shall not be considered as an infringement of patent rights.]

——————–

1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted for “using or selling” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted for “use or sale” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Substituted for “who is duly authorised by the patentee to sell or distribute the product” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 108. Reliefs in suits for infringement

¹[(1)] The reliefs which a court may grant in any suit for infringement include an injunction (subject to such terms, if any, as the court thinks fit) and, at the option of the plaintiff either damages or an account of profits.]

²[(2) The court may also order that the goods which are found to be infringing and materials and implement, the predominant use of which is in the creation of infringing goods shall be seized, forfeited or destroyed, as the court deems fit under the circumstances of the case without payment of any compensation.]

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1. Existing section 108 renumbered as sub-section (1) thereof by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 109. Right of exclusive licensee to take proceedings against infringement

(1) The holder of an exclusive licence shall have the like right as the patentee to institute a suit in respect of any infringement of the patent committed after the date of the licence, and in awarding damages or an account of profits or granting any other relief in any such suit the court shall take into consideration any loss suffered or likely to be suffered by the exclusive licensee as such or, as the case may be, the profits earned by means of the infringement so far as it constitutes an infringement of the rights of the exclusive licensee as such.

(2) In any suit for infringement of a patent by the holder of an exclusive licence under sub-section (1), the patentee shall, unless he has joined as a plaintiff in the suit, be added as a defendant, but a patentee so added as defendant shall not be liable for any costs unless he enters an appearance and takes part in the proceedings.

Section 110. Right of licensee under section 84 to take proceedings against infringement

Any person to whom a licence has been granted under section 84 shall be entitled to call upon the patentee to take proceedings to prevent any infringement of the patent, and, if the patentee refuses or neglects to do so within two months after being so called upon, the licensee may institute proceedings for the infringement in his own name as though he were the patentee, making the patentee a defendant; but a patentee so added as defendant shall not be liable for any costs unless he enters an appearance and takes part in the proceedings.

Section 111. Restriction on power of court to grant damages or an account of profits for infringement

(1) In a suit for infringement of a patent, damages or an account of profits shall not be granted against the defendant who proves that at the date of the infringement he was not aware and had no reasonable grounds for believing that the patent existed.

Explanation : A person shall not be deemed to have been aware or to have had reasonable grounds for believing that a patent exists by reason only of the application to an article of the word “patent”, “patented” or any word or words expressing or implying that a patent has been obtained for the article, unless the number of the patent accompanies the word or words in question.

(2) In any suit for infringement of a patent the court may, if it thinks fit, refuse to grant any damages or an account of profits in respect of any infringement committed after a failure to pay any renewal fee within the prescribed period and before any extension of that period.

(3) Where an amendment of a specification by way of disclaimer, correction or explanation has been allowed under this Act after the publication of the specification, no damages or account of profits shall be granted in any proceeding in respect of the use of the invention before the date of the decision allowing the amendment, unless the court is satisfied that the specification as originally published was framed in good faith and with reasonable skill and knowledge.

(4) Nothing in this section shall affect the power of the court to grant an injunction in any suit for infringement of a patent.

Section 112. [x x x]

¹[x x x]

——————–

1. Omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 113. Certificate of validity of specification and costs of subsequent suits for infringement thereof

¹[(1) If in any proceedings before the Appellate Board or a High Court for the revocation of a patent under section 64 and section 104, as the case may be, the validity of any claim of a specification is contested and that claim is found by the Appellate Board or the High Court to be valid, the Appellate Board or the High Court may certify that the validity of that claim was contested in those proceedings and was upheld.]

(2) Where any such certificate has been granted, then, if any subsequent suit before a court for infringement of that claim of the patent or in any subsequent proceeding for revocation of the patent in so far as it relates to that claim, the patentee or other person relying on the validity of the claim obtains a final order or judgment in his favour, he shall be entitled to an order for the payment of his full costs, charges and expenses of and incidental to any such suit or proceeding properly incurred so far as they concern the claim in respect of which the certificate was granted, unless the court trying the suit or proceeding otherwise directs:

PROVIDED that the costs as specified in this sub-section shall not be ordered when the party disputing the validity of the claim satisfies the court that he was not aware of the grant of the certificate when he raised the dispute and withdrew forthwith such defence when he became aware of such a certificate.

¹[(3) Nothing contained in this section shall be construed as authorising the courts or the Appellate Board hearing appeals from decrees or orders in suits for infringement or petitions for revocation, as the case may be, to pass orders for costs on the scale referred to therein.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 114. Relief for infringement of partially valid specification

(1) If in proceedings for infringement of a patent it is found that any claim of the specification, being a claim in respect of which infringement is alleged, is valid but that any other claim is invalid, the court may grant relief in respect of any valid claim which is infringed:

PROVIDED that the court shall not grant relief except by way of injunction save in the circumstances mentioned in sub-section (2).

(2) Where the plaintiff proves that the invalid claim was framed in good faith and with reasonable skill and knowledge, the court shall grant relief in respect of any valid claim which is infringed subject to the discretion of the court as to costs and as to the date from which damages or an account of profits should be reckoned, and in exercising such discretion the court may take into consideration the conduct of the parties in inserting such invalid claim in the specification or permitting them to remain there.

Section 115. Scientific advisers

(1) In any suit for infringement or in any proceeding before a court under this Act, the court may at any time, and whether or not an application has been made by any party for that purpose appoint an independent scientific adviser to assist the court or to inquire and report upon any such question of fact or of opinion (not involving a question of interpretation of law) as it may formulate for the purpose.

