Section 52 of The National Bank for Agriculture and Rural Development Act, 1981
- (1)No act or proceeding of the Board or of any committee of the National Bank shall be questioned on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Board or the committee, as the case may be.
- (2)No act done by any person acting in good faith as a director of the Board or as a member of a committee of the National Bank shall become invalid merely on the ground that he was disqualified to be a director or that there was any other defect in his appointment.
Summary
- Actions and decisions made by the Board or its committees remain legally valid even if there is an empty seat or vacancy on the Board at the time.
- Decisions cannot be challenged just because there was an error or defect in how the Board or committee was put together.
- If a person acts in good faith as a director or committee member, their actions are valid even if it is later discovered they were disqualified or poorly appointed.
- The purpose is to protect the ongoing, everyday business of the National Bank from being derailed by technical paperwork errors regarding its members.
Practical examples
FAQ
1. If the Board makes a decision while a director's chair is empty, is the decision illegal?
No, the law clearly states that no act of the Board shall be questioned merely because of a vacancy.
2. What happens if a director helps make a decision, but we later find out their appointment paperwork had a legal defect?
As long as the director was acting in good faith at the time, their actions remain completely valid despite the paperwork defect.
3. Does this section protect a director who knowingly breaks the rules regarding their appointment?
The protection specifically relies on the person acting in good faith. If they knew they were disqualified and acted anyway, this specific protection for their actions may not apply.
Test yourself
Q1.Under Section 52 of The National Bank for Agriculture and Rural Development Act, 1981, what effect does a vacancy on the Board have on the validity of the Board's proceedings?
Q2.Under Section 52 of The National Bank for Agriculture and Rural Development Act, 1981, which condition must be met for a disqualified director's actions to remain valid?
Q3.Under Section 52 of The National Bank for Agriculture and Rural Development Act, 1981, what types of groups within the National Bank are protected from having their acts invalidated due to constitutional defects?
Q4.Under Section 52 of The National Bank for Agriculture and Rural Development Act, 1981, a borrower tries to escape repaying a loan by claiming the committee that approved it had a legally flawed setup. Will this argument succeed?