Rajasthan act 63 of 1951 : The State Financial Corporations Act, 1951

STATE FINANCIAL CORPORATIONS ACT, 1951

[63 of 1951, dt. 31-10-1951] (As amended by Credit Information Companies (Regulation) Act, 2005)

An Act to provide for the establishment of State Financial Corporations BE it enacted by Parliament as follows:-

CHAPTER I PRELIMINARY

1. Short title, extent and comme,ncement (1) This Act may be called the State Financial Corporations Act, 1951. (2) It extends to the whole of India. (3) It shall come into force in any State on such date 1 as the Central Government

:nay, by notification in the Official Gazette, appoint. 2. Definitions

In this Act, unless the context otherwise requires- (a) "Board" means the Board of Directors. of the Financial Corporation;

(aa) "Development Bank" means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964); .

(b) "Financial Corporation" means a Financial Corporation established under section 3 and includes a Joint Financial Corporation established under section 3Ai

(c) "industrial concern" means any concern engaged or to be engaged in- (i) the manufacture, preservation or processing of goodsi

2[(ii) mining or development of minesi] (iii) the hotel industryi (iv) the transport of passengers or goods by road or by water or by air 3[or

by ropeway or by lift]i (v) the generation or distribution of electricity or any other form of power;

(vi) the maintenance, repair, testing or servicing of machinery of any description or vehicles or vessels or motor boats or trailers or tractorsi

(vii) assembling, repairing or packing any article with the aid of machinery or power;

2[(viii) the setting up or development of an industri.al area orindustrial estate;] (ix) fishing or providing shore facilities for fishing or maintenance thereof;

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1 "[he Act came into force from 1-8-1952 (in the whole ofIndia except the State ofjammu and Kashmir), vide Notification No. SRO 1317, dt. 28-7-1952.

2 Substituted by Act 43 of 1985. 3 Inserted by Act 43 of 1985. .t.

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.7._._._ mwmmawwmm-w: . , ~ - -- - - ~ - I 2 V “who... . 1 VM rw'v a. t i ‘ ‘ : 1 2 3 STATE FINANCIAL CORPORATIONS ACT, 1951 [63 of 1951, dt. 31-10-1951] (As amended by Credit Information Companies (Regulation) Act, 2005) An Act to provide for the establishment of State Financial Corporations BE it enacted by Parliament as follows:— CHAPTER I PRELIMINARY 1. Short title, extent and commencement (1) This Act may be called the State Financial Corporations Act, 1951. (2) It extends to the whole of India. 1 (3) It shall come into force in any State on such date 1 as the Central Government I may, by notification in the Official Gazette, appoint. 2. Definitions In this Act, unless the context otherwise requires— (a) ”Board” means the Board of Directorsof the Financial Corporation; (aa) ”Development Bank” means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964); i (b) ”Financial Corporation” means a Financial Corporation established under ‘ section 3 and includes a Joint Financial Corporation established under section 3A; - ' (c) ”industrial concern” means any concern engaged or to be engaged in—— (i) the manufacture, preservation or processing of goods; 2[(ii) mining or development of mines;] ' (iii) the hotel industry; (iv) the transport of passengers or goods by road or by water or by air 3[or by ropeway or by lift]; (v) the generation or distribution of electricity or any other form of power; (Vi) the maintenance, repair, testing or servicing of machinery of any description or vehicles or vessels or motor boats or trailers or tractors; (vii) assembling, repairing or packing any article with the aid of machinery or power; 2[(viii) the setting up or development of an industrial area or industrial estate;] (ix) fishing or providing shore facilities for fishing or maintenance thereof; ‘ [x- x- x] ' e 1 We . l '[he Act came into force from 1-8—1952 (in Notification No, SRO 1317, dt. 28-74952 Substituted by Act 43 of 1985. 3 Inserted by Act 43 of 1985. ..-._~..w..__.___.44a <..‘t ‘ , , Wmmrmﬂmmmwmmmwmm ﬁlllﬁl§¥5?ﬂé§§§~ﬁmg§twwP-‘Eisftigfirt:iragﬁyrgg; ‘, .a,“sarcasm-teeanathema-“ < -—-~ ._ 4 __.._A_.,,,.M........,_....___.A.~._.,msa._..mm.m,..__r . the whole of India except the State of Jammu and Kashmir), vide t. .1 wavy. -.._,,i g N ‘NWWW .v A .. ' . ,., Manager (Law-lnchazge) , Dy. General Managerﬁﬂ)

2 STATE FINANCIAL CORPORATIONS ACT, 1951 5.2

l[(X) providing weigh bridge facilities; (xi) providing engineering, technical, financial, management, marketing or

other services or facilities for industry; (xii) providing medical, health or other allied services; (xiii) providing software or hardwa~e services relating to information

technology, telecommunications or electronics including satellite linkage and audio or visual cable communication;

(xiv) setting up or development of toudsm related facilities including amusement parks, convention centres, restaurants, travel and transport (including those at airports), tourist service agencies and guidance and counselling services to the tourists;

(xv) construction; (xvi) development, maintenauce and construction of roads; (xvii) providing' commercial complex facilities and community centres including

conference halls; (xviii) floriculture; (xix) tissue culture, fish culture, poultry farming, breeding and hatcheries; (xx) service industry, such as altering, ornamenting, polishing, finishing, oiling,

washing, cleaning or otherwise treating or adapting any article or substance' with a view to its use, sale, transport,' delivery or disposal;

(xxi) research and development of any. conc~pt technology, design, process or product whether in relation to any bf the matters aforesaid, including any activities approved by the Small IndustriE:!sBank; or

(xxii) such other activity as may be approved by the Small Industries Bank;] 2[Explanation 11: The expression "processing of goods" includes any art or process

for producing, preparing or making an article by supjecting any material to a manual, mechanical, chemical, electrical or any other like operation.

l[Explanalioll2: If any doubt arises as to whether a concern is an industrial concern or not, the same shall be referred to the 3[SmallIndustries Bank}for its decision and the decision of the 3[SmallIndustries Bank] thereon shall be finaL}

(d) "prescribed" means prescribed by rules or regulations made under this Act; 4[[(da) the expression "public sector bank" means the State Bank of India

constituted under the State Bank of India Act, 1955, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, a cotresponding new bank constituted undet s. 3 of'the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under s. 3 of the Banking Companies (Acquisition and TrarisferofUndertakings) Act, 1980;]

(e) "Reserve Bank" means the Reserve Bank 6f India constituted under the Reserve Bank of India Act, 1934 (2'of 1934);

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1 Substituted by SFC (Amendment) Act, 2000 (Act No. 39of 2000), dt. 5-9-2000. 2 Explanation renumbered as Explanation 1by Act 43 of 1985~ 3 Substituted for "Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 4 Inserted by SFC(Amendment) Act, 2000 (Act No. 39 of 20(0), dt, 5-9-2000.

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i " - - airiz‘-»-——>~‘--v-~- - ~---- - *' \Ammi-nwg‘ qrv grim“ h ' Wan-N- v , , X I m 4;; “last-1...: , was I- Liam.“ si-i-hi' ‘ , 2 V STATE FINANCIAL CORPORATIONS ACT 1951 S. 2 m____l—_L_.__—_____~ 1[00 providing weigh bridge facilities; (xi) providing engineering, technical, financial, management, marketing or other services or facilities for industry; (xii) providing medical, health or other allied services; (xiii) providing software or hardware services relating to information technology, telecommunications or electronics including satellite linkage and audio or visual cable communication; (xiv) setting up or development of tourism related facilities including amusement parks, convention centres, restaurants, travel and transport (including those at airports), tourist service agencies and guidance and ‘ counselling services to the tourists; - - . . l (xv) construction; 1 ’ (xvi) development, maintenance and construction of roads; - (xvii) providing‘commercial complex facilities and community centres including i V V. conference halls; ' (xviii) floriculture; (xix) tissue culture, fish culture, poultry farming, breeding and hatcheries; (xx) service industry, such as altering, omamenting, polishing, finishing, oiling, washing, cleaning or otherwise treating or adapting any article or substance with a View to its use, sale, transport,‘de1ivery or disposal; i . (xxi) research and development of any concept technology, design, process or 3 ‘ _ product whether in relation to any of thematters aforesaid, including any activities approved by the Small Industries Bank; or , (xxii) such other activity as may be approved by the Small Industries Bank;] 2[Explanation 1 I : The expression ”processing of goods” includes any art or process for producing, preparing or making an article by subjecting any material to a manual, mechanical, chemical, electrical or any other like operation. ' 1[Explanatio;12 : If any doubt arises as to whether a concern is an industrial concern ' . or not, the same. shall be referred to the 3[Small Industries Bank] for its decision and the decision of the 3[Small Industries Bank] thereon shall be final] (d) ”prescribed” means prescribed by rules Cr regulations made under- this Act; 4[[(da) the expression ”public sector bank" means the State Bank of India ' constituted under the State Bank of India Act, 1955, a subsidiary bank as 3‘ defined in. the State Bank of India (Subsidiary Banks) Act, 1959, a corresponding new bank constituted under s. 3 of ‘the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under s. 3 of the Banking Companies (Acquisition and Transferof Undertakings) Act, 1980;] " (e) ”Reserve Bank” means the Reserve Banjlé of India constituted under the Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt, 5—9-2000. l 1 ' Reserve Bank of India Act, 1934 (2 ‘of 1934); V ‘Y‘_—-—~—————— \ , , l 1 Substituted by SFC (Amendment) Act, '2000 (Act No. 39 of 2000), dt. 5-9-2000. ‘ l 2 Explanation renumbered as Explanation 1 by Act 43 of 1985'. . I i Substituted for "Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000, l i '53 2&3" By. Central Manager ( P a A) '

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S.3A STATE FINANCIAL CORPORATIONS ACT, 1951 3

(f) "scheduled bank" means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);

1[(fa) "Small Industries Bank" means the Small Industries Development Bank of India established under sub-so(1) ofs. 3of the Small Industries Development Bank of India Act, 1989;]

2[(fb)] "State Co-operative Bank" shall have the meaning assigned to it in clause (f) of section 2 of the Reserve Bank ofIndia Act, 1934 (2 of 1934);

2[(fc)] "State Government", in relation to a Union Territory, means the Administrator thereof;

(g) "underwriting" means contract, with or without conditions, to subscribe for stocks, shares, bonds or debentures of an industrial concern with a view to the resale of the whole or any part thereof.

CHAPTER II INCORPORATION OF STATEFINANCIAL CORPORAnONS,

THEIR CAPITAL AND MANAGEMENT 3. Establishment of State FiI\a~cial Corporations

(1) The State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notifi- cation.

(2) The Financial Corporation shall be a body corporate by the name notified under sub-section (1), having p.erpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued. . 3A. Establishment of Joint Financial Corporations

(1) Notwithstanding anything contained in section 3, two or more States may, after consultation with the 3[SmallIndustries Bank], enter into an agreement that there shall be one Financial Corporation for the group of States participating in the agreement and if the agreement is published in the Official Gazette of each of those States, the Central Government may, by notification in the Official Gazette, establish a Joint Financial Corporation to serve and needs of those States under such name as may be specified in the notification.

(2) An inter-State agreement under sub-section (l) among the participa ting States may-

(a) provide for the fix'ation of the authorised capital of the Joint Financial Corporation, the number of fully paid-up shares into which it shall be divided and the allocation among the participating States of the shares to be distributed under clause (a) of sub-section (3)of section 4;

(b) provide fot the sharing of the liability for the guarantee under section 6 or section 7 or section 8;

1. Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 2 Renumbered by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 .Substituted for "Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000.