(2) The remuneration of the scientific adviser shall be fixed by the court and shall include the costs of making a report and a proper daily fee for any day on which the scientific adviser may be required to attend before the court, and such remuneration shall be defrayed out of moneys provided by Parliament by law for the purpose.

Chapter XIX – Appeals to the Appellate Board

Section 116. Appellate Board

¹[CHAPTER XIX

APPEALS TO THE APPELLATE BOARD

(1) Subject to the provisions of this Act, the Appellate Board established under section 83 of the Trade Marks Act, 1999 shall be the Appellate Board for the purposes of this Act and the said Appellate Board shall exercise the jurisdiction, power and authority conferred on it by or under this Act:

PROVIDED that the Technical Member of the Appellate Board for the purposes of this Act shall have the qualifications specified in sub-section (2).

(2) A person shall not be qualified for appointment as a Technical Member for the purposes of this Act unless he—

(a) has at least five years held the post of Controller under this Act or has exercised the functions of the Controller under this Act for at least five years; or

(b) has been for at least ten years functioned as a Registered Patent Agent and possesses a degree in engineering or technology or a masters degree in science from any University established under law for the time being in force or equivalent; or

²[(c) xxx]

S

Refusal of Controller to proceed with an application under section 15 not being an order, appeal thereagainst is maintainable.—Danieli AC Officcine Meccaniche SPA v. Controller of Patents 2000 (20) PTC 219 (Call)

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Clause (c) omitted by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 117. Staff of Appellate Board

(1) The Central Government shall determine the nature and categories of the officers and other employees required to assist the Appellate Board in the discharge of its functions under this Act and provide the Appellate Board with such officers and other employees as it may think fit.

(2) The salaries and allowances and conditions of service of the officers and other employees of the Appellate Board shall be such as may be prescribed.

(3) The officers and other employees of the Appellate Board shall discharge their functions under the general superintendence of the Chairman of the Appellate Board in the manner as may be prescribed.

Section 117 A. Appeals to Appellate Board

(1) Save as otherwise expressly provided in sub-section (2), no appeal shall lie from any decision, order or direction made or issued under this Act by the Central Government, or from any act or order of the Controller for the purpose of giving effect to any such decision, order or direction.

(2) An appeal shall lie to the Appellate Board from any decision, order or direction of the Controller or Central Government under section 15, section 16, section 17, section 18, section 19, ¹[section 20, sub-section (4) of section 25, section 28], section 51, section 54, section 57, section 60, section 61, section 63, section 66, sub-section (3) of section 69, section 78, subsections (1) to (5) of section 84, section 85, section 88, section 91, section 92 and section 94.

(3) Every appeal under this section shall be in the prescribed form and shall be verified in such manner as may be prescribed and shall be accompanied by a copy of the decision, order or direction appealed against and by such fees as may be prescribed.

(4) Every appeal shall be made within three months from the date of the decision, order or direction, as the case may be, of the Controller or the Central Government or within such further time as the Appellate Board may, in accordance with the rules made by it, allow.

——————–

1. Substituted for “section 20, section 25, section 27, section 28″ by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 117 B. Procedure and powers of Appellate Board

The provisions of sub-sections (2) to (6) of section 84, section 87, section 92, section 95 and section 96 of the Trade Marks Act, 1999 shall apply to the Appellate Board in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Trade Marks Act, 1999.

Section 117 C. Bar of jurisdiction of courts, etc

No court or other authority shall have or, be entitled to, exercise any jurisdiction, powers or authority in relation to the matters referred to in sub-section (2) of section 117A or section 117D.

Section 117 D. Procedure for application for rectification, etc., before Appellate Board

(1) An application ¹[for revocation of a patent before the Appellate Board under section 64 and an application for rectification of the register] made to the Appellate Board under section 71 shall be in such form as may be prescribed.

(2) A certified copy of every order or judgment of the Appellate Board relating to a patent under this Act shall be communicated to the Controller of the Board and the Controller shall give effect to the order of the Board and shall, when so directed, amend the entries in, or rectify, the register in accordance with such order.

——————–

1. Substituted for “for rectification of the register” by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 117 E. Appearance of Controller in legal proceedings

(1) The Controller shall have the right to appear and be heard—

(a) in any legal proceedings before the Appellate Board in which the relief sought includes alteration or rectification of the register or in which any question relating to the practice of the patent office is raised;

(b) in any appeal to the Appellate Board from an order of the Controller on an application for grant to a patent—

(i) which is not opposed, and the application is either refused by the Controller or is accepted by him subject to any amendments, modifications, conditions or limitations, or

(ii) which has been opposed and the Controller considers that his appearance is necessary in the public interest, and the Controller shall appear in any case if so directed by the Appellate Board.

(2) Unless the Appellate Board otherwise directs, the Controller may, in lieu of appearing, submit a statement in writing signed by him, giving such particulars as he thinks proper of the proceedings before him relating to the matter in issue or of the grounds of any decision given by him or of the practice of the patent office in like cases, or of other matters relevant to the issues and within his knowledge as the Controller may deem it necessary, and such statement shall be evidence in the proceedings.

Section 117 F. Costs of Controller in proceedings before Appellate Board

In all proceedings under this Act before the Appellate Board, the costs of the Controller shall be in the discretion of the Board, but the Controller shall not be ordered to pay the costs of any of the parties.

Section 117 G. Transfer of pending proceedings to Appellate Board

¹[Transfer of pending proceedings to Appellate Board. All cases of appeals against any order or decision of the Controller and all cases pertaining to revocation of patent other than on a counter-claim in a suit for infringement and rectification of register pending before any High Court, shall be transferred to the Appellate Board from such date as may be notified by the Central Government in the Official Gazette and the Appellate Board may proceed with the matter either de novo or from the stage it was so transferred.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 117 H. Power of Appellate Board to make rules

[The Appellate Board may make rules consistent with this Act as to the conduct and procedure in respect of all proceedings before it under this Act.]

