Central Government Notifies Amalgamation Scheme for New Bank of India and Punjab National Bank

The Central Government, through a Notification issued by the Ministry of Finance (Department of Economic Affairs, Banking Division), formally introduced the New Bank of India (Amalgamation and Transfer of Undertaking) Scheme, 1993. This legislative instrument, designated S.O. 662(E), was promulgated in exercise of the powers conferred by section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), following consultation with the Reserve Bank of India. The Scheme mandated the transfer of the entire undertaking of the New Bank of India, designated as the transferor bank, to the Punjab National Bank, which was identified as the transferee bank. A subsequent Notification, S.O. 663(E), specified September 4, 1993, as the appointed date for the Scheme to come into force, meaning the amalgamation became effective upon its publication in the Official Gazette.

Under the provisions of the Scheme, the undertakings of the New Bank of India were transferred to and vested in the Punjab National Bank. This vesting encompassed a broad spectrum of assets, rights, and liabilities. The legislation provided: “The undertakings of the transferor bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, capital, reserve funds, investments and all other rights and interests in, or arising out of, such property as were immediately before the commencement of this Scheme in the ownership, possession, power or control of the transferor bank in relation to the undertakings, whether within or outside India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind then subsisting of the transferor bank in relation to the undertakings.” Furthermore, any property held by the transferor bank under lease was deemed to transfer to the transferee bank, with provisions for renewal upon expiry. Crucially, all existing contracts, deeds, bonds, agreements, and legal proceedings involving the New Bank of India were to continue with full force and effect against or in favour of the Punjab National Bank, preventing abatement or prejudice to ongoing matters. The Scheme also addressed the status of employees, stipulating that every officer or employee of the New Bank of India would become an employee of the Punjab National Bank on the same terms and conditions, including rights to pension and gratuity, as if the transfer had not occurred. However, employees were granted the option to leave their service under the same terms. The Central Government was also tasked with formulating a separate scheme, in consultation with the Reserve Bank of India, for determining the placement and inter-se seniority of the transferor bank's employees relative to those of the transferee bank, considering factors such as experience. Concurrently with the commencement of the Scheme, the Board of Directors of the New Bank of India stood dissolved, and its Chairman and other whole-time directors ceased to hold office, receiving three months' salary and allowances in lieu of notice. Trustees or administrators of provident funds and gratuity funds for the employees of the New Bank of India were directed to transfer all monies and investments to the corresponding funds of the Punjab National Bank.

The legislative intent behind the New Bank of India (Amalgamation and Transfer of Undertaking) Scheme, 1993, was to facilitate a structured and legally sound consolidation within the nationalized banking sector. This move aimed to streamline operations and potentially enhance the financial stability and operational efficiency of the involved entities. The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, provided the overarching statutory framework for the nationalization and subsequent management of certain banks, and this Scheme served as a specific application of those powers to address a particular situation. Prior to such a scheme, the transfer of an entire banking undertaking, including its complex web of assets, liabilities, and human resources, would have presented significant legal and logistical challenges. The Scheme effectively bridged any potential statutory gaps by providing a clear, comprehensive mechanism for the seamless transfer of all aspects of the New Bank of India's operations to the Punjab National Bank. It introduced specific obligations for the Punjab National Bank regarding the continuity of business, contracts, and employee terms, while also establishing rights for the employees of the New Bank of India. The provisions for the dissolution of the transferor bank's board and the transfer of its funds ensured a clean and complete transition. The requirement for the Central Government to formulate a detailed employee placement scheme underscored the policy's commitment to addressing human resource aspects systematically, acknowledging the real-world impact of such amalgamations on individuals.

Keywords: Banking, Amalgamation, Nationalized Banks, New Bank of India, Punjab National Bank, Banking Companies Act, 1993, Financial Sector, India Geo Tags: India, Delhi District: Not Applicable