Section 58: Priority payments to depositors

2[58. Priority payments to depositors.-- (1) In every proceeding for winding-up of a banking company where a winding-up order has been made, within ninety days from the date of the winding-up order or where the winding-up order has been made before 1st day of August, 2001, within ninety days therefrom, the payments referred to in sub-section (2) shall be made by the official liquidator or adequate provision for such payments shall be made by him. 1[(2) Subject to sub-section (3), there shall be paid within the period of ninety days as specified in sub-section (1), in the first place, to each eligible depositor of the banking company, a sum up to the amount prescribed by the Deposit Protection Corporation under section 7 of the Deposit Protection Corporation Act, 2016 (XXXVII of 2016) or the balance at his credit whichever is less and any other liabilities owed to the Deposit Protection Corporation under sub-sections (1) and (2) of section 22 of the Deposit Protection Corporation Act, 2016 (XXXVII of 2016). (3) The total amount paid to each eligible depositor under sub-section (2) shall not exceed the amount prescribed by the Corporation under section 7 of the Deposit Protection Corporation Act, 2016 (XXXVII of 2016)__ (i) where a depositor is maintaining more than one deposit account with a banking company; and (ii) in the case of joint account holders of a deposit account.] (4) Where within the period of ninety days as specified in sub-section (1), full payments cannot be made of the amounts required to be paid under sub-section (2) with the assets in cash, the official liquidator shall pay within that period to every 1[eligible] depositor on a pro rata basis so much of the amount due to every 1[eligible] depositor as the official liquidator is able to pay with those assets, and shall pay the rest of that amount to every 1[eligible] depositor as and when sufficient assets are collected by the official liquidator in cash. (5) After payments have been made first to depositors in accordance with the foregoing provisions, the remaining assets of the banking company available for payment shall be utilised according to the following order of priority, namely:__ (a) firstly, for payment of balance due to depositors in accordance with a scheme to be prepared by the State Bank; 1[(aa) after payments have been made to dopositors in accordance with clause (a), secondly, for payment of Resolution funding support provided by the Federal Government under sub-section (1) of section 42I;] 1[(b) after payments have been made in accordance with clause (a) and (aa), thirdly, for payment on a pro rata basis to every claimant entitled to preferential payment under section 390 of the Companies Act, 2017 (XIX of 2017) or any other law for the time being in force; (c) after payments have been made in full in accordance with clauses (a), (aa) and (b), fourthly, for payment on a pro rata basis of the debts of the general creditors;] 1[(d) after payments have been made in full in accordance with clauses (a), (aa) and (b) and (c), fifthly, for payment on a pro rata basis of debts owed to sub- ordinated creditors; and (e) after payments have been made in full in accordance with clauses (a), (aa), (b), (c) and (d), finally, for payment on a pro rata basis of equity to shareholders.] (6) For the purposes of this section, banking companies, financial institutions specified in 1[section 3A and financial institutions as defined in clause 31 of sub-section (1) of section 2 of the Companies Act, 2017 (XIX of 2017)] shall be treated as general creditors and not depositors. (7) Subject to sub-section (8), in order to enable the official liquidator to have in his custody or under his control in cash as much of the assets of a banking company as possible, the securities given to every secured creditor may be redeemed by the official liquidator-- (a) where the amount due to a creditor is more than the value of the securities as assessed by him or, as the case may be, as assessed by the official liquidator, on payment of such value; and (b) where the amount due to the creditor is equal to or less than the value of the securities as so assessed, on payment of the amount due. (8) Where the official liquidator is not satisfied with the valuation made by the creditor, he may apply to the High Court for making a valuation. (9) When any depositor, claimant or creditor to whom any payment is to be made in accordance with the foregoing provisions, cannot be found or is not readily traceable, adequate measures shall be taken by the official liquidator for such payment. (10) For the purposes of this section, the payments specified in each of the following clauses shall be treated as payments of a different class, namely:-- (a) payments to depositors 1[and the Deposit Protection Corporation]pursuant to sub-sections (2) and (4); (b) payments to depositors pursuant to clause (a) of sub-section (5); 1[(bb) payments to Federal Government pursuant to clause (aa) of sub-section (5);] (c) payments to preferential claimants pursuant to clause (b) of sub-section (5); 1[*] (d) payments to the general creditors pursuant to clause (c) of sub-section (5). 1[(e) payments to the sub-ordinated creditors pursuant to clause (d) of sub-section (5); and (f) payments to the shareholders pursuant to clause (e) of sub-section (5).] (11) The payments to persons in each different class specified in sub-section (10) shall rank equally among themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall abate in equal proportion 1[:]] 1[Provided that in the application of clause (e) of sub-section (10), sub-classes can be created based on the contractual terms contemplating payments to be made to some sub-ordinated creditors after such other creditors.] 1[(12) The provisions of this section shall also apply to a banking company under winding up that is not a member of the Deposit Protection Corporation and in its application to such a banking company, shall have effect as if the word "eligible" has been omitted from sub-sections (2), (3) and (4).]

Effective date: 1962-06-07

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