Chapter XX – Penalties

Section 118. Contravention of secrecy provisions relating to certain inventions

If any person fails to comply with any direction given under section 35, ¹[or makes or causes to be made an application for the grant of a patent in contravention of section 39] he shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.

——————–

1. Inserted, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 119. Falsification of entries in register, etc.

If any person makes, or causes to be made, a false entry in any register kept under this Act, or a writing falsely purporting to be a copy of an entry in such a register, or produces or tenders, or causes to be produced or tendered, in evidence any such writing knowing the entry or writing to be false, he shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.

Section 120. Unauthorised claim of patent rights

If any person falsely represents that any article sold by him is patented in India or is the subject of an application for a patent in India, he shall be punishable with fine which may extend to ¹[one lakh] rupees.

Explanation 1 : For the purposes of this section, a person shall be deemed to represent —

(a) that an article is patented in India if there is stamped, engraved or impressed on, or otherwise applied to, the article the word “patent” or “patented” or some other word expressing or implying that a patent for the article has been obtained in India;

(b) that an article is the subject of an application for a patent in India if there are stamped, engraved or impressed on, or otherwise applied to, the article the words “patent applied for”, “patent pending”, or some other words implying that an application for a patent for the article has been made in India.

Explanation 2: The use of words “patent”, “patented”, “patent applied for”, “patent pending” or other words expressing or implying that an article is patended or that a patent has been applied for shall be deemed to refer to a patent in force in India, or to a pending application for a patent in India, as the case may be, unless there is an accompanying indication that the patent has been obtained or applied for in any country outside India.

——————–

1. Substituted for “ten thousand” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 121. Wrongful use of words, “patent office”

If any person uses on his place of business or any document issued by him or otherwise the words “patent office” or any other words which would reasonably lead to the belief that his place of business is or is officially connected with, the patent office, he shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both.

Section 122. Refusal or failure to supply information

(1) If any person refuses or fails to furnish—

(a) to the Central Government any information which he is required to furnish under sub-section (5) of section 100,

(b) to the Controller any information or statement which he is required to furnish by or under section 146. he shall be punishable with fine which may extend to ¹[ten lakh rupees]

(2) If any person, being required to furnish any such information as is referred to in subsection (1), furnishes information or statement which is false and which he either knows or has reason to believe to be false or does not believe to be true, he shall be punishable with imprisonment which may extend to six months, or with fine, or with both.

——————-

1. Substituted for “twenty thousand rupees” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 123. Practice by non-registered patent agents

If any person contravenes the provisions of section 129, he shall be punishable with fine which may extend to ¹[one lakh rupees in the case of a first offence and five lakh rupees] in the case of a second or subsequent offence.

——————–

1. Substituted for “ten thousand rupees in the case of a first offence and forty thousand rupees” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 124. Offences by companies

(1) If the person committing an offence under this Act is a company, the company as well as every person in charge of, and responsible to, the company for the conduct of its business at the time of the commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

PROVIDED that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or that the commission of the offence is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation : For the purposes of this section—

(a) “company” means any body corporate and includes a firm or other association of individuals; and

(b) “director”, in relation to a firm, means a partner in the firm.

Chapter XXI – Patent Agents

Section 125. Register of patent agents

¹[Register of patent agents. (1) The Controller shall maintain a register to be called the register of patent agents in which shall be entered the names, addresses and other relevant particulars, as may be prescribed, of all persons qualified to have their names so entered under section 126.

(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Controller to keep the register of patent agents in computer floppies, diskettes or any other electronic form subject to such safeguards as may be prescribed.]

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

Section 126. Qualifications for registration as patent agents

(1) A person shall be qualified to have his name entered in the register of patent agents if he fulfils the following conditions, namely,—

(a) he is a citizen of India;

(b) he has completed the age of 21 years;

(c) he has obtained a ¹[degree in science, engineering or technology from any University established under law for the time being in force] in the territory of India or possesses such other equivalent qualifications as the Central Government may specify in this behalf, and, in addition—

²[(i) xxx]

(ii) has passed the qualifying examination prescribed for the purpose; ³[or]

³[(iii) has, for a total period of not less than ten years, functioned either as an examiner or discharged the functions of the Controller under section 73 or both, but ceased to hold any such capacity at the time of making the application for registration.]

(d) he has paid such fee as may be prescribed.

⁴[(2) Notwithstanding anything contained in sub-section (1), a person who has been registered as a patent agent before the commencement of ⁵[the Patents (Amendment) Act, 2005] shall be entitled to continue to be, or when required to be re-registered, as a patent agent, on payment of the fee as may be prescribed].

——————–

1. Substituted for “degree from any university”, ibid.

2. Sub-clause (i) omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

4. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

5. Substituted for “the Patents (Amdt.) Act, 2002″ by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 127. Rights of patent agents

Subject to the provisions contained in this Act and to any rules made thereunder, every patent agent whose name is entered in the register shall be entitled—

(a) to practise before the Controller; and

(b) to prepare all documents, transact all business and discharge such other functions as may be prescribed in connection with any proceedings before the Controller under this Act.

Section 128. Subscription and verification of certain documents by patent agents

(1) All applications and communications to the Controller under his Act may be signed by a patent agent authorised in writing in this behalf by the person concerned.

¹[(2) xxx]

——————–

1. Omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 129. Restrictions on practice as patent agents

(1) No person, either alone or in partnership with any other person, shall practise, describe or hold himself out as a patent agent or permit himself to be so described or held out, unless he is registered as patent agent or, as the case may be, unless he and all his partners are so registered.

