Section 10 of the Reserve Bank of India Act, 1934 - Disqualifications of Directors and Members of Local Boards
Section 10 specifies circumstances in which a person cannot serve as a Director of the Reserve Bank of India or as a member of a Local Board. It also prevents certain closely connected persons from serving simultaneously on the same Local Board and creates specified exceptions for the Governor, Deputy Governors and the Government official Director referred to in Section 8(1)(d).
Section 10(1) - Persons disqualified
A person may not be a Director or member of a Local Board if that person:
- is a salaried Government official;
- is, or at any time has been, adjudicated an insolvent, has suspended payment, or has compounded with creditors;
- is found lunatic or becomes of unsound mind;
- is an officer or employee of any bank; or
- is a director of a banking company within the meaning of Section 5(c) of the Banking Regulation Act, 1949, or of a co-operative bank.
For Section 10(1)(e), a banking company is linked to the definition in Section 5(c) of the Banking Regulation Act, 1949. The cross-reference should therefore be read with the current text of that Act.
Section 10(2) - Connected persons cannot serve together
Two persons cannot simultaneously be Directors or members of the same Local Board where they are partners of the same mercantile firm, directors of the same private company, or where one is the general agent of, or holds a power of procuration from, the other or from a mercantile firm in which the other is a partner.
This restriction is directed at simultaneous membership where specified business, agency or authority relationships exist between two persons.
Section 10(3) - Statutory exceptions
The disqualifications in Section 10(1)(a), 10(1)(d) and 10(1)(e) do not apply to the Governor, a Deputy Governor, or the Director nominated under Section 8(1)(d).
The exception is limited to the three clauses expressly identified in subsection (3). It does not state that every disqualification in Section 10(1) is inapplicable to those office-holders.
Legal significance of Section 10
Section 10 is part of the governance safeguards in Chapter II of the RBI Act. It regulates eligibility by addressing Government employment, insolvency, mental incapacity, employment by banks and directorship in banking institutions, while also restricting simultaneous service by persons having specified close commercial or agency relationships.