Section 18 of The Government Securities Act, 2006
No recognition by the Bank of a person as the holder of a Government security, and no order made by the Bank under this Act shall be called in question by any Court so far as such recognition or order affects the relations of the Government or the Bank with the person recognised by the Bank as the holder of a Government security or with any person claiming an interest in such security; and any such recognition by the Bank of any person or any order by the Bank vesting a Government security in any person shall operate to confer on that person a title to the security subject only to his personal liability to the rightful owner of the security for money had and received on his account.
Summary
- Courts of law cannot challenge the Bank's recognition of a holder or any Bank order when it comes to the relationship between the Government or the Bank and that person.
- This protection also extends to anyone claiming an interest in the security, ensuring transactions between the Bank and the recognized holder are legally stable.
- When the Bank recognizes someone as the holder or vests a security in them, that person legally gets ownership title to the security.
- This official recognition does not protect a person from direct personal claims by the actual rightful owner.
- If a recognized holder is not the true owner, they remain personally liable to the rightful owner for any money they receive from the security, which is a claim for money had and received.
Practical examples
FAQ
1. Can a court challenge a decision by the Reserve Bank of India to recognize someone as a security holder?
No, courts cannot question the Bank's recognition of a holder or its orders when it comes to the relations of the Government or the Bank with that person or other claimants.
2. What does it mean when the Bank recognizes someone as a security holder?
It means that person gets legal title or ownership of the security in their dealings with the Bank and the Government.
3. Does the Bank's recognition protect a person if they are not the true rightful owner?
No, the recognized person remains personally liable to the true rightful owner for any money received from the security.
4. What is the legal claim a rightful owner can make against a falsely recognized holder?
The rightful owner can sue the person for money had and received on their account, which is a personal liability claim to recover the funds.
Test yourself
Q1.Under Section 18 of The Government Securities Act, 2006, what is the legal consequence of the Bank recognizing a person as the holder of a Government security?
Q2.Under Section 18 of The Government Securities Act, 2006, can a Court question an order made by the Bank vesting a Government security in a person?
Q3.Under Section 18 of The Government Securities Act, 2006, if a person is recognized as a holder but is not the actual rightful owner, what type of lawsuit can the rightful owner file?
Q4.Under Section 18 of The Government Securities Act, 2006, whose legal relations are protected from being questioned in Court when the Bank makes an order?