(2) No company or other body corporate shall practise, describe itself or hold itself out as patent agents or permit itself to be so described or held out.

Explanation : For the purposes of this section, practise, as a patent agent includes any of the following acts, namely,—

(a) applying for or obtaining patents in India or elsewhere;

(b) preparing specifications or other documents for the purposes of this Act or of the patent law of any other country;

(c) giving advice other than of scientific or technical nature as to the validity of patents or their infringement.

Section 130. Removal from register of patent agents and restoration

(1) The ¹[Controller] may remove the name of any person from the register when it is satisfied, after giving that person a reasonable opportunity of being heard and after such further inquiry, if any, as ²[he] thinks fit to make—

(i) that his name has been entered in the register by error or on account of misrepresentation or suppression of material fact; or

(ii) that he has been convicted of any offence and sentenced to a term of imprisonment or has been guilty of misconduct in his professional capacity which in the opinion of the ³[Controller] renders him unfit to be kept in the register.

(2) The ³[Controller] may, on application and on sufficient cause being shown, restore to the register the name of any person removed therefrom.

——————-

1. Substituted for “Central Government”, ibid.

2. Substituted for “it”, ibid.

3. Substituted for “Central govt.” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003.

Section 131. Power of Controller to refuse to deal with certain agents

(1) Subject to any rules made in this behalf, the Controller may refuse to recognise as agent in respect of any business under this Act—

(a) any individual whose name has been removed from, and not restored to, the register;

(b) any person who has been convicted of an offence under section 123; ,

(c) any person, not being registered as a patent agent, who in the opinion of the ¹[Controller] is engaged wholly or mainly in acting as agent in applying for patents in India or elsewhere in the name or for the benefit of the person by whom he is employed;

(d) any company or firm, if any person whom the ¹[Controller] could refuse to recognise as agent in respect of any business under this Act, is acting as a director or manager of the company or is a partner in the firm.

(2) The ¹[Controller] shall refuse to recognise as agent in respect of any business under this Act any person who neither resides nor has a place of business in India.

——————-

1. Substituted for “Central govt.” by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.0.561(E), dt. 20-5-2003.

Section 132. Saving in respect of other persons authorised to act as agents

Nothing in this chapter shall be deemed to prohibit—

(a) the applicant for a patent ¹[x x x] from drafting any specification or appearing or acting before the Controller; or

(b) an advocate, not being a patent agent, from taking part in any ²[hearing before the Controller on behalf of a party who is taking part in any proceeding under this Act].

——————–

1. Words “or any person, not being a patent agent who is duly authorised by the applicant” omitted, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

2. Substituted for “proceedings under this Act otherwise than by way of drafting any specification”, ibid.

Chapter XXII – International Arrangements

Section 133. Convention countries

¹[Convention countries. Any country, which is a signatory or party or a group of countries, union of countries or inter-governmental organizations which are signatories or parties to an international, regional or bi-lateral treaty, convention or arrangement to which India is also a signatory or party and which affords to the applicants for patents in India or to citizens of India similar privileges as are granted to their own citizens or citizens to their member countries in respect of the grant of patents and protection of patent rights shall be a convention country or convention countries for the purposes of this Act.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 134. Notification as to countries not providing for reciprocity

Where any country specified by the Central Government in this behalf by notification in the Official Gazette does not accord to citizens of India the same rights in respect of the grant of patents and the protection of patent rights as it accords to its own nationals, no national of such country shall be entitled, either solely or jointly with any other person—

(a) to apply for the grant of a patent or be registered as the proprietor of a patent;

(b) to be registered as the assignee of the proprietor of a patent; or

(c) to apply for a licence or hold any licence under a patent granted under this Act.

Section 135. Convention applications

(1) Without prejudice to the provisions contained in section 6, where a person has made an application for a patent in respect of an invention in a convention country (hereinafter referred to as the “basic application”), and that person or the legal representative or assignee of that person makes an application under this Act for a patent within twelve months after the date on which the basic application was made, the priority date of a claim of the complete specification, being a claim based on matter disclosed in the basic application, is the date of making of the basic application.

Explanation : Where applications have been made for similar protection in respect of an invention in two or more convention countries, the period of twelve months referred to in this sub-section shall be reckoned from the date on which the earlier or earliest of the said applications was made.

(2) Where applications for protection have been made in one or more convention countries in respect of two or more inventions which are cognate or of which one is a modification of another, a single convention application may, subject to the provisions contained in section 10, be made in respect of those inventions at any time within twelve months from the date of the earliest of the said applications for protection:

PROVIDED that the fee payable on the making of any such application shall be the same as if separate applications have been made in respect of each of the said inventions, and the requirements of clause (b) of sub-section (1) of section 136 shall, in the case of any such application, apply separately to the applications for protection in respect of the said inventions.

¹[(3) In case of an application filed under the Patent Cooperation Treaty designating India and claiming priority from a previously filed application in India, the provisions of subsections (1) and (2) shall apply as if the previously filed application were the basic application:

PROVIDED that a request for examination under section 11B shall be made only for one of the applications filed in India.]

——————–

1. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 136. Special provisions relating to convention applications

(1) Every convention application shall—

(a) be accompanied by a complete specification; and

(b) specify the date on which and the convention country in which the application for protection, or as the case may be, the first of such applications was made; and

(c) state that no application for protection in respect of the invention had been made in a convention country before that date by the applicant or by any person from whom he derives title.

(2) Subject to the provisions contained in section 10, a complete specification filed with a convention application may include claims in respect of developments of, or additions to, the invention in respect of which the application for protection was made in a convention country, being developments or additions in respect of which the applicant would be entitled under the provisions of section 6 to make a separate application for a patent.