S. 3A i STATE FINANCIAL CORPORATIONS ACT: 1951 3 ‘ (f) ”scheduled bank” means a bank for the time being included in the second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); 1['(fa) ”Small Industries Bank” means. the Small Industries Development Bank of India established under sub-s. (1) of s. 3 of the Small Industries Development Bank of India Act, 1989;] - 2{(fb)] ”State Co-operative Bank” shall have the meaning assigned to it in clause ' (f) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934); 2[(fc)] ”State Government", in relation to a Union-Territory, means the Administratorthereof; (g) ”underwriting” means contract, with or without conditions, to subscribe for stocks, shares, bonds or debentures of an industrial concern with a view to the resale of the whole or any part thereof. CHAPTER II INCORPORATION OF STATE FINANCIAL CORPORATIONS, THEIR CAPITAL AND MANAGEMENT 3. Establishment of State Financial Corporations (1) The State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notifi— cation. (2) The Financial Corporation shall be a body corporate by the name notified under sub-section (1), having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued. 3A. Establishment of Joint Financial Corporations (1) Notwithstanding anything contained in section 3, two or more States may, after consultation with the 3[Small Industries Bank], enter into an agreement that there shall be one Financial Corporation for the group of States participating in the agreement . and if the agreement is published in the Official Gazette of each of those States, the ' 1 Central Government may, by notification in the Official Gazette, establish a Joint ' Financial Corporation to serve and needs of those States under such name as may be specified in the notification. (2) An inter-State agreement under sub-section (1) among the participa ting States may—— (a) provide for the fixation of the authorised capital of the Joint Financial Corporation, the number of fully paid-up shares into which it shall be divided and the allocation among the participating States of the shares to be distributed under clause (a), of sub-section (3) of section 4; (b) provide for the sharing of the liability for the guarantee under section 6 or section 7 or section 8; ' (c) provide for the number of Directors to be nominated to the Board by each i I, participating State Government; 1 ' Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 2 Renumbered by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), (It. 5-9-2000. 3 Substituted for ”Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), (it. 5-9—2000, lab . 9. Q __ ‘_ 5. range} . urohr. "3'=“"'mfai?13geﬂt.éiiiiﬁichartGIT"' - . .r . r

(3) Subject to the approval of the State Government and the Small Industries Bank, the Board shall determine the number of shares which may, respectively, be distribu'ted among-

(d) provide for the apportionment among the participating States of expenditure in connection with the Joint Financial Corporation;

(e) [Omitted byAct 430/1985] ,

(f) determine which of the participating State Governments shaH exercise the several functions of the State Government under this Act, and references in this Act to the State Government, in relation to the Joint Financial Corporation, shall save as otherwise expressly provided, be construed accordingly;

(g) provide for consultation among the participating States either generally or with reference to particular matters arising under this Act;

(h) make such incidental and consequential provisions, not inconsistent with this Act, as may be deemed necessary or expedient for giving effect to the agreement.

(3) The Joint Financial Corporatibnshall be a body corporate by the name notified under sub-section (I), having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued.

(4) Any reference in this Act to "State" in relation to a Joint Financial Corporation established for two or more States, shall be construed as a reference to each such State. 4. Share capital and shareholders

1[(1) The'authorised capital of the Financial Corporation shall be suchsum as may be fixed by the State Government in this behalf, but it shall not be less than fifty lakhs of rupees, or exceed five hundred crores of rupees:

PROVIDED that the State Government may, on the recommendation of the Small Industries Bank, by notification in the Official Gazette, increase the authorised capital up to one thousand crores of rupees.

(2) Subject to the provisions of section 4D, the authorised capital shall be divided into such number of fully paid-up shares of the same face value and such number of fully paid-up redeemable preference shares of the same face value and shall be issued to the parties mentioned in clauses (a), (b) and (c) of sub-so (3) and in the case of parties referred to in clause (d) of that sub-section, such shares shall be issued at such times and in such manner as the State Government may, by notification ~n the Official Gazette, determine.

STATE FINANCIAL CORPORATIONS ACT, 1951

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Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9.2000. ! 'I

(a) (b) (c)

the State Government; the Small Industries Bank;

public sector banks, the Life Insurance Corporation of India established under s. 3 of t.he Life Insurance Corporation Act; 1956, othetinsurance companies'owned or controlled by the Central Government, other ihstitutions owned or controlled by the Central Government or the State Government, as the case may be; and

STATE FINANCIAL CORPORATIONS ACT, 1951 (d) provide for the apportionment among the participating States of r expenditure in connection with the Joint Financial Corporation; (e) [ Omitted byAct 43 of 1985] (f) determine which of the participating State Governments shall exercise the several functions of the State Government under this Act, and references in this Act to the State Government, in relation to the Joint Financial Corporation, shall save as otherwise expressly provided, be construed accordingly; 1 provide for consultation among the participating States either generally or with reference to particular matters arising under this Act; (h) make such incidental and consequential provisions, not inconsistent with this Act, as may be deemed necessary or expedient for giving effect to the agreement. ' ’ (3) The Joint Financial Corporation shall be a body corporate by the name notified under sub-section (1), having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property and shall by the said name sue and be sued. (4) Any reference in this Act to “State" in relation to a Joint Financial Corporation established for two or more States, shall be construed as a reference to each such State. 4. ' Share capital and shareholders , 1[(1) The‘authorised capital of the Financial-Corporation shall be suchsum as may be fixed by the State Government in this behalf,.but it shall not be less than fifty lakhs of rupees, or exceed five hundred crores of rupees: PROVIDED that the State Government may, on the recommendation of the Small Industries Bank, by notification in the Official Gazette, increase the authorised capital up to one thousand crores of rupees. (2) Subject to the provisions of section 4D, the authorised capital shall be divided into such number of fully paid-up shares of the same face value and such number of fully paid-up redeemable preference shares of the same face value and shall be issued to the parties mentioned in clauses (a), (b) and (c) of sub—s. (3) and in the case of parties referred to in clause (d) of that sub-section, such shares shall be issued at such times and in such manner as the State Government may, by notification in the Official Gazette, determine. (3) Subject to the approval of the State Government and the Small Industries Bank, the Board shall determine the number of shares which may, respectively, be distributed among- ' (a) the State Government; (b) the Small Industries Bank; (c) public sector banks, the Life lnsuranceCorporatign of India established under s: 3_ of the Life Insurance Corporation Act, 1956, otheF‘rﬁs‘uT-ance companies owned or controlled by the Central Government, other institutions owned or controlled by the Central Government or the State Government, as the case may be; and . l Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5—9-2000.

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S.4B STATE FINANCIAL CORPORATIONS ACT, 1951 5

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(d) parties other than those referred to in clause (a) or clause (b) or clause(c): PROVIDED that the number of shares which may be allocated to parties referred to in clause (d) shall in no case exceed forty-nine per cent. of the total number of issued equity shares: PROVIDED FURTHE.R that no increase in the.issued equity capital shall be made in such a manner that the parties referred to in clause (a) or clause (b) or clause (c) hold in aggregate, at any time less than fifty-one per cent. of the issued equity capital of the Financial Corporation.)

(4) Subject to the other provisions contained in this section, the allocation of shares among the parties referred to in clauses (c) and (d) of sub-section (3) and the allotment of such shares shall be made by the Financial Corporation in such manner as may be prescribed.

1[(5) If any shares allocated to any of the parties referred to in clauses (c) and (d) of sub-section (3) remain unsubscribed, they shall be subscribed for equally by the State Government and the 2[Small Industries Bank].] 4A. Special class of shares

(1) The State Government may, in consultation with the 2[Small Industries Bank], specify from time to time such part of the unissued capital of the Financial Corporation as shall be allocated fOJ the issue of a special class of shares.

(2) The special class of shares so allocated under sub-section (1), shall be,- (a) divided into such number of shares of the same face value as the State

Government may, in cOnsultation with the 2[Small Industries Bank) determine;

(b) subscribed by the State Government and the 2[Small Industries Bank] and they may do so in such proportion as may be agreed upon by and between them and the Financial Corporation shall make allotment of such shares accordingly.

(3) The funds representing the capital subscribed as aforesaid shall be used only for sl,lch purposes, in such manner and for rendering assistance to such class or category of industrial concerns, as the 2{Small Industries Bank] may, in consultation with and after obtaining the advice of the State Government, specify in this behalf from time to time and nothing contained in 3[ .••..•] section 48 shall apply thereto.

(4) The rate of dividend declared on the special class of shares in respect of any .accounting year of a Financial Corporation shall not exceed the rate of dividend in respect of its other shares.

(5) Nothing contained in sub-sections (2) to (5) of section. 4, section 5, and 4[sub.8ec~jnns (1) to (4) of section 6], shall apply to the special class of shares. 4B. Transft!'"" .)f share capilal to Development Bank

On such .late as the Central Government may. by notification in the Official Gazette, specify (hereinafter referred to as the specified date), all the shares of every Financial Corporation subscribe'd. by the Reserve Bank as on the date immediately

1 Substituted by Act 43 of 1985. 2 Substituted for "Development Bank" by SFC(Amendment) Act, 2000(Act No. 39 of 2000),dt. 5-9-2000. 3 Words "section 47 or" omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000),dt. 5-9-2000. 4 Substituted for "sub-section (1) of section (6)" by SFC (Amendment) Act. 2000 (Act No. 39 of 2000), dt.

5-9-2000.

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.—-—-—~‘ ..- Manager (Law-Incharge) S. 413 STATE FINANCIAL CORPORATIONS ACT 1951 5 M (d) parties other than those referred to in clause (a) or clause (b) or clause(c): PROVIDED that the number of shares which may be allocated to parties referred to in clause (d) shall in no case exceed forty-nine per cent. of the total number of issued equity shares: PROVIDED FURTHER that no increase in theissued equity capital shall be made in such a manner that the parties referred to in clause (a) or clause (b) or clause (c) hold in aggregate, at any time less than fifty-one per cent. of the issued equity capital of the Financial Corporation] _ (4) Subject to the other provisions contained in this section, the allocation of shares among the parties referred to in clauses (c) and (d) of sub-section (3) and the allotment of such shares shall be made by the Financial Corporation in such manner as may be prescribed. 1[(5) If any shares allocated to any of the parties referred to in clauses (c) and (d) of sub-section (3) remain unsubscribed, they shall be subscribed for equally by the State Government and the 2[Small Industries Bank].] 4A. Special class of shares (1) The State Government may, in consultation with the 2[Small Industries Bank], specify from time to time such part of the unissued capital of the Financial Corporation as shall be allocated for the issue of a special class of shares. (2) The special class of shares so allocated under subsection (1), shall be,— (a) divided into such number of shares of the same face value as the State Government may, in consultation with the 2{Small Industries Bank] determine; ' (b) subscribed by the State Government and the 2[Small Industries Bank] and they may do so in such proportion as may be agreed upon by and between them and the Financial Corporation shall make allotment of such shares accordingly. ' (3) The funds representing the capital subscribed as aforesaid shall be used only for such purposes, in such manner and for rendering assistance to such class or category of industrial concerns, as the 2[Small Industries Bank] may, in Consultation with and after obtaining the advice of the State Government, specify in this behalf from time to time and nothing contained in 3[""“] section 48 shall apply thereto. (4) The rate of dividend declared on the special class of shares in respect of any accounting year of a Financial Corporation shall not exceed the rate of dividend in respect of its other shares. (5) Nothing contained in sub-sections (2) to (5) of section- 4, section 5, and 4[sub-sections (1) to (4) of section 6], shall apply to the special class of shares. 48. Transits-r of share capital to Development Bank On such date as the Central Government may, by notification in the Official Gazette, specify (hereinafter referred to as the specified date), all the shares of every Financial Corporation subscribed'by the Reserve Bank as on the date immediately 1 Substituted by Act 43 of 1985. 2 Substituted for ”Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 Words ”section 47 or" omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 4 Substituted for ”sub-section (1) of section (6)” by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5—92000. t» it? . av. r'uu- " -' ' .-_ . 5—; ‘:_ "1‘577‘ .-,...- T"“"'TWTQRAWT “a? ‘7‘“ “‘5‘” “‘ “"7 .~».- ‘ F’- I wan 1:: i 1373‘ on By. General Manager ( P a A) y guru),

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. STATE FINANCIAL CORPORA T19NS ACT, 1951 S.4C

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preceding the specified date, shall, stand transferred to, and vested in, the Development Bank. 4C. Payment of amount

The Reserve Bank shall be given by the Developljnent Bank, in cash, for the transfer to, and vesting in, the Development Bank of the sha~s of every Financial Corporation which have been subscribed by the Reserve Bank, an lamount equal to the face value of the shares of the Financial Corporation so subscribed~ 1[4D. Issue of redeemable preference shares :

(1) On and after the commencement of the State:Financial Corporations (Amend- ment) Act, 2000, the Financial Corporation may- :

(a) issue redeemable preference shares on s*h terms and in such'manner as the Board may decide; and . .

(b) convert, such number of equity shares as jt may decide into redeemable preference shares, with the prior approvallof.the State Government and the Small Industries Bank, by a resolution pas~Jd in the general meeting of the shareholders: J

PROVIDED that such conversion shall in no case ~educe the equity shares held by the parties referred to in clauses (a), (b) and (c) of sub--j;.(3) of s. 4 to less than fifty one per cent. of the issued equity capital of the Financial C{>rporation.

(2)The redeemable preference shares referred to ilnsub-so (1) shall- (a) carry such fixed rate of dividend as theFin~mcial Corporation may specify

at the time of such issue or conversion; anq (b) neither be transferable nor carry any voting tights.

(3)The redeemable preference shares referred to irl sub-so(1) shall be redeemed by the Financial Corporation in such instalments and in ~uch manner as the Board may determine. .

