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      Question

      Under Section 23 of the Payment and Settlement Systems

      Act, 2007, a large commercial bank, Bank Y, participates in a Clearing Corporation's net settlement system. On a particular settlement date, the Clearing Corporation determines that Bank Y owes ₹500 crores to the system after netting. That same evening, before actual payment is made, Bank Y is placed under moratorium by the RBI. The next morning, a liquidator is appointed, and Bank Y's creditors demand that the settlement determination be reopened on grounds that actual funds were not transferred. Which of the following correctly applies Section 23(3) to this scenario?
      A The settlement determination can be reopened because actual payment was not made; settlement finality applies only after funds are physically transferred Correct Answer Incorrect Answer
      B The settlement determination is final and irrevocable as soon as the net amount was determined by the Clearing Corporation, notwithstanding the subsequent moratorium or liquidation; the liquidator cannot reopen the settlement Correct Answer Incorrect Answer
      C The settlement determination becomes final only if Bank Y voluntarily acknowledges the obligation; RBI moratorium automatically suspends settlement finality pending resolution Correct Answer Incorrect Answer
      D The liquidator can reopen the settlement if creditors prove financial hardship caused by the original determination Correct Answer Incorrect Answer
      E The settlement finality applies only to settlements explicitly documented in writing; electronic determinations can be challenged within 30 days Correct Answer Incorrect Answer

      Solution

      Explanation: Section 23(3) of the PSSA, 2007 provides: "A settlement effected under such procedure shall be final and irrevocable." This is further clarified by Explanation 1 to Section 23: "For the removal of doubts, it is hereby declared that the settlement, whether gross or net, referred to in this section is final and irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions payable as a result of such settlement is determined, whether or not such money, securities or foreign exchange or derivatives or other transactions is actually paid." The statute is explicit: finality attaches to the determination, not to actual payment. The language "whether or not such money...is actually paid" specifically negates the argument that finality depends on physical transfer. Section 23(6) additionally provides: "Notwithstanding anything contained in the...Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016 or any other law for the time being in force, the liquidator or receiver...shall not re-open any determination that has become final and irrevocable." This creates an express statutory override of insolvency law. Bank Y's moratorium and liquidation do NOT reopen the settlement. The Clearing Corporation's determination becomes final and irrevocable at the moment of determination, protecting payment system integrity. Thus, option (B) correctly applies Section 23(3) and Explanation 1

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