(3) A convention application shall not be post-dated under sub-section (1) of section 17 to a date later than the date on which under the provisions of this Act the application could have been made.

Section 137. Multiple priorities

(1) Where two or more applications for patents in respect of inventions have been made in one or more convention countries and those inventions are so related as to constitute one invention, one application may be made by any or all of the persons referred to in subsection (1) of section 135 within twelve months from the date on which the earlier or earliest of those applications was made, in respect of the inventions disclosed in the specifications which accompanied the basic applications.

(2) The priority date of a claim of the complete specification, being a claim based on matters disclosed in one or more of the basic applications, is the date on which that matter was first so disclosed.

(3) For the purposes of this Act, a matter shall be deemed to have been disclosed in a basic application for protection in a convention country if it was claimed or disclosed (otherwise than by way of disclaimer or acknowledgment of a prior art) in that application, or any documents submitted by the applicant for protection in support of and at the same time as that application, but no account shall be taken of any disclosure effected by any such document unless a copy of the document is filed at the patent office with the convention application or within such period as may be prescribed after the filing of that application.

Section 138. Supplementary provisions as to convention applications

¹[(1) Where a convention application is made in accordance with the provisions of this Chapter, the applicant shall furnish, when required by the Controller, in addition to the complete specification, copies of the specifications or corresponding documents filed or deposited by the applicant in the patent office of the convention country as referred to in section 133 verified to the satisfaction of the Controller, within the prescribed period from the date of communication by the Controller.]

(2) If any such specification or other document is in a foreign language, a translation into English of the specification or document, verified by affidavit or otherwise to the satisfaction of the Controller, shall be ²[furnished when required by the Controller].

(3) For the purposes of this Act, the date on which an application was made in a convention country is such date as the Controller is satisfied, by certificate of the official chief or head of the patent office of the convention country or otherwise is the date on which the application was made in that convention country.

³[(4) An international application filed under the Patent Co-operation Treaty designating India shall have effect of filing an application for patent under section 7, section 54 and section 135, as the case may be, and the title, description, claim and abstract and drawings, if any, filed in the international application shall be taken as complete specification for the purposes of this Act.

(5) The filing date of an application for patent and its complete specification processed by the patent office as designated office shall be the international filing date accorded under the Patent Cooperation Treaty.

(6) Amendment, if any, proposed by the applicant for an international application designating India or designating and electing India before international searching authority or preliminary examination authority shall, if the applicant so desires, be taken as an amendment made before the patent office.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “annexed to the specification or document”, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

3. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 139. Other provisions of Act to apply to convention applications

Save as otherwise provided in this chapter, all the provisions of this Act shall apply in relation to convention application and a patent granted in pursuance thereof as they apply in relation to an ordinary application and a patent granted in pursuance thereof.

Chapter XXIII – Miscellaneous

Section 140. Avoidance of certain restrictive conditions

(1) It shall not be lawful to insert—

(i) in any contract for or in relation to the sale or lease of a patented article or an article made by a patented process; or

(ii) in a licence to manufacture or use a patented article; or

(iii) in a licence to work any process protected by a patent, a condition the effect of which may be—

(a) to require the purchaser, lessee, or licensee to acquire from the vendor, lessor, or licensor, or his nominees, or to prohibit him from acquiring or to restrict in any manner or to any extent his right to acquire from any person or to prohibit him from acquiring except from the vendor, lessor, or licensor or his nominees, any article other than the patented article or an article other than that made by the patented process; or

(b) to prohibit the purchaser, lessee or licensee from using, or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee, to use an article other than the patented article or an article other than that made by the patented process, which is not supplied by the vendor, lessor or licensor or his nominee; or

(c) to prohibit the purchaser, lessee or licensee from using or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee to use any process other than the patented process, and any such condition shall be void.

¹[(d) to provide exclusive grant back, prevention to challenges to validity of patent and coercive package licensing.]

(2) A condition of the nature referred to in clause (a) or clause (b) or clause (c) of subsection (1) shall not cease to be a condition falling within that sub-section merely by reason of the fact that the agreement containing it has been entered into separately, whether before or after the contract relating to the sale, lease or licence of the patented article or process.

(3) In proceedings against any person for the infringement of a patent, it shall be a defence to prove that at the time of the infringement there was in force a contract relating to the patent and containing a condition declared unlawful by this section:

PROVIDED that this sub-section shall not apply if the plaintiff is not a party to the contract and proves to the satisfaction of the court that the restrictive condition was inserted in the contract without his knowledge and consent, express or implied.

(4) Nothing in this section shall—

(a) affect a condition in a contract by which a person is prohibited from selling goods other than those of a particular person;

(b) validate a contract which, but for this section, would be invalid;

(c) affect a condition in a contract for the lease of, or licence to use, a patented article, by which the lessor or licensor reserves to himself or his nominee the right to supply such new parts of the patented article as may be required or to put or keep it in repair.

²[(5) xxx]

——————–

1. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 141. Determination of certain contracts

(1) Any contract for the sale or lease of a patented article or for licence to manufacture, use or work a patented article or process, or relating to any such sale, lease or licence, ¹[x x x], may at any time after the patent or all the patents by which the article or process was protected at the time of the making of the contract has or have ceased to be in force, and notwithstanding anything to the contrary in the contract or in any other contract, be determined by the purchaser, lessee, or licensee, as the case may be, of the patent on giving three months’ notice in writing to the other party.

(2) The provisions of this section shall be without prejudice to any right of determining a contract exercisable apart from this section.