I4E. Reduction of share capital . • (1) The Financial Corporation, with the prior app~oval of the State Government

and the Small Industries Bank may, by resolution passied in a general meeting of the shareholders, reduce its share capital in any"way. ,

(2) Without prejudice to the generality of the forefPing power, the share capital may be reduced by- ! I

(a) extinguishing or reducing liability on any of its equity shares in respect of share capital not paid-up; or •.

(b) either with or without extinguishing or redudng liability on any of its equity shares, cancelling any paid-up share tapital which is lost or is unrepresented by available assets; or

(c) either with or without extinguishing or reduc~ng liability onany of its equity shares, paying off any paid-up share capital which is in excess of the wants of the Financial Corporation.. i

4F. Restriction on exercising of voting right I

Every shareholder of the Financial Corporation holqing equity shares shall have a right to vote in respect of such shares on every resolutionjand his voting right on a poll

i Sees. 40 to 4H inserted by SFC (Amendment) Act, 2000 (Act No. 39 9£ 2000), dl. 5-9-2000.

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5 ,_ i l . . . t "‘ 6 'STATE FINANCIAL CORPORATI Ns ACT 1951 s.4c A i i preceding the s i _ Bank. 3 l i i pecified date, shall, stand transferred to, and vested in, the Development 4C. Payment of amount The Reserve Bank shall be given by the Development Bank, in cash, for the transfer ' ‘ 3 to, and vesting in, the Development Bank of the sha s of every Financial Corporation which have been subscribed by the Reserve Bank, an amount equal to_ the face value of ' the shares of the Financial Corporation so subscribed? 1[4D. Issue of redeemable preference shares (1) On and after the commencement of the StateéFinancial Corporations (Amend- ment) Act, 2000, the Financial Corporation may— ‘ (a) issue redeemable preference share the Board may decide; and (b) convert, such number of equity shares as it may decide into redeemable preference shares, with the prior approvallofthe State Government and the Small Industries Bank, by a resolution passéd in the general meeting of the shareholders: s on such terms and in such‘manner as the parties referred to in clauses (a), (b) and (c) of Sub-s. (3) of s. 4 to less than fifty one per cent. of the issued equity capital of the Financial C" rporation. (2) The redeemable preference shares referred to in sub-s. (1) shall— (a) carry such fixed rate of dividend as theFinbncial Corporation may specify at the time of such issue or conversion; and ' (b) neither be transferable nor carry any voting rights. (3) The redeemable preference shares referred to i sub-s. (1) shall be redeemed by the Financial Corporation in such instalments and in duch manner as the Board may determine. i 4E. Reduction of share capital ' i , (1) The Financial Corporation, with the prior appi-oval of the State Government and the Small Industries Bank may, by resolution passed in a general meeting of the shareholders, reduce its share capital in anyway. (2) Without prejudice to the may be reduced by— (a) extinguishing or reducing liability on'any of its equity shares in respect of share capital not paid-up; or 1 (b) either with or without extinguishing or redudtng liability on any of its equity shares, cancelling any paid-up share [capital which is lost or is unrepresented by available assets; or (c) either with or without extinguishing or reducing liability on any of its equity shares, paying off any paid-up share capital Which is in excess of the wants of the Financial Corporation. 4F. Restriction on exercising of voting right Every shareholder of the Financial Corporation holding equity shares shall have a right to vote in respect of such shares on every resoiutionand his voting right on a poll generality of the foregoing power, the share capital " 1 Secs. 4D to 4H inserted by SFC (Amendment) Act , 2000 (Act No. 39 (it 2000), dt. 5-9-2000. . ' ' , ‘ . Smartest: ( 3

_.---_. -_ ...._------------------------------------------....,

5.5 5TATEFINANCIALCORPORATION5ACT,1951 7

..shall be in proportion to his share of the paid-up equity capital of the Financial Corporation:

PROVIDED that, however, that no shareholder, other than a shareholder referred to in clauses (a), (b) and (c) of sub-so(3) of s. 4, shall be entitled to exercise voting rights in respect of any equity share'held by him in excess of ten per cent of the issued equity capital. 4G. Proxy voting .

In a general meeting refe,rred to in clause (b) of sub-so (1) of s. 4D and sub-so (1)of s. 4E, the resolution for conversion or reduction of share capital shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast in favour of the resolution are not less than three times the number of votes, if any, cast against the resolution by shareholders so entitled and voting. 4H. Transfer of share capital to small industries bank

On such date as the Central Government may, by notification in the Official Gazette, notify (hereinafter referred to as the notified date) all the shares of every Financial Corporation subscribed by the Development Bank and the amount outstand- ing in respect of loans in lieu of capital provided by the Development Bank as on the date immediately preceding the notified date, shall stand transferred to, and vested in, the Small Industries Bank, such transfer shall be at such rate and be paid in cash or such' other manner as may be mutually agreed upon between the Development Bank and the' Smhll Industries Bank.] 1[5. Transfer of shares

(1)Save as otherwise provided in sub-so(2), the shares of the Financial Corpora tion shall be freely transferable.

(2)Nothing contained in sub-so(1)shall entitle the parties referred to in clauses (a), (b) and (c) of sub-so (3) of s. 4 to ,transfer any of the shares held by them in the Financial, Corporation if such transfer will result in reducing the aggregate value of shares held by them to less than fifty one per cent. of the issued equity capital of the Financial Corporation.

(3) The Board may refuse to register the transfer of any shares in the name of the transferee on anyone or more of the following grounds, and on no other ground, namely:-

(a) the transfer of the shares is in contravention of the provisions of the Act or regulations made thereunder or any other law;

(b) the transfer of the shares, in the opinion of the Board, is prejudicial to the interests of the Financial Corporation or to the Public interest;

(c) the transfer of shares is prohibited by an order of a court, tribunal or any other authority under any law for the time being in force.

(4) The Board shall, before the expiry of two months from the date on which the: instrument of transfer of shares of the Financial Corporation is lodged with it for the: purpose of registration of such transfer, not only form, in good faith, its opinion as to Whether such registration ought not or ought to be refused on any of the grounds' referred to in sub-so (3)but al~,-

Sees, 5 to 10 substituted by SFC (Amendment) Act, ;WOO (Act No. 39 of 2000), dt. 5-9-2000.

14$.” 4 - I U. r5)“ 5‘ Jraaiu. ‘ ,'. -. . S. 5 STATE FINANCIAL CORPORATIONS ACT, 1951 7 5 shall be in proportion to his share of the paid- up equity capital of the Financial . Corporation: PROVIDED that, h0wever, that no shareholder, other than a shareholder referred to in clauses (a), (b) and (c) of sub-s. (3) of s. 4, shall be entitled to exercise voting rights in respect of any equity share'held by him in excess of ten per cent of the issued equity capital. 46. Proxy voting In a general meeting referred to in clause (b) of sub-s. (1) of 5. 4D and sub-s. (1) of 5. 4E, the resolution for conversion or reduction of share capital shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast in favour of the resolution are not less than three times the number of votes, if any, cast against the resolution by shareholders so entitled and voting. 4H. Transfer of share capital to small industries bank On such date as the Central Government may, by notification in the Official Gazette, notify (hereinafter referred to as the notified date) all the shares of every ‘ Financial Corporation subscribed by the Development Bank and the amount outstand- '. ing in respect of loans in lieu of capital provided by the Development Bank as on the date immediately preceding the notified date, shall stand transferred to, and vested in, the Small Industries Bank, such transfer shall be at such rate and be paid in cash or such' other manner as may be mutually agreed upon between the Development Bank and the' Smhll Industries Bank ] 1[5. Transfer of shares (1) Save as otherwise provided in sub-s. (2), the shares of the Financial Corporation shall be freely transferable. (2) Nothing contained in sub-s. (1) shall entitle the parties referred to in clauses (a), (b) and (c) of sub-s. (3) of s. 4 to .transfer any of the shares held by them in the Financial - Corporation if such transfer will result in reducing the aggregate value of shares held by them to less than fifty one per cent. of the issued equity capital of the Financial Corporation. (3) The Board may refuse to register the transfer of any shares 1n the name of the transferee on any one or more of the following grounds, and on no other ground, namely: — (a) the transfer of the shares is in contravention of the provisions of the Act or regulations made thereunder or any‘other law; (b) the transfer of the shares, in the opinion of the Board, is prejudicial to the interests of the Financial Corporation or to the Public interest; (c) the transfer of shares is prohibited by an order of a court, tribunal or any other authority under any law for the time being in force. (4) The Board shall, before the expiry of two months from the date on which the? instrument of transfer of shares of the Financial Corporation is lodged with it for the: purpose of registration of such transfer, not only form, in good faith, its opinion as to Whether such registration ought not or ought to be refused on any of the grounds" 1eferred to in Sub-s (3) but also,— 1 Secs. 5 to 10 substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. “mpr-A— .""7‘7‘""' ._1 thin“ iﬁC‘WGJ ”“7 T." . e 1:11. 1.41 By. General Manager ( P ti A)

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8 STATE FINANCIAL CORPORA nONS ACT, 1951 5.6

(i I

(a) if it has formed the opinion that such registration ought not to be so refused, effect such registration; and

(b) if it has formed the opinion that such registration ought to be refused on any of the grounds mentioned in sub-so (3), intimate the transfer or land the transferee by notice in writing. I

(5) An appeal against the order of refusal of the Board under sub-so (4) ,;;halllie to the Central Government and the procedure for filing and hearing of such appeal shall be in accordance with the rules made by the Central Government in this behalf. 6. Conversion of shares guaranteed by State Govkrnment

(1) On the commencement of the State Financial Corporations (Amendment) Act, 2000, every shareholder shall be given by the Financial Corporation an option to require the Financial Corporation to convert the shares held by him into shares of. the same nominal value without the State Government guarantee and issue fresh share certificate or to pay the amount paid in respect of such shares ~ot exceeding the face value of the shares held by him.

(2) The option referred in to sub-so (1) shall be given by the Financial Corporation to every existing shareholder.before the expiry of thre~ months from the commencement of the State Financial Corporations (Amendment) Act, 2000 and shall be exercised by the shareholder within three months from the date of receipt of such option.

(3) The option exercised under sub-so (2) shall be final and shall not be altered or rescinded after it has been exercised. I .

(4) If, a shareholder exercises option for receivi~g the payment within the stipu- lated time, the Financial Corporation shall on surrender of the share certificate held by him pay him the amount paid in respect of such shares not exceeding the face value thereof:

PROVIDED that if any shareholder fails to exercise the option given to him under sub-section (1), within the time stipulated in sub-section (2), he shall be deemed to have exercised the first option.

(5) Nothing contained in sub-section (4) shall be deemed to result inredl/ction of the share capital and the Financial Corporation m~y, subject to the provisions of sub-section (3) of section 4, allot the shares surrendered by any shareholder, to any other person. .

(6) The Financial Corporation shall keep at Its head office a register, in one or more books, of shareholders and shall enter therein the following particulars so far as they may be available, namely:- :

(i) the names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number; I

(ii) the date on which each person is so enter~d as a shareholder; (iii) the date on which any person ceases to be a shareholder; and (iv) such otDer particulars as.may be prescribed:

PROVIDED that nothing in this sub-section shall apply to the shares held with a depository under the Depositories Act, 1996. .

(7) Notwithstanding anything contained in sub-section (6), it shall be lawful for the Financial Corporation to keep the register of the shareholders in computer floppies or .diskettes, compact disk or any other electronic form subject to such safeguards as may be prescribed. I

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(f, :11; __' __'_:_:._;:‘--"‘ .2: "'z- i .. ._._ . 7._--..,‘.‘- . :41- .wwmg _.7.-.~._.s__..-.~.__- STATE FINANCIAL CORPORATIONS ACT 1951 S. 6 (a) if it has formed the opinion that such registration ought not to be so refused, effect such registration; and ' (b) if it has formed the opinion thatsuch registration ought to be refused on any of the grounds mentioned in sub-s. (3), intimate the transfer or/ and the transferee by notice in writing. (5) An appeal against the order of refusal of the Board under sub-s. (4) shall lie to the Central Government and the procedure for filing and hearing of such appeal shall be in accordance with the rules made by the Central Government in this behalf. 6. Conversion of shares guaranteed by State Government: (1) On the commencement of the State Financial Corporations (Amendment) Act, 2000, every shareholder shall be given by the Financial Corporation an option to require the Financial Corporation to convert the shares held by him into shares of. the same nominal value without the State Government guarantee and issue fresh share certificate or to pay the amount paid in respect of such shares riot exceeding the face value of the shares held by him. " (2) The option referred in to sub-s. (1) shall be given by the Financial Corporation . to every existing shareholder-before the expiry of three months from the commencement » . of the State Financial Corporations (Amendment) Act, 2000 and shall be exercised by ' , 5” the shareholder within three months from the date of receipt of such option. » " f l , (3) The option exercised under sub-s. (2) shall be final and shall not be altered or . . rescinded after it has been exercised. (4) If, a shareholder exercises option for receiviiig the payment within the stipu- lated time, the Financial Corporation shall on surrender of the share certificate held by him pay him the amount paid in respect of such shares not exceeding the face value thereof 2 . . J . PROVIDED that if any shareholder fails to exercise the option given to him under sub—section (1), within the time stipulated in sub-section (2), he shall be deemed to have , i exercised the first option. - (5) Nothing contained in sub-section (4) shall bejdeemed to result in'reduction of ‘ the share capital and the Financial Corporation may, subject to the provisions of , sub-section (3) of section 4., allot the shares surrendered by any shareholder, to any other _ person. ‘ . , (6) The Financial Corporation shall keep at its head office a register, in one or more ‘ I ,‘ books, of shareholders and shall enter therein the following particulars so far as they . ,' may be available, namely:— , : - . 0 § (.1) the names, addresses and occupations, if any, of the shareholders and'a statement of the shares held by each shareholder, distinguishing each share by its denoting number; ‘ ' (ii) the date on which each person is so entered as a shareholder; (‘- (iii) the date on which any person ceases to be a shareholder; and (iv) such other particulars as-may be prescribed: : V PROVIDED that nothing in this sub-section shall apply to the shares held with a ' depository under the Depositories Act, 1996. (7) Notwithstanding anything contained in sub-section (6), it shall be lawful for the Financial Corporation to keep the register of the shareholders in computer ﬂoppies ordiskettes, compact disk or any other electronic form subject to such safeguards as may be prescribed.

