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Section 36 of The National Bank for Agriculture and Rural Development Act, 1981

Notwithstanding anything to the contrary contained in any other law for the time being in force, the validity of any loan or advance granted by the National Bank in pursuance of the provisions of this Act shall not be called in question merely on the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution, contract, memorandum, articles of association or other instrument: Provided that nothing in this section shall render valid any loan or advance obtained by any company or co-operative society where such company or co-operative society is not empowered by its memorandum to obtain loans or advances.

Summary

A loan or advance granted by the National Bank cannot be cancelled or challenged in court just because the borrower broke another law, contract, or internal company rule when getting it.
This rule protects the National Bank's loans from being declared invalid due to minor technicalities or broken agreements outside of this Act.
However, if a company or a co-operative society gets a loan when its own fundamental founding document (its memorandum) strictly forbids it from obtaining loans, the loan is not protected and is considered invalid.

Practical examples

1On May 12, 2024, Green Valley Co-operative borrows 2 million rupees from the National Bank. Later, someone discovers the cooperative missed a technical voting step required by a local state law before signing. The loan remains completely valid and must be repaid because of this rule.

2On November 3, 2025, Blue River Farm Company takes a loan from the National Bank. However, Blue River's official memorandum of association specifically states it has no legal power to obtain any loans. In this rare case, the loan is not protected and is invalid.

FAQ

1. Can a borrower escape repaying the National Bank by claiming the loan violated their own company policies?

No, the validity of the loan cannot be questioned just because it did not comply with a company's internal articles of association or resolutions.

2. What happens if a company's fundamental founding document does not give it the power to borrow at all?

If the company or co-operative society's memorandum does not empower it to obtain loans, then the protection does not apply, and the loan is not legally valid.

3. Does this rule protect loans given by other banks too?

No, this specific rule only protects the validity of loans and advances granted by the National Bank.

Test yourself

Q1.Under Section 36 of The National Bank for Agriculture and Rural Development Act, 1981, which of the following is the ONLY valid reason mentioned to question the validity of a loan granted by the National Bank?

Q2.Under Section 36 of The National Bank for Agriculture and Rural Development Act, 1981, what happens if a loan granted by the National Bank conflicts with an existing contract the borrower has with a third party?

Q3.Under Section 36 of The National Bank for Agriculture and Rural Development Act, 1981, who does the exception regarding the lack of power to obtain loans apply to?

Q4.Based on the text of Section 36 of The National Bank for Agriculture and Rural Development Act, 1981, why does this provision exist?

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