——————–

1. Words “whether made before or after the commencement to this Act” omitted, by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 142. Fees

(1) There shall be paid in respect of the grant of patents and applications therefor, and in respect of other matters in relation to the grants of patents under this Act, such fees as may be prescribed by the Central Government.

(2) Where a fee is payable in respect of the doing of an act by the Controller, the Controller shall not do that act until the fee has been paid.

¹[(3) Where a fee is payable in respect of the filing of a document at the patent office, the fee shall be paid along with the document or within the prescribed time and the document shall be deemed not to have been filed at the office if the fee has not been paid within such time.]

(4) Where a principal patent is granted later than two years from the date of filing of the ²[the application], the fees which have become due in the meantime may be paid within a term of three months from the date of the recording of the patent in the register ³[or within the extended period not later than nine months from the date of recording.]

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

2. Substituted for “complete specification” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 143. Restrictions upon publication of specification

¹[Restrictions upon publication of specification. Subject to the provisions of Chapter VII, an application for a patent, and any specification filed in pursuance thereof, shall not, except with the consent of the applicant, be published by the Controller before the expiration of the period prescribed under sub-section (1) of section 11A or before the same is open to public inspection in pursuance of sub-section (3) of section 11A or section 43.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 144. Reports of examiners to be confidential

The reports of examiners to the Controller under this Act shall not be open to public inspection or be published by the Controller; and such reports shall not be liable to production or inspection in any legal proceeding unless the court certifies that the production or inspection is desirable in the interest of justice, and ought to be allowed.

Section 145. Publication of official journal

¹[Publication of official journal. The Controller shall publish periodically an official journal which shall contain such information as may be required to be published by or under the provisions of this Act or any rule made thereunder.]

——————–

1. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 146. Power of Controller to call for information from patentees

(1) The Controller may, at any time during the continuance of the patent, by notice in writing, require a patentee or a licensee, exclusive or otherwise, to furnish to him within two months from the date of such notice or within such further time as the Controller may allow, such information or such periodical statements as to the extent to which the patented invention has been commercially worked in India as may be specified in the notice.

(2) Without prejudice to the provisions of sub-section (1), every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner and form and at such intervals (not being less than six months) as may be prescribed statements as to the extent to which the patented invention has been worked on a commercial scale in India.

(3) The Controller may publish the information received by him under sub-section (1) or sub-section (2) in such manner as may be prescribed.

Section 147. Evidence of entries, documents, etc.

(1) A certificate purporting to be signed by the Controller as to any entry, matter or thing which he is authorised by this Act or any rules made thereunder to make or do, shall be prima facie evidence of the entry having been made and of the contents thereof and of the matter or thing having been done or omitted to be done.

(2) A copy of any entry in any register or of any document kept in the patent office or of any patent, or an extract from any such register or document, purporting to be certified by the Controller and sealed with the seal of the patent office shall be admitted in evidence in all courts, and in all proceedings, without further proof or production of the original.

(3) The Controller or any other officer of the patent office shall not, in any legal proceedings to which he is not a party, be compellable to produce the register or any other document in his custody, the contents of which can be proved by the production of a certified copy issued under this Act or to appear as a witness to prove the matters therein recorded unless by order of the court made for special causes.

Section 148. Declaration by infant, lunatic, etc.

(1) If any person is, by reason of minority, lunacy or other disability, incapable of making any statement or doing anything required or permitted by or under this Act the lawful guardian, committee or manager (if any) of the person subject to the disability, or if there be none, any person appointed by any court possessing jurisdiction in respect of his property, may make such statement or a statement as nearly corresponding thereto as circumstances permit, and do such thing in the name and on behalf of the person subject to the disability.

(2) An appointment may be made by the court for the purposes of this section upon the petition of any person acting on behalf of the person subject to the disability or of any person interested in the making of the statement or the doing of the thing.

Section 149. Service of notices, etc. by post

Any notice required or authorised to be given by or under this Act, and any application or other document so authorised or required to be made or filed, may be given, made or filed by post.

Section 150. Security for costs

If any party by whom notice of any opposition is given under this Act or by whom application is made to the Controller for the grant of a licence under a patent neither resides nor carries on business in India, the Controller may require him to give security for the cost of the proceedings, and in default of such security being given may treat the opposition or application as abandoned.

Section 151. Transmission of orders of courts to Controller

(1) Every order of ¹[the High Court or the Appellate Board] on a petition for revocation, including orders granting certificates of validity of any claim, shall be transmitted by ¹[the High Court or the Appellate Board] to the Controller who shall cause an entry thereof and reference thereto to be made in the register.

(2) Where in any suit for infringement of a patent or in any suit under section 106 the validity of any claim or a specification is contested and that claim is found by the court to be valid or not valid, as the case may be, the court shall transmit a copy of its judgment and decree to the Controller who shall on receipt thereof cause an entry in relation to such proceeding to be made in the prescribed manner in a supplemental record.

(3) The provisions of sub-sections (1) and (2) shall also apply to the court to which appeals are preferred against decisions of the ²[Appellate Board or the Courts] referred to in those sub-sections.

——————–

1. Substituted for “the High Court” by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

2. Substituted for “courts” by the Patents (Amdt.) Act, 2005, w.e.f. the date to be notified.

Section 152. [xxx]

¹[xxx]

——————–

1. Omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 153. Information relating to patents

A person making a request to the Controller in the prescribed manner for information relating to any such matters as may be prescribed as respects any patent specified in the request or as respects any application for a patent so specified shall be entitled, subject to the payment of the prescribed fee to have information supplied to him accordingly.

