RBI Act, 1934 / Chapter IIIB

Sections 45-Q and 45-QA RBI Act, 1934 - Override and Deposit Repayment

Section 45-Q of the Reserve Bank of India Act, 1934 gives the provisions of Chapter IIIB overriding effect where another law or legally effective instrument is inconsistent. Section 45-QA requires a non-banking financial company (NBFC) to repay deposits according to their terms and provides a statutory mechanism for ordering repayment where the company defaults.

Section 45-Q - Chapter IIIB to override other laws

The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

Meaning of the overriding clause

The expression notwithstanding anything inconsistent therewith is a non-obstante clause. In a direct conflict, the relevant provision of Chapter IIIB prevails to the extent of the inconsistency. It does not mean that every other law ceases to apply to NBFCs; provisions capable of operating consistently continue to apply. The Chapter concerns regulation of non-banking institutions and financial companies, including deposits, RBI directions, inspections and supervisory measures.

Section 45-QA - Power to order repayment of deposit

Sub-section (1): Repayment according to terms

(1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.

Sub-section (2): Order on failure to repay

(2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under section 10E of the Companies Act, 1956 (1 of 1956) may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order:

Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.

Current institutional position: The statutory wording above refers to the former Company Law Board under the Companies Act, 1956. Following the constitution of the National Company Law Tribunal (NCLT) and the applicable transfer-of-functions framework under the Companies Act, 2013, references to the former Board must be read with the operative tribunal and jurisdictional provisions. Do not treat the Company Law Board as a presently functioning forum.

Definitions and legal effect

Non-banking financial company: Section 45-I(f) sets out the definition of an NBFC. Classification is subject to the statutory definitions, RBI notifications and applicable exclusions.

Deposit: Section 45-I(bb) defines deposit for Chapter IIIB, subject to specified exclusions. Not every sum received by a company is necessarily a deposit within the applicable regulatory framework.

Failure to repay: Section 45-QA(1) places a substantive repayment obligation on the NBFC unless the deposit has been renewed. Sub-section (2) provides for an order for repayment of all or part of a deposit, immediately or on specified terms, after considering the statutory interests and procedural opportunity to be heard.

Priority of Chapter IIIB: Section 45-Q helps prevent inconsistent contractual arrangements or other legal provisions from undermining the statutory regulatory safeguards. Its application in a particular dispute depends on the precise inconsistency and other applicable enactments.

What depositors should do if an NBFC fails to repay

  1. Keep the deposit receipt, contract, renewal documents, bank statements and maturity details.
  2. Send a written repayment demand to the NBFC and preserve proof of delivery and responses.
  3. Check whether the entity is RBI-regulated, whether the amount qualifies as a deposit, and whether the company is under insolvency, liquidation or other special proceedings.
  4. Identify the legally competent forum and procedure under Section 45-QA as read with the Companies Act, 2013, NCLT framework and other currently applicable laws. Different remedies may be subject to jurisdictional restrictions.
  5. Where appropriate, consult RBI's official complaint and regulatory resources; a regulatory complaint should not be assumed to replace a statutory recovery proceeding.

Section 45-QA must be read with relevant RBI directions, deposit-taking restrictions and other laws applicable to the specific NBFC. For example, Section 45-MB concerns prohibitions on accepting deposits and dealing with assets.

Official law and regulatory resources

Legislation, forum jurisdiction and applicable RBI directions should be checked against the latest official notifications and the facts of the deposit.