S. 7

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STATE FINANCIAL CORPORATIONS ACT, 1951 9

(8) Notwithstanding anythjng contained in the Indian Evidenc'e Act, 1872, a copy ot or extract from, the register of shareholders, certified to be a true copy under the hand of an officer of the Financial Corporation authorised in this behalf, shall, in all legal proceedings, be admissible in evidence.

(9)The register of beneficial owners maintained by depository under section 11 of the Depositories Act, 1996 shall be deemed to be a register of shareholders for the purposes of this Act.

(10)Notwithstanding anything contained in sub-sections (6), (7)and (8),no notice of any trustj express, implied or constructive, shall be entered on the register of shareholders or be receivable by the Financial Corporation:

PROVIDED that nothing in this sub-section shall apply to a depository in respect of shares held by it as a registered owner on behalf of a beneficial owner.

Explanation: For the purposes of sub-so(6),{"9) and this sub-section, the expressions "beneficial owner", "depository" 'and "registered owner" shall have the meanings respectively assigned to them in clauses (a), (e) and G) of sub-so (1) of s. 2 of the Depositories Act, 1996.

(11)Notwithstanding anything contained in the Indian Trusts Act, 1882, the shares of the Financial Corporation shall be deemed to be included among the securities enumerated in s. 20 of that Act. 7. Additional capital of Financial Corporation and its borrowing powers

(1) The Financial Corporation may issue and sell bonds and debentures for the purpose of increasing its working capital.

(2) The State Government may, on a request being made to it by the Financial Corporation, guarantee the bonds and debentures issued by the Financial Corporation as to the repayment of principal and the payment of interest at such rate as may be fixed by that Government.

(3)Notwithstanding anything contained in the Acts hereinafter mentioned in this sub-section, such of the bonds and debentures issued by the Financial Corporation as are guaranteed by the State Government as the repayment of the principal and payment of interest and receipts issued by it for such of deposits as are guaranteed by the State Government as to the repayment of the principal and payment of interest shall be deemed to be included among the. securities enumerated in S. 20 of the Indian Trusts Act, 1882and also to be approved securities for the purpose of the Insurance Act, 1938 and the Banking Regulation Act, 1949.

(4) The Financial Corporation may, for the purposes of carrying out its functions under this Act, borrow money from the Reserve Bank-

1 •

(a) repayable on demand or on the expiry of a fixed period not exceeding ninety days from.the date on which the money is so borrowed against the security of- (i) stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India, or (ii) bills of exchange and promissory notes as are eligible for purchase or re-discount by the Reserve Bank or as are fully guaranteed as to the repayment of the principal and payment of interest by a State Governmentj

(b) repayable on the expiry of a fixed period not exceeding eighteen months from the date on which the money is so borrowed, against securities of the Central Government or of any State Government of the maturity, or subject

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9 S. 7 . ..._________._____.__—-L—-—————-‘——‘.‘ STATE FINANCIAL CORPORATIONS ACT 1951 (8) Notwithstanding anything contained in the Indian Evidence Act, 1872, a copy Of, or extract from, the register of shareholders, certified to be a true copy under the hand of an officer of the Financial Corporation authorised in this behalf, shall, in all legal proceedings, be admissible in evidence. (9) The register of beneficial owners maintained by the Depositories Act, 1996 shall be deemed to be a register 0 purposes of this Act. (10) Notwithstanding anything contained in sub-sections (6), (7) and (8), no notice of any trust; express, implied or constructive, shall be entered on the register of shareholders or be receivable by the Financial Corporation: PROVIDED that nothing in this sub-section shall apply to a depository in respect of shares held by it as a registered owner on behalf of a beneficial owner. Explanation : For the purposes of sub—s. (6), (9) and this sub-section, the expressions ”beneficial owner", ”depository” 'and “registered owner” shall have the meanings respectively assigned to them in clauses (a), (e) and (j) of sub-s. (1) Of s. 2 of the Depositories Act, 1996. hing contained in the Indian Trusts Act, 1882, the shares (11) Notwithstanding anyt of the Financial Corporation shall be deemed to be included among the securities enumerated in s. 20 of that Act. 7. Additional capital of Financial Corporation and its borrowing powers (1) The Financial Corporation may issue and sell bonds and debentures for the purpose of increasing its working capital. (2) The State Government may, on a request being made to it by the Financial Corporation, guarantee the bonds and debentures issued by the Financial Corporation as to the repayment of principal and the payment of interest at such rate as may be fixed by that Government. . (3) Notwithstanding anything contained in the Acts hereinafter mentioned in this sub-section, such of the bonds and debentures issued by the Financial Corporation as are guaranteed by the State Government as the repayment of the principal and payment of interest and receipts issued by it for such of deposits as are guaranteed by the State Government as to the repayment of the principal and payment of interest shall be deemed to be included among the securities enumerated in s. 20 of the Indian Trusts Act, 1882 and also to be approved securities for the purpose of the Insurance Act, 1938 and the Banking Regulation Act, 1949. (4) The Financial Corporation may, for the purposes of carrying out its functions under this Act, borrow money from the Reserve Bank—- (a) repayable on demand or on the expiry of a fixed period not exceeding ninety days fromthe date on which the money is so borrowed against the security of— I (i) stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India, or ’ (ii) bills of exchange and promissory notes as are eligible for purchase or re-discount by the Reserve Bank or as are fully guaranteed as to the repayment of the principal and payment'of interest by a State Government; (b) repayable on the expiry of a fixed period not exceeding eighteen months from the date on which the money is so borrowed, against securities of the Central Government or of any State Government of the maturity, or subject depository under section 11 of f shareholders for the lv/ , ...._d_-._ w». .m. 6 Paint: Purchit Dy. semi Managert MA) _ . ;:-'.“‘zz:. xi" :2: ,.._,_ ---.- - . ~.- ~._- ‘ 3"

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10 STATE FINANCIAL CORPORA nONS ACT, 1951 5.8 to the previous approval of the State Government, against bonds and debentures issued by the Financial Corporation and maturing within a period not exceeding eighteen months from the date on which the money is so borrowed and every such bond and debenture shall be guaranteed by the State Government: PROVIDED that the amount borrowed by the Financial Corporation under cIa. (b) shall not at any time exceed in the aggregate twice the paid-up share capital thereof. ' ,.

(5) The Financial Corporation may, for the purpose of carrying out'its functions under this Act, borrow money from the State Govem~ent, any financial il1stitution, scheduled bank, insurance company or any other person approved by the Board on such terms and conditions as may be agreed upon. I

(6)The total amountofbonds and debentures issue~ and outstanding, the amounts borrowed by the Financial Corporation' under cia. (b) of sub-so (4) and sub-so (5) and of the contingent liabilities of the Financial Corporation in the form of guarantees given by it or underwriting agreements entered into by it, shall not exceed ten times the amount of the paid-up share capital and reserve fund of the Financial Corporation:

PROVIDED that the Financial Corporation may, with the prior approval of the Small Industries Bank, exceed the aforesaid limit up to thirty times the amount of the paid-up share capital and reserve fund of the Financial Corporation. 8. Deposits with Financial Corporation

(1)The Financial Corporation may accept from the State Government, or with the prior approval of the Reserve Bank, from a local authority or any other person deposits repayable after the expiry of a period which shall not be less than twelve months from the date of the making of the deposit and on such other terms as the Board thinks fit:

PROVIDED that the total amount of such deposits shall not exce~d twice the paid-up share capital of the Financial Corporation:

PROVIDED FURTHER thattheState Government J;naypermit the Financial Cor- poration to accept deposits up to a higher limit not exceeding ten times the paid-up share capital of the Financial Corporation.

(2) Any deposit accepted under sub-so (1), 'other than a deposit from the State Government may, if so required by the Financial Corporation, be guaranteed by the State Government as to the repayment of the principal and payment of interest. 9. Management

(1)The general superintendence, direction and management of affairs and business of the Financial Corporation shall vest in a Board of directors which may exercise all, powers and do all such acts and things, as may be exercised or done by the Financial Corporation and are not by this Act expressly directed or required to be done by the Financial Corporation in general meeting. '

(2)The Board may direct that any power exercisable by it under this Act shall also be exercisable in such cases and subject to such conditions, if any, as may be specified by it, by the chairman, managing director or the whole-time director. 10. Board of directors,../

. The Board of directors shall consist of the following,lnamely:- (a) a director to be nominated as chairman undet sub-so (1)of sec. 15;

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Ki 10 STATE FINANCIAL CORPORATIONS ACT, 1951 S. 8 NR“ to the previous approval of the State Government, against bonds and debentures issued by the Financial Corporation and maturing within a period not exceeding eighteen months from the date on which the money is so borrowed and every such bond and debenture shall be guaranteed by the State Government: . - ' PROVIDED that the amount borrowed by the Financial Corporation under cla. (b) shall not at any time exceed in the aggregate twice the paid-up share capital thereof. ‘ (5) The Financial Corporation may, for the purpose ‘of carrying out‘its functions under this Act, borrow money from the State Government, any financial institution, scheduled bank, insurance company or any other person? approved by the Board on such terms and conditions as may be agreed upOn. (6) The total amount of bonds and debentures issued and outstanding, the amounts borrowed by the Financial Corporation under cla. (b) of sub-s. (4) and sub-s. (5) and of the contingent liabilities of the Financial Corporation in the form of guarantees given by it or underwriting agreements entered into by it, shall not exceed ten times the amount of the paid-up share capital and reserve fund of the Financial Corporation: PROVIDED that the Financial Corporation may, with the prior approval of the Small Industries Bank, exceed the aforesaid limit up to thirty times the amount‘of the paid-up share capital and reserve fund of the Financial Corporation. 8. Deposits with Financial Corporation (1) The Financial Corporation may accept from the State Government, or with the prior approval of the Reserve Bank, from a local authority or any other person deposits repayable after the expiry of a period which shall not be less than twelve months from the date of the making of the deposit and on such other terms as the Board thinks fit: PROVIDED that the total amount of such deposits shall not exceed twice the paid-up share capital of the Financial Corporation: 3 - PROVIDED FURTHER that the 'State Government may permit the Financial Cor- poration to accept deposits up to a higher limitnot exceeding ten times the paid-up share capital of the Financial Corporation. - (2) Any deposit accepted under sub-s. (1), other than a deposit from the State Government may, if so required by the Financial Corporation, be guaranteed by the State Government as to the repayment of the principal and payment of interest. 9. Management ( 1) The general superintendence, direction and management of affairs and business of the Financial Corporation shall vest in a Board of directors which may exercise all powers and do all such acts and things, as may be exercised or done by the Financial Corporation and are not by this Act expressly directed or required to be done by the \. Financial Corporation in general meetin . (2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in such cases and-subject to such conditions, if any, as may be specified by it, by the chairman, managing director or the whole-time director. 110; Board of directors , The Board of directors shall consist of the following,lnamely:-— (a) a director to be nominated as chairman underi sub-s. (1) of sec. 15;

