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      Question

      Section 37(1) of the Banking Regulation Act, 1949

      empowers the High Court to grant a moratorium to a banking company that is temporarily unable to meet its obligations. Under Section 37(2), such an application for moratorium shall ordinarily not be maintainable unless it is accompanied by a report of the Reserve Bank. What is the outer ceiling on the total period of moratorium that the High Court may grant under Section 37(1)?
      A Three months Correct Answer Incorrect Answer
      B One year Correct Answer Incorrect Answer
      C Ninety days Correct Answer Incorrect Answer
      D Six months Correct Answer Incorrect Answer
      E Twelve months Correct Answer Incorrect Answer

      Solution

      Section 37(1) provides that the High Court may grant a moratorium staying all actions and proceedings against a banking company for a fixed period on such terms as it thinks fit, and may from time to time extend the period, so however that the total period of moratorium shall not exceed six months. The application must ordinarily be accompanied by a Reserve Bank report indicating that the banking company will be able to pay its debts if the moratorium is granted. The proviso permits the High Court, for sufficient reasons, to grant relief even without such a report, whereupon it must call for a report from the Reserve Bank and may then rescind or modify any earlier order. If the RBI finds affairs are being conducted detrimentally to depositors, it may apply to the High Court for winding up.

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