56Act to apply to co-operative societies subject to modifications

¹[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, co-operative 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) references to "commencement of this Act" shall be construed as references 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,--

²[(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;

³[(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;

³[(cciiia) "multi-State co-operative bank" means a multi-State co-operative society which is a primary co-operative bank;

(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 multiState 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 a member:

(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;

(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", ⁴*** "primary rural credit society" and "state co-operative bank" shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]

⁵[(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 ⁶[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 ⁶[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 a 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;

⁷[(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 one of such words.

(2) Nothing in this section shall apply to--

(a) a primary credit society, or

(b) a co-operative society formed for the protection of the mutual interest of cooperative 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."];

⁸[(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) ⁹[Sections 10, 10A, ¹⁰[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 cooperative bank or for such further period not exceeding one year as 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 purposes of this section, "value" means the real of 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 such co-operative bank, a determination thereof by the Reserve Bank shall be final for the purposes of this section.';

(i) sections 12, 12A, 13 and 15 to 17 shall be omitted;

¹¹[(j) for section 18, the following section shall be substituted:--

"18. Cash reserve.--(1) Every co-operative bank, not being ¹²[a co-operative bank] for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 ¹³[(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 co-operative bank of the district concerned, or in one or more of the aforesaid ways, a sum equivalent to ¹⁴[such per cent.] of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight ¹⁵[as the Reserve Bank may specify, by notification in the official Gazette, from time to time having regard to the needs for securing the monetary stability in the country] and shall submit to the Reserve Bank before the fifteenth day of every month a return showing the amount so held on alternate Friday 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, ¹⁶*** the Exim Bank, ¹⁷[the Reconstruction Bank], ¹⁸[the National Housing Bank]], the National Bank ¹⁹[, 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 co-operative bank;

(iii) in the case of a State or central co-operative bank, also any deposit of money with it representing the reserve fund or any part thereof maintained with it by any other co-operative society within its area of operation, and in the case of a central cooperative 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 ²⁰[co-operative bank] of the State concerned or the central co-operative 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 ²¹[a corresponding new bank or IDBI Bank Ltd.], 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 co-operative 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 extend 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.

²²[(1A) If the balance held by co-operative bank referred to in sub-clause (cci) of clause (c) of section 56 of the Banking Regulation Act, 1949, at the close of business on any day is below the minimum specified under sub-section (1), such co-operative bank shall, without prejudice to the provisions of any other law for the time being in force, be liable to pay to the Reserve Bank, in respect of that day, penal interest at a rate of three per cent. above the bank rate on the amount by which such balance falls short of the specified minimum, and if the shortfall continues further, the penal interest so charged shall be increased to a rate of five per cent. above the bank rate in respect of each subsequent day during which the default continues.

(1B) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an application in writing by the defaulting co-operatrive bank, that such defaulting co-operative bank had sufficient cause for its failure to comply with the provisions of sub-section (1), it may not demand the payment of the penal interest.

(1C) The Reserve Bank may, for such period and subject to such conditions as may be specified, grant to any co-operative bank such exemptions from the provisions of this section as it thinks fit with reference to all or any of its officers or with reference to the whole or any part of its assets and liabilities.]

(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 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 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 cooperative bank to which it is affiliated;

(iii) in the case of a primary co-operative bank, the holding of shares in the central cooperative bank to which it is affiliated or in the State co-operative 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.";

²³[(l) for section 20 of the principal Act, the following section shall be substituted, namely:--

"20. Restriction 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 or 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 cooperative 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 sub-section 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 loan or advance within such time as may be specified in the order.];

²⁴[(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 individual," 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--

²⁵* * * * *

(b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject 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.

²⁶[Provided further that nothing in this sub-section shall apply to a primary credit society carrying on banking business on or before the commencement of the Banking Laws (Amendment) Act, 2012, for a period of one year or for such further period not exceeding three years, as the Reserve Bank may, after recording the reasons in writing for so doing, extend.]

²⁷[(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 such commencement, every cooperative bank which comes into existence as a result of the division of any other cooperative 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, ²⁸[every primary credit society which had become a primary co-operative bank on or before the commencement of the Banking Laws (Amendment) Act, 2012 (4 of 2013), shall before the expiry of three months from the date on which it had become a primary co-operative bank] and every co-operative society ²⁹*** 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 Laws (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 co-operative 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 ³⁰[thereafter];

³¹* * * * *

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.]

³²[(ii) sub-section (3A) shall be omitted;

(iii) in sub-section (4), in clause (iii), the words, brackets, figure and letter "and sub-section (3A)" shall be omitted;]

³³[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-State co-operative society by the Reserve Bank under section 22, which was subsisting on the date of commencement of the Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (24 of 2004), shall be invalid or be deemed ever to have been invalid merely by the reason of such judgment, decree or order;

(b) Every licence, granted to a multi-State co-operative society by the Reserve Bank under section 22, which was subsisting on the date of commencement of the Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (24 of 2004), shall be valid and be deemed always to have been validly granted in accordance with law;

(c) A multi-State co-operative society whose application for grant of licence for carrying on banking business was pending with the Reserve Bank on the date of commencement of the Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (24 of 2004) shall be eligible to carry on banking business until it is granted a licence in pursuance of section 22 or is, by a notice in writing notified by the Reserve Bank that the licence cannot be granted to it;]

³⁴[(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 a 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 other like occasion;

(b) the ³⁵[opening or changing the location of branches] by a central co-operative bank within the area of its operation.";

³⁶[(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 send 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."]