S, 10 STATE FINA~CIALCORPORATIONS ACT, 1951 11

(b) two directors nominated by the State Government of whom one director shall be a person who has special knowledge of or experience in small-scale industries: PROVIDED that in the case of a Joint financial Corporation, the number of directors shall be such as the State Governments of the participating States. may, by agreement among themselves, think fit to nominate each participating State Government nominating,not more than two directors: PROVIDED FURTHER that in the case of ~Joint Financial Corporation, the director, who shall.have special knowledge ot or experience in, small-scale industries, shall be nominated by that participating State which, according to the terms ot agreement between the participating States, is entitled to 'make such nomination;

(c) two directors nominated by the Small Industries llaD.k;",.••••••....,r.;:;::: •.• :J.~..•....•... (b) two directors nominated iIl the prescribed manner by the parties mentioned

in clause (c) of sub-so (3)of sac. 4; (e) such number of .d.irectors elected, in the prescribed manner, by

shareholders, other than mentioned in clauses (a), (b) and (c)of sub-so (3)of sec. 4, whose names are entered on the register of shareholders of the Financial Corporation, ninety days before the date of the meeting in which such 'election takes place on the following basis, namely: (i) where the total amount of issued equity share capital held by such shareholders is ten per cent. or less of the total issued equity capital, two directors; (ii) where the total amount of issued equity share capital held by such shareholders is more than ten per cent. but less than twenty-five per cent of total issued equity capitat three directors; (iii) where the total amount of issued equity share capital held by such shareholders is twenty-five per cent or more of total issued equity capital, four directors; and (iv) where the total amount of issued equity s~are capital held by equity shareholders referred to in this clause does not permit election of all the four directors, the Board shall co-opt such number of directors as is required to make up ~he sai9 number who shall retire in equal number on the assumption ofcharge by the elected directors inthe order of their co-option;

(f) a managing director appointed in accordance with the provisions of sub-so (1) of sec. 17:

PROVIDED that on the first constitution of the Board, the directors referred to in ciause (d) shall be nomina ted by the State Government and directors so nomina ted shall, fOJthe purpose of this Act, be deemed to be elected directors:

PROVIDED FURTHER that all the directors of the Board first constituted, other . than the managing director, shall retire at the end of the first year.]

1[***]

Sec. lOA omitted by SPC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5.9-2000.

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r STATE FINANCIAL CORPORATIONS ACT, 1951 11 (b) two directors nominated by the State Government of whom one director shall be a person who has special knowledge of or experience in small-scale industries : PROVIDED that in the case of a Joint Financial Corporation, the number of directors shall be such as the State Governments of the participating States - may, by agreement among themselves, think fit to nominate each participating State Government nominatingnot more than two directors: PROVIDED FURTHER that in the case of a Joint Financial Corporation, the director, who shall. have special knowledge of, or experience in, small-scale industries, shall be nominated by that participating State which, according to the terms of agreement between the participating States, is entitled to ’make such nomination; (c) two directors nominated by the Small Industries a" ' bark: PL- (b) two directors nominated in the prescribed manner by the parties mentioned in clause (c) of sub-s. (3) of sec. 4; (e) such number of directors elected, in the prescribed manner, by shareholders, other than mentioned in clauses (a), (b) and (c) of sub—s. (3) of sec. 4, whose names are entered on the register of shareholders of the Financial Corporation, ninety days before the date of the meeting in which such “election takes place on the following basis, namely: (i) where the total amount of issued equity share capital held by such shareholders is ten per cent. or less of the total issued equity capital, two directors; (ii) where the total amount of issued equity share capital held by such shareholders is more than ten per cent. but less than twenty—five per cent of total issued equity capital, three directors; - (iii) where the total amount of issued equity share capital held by such shareholders is twenty-five per cent or more of total issued equity capital, fourldirectors; and (iv) where the total amount of issued equity share capital held by equity shareholders referred to in this clause does not permit election of all the four directors, the Board shall co-Opt such number of directors as is required to make up. the said number ‘who shall retire in equal number on the assumption of charge by the elected directors in~the order of their co-option; (f) a managing director appointed in accordance with the provisions of sub-s. (1) of sec. 17: PROVIDED that on the first constitution of the Board, the directors referred to in clause (d) shall be nominated by the State Government and directors so nominated shall, for the purpose of this Act, be deemed to be elected directors: PROVIDED FURTHER that all the directors of the Board first constituted, other , than the managing director, shall retire at the end of the first year] was] 1 Sec. 10A omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5—9v2000i

12 \ \

STATE FINANCIAL CORPORA nONS ACT, 1951 S. 11

;',

1[11. Term of office and retirement of directors (1) A nominated director shall hold office during the pleasure of the authority

nominating him. . i (2)Subject to the prov.~~ionsofsub-section (1),a nbminated director shall hold office

for such term not exceeding::three years and sJ.lallalso be eligible for re-nomination: PROVIDED that no' ~uch director shall hold office Continuously for a period

exceeding six years. . (3) An elected director other than a director deemed to be elected under the first

proviso to clause (d) of sec. 10 shall hold office for th~ee years and shall also be eligible for re-election: .

PROVIDED that no such director shall hold bffice continuously for a period exceeding six years. 12. Disqualifications for being a director

No person shall be a director, if he- (a) has been found to be of unsound mind by a court of competent jurisdiction

and the finding is in force; or (b) is or at any time has been, adjudicated as insolvent or has suspended

payment of his debts or has compunded with his creditors; or (c) has been convicted by a cQurtof any offence involving moral turpi tude and

sentenced in respect thereof to imprisonplent of not less than six months and a period of five years has not elapsed from the date of expiry of the sentence; or

(d) is elected by the persons referred to in cl~use (d) of sub-so (3) of sec. 4 but not registered as shareholder in his own right of unencumbered shares of a nominal value of not less than ten thbusand rupees in the Financial Corporation; or

(e) has not paid any call in respect of shares of the Financial Corporation held by him, whether alone or jointly with others, and six .months have elapsed from the last day fixed forthe payment of the calL]

13. Removal of Director from office 2[[(1)} The State Government may remove from pffice any Director who-

(a) is, or has become, subject to any of the disqualifications mentioned in section 12; or

(b) without excuse sufficient in the opinion of the State Government to exonerate it, is absent without leave of the Board from more than three consecutive meetings of the Board.

3[(2) The shareholders, other than those mentioned in clauses (a), (b) and (c) of sub-so (3) of sec. 4, whose names are entered on the re~ister of shareholders, may, after giving to the director a reasonable opportunity of being heard in the manner as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the aggregate not less than one-half of the total issued equity share capital held by all

1 Sees. 11 and 12 substituted by SFC (Amendment) Act; 2000 (Act No. 39 of 2000), dt. 5-9-2000 .. 2 Renumbered by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000.

. I

3'1! 12 STATE FINANCIAL CORPORATIONS ACT 1951 S 11 ‘ '\ 1[11 Term of office and retirement of directors (1) A nominated director shall hold office during the pleasure of the authority nominating him. _ . i (2) Subject to the provisions of sub-section (1), a nominated director shall hold office for such term net exceedingxthree years and shall also be eligible for re-nomination: PROVIDED that no} such director shall hold office continuously for a period exceeding six years. ' ‘ . (3) An elected director other than a director deemed to be elected under the first proviso to clause (d) of sec. 10 shall hold office for three years and shall also be eligible for re—election: PROVIDED that no such director shall hold office continuously for a period exceeding six y.ears 12. Disqualifications for being a director No person shall be a director, if he— (a) has been found to be of unsound mind by a court of competent jurisdiction and the finding 15 in force; or (b) is or at any time has been, adjudicated as insolvent or has suspended payment of his debts or has compunded with his creditors; or (c) has been convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment of not less than six months and a period of five years has not elapsed from the date of expiry of the sentence, or (d) is elected by the persons referred to in clause (d) of sub- -s. (3) of sec. 4 but not registered as shareholder in his own right of unencumbered shares of a nominal value of not less than ten thOusand rupees in the Financial Corporation; or (e) has not paid any call 1n respect of shares of the Financial Corporation held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call ] 13. Removal of Director from office 2[[(1)] lThe State Government may remove from office any Director who—— (a) is, or has become, subject to any of the disqualifications mentioned in section _ 12; or (b) without excuse sufficient in the opinion of the State Government to exonerate it, is absent without leave of the Board from more than three consecutive meetings of the Board. ' 3[(2) The shareholders, other than those mentioned in clauses (a), (b) and (c) of sub-s.( (3) of sec. 4, whose names are entered on the register of shareholders, may, after giving to the director a reasonable opportunity of being heard 1n the manner as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the aggregate not less than one-half of the total issued equity share capital held by all 1 Secs. 11 and 12 substituted by SFC (Amendment) Act; 2000 (Act No. 39 of 2000), dt. 5—9-2000.- 2 Renumbered by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. l . / . «61“ \ u .r, we 9 ‘. 1nd .1 11:3?” 'e""U ‘_,XJ‘:~‘ ¥

'~,

S. 17 STATE FINANCIAL CORPORATIONS ACT, 1951 13

such shareholders, remove any directors elected under clause (d) of sec. 10 and elect in his place another person to fill the vacancy so caused.] 14. Resignation of office by Director and filling up of casual vacancies

1[(1) Any dire'ctor elected under clause (d) of section 10may, by giving notice in writing to the Chairman of the Board, resign from his office and on such resignation being accepted, shall be deemed to have vacated his office.) .

(2) A cas~al vacancy in the office of an elected Director shall be filled by election and a Director so elected shall hold office for the unexpired portion of the term of his predecessor.

(3) No act or proceeding of the Board shall be questioned on the ground merely of the existence of any vacancy in, or any defect in the constitution of, the Board. 1[15. Chairman of Board

(1) The Small Industries Bank shall, in consultation with the State Government nominate a director as a Chairman of the Board for such period not\ exceeding three years and no such terms and conditions as the Small Industries Bank may specify:

PROVIDED that the Chairman shall not be a whole-time director unles3 he is also appointed to function as the managing director:

PROVIDED FURTHER that the Chairman shall so long as he remains a director be eligible for re-appointment as Chairman.

(2) The Chair~an shall preside over the meetings of the Board and the general meetings of the Financial Corporation.] 16. Remuneration of Directors

The Directors other than the Managing Director and not being servants of the Government shall be paid such fees as may be prescribed for attending meetings of the Board and, if they are members of the Executive Committee, or any other committee . appointed by the Financial Corporation, for attending meetings of such committee. 17. Managing Director

1[(1) The managing director shall- (a) be appointed, in consultation with the Small Industries Bank, by the State

Government; (b) be a whole-time officer of the Financial Corporation; (c) perform such duties as the Board, by regulations, entrust or delegate to him; (d) hold office for such term not exceeding three years as the State Government

may specify and shall be eligible for re-appointment; (e) receive such salary and allowances and be subject to other terms and

conditions of service as the Board may, with the previous approval of the State Government, determine.]

(2) The State Government may, after consulting the Board, remove the Managing Director from office:

• PROVIDED that no Managing Director shall be so removed unless he has been given an opportunity of showing cause against his removal.

S. 17 STATE FINANCIAL CORPORATIONS ACT, 1951 13 such shareholders, remove any directors elected under clause.(d) of sec. 10 and elect in his place another person to fill the vacancy so caused.] 14. Resignation of office by Director and filling up of casual vacancies 1[(1) Any director elected under clause (d) of section 10 may, by giving notice in. writing to the Chairman of the Board, resign from his office and on such resignation being accepted, shall be deemed to have vacated his office] (2) A casual vacancy in the office of an elected Director shall be filled by election - . and a Director so elected shall hold office for the unexpired portion of the term of his ; predecessor. . , l (3) No act or proceeding of the Board shall be questioned on the ground merely . i > of the existence of any vacancy in, or any defect in the constitution of, the Board. 1{15. Chairman of Board (1) The Small Industries Bank shall, in consultation with the State Government nominate a director as a Chairman of the Board for such period not exceeding three years and no such terms and conditions as the Small Industries Bank a ay specify: PROVIDED that the Chairman shall not be a whole-time director unless he is also appointed to function as the managing director: . PROVIDED FURTHER that the Chairman shall so long as he remains a director be 5 eligible for re~appointment as Chairman. . ' .. i (2) The Chairman shall preside over the meetings of the Board and the general 5 meetings of the Financial Corporation] 16. Remuneration of Directors 1 The Directors other than the Managing Director and not being servants of the Government shall be paid such fees as may be prescribed for attending meetings of the Board and, if they are members of the Executive Committee, or any other committee . appointed by the Financial Corporation, for attending meetings of such committee. 17. Managing Director t I 1[(1) The managing director shall— . é . (a) be appointed, in consultation with the Small Industries Bank, by the State ; Government; (b) be a whole-time officer of the Financial Corporation; (c) perform such duties as the Board, by regulations, entrust or delegate to him; 1 . (d) hold office for such term not exceeding three years as the State Government may specify and shall be eligible for re-appointment; (e) receive such salary and allowances and be subject to other terms and [ Conditions of service as the Board may, with the previous approval of the State Government, determine] (2) The State Government may, after consulting the Board, remove the Managing 1 Director from office: , PROVIDED that no Managing Director shall be so removed unless he has been given an opportunity of showing cause against his removal. '1 - 1 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. . ex ‘9‘ A (0 632‘ . ' * 3‘ “1'19 n I ‘ o l‘ (- t l , .a are. raw! - :'; "ﬁ' 4%th . .V. -."‘_L.‘~’.La.“ Lewes. -_.. .._. . . .. . . . _ : ' Dy General Manager ( P a A)

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14 STATE FINANCIAL CORPORA TIONS ACT, 1951 S.18

1[(3) Notwithstanding anything cont~ined in sub-so(1),the State Government, with prior consultation of the Small Industries Bank,shall have the right to terminate the term of office of the managing director at any time, before the expiry of the term specified under clause (d) of sub-section (1)by giving him notice of not less than three months in writing or three months salary and allowances in lieu of such notice and the managing director shall also have right to relinquish his office at any time before the expiry of term specified under clause (d) of sub-so (1)by giving to the State Governm~nt notice of not less than three months in writing.] 2[18. Executive Committee

(1)The Board shall constitute an Executive Committee consisting of the chairman and managing director, thewhole-time directors and such other directors as itmay deem fit: !

