Rules Prescribe Compensation Mechanism for Imperial Bank Shareholders

The Central Government, in consultation with the Reserve Bank, issued The State Bank (Compensation on Imperial Bank Shares) Rules, 1955, a set of delegated legislation designed to operationalize the compensation process for shareholders of the erstwhile Imperial Bank of India. These rules were promulgated on June 23, 1955, under the authority granted by section 49 of the State Bank of India Act, 1955 (23 of 1955), read with section 22 of the General Clauses Act, 1897. The enactment of these rules became necessary following the establishment of the State Bank of India, which involved the acquisition of the undertaking of the Imperial Bank of India, thereby necessitating a structured approach to compensate its shareholders. The rules came into force on July 1, 1955, coinciding with the operational commencement of the State Bank of India Act.

The rules delineate a comprehensive framework for claiming and receiving compensation. They define key terms such as "Act" referring to the State Bank of India Act, 1955, and "schedule" referring to the First Schedule of that Act, which would have outlined the compensation principles. For the purpose of calculating compensation, the rules specify how different shareholdings are to be combined, treating all shares registered in the name of a single shareholder or in the joint names of the same two or more shareholders as single holdings. A detailed application procedure is laid out, requiring shareholders to submit their claims to the Reserve Bank using specific forms: Form 'A' for registered shareholders, Form 'B' for surviving joint shareholders, and Form 'C' for legal representatives of deceased shareholders. Each application must be accompanied by the original share certificate issued by the Imperial Bank. Applications were to be lodged at designated Local Head Offices of the State Bank, depending on where the Imperial Bank's branch register was maintained. The rules also provide for the issuance of a warrant in Form 'D' by the Reserve Bank for the transfer of State Bank shares to eligible claimants.

A crucial aspect of the compensation mechanism involves the adjustment and payment of the balance. The legislation provided: “...the price of the shares that the Reserve Bank may decide to transfer to him shall be adjusted against the total amount of compensation payable... and the balance shall be paid to him in the manner hereinafter provided...” This balance could be paid in Central Government securities or by cheque drawn on the Reserve Bank, with specific provisions for amounts up to Rs. 10,000 to be paid by cheque if applied for. The rules meticulously address complex scenarios, such as claims by legal representatives of deceased shareholders, requiring probate, letters of administration, or succession certificates, though the Reserve Bank retained discretion to waive such requirements under indemnity. Claims by transferees of shares were also accommodated, provided they could demonstrate the original shareholder's inability to apply and produce a valid instrument of transfer. For other claims not explicitly covered, the Reserve Bank was granted absolute discretion, potentially requiring court orders or indemnity bonds. Furthermore, the rules stipulated procedures for shareholders whose share certificates were lost, destroyed, mutilated, or stolen, requiring compliance with the Imperial Bank's previous procedures for duplicate issuance, again with the Reserve Bank holding discretionary power. Information regarding compensation payments was generally restricted to the applicant, but the Reserve Bank could furnish it to others for a prescribed fee. The forms appended to the rules provided detailed instructions, including a specific timeline for certain options, noting that the option to receive compensation up to the first Rs. 10,000 by cheque was available only for claims lodged on or before October 1, 1955.

Keywords: State Bank of India, Imperial Bank, Compensation Rules, Shareholder Compensation, Reserve Bank of India, Delegated Legislation, 1955 Geo Tags: India, Not Applicable District: Not Applicable