The question (15 marks)
A non-banking financial company, having been directed by the Reserve Bank to stop accepting deposits, proposes a scheme of arrangement with its depositors under company law. Advise on whether the scheme can be sanctioned, and explain how the regulation of such a company differs from that of a banking company. (15 marks)
MU Module 2, heads 2.1 and 2.2; pack chapter on the Banking Regulation Act; RBI Act Chapter III-B.
Plan your answer on paper before you look at the authorities — issue first, then the rule, then apply it to these facts.
It tests Unit 2 · The Laws Governing Financial Institutions of Law of Banking and Negotiable Instruments.
Authorities you will need
- M/S Integrated Finance Co. Ltd. v. Reserve Bank of India
- Reserve Bank of India Act 1934, ss. 45-IA, 45K, 45L, 45MB, 45N, 45QA, 45-Q
- Banking Regulation Act 1949, ss. 22, 35, 35A, 36AA, 36AB, 45, 38
- Banking Regulation Act 1949, s. 44B, on compromises with creditors of a banking company
How an answer is marked
A full-marks answer names the issue in one line, states the rule with its section, cites the authority, applies it to these facts and concludes — in that order. The app's model answer for this question is written in exactly that shape, with a checklist to mark your own attempt against.