PROVIDED that in the case of a Joint Financial Corporation, if the directors nominated under clause (b) of section 10 represent different State Governments then, all of them shall be members of the Executive Committee.

(2)The Executive Committee shall discharge such functions as may be prescribed or as may be delegated to it by the Board.

(3)The Board may constitute such dtller committees whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons for such purpose or purposes as it may think fit.] 19. Meetings of the Board and Committee

(1) The Board and the Executive Committee shall meet at such times and places and shall observe such rules of procedure in regard to transaction of business at its meetings as may be provided by regulations made under this Act.

(2) All questions at a meeting shall be decided by a mdjority of votes of the members present, and, in the case of equality of votes, the Chairman or in his absence, any other person presiding, shall have a second!or casting vote.

(3) No Director shall vote on any matter in which he is interested. 3[***]

(5) If for any reason the Chairman of the Board or the Chairman of the Executive Committee is unable to attend any meeting of the Board or, as the case may be, of the Executive Committee,- .

(a) in the case of the meeting of the Board, a Director 4[* * *] authorised by the Chairman of the Board in writing shall preside at such meeting, but if the Director so authorised is absent or i~no such authorisation has been made, the Board may elect a Director to preside at the meeting; and

(b) in the case of the meeting of the Executive Committee, a member authorised in writing by the Chairman of that Committee shall preside at that meeting, but if the member so authorised is absent or if no such authorisation has been made, the Committee may elect any of its members to preside at that meeting.

I 1 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt 5-9-2000. 2 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 SUb-55. (3A) and (4) omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 4 Certain words omitted by Act 43 of 1985.

------------------------------~--- -

14 STATE FINANCIAL CORPORATIONS ACT 1951 ' S. 18 W. V 1[(3) Notwithstanding anything contained in sub-s. (1), the State Government, with - ' prior consultation of the Small Industries Bank, shall have the right to terminate the term of office of the managing director at any time, before the expiry of the term specified under clause (d) of sub-section (1) by giving him notice of not less than three months in writing or three months salary and allowances in lieu of such notice and the managing director shall also have right to relinquish his office at any time before the expiry of term specified under clause (d) of sub-s. (1) by giving to the State Government notice of not less than three months in writing.) 2[18. Executive Committee (1) The Board shall constitute an Executive Committee consisting of the chairman and managing director, the whole-time directors and such other directors as it may deem fit : ' l PROVIDED that in the case of a Ioint Financial Corporation, if the directors nominated under clause (b) of section 10 represent different State Governments then, all of them shall be members of the Executive Committee. (2) The Executive Committee shall discharge such functions as may be prescribed or as may be delegated to it by the Board. (3) The Board may constitute such other committees whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons for such purpose or purposes as it may think fit] 19. Meetings of the Board and Committee (1) The Board and the Executive Committee shall meet at such times and places and shall observe such rules of procedure in regard to transaction of business at its meetings as may be provided by regulations made under this Act. _ (2) All questions at a meeting shall be decided by a majority of votes of the members present, and, in the case of equality of votes, the Chairman or in his absence, any other person presiding, shall have a secondtor casting vote. (3) No Director shall Vote on any matter in which he is interested. Slsssl (5) If for any reason the Chairman of the Board or the Chairman of the Executive Committee is unable to attend any meeting of the Board or, as the case may be, of the ' Executive Committee,— (a) in the case of the meeting of the Board, a Director 4[* * *] authorised by the Chairman of the Board in writing shall preside at such meeting, but if the Director so authorised is absent or if no such authorisation has been made, the Board may elect a Director to preside at the meeting; and (b) in the case of the meeting of the Executive Committee, a member authorised in writing by the Chairman of that COmmittee shall preside at that meeting, but if the member so authorised is absent or if no such authorisation has been made, the Committee may elect~ any of its members to preside at that - meeting i Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), (it. 5-9-2000. Sub—ss. (3A) and (4) omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. Certain words omitted by Act 43 of 1985. #QJNr—I

5.25

. ~. .

STATE FINANCIAL CORPORA nONS ACT, 1951 15

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20. Powers of Executive Committee (1) Subject to such general or special directions as the Board may from time to

time give, the Executive Committee may deal with any matter within the competence of the Board.

(2) The minutes of every meeting of the Executive Committee l[shall, after confirmation thereof at the next meeting of the Executive Committee, be laid 1before the Board at the next following meeting of the Board. 21. Advisory Committee

The Financial Corporation may appoint 2[one or more committee or committees consisting wholly of Directors or wholly of other persons or partly of Directors and pa~tly of other person.s) for the purp0i'e of aSl>istingthe Financial Corporation in the efficient discharge of its functions and, in particular, for the purpose of securing that those functions art' exercised with due regard to the circumstances and conditions prevailing in,and the requirements of, particular areas or industries. 22. Offices and agencies

The Financial Corporation shall establish its head office and other offices and agencies at such places as the State Government may, from time to time, specify and save as aforesaid, the Financial Corporation may establish additional offices or agencies in such other places within the State as it may consider necessary. 23. Officers and other employees of the Financial Corporation

The Financial Corporation may appoint such officers, advisers and employees as it considers necessary for the efficient performance of its functions, and determine, by regulations, their conditions of appointment and service and the remuneration payable to them:

3[•••.••J

CHAPTER III . POWERS AND DUTIES OF THE BOARD

24. General duty of lhe Board

The Board in discharging its functions under this Act shall act on business princi- ples, due regard being had by it to the interests of industry, commerce and the general public. 25. Business which Financial Corporation may transact

4[(1) The Financial Corporation may, subject to the provisions of this Act, carryon aile!. tremsact any of the following kinds of business, namely:-

(!', guaranteeing, on such terms and conditions as may be ag!,eed upon,- (i) ioans raisp.dby industrial concerns which are repayabl~ within a period not exceeding twenty years, and are floated in the public market; (ii) loans raised by industrial concerns from scheduled banks or State co-operative banks or other financial institutions;

1 Substituted by Act 43 of 1985, for words "shall be laid". 2 Substituted by Act 43 of 1985. 3 Proviso omitted by SFC (Am('ndment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 4 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000.

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..,~ . _ - W“ 0‘6“;er .._, ----- v”. MQACxG) ,. .- o S. 25 STATE FINANCIAL CORPORATIONS ACT 1951 15 “W. 20. Powers of Executive Committee (1) Subject to such general or special directions as the Board may from time to time give, the Executive Committee may deal with any matter within the competence of the Board. (2) The minutes of every meeting of the Executive Committee 1(shall, after confirmation thereof at the next meeting of the Executive Committee, be laid] before the Board at the next following meeting of the Board. 21.- Advisory Committee The Financial Corporation may appoint 2[one or more committee or committees consisting wholly of Directors or wholly of other persons or partly of Directors and partly of other persons] for the purpose of assisting the Financial Corporation in the efficient discharge of its functions and, in particular, for the purpose of securing that those functions are exercised with due regard to the circumstances and conditions prevailing in, and the requirements of, particular areas or industries. 22. Offices and agencies The Financial Corporation shall establish its head office and other offices and agencies at such places as the State Government may, from time to time, specify and save as aforesaid, the Financial Corporation may establish additional offices or agencies in such other places within the State as it may consider necessary. ' 23. Officers and other employees of the Financial Corporation The Financial Corporation may appoint such officers, advisers and employees as it considers necessary for the efficient performance of its functions, and determine, by regulations, their conditions of appointment and service and the remuneration payable to them: 3[x~x-xe] CHAPTER m . POWERS AND DUTIES or THE BOARD 524. General duty of the Board The Board in discharging its functions under this Act shall act on business princi- ples, due regard being had by it to the interests of industry, commerce and the general pubhc 25. Business which Financial Corporation may transact 4[(1) The Financial Corporation may, subject to the provisions of this Act, carry on and transact any'of the following kinds of business, namely:— {4‘5 guaranteeing, on such terms and conditions as may be agreed upon,—~— ’l (i) ioans raised by industrial concerns which are repayable within a period not exceeding twenty years, and are floated in the'public market; (ii) loans raised by industrial concerns from scheduled banks or State co-operative banks or other financial institutions; M Substituted by Act 43 of 1985, for words “shall be laid". Substituted by Act 43 of 1985. 1 2 3 Proviso omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 4 Substituted by SEC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. t'n—e'n-r "f "".i *" .y ‘3‘ ~-- 1 - - ..» . ........~v.'s3:~~'"'1‘ ‘I‘ “h" “- rs). . a v1- ——; _..'...> _ \ta‘ “‘3 A Dy. General Barrage? ( P a if.)

16 STATE FINANCIAL CORPORATIONS ACT, 1951 5.25

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(b) guaranteeing, on such terms and conditions as may be agreed upon, deferred payments due from any industrial concern in connection with its purchase of capital goods within India; .

(d) transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns;

(e) acting as agent of the Central Government or the State Governm;nt or the Development Bank or the Small Industries Bank or the IFCI Limited formed and registered under the Companies Act, 1956, or any other financial institution notified in this behalf by the ~entral Government in respect of any matter connected with, or arising out bf, the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern or relating to the business of the Development Bank, Small . Industries Bank, IFCI Limited or financialinstitution;

(f) subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern or any other concern;

(g) retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfilment of its underwriting liabilities and disposing of the stock, shares, bonds 9r debentures so acquired;

(h) granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding twenty years from the date on which they are granted or subscribed to, as the case may be: PROVIDED that the Financial Corporation may, with the prior approval of the Small Industries Bank, exceed the said limit of twenty years up to a further period 01ten years: PROVIDED FURTHER that nothing contained in this clause shall be deemed to preclude the Financial Corporation from granting loans or advances to, or subscribing to debentures of, and industrial concern to which may be attached an option to ~onveh such debentures or loans into stock or shares of the industrial concern: PROVIDED ALSO that the Financial Corporation may, in the exercise of such option, convert the amounts outstanding on such debentures. or loans into stock or shares of the industrial concern if such concern increases its subscribed capital by the issue of further stock or shares in accordance with the subject to, the provisions of s. 81 of the Companies Act, 1956.

