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of <h1>Court upholds appointment of official liquidator under Banking Companies Act, emphasizing RBI's role</h1> <h3>Mercantile Bank Ltd., In re</h3> The court upheld the appointment of Mr. Bhagirath Das as the official liquidator under the Banking Companies Act for the Punjab Mercantile Bank Limited in ... Winding up – Appointment of official liquidator Issues:Challenge to the appointment of official liquidator under Banking Companies Act in connection with the settlement of debtors of a bank in liquidation.Analysis:In this case, three claims were filed challenging the appointment of Mr. Bhagirath Das as the official liquidator under the Banking Companies Act concerning the Punjab Mercantile Bank Limited in liquidation. The appointment was made following a petition for winding up the bank under section 38 of the Banking Companies Act, where Mr. Bhagirath Das was suggested by Mr. D.K. Mahajan on behalf of the Reserve Bank. The appointment was challenged based on the argument that the appointment should have been in accordance with the new Companies Act of 1956, which mandates the appointment of a whole-time or part-time official liquidator for each High Court under sections 448 and 449. It was also noted that there had been changes in the appointment of the official liquidator for the court, further complicating the issue.Moreover, a new section 38A was added to the Banking Companies Act of 1949, which introduced the concept of a court liquidator attached to every High Court for winding up banking companies. The provision specifies the circumstances under which the court liquidator shall become the official liquidator of a banking company. The objectors argued that the notification by the Central Government regarding the appointment of court liquidators should govern the appointment of a liquidator for a banking company being wound up. They contended that the new Companies Act, being a later enactment, should supersede the provisions of the Banking Companies Act where inconsistencies arise.The court analyzed the provisions of both the Banking Companies Act and the new Companies Act to determine the legality of the appointment of the official liquidator. It was held that the winding up of banking companies is distinct from other companies governed by the Companies Act, and the appointment of an official liquidator does not necessarily have to align with the official liquidator appointed for the court under the Companies Act. The court emphasized that while the appointment may not be obligatory, the wishes of the Reserve Bank, as the petitioner, should be considered in the selection of the official liquidator. Ultimately, the court found the appointment of Mr. Bhagirath Das as official liquidator to be legal and dismissed the preliminary objection raised by the objectors.
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