Calcutta High Court Directs Time-Bound Completion of Liquidation of 32 Banking Companies

Background and Context

The Calcutta High Court has concluded an application presented by the Reserve Bank of India under Section 39 of the Banking Regulation Act, 1949, seeking judicial directions to bring to a close the long-pending liquidation of 32 banking companies. These banking entities had already been ordered to be wound up in terms of a notification dated 3 June 2025, and multiple orders had earlier been issued in Company Petition No. 331 of 1949 dealing with their liquidation.

Over time, the liquidation proceedings continued under the supervision of the Court, with Punjab National Bank functioning as the Court-appointed Official Liquidator. However, in light of the prolonged pendency and incomplete status of the liquidation, the Reserve Bank of India decided, on the basis of a communication dated 26 June 2024, to move the High Court for specific directions to ensure that the entire process reaches finality within a definite time frame.

Role of Reserve Bank of India

  • The Reserve Bank of India, invoking its authority under Section 39 of the Banking Regulation Act, 1949, approached the High Court.
  • The central purpose of the application was to obtain necessary directions so that the liquidation of all 32 banking companies, as identified in the notification dated 3 June 2025, could be completed expeditiously.

Role of Punjab National Bank as Official Liquidator

  • Punjab National Bank had been appointed by the Court as the Court Liquidator and was functioning in the capacity of Official Liquidator in respect of these 32 banking companies.
  • The application essentially sought directions binding on Punjab National Bank, in its role as Official Liquidator, to bring the liquidation proceedings to a conclusive end.

Statutory Provisions Relied Upon

The Court examined the legal framework under the Banking Regulation Act, 1949, particularly:

  • Section 39 – Reserve Bank to be official liquidator
  • Section 39A – Application of Companies Act to liquidators

The text of these provisions, as reproduced in the order, clarifies:

Section 39 provides that, notwithstanding any provision in Section 38A of the Banking Regulation Act or Section 448 or Section 449 of the Companies Act, 1956, in a High Court winding up of a banking company, on an application by the Reserve Bank, the Reserve Bank, the State Bank of India, any other Central Government-notified bank, or an individual mentioned in such application shall be appointed as the official liquidator. Any existing liquidator must vacate office upon such appointment. It further specifies that, subject to directions of the High Court, the remuneration of the official liquidator and all winding-up costs and establishment expenses shall be met out of the assets of the banking company, and no fees shall be payable to the Central Government from such assets.

Section 39A states that all provisions of the Companies Act, 1956 relating to a liquidator, insofar as they do not conflict with the Banking Regulation Act, 1949, apply to a liquidator appointed under Section 38A or Section 39, and any reference to “official liquidator” in the relevant Parts includes any liquidator of a banking company.

These provisions enabled the Court to recognize the legitimacy of the ongoing liquidation under the supervision of the Official Liquidator, and to issue further directions for completion of the process.

Core Issues Before the Court