³⁷[(q) in section 24,--

³⁸* * * * *

³⁹[(ii) for sub-section (2A), the following sub-section shall be substituted, namely:--

"(2A) A scheduled 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 every other co-operative bank, in addition to the cash reserve which it is required to maintain under section 18, shall maintain in India, assets, the value of which shall not be less than such percentage not exceeding forty per cent. of the total of its demand and time liabilities in India as on last Friday of the second preceding fortnight as the Reserve Bank may, by notification in the Official Gazette, specify from time to time and such assets shall be maintained in such form and manner, as may be specified in such notification." ;]

(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 co-operative 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 "thirty days" shall be substituted."]

⁴⁰[(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 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.

⁴¹[(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;

⁴²[(ria) in section 26A, for the words "banking companies", the words “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 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 co-operative banks, other than primary co-operative banks."

(s) for ⁴³[section 29], the following section shall be substituted, namely:--

"29. Accounts and balance-sheet.--(1) At the expiration of each year ending with the 30th day of June ⁴⁴[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 ⁴⁰[or the period] a balance-sheet and profit and loss account as on the last working day of the year ⁴⁰[or the period] in the Forms set out in the Third Schedule or as near thereto as circumstances admit.

(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 three 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:]

⁴⁵[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.]

⁴⁶[(sa) for section 30, the following section shall be substituted, namely:--

"30. Audit.-- (1) Without prejudice to anything contained in any other law for the time being in force, where the Reserve Bank is satisfied that it is necessary in the public interest or in the interest of the co-operative bank or its depositors so to do, it may at any time by general or special order direct that an additional audit of the co-operative bank accounts, for any such transactions 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 appoint a person duly qualified under any law for the time being in force to be an auditor of companies to conduct such 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 co-operative bank.

(2) The expenses of, or incidental to, the additional audit specified in the order made by the Reserve Bank shall be borne by the co-operative bank.

(3) The auditor referred to in sub-section (1) shall have such powers, exercise such functions vested in and discharge the duties and be subject to the liabilities and penalties imposed on auditors of companies by section 227 of the Companies Act, 1956 (1 of 1956) and also that of the auditors, if any, appointed by the law establishing, constituting or forming the co-operative bank to the extent the provisions of the Companies Act, 1956 are not inconsistent with the provisions of such law.

(4) In addition to the matters referred to in the order under sub-section (1) the auditor shall 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 co-operative bank which came to his notice have been within the powers of the co-operative bank;

(c) whether or not the returns received from branch offices of the co-operative bank have been found adequate for the purpose of his audit;

(d) whether the profit and loss accounts, shows a true balance or 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 Reserve Bank and the shareholders of the co-operative bank.' '.

⁴⁷[(t) in section 31,--

(i) for the words "within theree 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 co-operative 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;

⁴⁸ [(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 co-operative bank is registered."];

(ii) in sub-section (4), clause (b) shall be omitted;

⁴⁹ [(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."]

⁵⁰ [(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 banks" and "co-operative bank other than a primary co-operative bank" shall, respectively be substituted.]

⁵¹ [(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 of business any co-operative bank" shall be substituted;

(y) section 35B shall be omitted;

⁵² [(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 re-organisation or expansion of cooperative 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 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 cooperative bank which has been refused a licence under section 22 or 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 ⁵³[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.";

⁵⁴[(zaa) after section 36AA of the principal Act, the following sections shall be inserted, namely:--

"36AAA.--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 or 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 cooperative 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 (39 of 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 notwithstanding that such power is exercisable by a resolution passed in the general meeting of such multiState 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 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 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.

36AAB.--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 (47 of 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 (39 of 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 (39 of 2002); or

(c) An order for the supersession of the Board and the appointment of an Administrator therefore 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 multi-State co-operative bank under clause (b) or an 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.

36AAC.-- 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 (47 of 1961), is wound up and the Deposit Insurance Corporation has become liable to the depositors of the insured bank under sub-section (1) or sub-section (2) of section 16 of that 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 that Act.

(zab) In section 36AD, sub-section (3) shall be omitted;";

(zb) ⁵⁵[Part IIA except sections 36AAA, 36AAB and 36AAC], ⁵⁶[Part IIC,] Part III, except sub-sections (1), (2) and (3) of section 45, and Part IIIA except section 45W shall be omitted;

⁵⁷[(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 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” shall be omitted;

(ii) sub-section (4) shall be omitted;

⁵⁸[(zji) in section 54, after the expression "Reserve Bank", wherever it occurs, the expression "or the National Bank" shall be inserted.]

(zk) for section 55 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(18 of 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:--