Section 154. Loss or destruction of patents

If a patent is lost or destroyed, or its non-production is accounted for to the satisfaction of the Controller, the Controller may at any time, on application made in the prescribed manner and on payment of the prescribed fee, cause a duplicate thereof to be sealed and delivered to the applicant.

Section 155. Reports of Controller to be placed before Parliament

The Central Government shall cause to be placed before both Houses of Parliament once a year a report respecting the execution of this Act by or under the Controller.

Section 156. Patent to bind government

Subject to the other provisions contained in this Act, a patent shall have to all intents the like effect as against government as it has against any person.

Section 157. Right of government to sell or use forfeited articles

Nothing in this Act shall affect the power of the government or of any person deriving title directly or indirectly from the government to sell or use any articles forfeited under any law for the time being in force.

Section 157 A. Protection of security of India

¹[Protection of security of India. Notwithstanding anything contained in this Act, the Central Government shall —

(a) not disclose any information relating to any patentable invention or any application relating to the grant of patent under this Act, which it considers prejudicial to the interest of the security of India;

(b) take any action including the revocation of any patent which it considers necessary in the interest of the security of India by issue of a notification in the official gazette to that effect.

Explanation : For the purposes of this section, the expression “security of India” includes any action necessary for the security of India which —

(i) relates to fissionable materials or the materials from which they are derived; or

(ii) relates to the traffic in arms, ammunition and implements of war -and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; or

(iii) is taken in time of war or other emergency in international relations.]

——————–

1. Substituted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561 (E), dt. 20-5-2003.

Section 158. Power of High Courts to make rules

The High Court may make rules consisent with this Act as to the conduct and procedure in respect of all proceedings before it under this Act.

Section 159. Power of Central Government to make rules

(1) The Central Government may, by notification on the Official Gazette, make rules for carrying out the purposes of this Act.

(2) Without prejudice to the generality of the forgoing power, the Central Government may make rules to provide for all or any of the following matters, namely,—

(i) the form and manner in which any application for a patent, any specifications or drawings and any other application or document may be filed in the patent office;

¹[(ia)the period which the Controller may allow the filing of statement and undertaking for in respect of applications under sub-section (1), the period within which the details relating to processing of applications may be filed before the Controller and the details to be furnished by the applicant to the Controller under sub-section (2) of section 8;

(ib) the period within which a reference to the deposit of materials shall be made in the specification under sub-clause (A) of clause (ii) of the proviso to sub-section (4) of section 10;

(ic) the period for which application for patent shall not be open to the public under sub-section (1) and the manner in which the applicant may make a request to the Controller to publish his application under sub-section (2) of section 11A;

(id) the manner of making the request for examination for an application for patent and the period within which such examination shall be made under sub-sections (1) and (3) of section 11B;

(ie) the manner in which an application for withdrawal of an application for grant of a patent shall be made and the period within which a request for examination from the date of revocation of secrecy directions shall be made under the proviso to sub-section (4) of section 11B.]

(ii) the time within which any act or thing may be done under this Act, including the manner in which and the time within which any matter may be ²[published] under this Act;

(iii) the fees which may be payable under this Act and the manner and time of payment of such fees;

(iv) the matters in respect of which the examiner may make a report to the Controller;

³[(v)the manner in which and the period within which the Controller shall consider and dispose off a representation under sub-section (1) of section 25;

(va) the period within which the Controller is required to dispose off an application under section 39;]

(vi) the form and manner in which and the time within which any notice may be given under this Act;

(vii) the provisions which may be inserted in an order for restoration of a patent for the protection of persons who may have availed themselves of the subjectmatter of the patent after the patent had ceased;

(viii) the establishment of branch offices of the patent office, and the regulation generally of the business of the patent office, including its branch offices;

(ix) the maintenance of the register of patents ⁴[and the safeguards to be observed in the maintenance of such register in computer floppies, diskettes or any other electronic form] and the matters to be entered therein;

(x) the matters in respect of which the Controller shall have powers of a civil court;

(xi) the time when and the manner in which the register and any other document open to inspection may be inspected under this Act;

(xii) the qualifications of, and the preparation of a roll of, scientific advisers for the purpose of section 115;

⁴[(xiia) the salaries and allowances and other conditions of service of the officers and other employees of the Appellate Board under sub-section (2), and the manner in which the officers and other employees of the Appellate Board shall discharge their functions under sub-section (3) of section 117;

(xiib) the form of making an appeal, the manner of verification and the fee payable under sub-section (3) of section 117A;

(xiic) the form in which, and the particulars to be included in, the application to the Appellate Board under sub-section (1) of section 117D;]

(xiii) the manner in which any compensation for acquisition by government of an invention may be paid;

(xiv) the manner in which the register of patent agents may be maintained ⁴[under sub-section (1) of section 125 and the safeguards to be observed in the maintenance of such register of patent agents on computer floppies, diskettes or any other electronic form under sub-section (2) of that section;] the conduct of qualifying examinations for patent agents; and matters connected with their practice and conduct, including the taking of disciplinary proceedings against patent agents for misconduct;

(xv) the regulation of the making, printing, publishing and selling of indexes to, and abridgments of specifications and other documents in the patent office, and the inspection of indexes and abridgments and other documents;

(xiv) any other matter which has to be or may be prescribed.

(3) The power to make rules under this section shall be subject to condition of the rules being made after previous publication:

⁵[PROVIDEO that the Central Government may, if it is satisfied that circumstances exist which render it practically not possible to comply with such condition of previous publication, dispense with such compliance.]