Explanation: In this clause, the expression "the amounts outstanding on such debentures or loans" shall mean the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted

Iinto stock or shares; . . (i) accepting or discounting promissory notes and bills of exchange made,

drawn, accepted or endorsed by industrial concerns or by any person selling caphal goods manufactured by one industrial concern to another industrial concern;

0) undertaking research and surveys for eval uating or dealing with marketing 'or investments or undertaking and carrying on techno-economic studies or other activities in connection with the development of any ind ustry;

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I“ ' 16 STATE FINANCIAL CORPORATIONS ACT: 1951 S. 25 (b) guaranteeing, on such terms and conditions as may be agreed upon, deferred payments due from any industrial concern in connection with its purchase of capital goods within India; ‘ ' (c) underwriting of the issue of stock, shares, bonds or debentures by industrial concerns; (d) transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns; (e) acting as agent of the Central Government or the State Government or the Development Bank or the Small Industries Bank or the IFCI Limited formed and registered under the Companies Act, 1956, or any other financial institution notified in this behalf by the Central Government in respect of any matter connected with, or arising out of, the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern or relating to the business of the Development Bank, Small ' Industries Bank, IFCI Limited or financialinstitution; (f) subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern or any other concern; (g) retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfilment of its underwriting liabilities . and disposing of the stock, shares, bonds or debentures so acquired; (h) granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding twenty years from the . date on which they are granted or subscribed to, as the case may be: PROVIDED that the Financial Corporation may, with the prior approval of the Small Industries Bank, exceed the said limit of twenty years up to a further period of ten years: PROVIDED FURTHER that nothing contained in this clause shall be deemed to preclude the Financial Corporation from granting loans or advances to, or subscribing to debentures of, and industrial concern to which may be attached an option to eonveit such debentures or loans into stock or shares of the industrial concern: ‘ PROVIDED ALSO that the Financial Corporation may, in the exercise of such option, convert the amounts outstanding on such debentures. or loans into stock or shares of the industrial concern if such concern increases its subscribed capital by the issue of further stock or shares in accordance with the subject to, the provisions of s. 81 of the Companies Act, 1956. Explanatibn : In this clause, the expression "the amounts Outstanding on such debentures or loans” shall mean the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted into stock or shares; ‘ ‘ (i) accepting or discounting promissory notes and bills of exchange made, drawn, accepted or endorsed by industrial concerns or by any person selling capital goods manufactured by one industrial concern to another industrial concern; ' (j) undertaking research and surveys for evaluating or dealing With marketing "or investments or undertaking and carrying on techno-economic studies or other activities in connection with the development of any industry; ‘ ﬂop-i r, [ Fri-tr“: \‘J st.” _ -ﬂ_- at.“ l; \Q/f-(t tincture MancthQI-J . Qw‘oujﬂa 1 V ' \L’z‘ .Av‘kl“ ‘ edits?“ \w‘ .t ‘r.

S.2SA STATE FINANCIAL CORPORATIONS ACT, 1951 17

I I

I J

(k) providing technical and administrative assistance to an~ industria.l concern or any person for the promotion, management or expanSIOnof any lOdustry;

(I) planning and assisting in the promotion and development of industries; (m) providing consultancy and merchant banking services; (n) dcting as the trustee for the holders of debentures or other securities; (0) leasing, sub-leasing or giving on hire or hire-purchase of indUstrial plant,

equipment, machinery or any other asset; (p) factoring;

(q) providing export related credit and services; (r) undertaking money market related activities;

. (s) setting up of mutual funds and undertaking asset management activity; (t) promoting, forming or conducting or assisting in the promotion, formation,

or conduct of companies, subsidiaries, societies, trusts or such other aSSociations of persan~ as it may deem fit;

(u) . opening or confirming or endorsing letters of credit and negotiating or collecting bills and other documents drawn thereunder;

(v) doing such other business as the Small Industries Bank may authorise, and/ or generally the doing of such acts and things as may be incidental to or consequential upon, the exercise of its powers or the discharge of its duties under this Act.

(2)The Financial Corporation may receive, in consideration of any of the services mentioned in sub-so (I), such commission, brokerage, interest, remuneration or fee asmay be agreed upon.]

(3) Subject to the provisions of sub-section (5) of section 7, the aggregate of contingent liabilities of the Financial Corporation under clauses (a), (b), (c) and (ca) of sub-section (1) shall not at any time exceed twice the paid-up share capital and reserve fund of the Corpora tion except with the prior approval of the State Government and in consultation with the l[Small Industries Bank] but in no case shall exceed thrice the paid-up share capital and reserve fund of the Corporation.

(4) Nothing contained in this Section shaH entitle any Financial Corporation to hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent 'of the subscribed share capital of that company or thirty per cent of its Own paid-up share capital and free reserves, whichever is less.

(5) If, on the commencement of the State Financial Corporations (Amendment) Act, 1972(77of 1972),any Financial Corporation is holding shares in excess of the limits specified in sub-section (4), the Corporation shaU report the matter forthwith to the Reserve Bank and shaU, within such period as the Reserve Bank may allow, so reduce its share holding as to conform to the provisions of that sub-section. 2[25A. Power to acquire rights

The Financial Corporation sha~have the right to acquire, by transfer or assign- ment, the rights and interests of any such financial institution as may be notified by the Central Government (including any other rights incidental thereto) in relation to any

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1 2 Substituted for "Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dl. 5-9-2000.Inserted by Act 43 of 1985.

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5. 25A STATE FINANCIAL CORPORATIONS ACT 1951 17 xxx—“SE (k) providing technical and administrative assi or any person for the promotion, management or expansion of any industry; (I) planning and assisting in the promotion and development of industries; (m) providing consultancy and merchant banking services; (n) acting as the trustee for the holders of d (o) leasing, sub-leasing or giving on hire or hire- equipment, machinery or any other asset; (p) factoring; I stance to any industrial concern (t) promoting,formingorconductingor ' or conduct of companies, subsidiaries, associations of persons as it may deem fit; (u) I opening or confirming or endorsin collecting bills and other documents (v) doing such other business / societies, trusts or such other g letters of credit and negotiating or drawn thereunder; whether as pledgee, mortgagee or absolute owner, of an cent *of the subscribed share ca ' Substituted for "Development Bank” by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 59—2000. 2 Inserted by Act 43 of 1985. . a“ k , V3- may} t .9 ‘5 41‘ 93' Vaﬁ-ﬁnw“ . a - 53?"; “W” ' ‘ ' " - "'- 'Dy.EérttratManagar(PﬁA) W“

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I 18 STATEFINANCIALCORPORATlONS ACT, 1951 s.25B

. Iloan or advance granted or any amount recoverable bYlsuchinstitution, either in whole or in part, by the execution or issue of any instrument orpy the transfer of any instrument by endorsement or in any other manner: I

PROVIDED that such loah or advance or amount relates to any business which.the Financial Corporation may transact under this Act.] I l[25B Gifts, grants, etc. i

The Financial Corporation may receive gifts, ~onations or benefactions from

Government or any other source.] I . L[26. Limit of accommodation •On and from the commencement ~fthe State.Finahcial Corporations (Amendment) Act, 2000, the Financial Corporation shall not enter into any arrangements under cla. (a), (d) or (h) of sub-section (1) of sec. 25 with any iridustrial concern so that the total amount outstanding against that concern in respect bf all such arrangements togeth~r with the amount of the face value of the shares and stocks of that concern whether subscribed or agreed to be subscribed and the out~tanding liabilities on account of underwriting agreements and the deferred payments guarantee is more than-

(i) five hundred lakhs of rupees in the case ~ofa corporation established by or under any other law or a company as d'efined in sec. 3 of the Companies Act, .1956 or a co-operative society r~gistered under the Co-operative Societies Act, 1912 or any other law relating to co-operative societies for the

time being in force; and. I . (ii) two hundred lakhs of rupees 10 any other case:

PROVIDED that the Financial Corporation may, with the prior approval of the Small Industries Bank, exceed tne lithit under clause (i) or clause (ii)up

to four times.] i 27. power to impose conditions for accommodation

(1) In entering into any arrangement under s~ction 25with an industrial concern, the Financial Corporation may impose such conditions as it may think necessary or expedient for protecting the interests of the Financi~l Corporation and securing that the accommodation granted by it is put to the best use1bythe industrial'concern. .

(10) Where any arrangement entered into byi the Financial Corporation with an industrial concern provides for the appointment by the Financial Corporation of one or more Directors of such industrial concern, such provision and any appointment. of Directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Compahies Act, 1956 (1 of 1956), or in any other law for the time being in force or in the merrlorandum, Articles of Association or any other instrument relating to the industrial cojncern, and any provision regarding share qualification, age limit, number. of Directorships, removal of office of Directors and such like conditions contained in any such l~w or instrument aforesaid shall not apply to any Director appointed by the Financ~al Corporation in pursuance of the

arrangement as aforesaid. . i . (3) Any Director appointed in pursuance of sub-section (2) shaU-I

i . I Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 20.00), dt. 5-9-2000. ~ Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9.2000.

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_ 5.253 18 . STATE FINANCIAL CORPORATIOhiS ACT, 1951 l ? loan or advance granted ora he execution or issue of any ins by endorsement or in any other manner: PROVIDED that such loan or advance Financial Corporation may transac 1[253 Gifts, grants, etc. The Financial Corpora Government or any other source.) 7‘[26. Limit of accommodation On and from the commencement of th Act, 2000, the Financial Corporation shall (a), (d) or (h) of subsection (1) of sec.. amount outstanding against that concern with the amount of the face valu subscribed or agree underwriting agreements and the deferre (1) five hundred lakhs of rupees ' ’ under any other law or a Societies Act, 1912 or any ot time being in force; and (ii) two hundred lakhs of ru PROVIDED that the the Small Industries . to four times.) 27. POWer to impose conditions (1) In entering into any arran the Financial Corporation may impose expedient for protecting the interests of accommodation granted by it is pu (10) Where any arrange industrial concern provides for more Directors of such industrial (2 Directors made in pursuance thereof anything to the contrary contained in other law for the time any other instrument relating to share qualification, age limit, and such like conditions c apply to any Director appointed by arrangement as aforesaid. (3) Any Director appointed in pursu , l inserted by SFC (Amendment) , 2 Substituted by SFC (Amendmen . ny amount recoverable by t under this Act] tion may receive gifts, 7.5 with any in" e of the shares and stocks of that d to be subscribed and the cuts company as l Act,‘1956 or a co-operative society re her law relating to co-operative societies for the , l pees in any other case: Financial Corporation may, Bank, exceed the limit under . | for accommodation l . gement under section 2 t to the best useab ment entered into byi the the appointment oncern, Such 'provisi being in force or i the industrial co1ncern, number. of Directorships, re ontained in any su .2122: 37355:; 51“. mass . V I . . l A "3:133...“ “ngjmﬁﬁﬁﬁsﬂﬁb‘ '- 1-.5'1', such institution, either in whole trument or‘,by the transfer of any instrument or amount donations or benefactions from e State'Financial Corporations (Amendment) not enter into any arrangements under cla. dustrial concern so that the total all such arrangements together concern whether tanding liabilities on account of ntee is more than—— in respect of d payment's guara in the case (of a corporation established by or defined in sec. 3 of the Companies gistered under the Co—operative with the prior approval of clause (i) or clause (ii) up 5 with an industrial concern, think necessary or such conditions as it may securing that the the Financial Corporation and y the industrial‘concern. Financial Corporation with an Financial Corporation of one or on and any appointmentof shall be valid and effective notwithstanding the Compahies Act, 1956 (1 of 1956), 'or in any . l - . . n the memorandum, Articles of Assocration or and any provision regarding " ‘ moval of office of Directors ,i nt aforesaid shall not . 't of the by the ch law or instrume the Financial Corporation in pursuance _ .l ance of sub-section (2) shall—— it: .. _ .m" «woman-M

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S.28 STATE FINANCIAL CORPORA TIONS ACT, 1951 19

(a) hold office during the pleasure of the Financial Corporation and may be removed or substituted by any person by order in writing by the Financial Corporation; , .

(b) not incur any obligation or liability by reason only of his being a Director 0r for anything done or omitted to be done in good faith in the discharge of his duties as a Director or anything in relation thereto;

. (c) not be liable to retirement by rotation and shall not be taken into account for comp'uting the number of Directors liable to such retirement.

28. Prohibited business

(1) The Financial Corporation shall not-

(a) except as provided in section 8, accept deposits;

(b) except as provided in clauses (da), (f) and (g) of sub-section (1) of section 25, subscribe to the shares or stock of any company;

l[(d) grant any form of assistance to any industrial concern in respect of which the aggregate of the paid-up share capital and free reserves exceeds ten crores of rupees or such higher dmountnot exceeding thirty cranis of rupees as the Stdle Governrn€'nL or. the recommendation ()f the SUl<:>!l II1Jllslries Bdnkr may. by l\l)t;~ilaliur, in. ihl:.'Dflicial G..tzdte, :,pl:dly,]

(2) The hn~lnd<lJ Corporatioll shall not enter into any kind of bUl:iiness with any 'mduslri'-l! .:oncernr cf whiLh <lny of the Directors of the Financial Corporation is a proprietor, partner, Director, manager, agent, cmph)yee ur guarantor, or in which one 01' more Directors of the Financial Corporation together hold substantial interest:

PROVIDED that this section shall not apply to any industrial concern if any Dill'ctUI' or the Fil\undal Corpuration-

(i) is nominated as a Director of the Board of such concern by the Government or a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956), or by a Corporation established by or under any other law;or

(ii) is elected on the Board of such concern by virtue of shares held in the concern by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956)r or by a Corporation established by or under any other law, by reason only such nomination or election, as the case maybe.

Explanation: !!Substantial interest!! in relation to an industrial concern means the beneficial interest held by one or more of the Directors of the Financial Corporation or by any relative as defined in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956) of such Director whether singly or taken togetherr in the shares of the industrial concernr the aggregate amount paid-up on which either exceeds five lakhs of rupees or fi~ per centr of the paid-up share capital of the industrial concern

r whichever is less.

