Banks and Financial Institutions Act, 2017

Provided that transfer, mortgage, or entry and deletion may be made with the prior approval of Nepal Rastra Bank.

(2) If the Liquidator, in any manner, becomes aware that any act done six months prior to the date of the court order to commence compulsory liquidation has caused damage or loss to the interests of the depositors and creditors of such bank or financial institution, the Liquidator shall submit a petition to the court regarding such matter and also inform Nepal Rastra Bank thereof.

(3) If, upon examining the petition submitted by the Liquidator pursuant to sub-section (2), the court finds that any of the following acts have occurred, it may declare such acts invalid and void:

(a) If a decision to grant a gift has been made,

(b) If an act has been done that harms or damages the rights and interests of depositors or creditors,

(c) If payment or transfer was made before the due date for repayment of a loan, or if the release, transfer, or entry and deletion of collateral occurred before the maturity of the loan,

(d) If a contract is found to have been entered into in the course of any transaction that imposes additional liability on the bank or financial institution beyond what is normal or customary,

(e) If any agreement or transaction is found to have been entered into with arrangements different from the regular banking and financial transactions permissible under this Act,

(f) If a contract has been made to employ a related person.

(4) If any bank or financial institution has undergone compulsory liquidation, the following transactions shall be void:

(a) Preferential transactions made within six months before the commencement of compulsory liquidation proceedings or within six months after the commencement of such proceedings,

(b) Preferential transactions with related persons made within one year before the commencement of compulsory liquidation proceedings or within one year after the commencement of such proceedings,

(c) Any transaction made at an undervalue within one year before the commencement of compulsory liquidation proceedings or within one year after the commencement of such proceedings, as a result of which the bank or financial institution underwent compulsory liquidation, or other transactions made at an undervalue after the commencement of compulsory liquidation proceedings,

(d) Fraudulent transactions made within two years before the commencement of compulsory liquidation proceedings or within two years after the commencement of such proceedings.

(5) To have the transactions referred to in sub-section (4) declared void, the Liquidator shall file a petition in the court.

(6) If the court is satisfied that any transaction is void, the court may issue the following orders:

(a) Ordering the concerned person to pay to the Liquidator the whole or part of the amount paid by the bank or financial institution in relation to such transaction,

(b) Ordering the concerned person to deliver to the Liquidator the property so transacted or its equivalent value,

(c) Ordering the complete or partial discharge or release of a loan taken by the bank or financial institution through such transaction, or the security or guarantee given by the bank or financial institution for such loan,

(d) Ordering that any remission, assignment, or agreement entered into between the bank or financial institution and another person as a result of the void transaction shall be void, ineffective, or unenforceable,

(e) If any further order is necessary to implement an order under this sub-section, the court shall also issue such order.

(7) If any act under sub-section (3) or (4) has caused any loss or damage to the bank or financial institution due to the action of any director, office bearer, employee, or other person, such loss or damage shall be personally borne by them.