——————–

1. Existing clauses (ia) and (ib) substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

2. Substituted for “advertised” by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

3. Substituted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

4. Inserted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

5. Inserted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Section 160. Rules to be placed before Parliament

Every rule made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and, if before the expiry of the session immediately following the session or the successive sessions aforesaid both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Section 161. [xxx]

¹[xxx]

——————–

1. Omitted by Patents (Amdt.) Act, 2002, w.e.f. 20-5-2003 vide S.O. 561(E), dt. 20-5-2003.

Section 162. Repeal of Act 2 of 1911 insofar as it relates to patents and saving

(1) The Indian Patents and Designs Act, 1911, in so far as it relates to patents, is hereby repealed, that is to say, the said Act shall be amended in the manner specified in the schedule.

¹[x x x]

(4) The mention of particular matters in this section shall not prejudice the general application of the General Clauses Act, 1897, (10 of 1897) with respect to repeals.

(5) Notwithstanding anything contained in this Act, any suit for infringement of a patent or any proceeding for revocation of a patent, pending in any court at the commencement of this Act, may be continued and disposed of, as if this Act had not been passed.

——————–

1. Sub-sections (2) & (3) omitted, ibid.

Section 163. [xxx]

¹[xxx]

——————–

1. Existing section 163 omitted by the Patents (Amdt.) Act, 2005, w.e.f. 1-1-2005.

Consumer Protection Act

November 30, 2014

CHAPTER I: PRELIMINARY

Section 1. Short title, extent, commencement and applications

(1) This Act may be called the Consumer Protection Act, 1986.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall come into force on such date as the Central Government may, by notification, appoint and different dates may be appointed for different States and for different provisions of this Act.

(4) Save as otherwise expressly provided by the Central Government by notifications, this Act shall apply to all goods and services.

Section 2. Definitions

(1) In this Act, unless the context otherwise requires,-

1[(a) “appropriate laboratory” means a laboratory or organisation-

(i) recognised by the Central Government;

(ii) recognised by a State Government, subject to such guidelines as may be prescribed by the Central Government in this behalf; or

(iii) any such laboratory or organisation established by or under any law for the time-being in force, which is maintained, financed or aided by the Central Government or a State Government for carrying out analysis or test of any goods with a view to determining whether such goods suffer from any defect;

2[(aa) “branch office” means-

(i) any establishment described as a branch by the opposite party, or

(ii) any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the establishment;

(b) “complainant” means-

(i) a consumer; or

(ii) any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956), or under any other law for the time being in force; or

(iii) the Central Government or any State Government,

2[(iv) one or more consumers, where there are numerous consumers having the same interest;] who or which makes a complaint;

(c) “complaint” means any allegation in writing made by a complainant that-

1[(i) an unfair trade practice or a restrictive trade practice has been adopted by any trader;]

(ii) 1[the goods bought by him or agreed to be bought by him] suffer from one or more defect;

(iii) 1[the services hired or availed of or agreed to be hired or availed of by him] suffer from deficiency in any respect;

(iv) a trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods;

2[(v) goods which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of the provisions of any law for the time being in force requiring traders to display information in regard to the contents, manner and effect of use of such goods. with a view to obtaining any relief provided by or under this Act;

(d) “consumer” means any person who-

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) 1[hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who 1[hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payments, when such services are availed of with the approval of the first-mentioned person;

2[Explanation: For the purposes of sub-clause (i), “commercial purpose” does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;]

(e) “consumer dispute” means a dispute where the person against whom a complaint has been made, denies or disputes the allegations contained in the complaint;

(f) “defect” means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or 2[under any contract, express or] implied, or as is claimed by the trader in any manner whatsoever in relation to any goods;

(g) “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;

(h) “District Forum” means a Consumer Disputes Redressal Forum established under clause (a) of section 9;

(i) “goods” means goods as defined in the Sale of Goods Act, 1930 (3 of 1930);

(j) “manufacturer” means a person who-

(i) makes or manufactures any goods or parts thereof; or

(ii) does not make or manufacture any goods but assembles parts thereof made or manufactured by others and claims the end product to be goods manufactured by himself; or

(iii) puts or causes to be put his own mark on any goods made or manufactured by any other manufacturer and claims such goods to be goods made or manufactured by himself.

Explanation : Where a manufacturer despatches any goods or part thereof to any branch office maintained by him, such branch office shall not be deemed to be the manufacturer even though the parts so despatched to it are assembled at such branch office and are sold or distributed from such branch office.

2[(jj) “member” includes the President and a member of the National Commission or a State Commission or a District Forum, as the case may be;]

(k) “National Commission” means the National Consumer Disputes Redressal Commission established under clause (c) of section 9;

(l) “notification” means a notification published in the Official Gazette;

(m) “person” includes-

(i) a firm whether registered or not;

(ii) a Hindu undivided family;

(iii) a co-operative society;

(iv) every other association of persons whether registered under the Societies Registration Act, 1860 (22 of 1860) or not;

(n) “prescribed” means prescribed by rules made by the State Government, or as the case may be, by the Central Government under this Act;

2[(nn) “restrictive trade practice” means any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as a condition precedent for buying, hiring or availing of other goods or services;]

(o) “service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, 6[housing construction], entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;

(p) “State Commission” means a Consumer Disputes Redressal Commission established in a State under clause (b) of section 9;

(q) “trader” in relation to any goods means a person who sells or distributes any goods for sale and includes the manufacturer thereof, and where such goods are sold or distributed in package form, includes the packer thereof;

2[(r) “unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely,-

(1) the practice of making any statement, whether orally or in writing or by visible representation which,-

(i) falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;

(ii) falsely represents that the services are of a particular standard, quality or grade;

(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;

(iv) represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;

(v) represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;

(vi) makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;

(vii) gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;

(viii) makes to the public a representation in a form that purports to be-