Banking · Company Accounts
A textile company has a current account with your bank with operating instructions 'Any two directors to sign jointly.' The bank receives a Board Resolution signed by Director A and Director B, stating Director C has been removed and Director D is appointed. Two days later, Director C submits a letter claiming his removal was illegal and that he has filed a petition with NCLT, demanding the bank freeze account operations. Meanwhile, a check signed by A and B is presented. How should the bank navigate this situation under the Companies Act 2013?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank should recognize Mr. D as the new director based on the resolution provided and ignore Mr. C's letter as he has not provided a stay order from the court.
- 2The bank should honor the check but inform Mr. A and Mr. B that no further checks will be paid until they provide a certified copy of the NCLT's decision.
- 3The bank should immediately freeze the account because the dispute over the Board's composition constitutes a 'Notice of Dispute.'
- 4The bank should pay the check because the existing mandate (any two directors) is satisfied by the signatures of Mr. A and Mr. B, regardless of the dispute over Mr. C's status.✓
Correct answer
The bank should pay the check because the existing mandate (any two directors) is satisfied by the signatures of Mr. A and Mr. B, regardless of the dispute over Mr. C's status.
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