(3) The provisions of sub-section (2)-

(i) shall no't apply to any transaction relating to the business entered into prior to the commencement of the State Financial Corporations (Amendment)

Substituted by SFC (Amendment) Act, 2000 (Act No, 39 0(2000), dt. 5-9-2000.

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S. 28 STATE FINANCIAL CORPORATIONS ACT 1951 ' 19 (a) hold office during the pleasure of the Ft removed or substituted b Corporation; , ‘ (b) not incur any obligation or liabili nancial Corporation and may be y any person by order in writing by the Financial (c) not be liable to retirement by rotation and shall not be taken into account - for computing the number of Directors liable to such retirement. 28. Prohibited business (1) The Financial Corporation shall not-— (a) except as provided in section 8, accept deposits; (b) except as provided in clauses ( da), (f) and (g) of subsection (1) of section 25, subscribe to the shares or st ock of any company; (c) grant any loan or advance on the security of its own shares; as the State Government. on Bank, may. by notiﬁcation in (2) The Financial Corporation sh the recommendation of the 3m all hid uSUieS the Ofﬁcial (Iiumtte, specify] all not enter into any kind of business with any uidustriai concern, of which any of the Directors of the Financial Corporation is a proprietor, partner, Director, manager, agent, employee or Wuaranlor, or in which one or more Directors of the Financial Corporation together hold substantial interest: ) of section 2 of the Companies Act, 1956 (1 of in the shares of the industrial exceeds five lakhs of rupees or 'd-up share capital of the industrial concern, whichever is less. (3) The provisions of sub-section (2)— (i) shall not apply to an y transaction relating to the business entered into prior to the commencem ent of the State Financial Corporations (Amendment) -R- 1 Substituted by SFC (Amendment) Act, .45 V “(0“ Knit 5"? ‘, 63W” 2 ‘ “at“; $0 ”ﬁrst Q'ﬁﬁl::".“.~.7 L 0 .. a J” runs W-v?—\:—~~——~-~-.———.—~crem «ESP-(NF , -~~ «-— @253" - . _ . ,- .- ~ _ _, .

20 STATEFINANCIALCORPORATION5ACT,1951 5.29

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Act, 1972(77of 1972),and all such business and any transaction in relation thereto may be implemented or continued ,asif that Act had not come into force;

(ii) shall apply only so long as the conditions precedent to such disability as set.

out in the sub-section continue. 29. ights of Financial Corporation in case of default

(1) Where any industrial concern, which is under a liability to the Finan<;ial Corporation under an agreement, makes any default in repayment of any loan. or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.

(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (I), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.

(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the origix:l'\lgoods.

(4) Where any action has been taken 'against an industrial concern under the provisions of sub-section (I), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.

(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (I), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern.

COMMENTS

Action taken under s. 29 is not open to judicial review, and the provision is intra vires.-Saraf

Steel (P) Ltd. v. Delhi Financial Corporation 1995 (34) DRJ 276 In s. 29, the State Financial Corporation has been given certain additional powers as a

secured creditor to realise to seize/take possession of an~ transfer the property, which forms its security and for that limited purpose, the State Financial Corporation is vested with the powers to pass on good title to the purchaser as if they were the owners of the property or they could be sued as if they were the owners thereof. Apart from this limited additional right, they have no status other than that of a secured creditor which becomes clear on a plain reading of the section, particularly sub-so (4), which provides for the payment of the residue amount recovered in excess. of the Financial Corporation's dues to be paid to the p~rson entitled thereto, which means in the' present context, the company in liquidation. Right of the Financial Corporation is only confined to recovery of its dues, costs, charges and expenses and nothing more. The true owner also remains entitled to redeem the property. For these reasons also, the section cannot be construed to give' State Financial Corporation rights of full ownership, as contended by counsel. So long as the winding up proceedings have not commenced, the State Financial Corporations enjoy the absolute

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. present context, the company in liquid 20 SFATE FINANCIAL CORPORATIONS ACT 1951 S, 29 Act, 1972 (77 of 1972), and all such business and any transaction in relation thereto may be implemented or continued as if that Act had not come into force; (ii) shall apply only so long as the conditions precedent to such disability as set - out in the sub-section continue. 29. ights of Financial Corporation in case of default (1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its a greement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concern, as well the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the 5 security held by it as it had with respect to the original goods. (4) Where any action has been taken against an industrial concern under the provisions of sub—section (1), all costs, Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto. (5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of subsection (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern. COMMENTS Action taken under s. 29 is not open to judicial review, and the provision is intra vires.—Saral Steel (P) Ltd. v. Delhi Financial Corporation 1995 (34) DHJ 276 in s. 29, the State Financial Corporation has been given certain additional powers as a secured creditor to realise to seize/take possession oi and transler the property. which forms its security and for that limited purpose, the State Financial Corporation is vested with the powers to pass on good title to the purchaser as it they were the owners ol the property or they could be sued as it they were the owners thereof. Apart from this limited additional right, they have no status other than that of a secured creditor which becomes clear on a plain reading of the section, particularly sub. _ ol the Financial Corporation’s dues to be paid to the person entitled thereto, recovery of its dues, costs. charges and expenses and nothing more. The true owner also remains entitled to redeem the property. For these reasons also, the section cannot be construed to give" State Financial Corporation rights of full ownership. as contended by counsel. So long as the winding up proceedings have not commenced, the State Financial Cerporations enjoy the absolute charges and expenses which in the opinion of the . s. (4), which provides for the payment of the residue amount recovered in excess which means in the ‘ ation. Right of the Financial Corporation is only confined to .

S.31 STATE FINANCIAL CORPORA nONS ACT, 1951 21

right as contemplated by s. 29, but in the case of industrial concerns, w~ich are "existing companies" or companies incorporated under the provisions of the Companies Act, 1956and in respect'whereof winding up proceedings have commenced, if any sale of security is contemplated by the State Financial Corporation, they would be required to proceed to sell the security only after obtaining leave from the court. Thus it becomes clear (from s. 32) that in the cases where winding up proceedings have commenced in respect of industrial concern, which is a company, the legislature did not intend to give to the Financial Corporalions any preference over the creditors of the industrial concern, not conferred on it by any other law. I have already held hereinabove that the Financial Corporation or any other secured creditor by seeking leave of the court under s. 537(1)(b) of the Companip.s Act would not lose. its right to stand outside winding up or to sell the security. This right, however, is Subject to otlier provisions such as ss. 529. 529A of the Companies Act, 1956.-Peerless General Finance v.Majestic Apparels (P) Ltd. AIR 1995Del 373 : 1995 (34)DRJ178

30. ~er to call for repayment before agreed period \.,./Notwithstanding anything in any agreement to the contrary, the Financial Corpo- ration may, by notice in writing, require any industrial concern to which it has granted any loan or advance to discharge forthwith in full its liabilities to the Financial Corpo-ration,-.j

:J (a) ifitappears to the Board thatfalseormisleadinginformation inanymaterial particular was given by the industrial concern in its application for the loanor advance; or

(b) if the industrial concern has failed to comply with the terms of its contract with the Financial Corporation in the matter of the Joan or advance; or

(c) if there is a reasonable apprehension that the industrial concern is unable to pay its debts or that proceedings for liquidation may be commenc~d inrespect thereof; or

(d) if the property pledged, mortgaged, hypothecatJd or assigned to the Financial Corponlti'on as security for the loan or advance is not insured and kept insured by the industrial concern to the satisfaction of the Financial Corporation or depreciates in value to such an extent that, in the opinion of the Board, further security to the satisfaction of the Board should be given and such security is not given; or

(e) if, without the permission of the Board, any machinery, plant or other equipment, whether forming part of the security or otherwise, is removed from the premises of the industrial concern without being replaced; or

(f) if for any reason it is necessary to protect the interests of the FinancialCorporation. 31. Special provisi0I"ls for enforceltlent of claims by Fin".ncial Corporation

(1) Where an industrial concern, in breach of any agreement, make any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to

' comply with the terms of.its agreement with the Financial Corporation or where the " Financial Corporation requires an industrial concern to make immediate repayment oj any loan or advance under section 30 and the industrial concern fails to make such repayment, then, without preju,dice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property Act, 1882 (4 of 1882) any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries

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r154 S. 31 9'1 orcompanies incorporated underthe provis‘ winding up proceedings have commence Financial Corporation, they would be req uired to proceed to sell leave from the court. Thus it becomes the security only after obtaining in the cases where winding up the legislature 30. P0 er to call for repayment before agreed period \/I\l:,twithstanding anything ' ration may, by notice in writing, any loan or advance to discha ration——

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22 STATE FINANCIAL CORPORA lIONS ACT, 1951 5.31

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Since under s. 31 any officer of the Financial Corporation generally or specially authorised by the Board may apply to the concerned District Judge to 'recover moneys due from an industrial concern by sale of property secured therefor and by reason of. Regulation 59 framed under s. 4 plaints, written statements, vakalatnamas, affidavits, etc. may be signed ahd verified on behalf of the corporation by the managing Director or any other officer empowered under Regulation 58 to sign documents for and on behalf of the corporation and by a notification the Board of Directors have in exercise of the power under Regulation 58 authorised the secretary to sign or endorse number of documents, the petition under s. 31 signed and preferred by the managing Director and the secretary in this case was held to be maintainable. Where the corporation in its petition under s. 31 to recover moneys due from its constituent had calculated and claimed the amount as up to date of the petition, interest on agreed rate for period subsequent to the petition could be included while granting relief. Jtis not possibLe to plead that the judge ceinnot grant more relief than what is sought.-Gulab Ram Subhash Chander v. K.1araititalAIR 198$ P&H 45

An Rpplication under s. 31 of the Act is not a plaint and proceedings thereon are not a suit. (See.Maharashtra State Financial Corporation v. Jaycee Drugs and Pharmaceuticals (P) Ltd. AIR 1978 SC 1675; Mis. Parkash Playing Cards Manufacturing Co., Delhi v. Delhi Financiat Corporation AtR 1980 Delhi 48). Nevertheless in the very nature of the powerconferred on the District Judge under s. 31 of the Act some sort of inquiry, howsoever summarY, is contemplated which would enable determination of the liability in terms of money for whiqh sale of property, transfer of management or attachment may be made. In fact s. 32(6) itself :provides that on a cause being shown by the debtor and sureties against the proposed action, the District Judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908, insofar as such provisions may be applied thereto. The Act does not provide, nor does contemplate, coercive processes for recovery being issued merely for asking of Financial Corporation.-Nigam Enterprises v.Delhi Financial Corporation 1994 (29) DRJ

on the whole or a substantial part of its business for one or more of the following reliefs, I . I

name,y- . (a) for an order for the sale of the property pledged, mortgaged, hypothecated

C'f assigned to the Financial Corporation as security for the loan or advance;

l[(oa) for enforcing the liability of any surety; or) (b) for transferring the management of the industrial concern to the Finan~ial

Corporation; or (c) for an ad interim injunction restraining the industrial concern from

transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.

(2) An application under sub-section (1) shall'state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.

COMMENTS

Inserted by Act 43 of 1985.

22 STATE FINANCIAL CORPORATIONS ACT: 1951 S. 31 ial part of its business for one or more of the following reliefs, on the whole or a substant namely— . (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or 1[(aa) for enforcing the liability of any surety; or] (b) for transferring the management of theindustrial concern to the Finandial Corporation; or ' p (c) for an ad interim injunction restraining the industrial concern from hinery or plant or equipment from the transferring or removing its mac premises of the industrial concern without the pe where such removal is apprehended. (2) An application under sub-section (1) shall‘ state liability of the industrial concern to the Financial Corporation, is made and such other particulars as may be prescribed. COMMENTS tthe Act is not a plaint and proceedings thereon are not a suit. Corporation v. Jaycee Drugs and Pharmaceuticals (P) Ltd. AIR Cards Manufacturing 00., Delhi v. Delhi Financial Corporation AIR 1980 Delhi 48). Nevertheless in the very nature of the powerconlerred on the District Judge under s. 31 ot the Act some sort of inquiry, howsoever summary, is contemplated which Would enable determination of the liability in terms of money for whidh sale of property, transfer of management or attachment may be made. in fact 5. 32(6) itself provides that on a cause being shown by the debtor and sureties against the proposed action. the District Judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure. 1908, insofar as such provisions may be applied thereto. The Act does not provide, nor does contemplate, coercive processes tor reco asking of Financial Corporation.——Nigam Enterprises v. Delhi Financia 178 rmission of the Board, the nature and extent of the the ground on which it An application under s. 31 o (See-Maharashtra State Financial 1978 SC 1675; M/s. Parkash Playing very being issued merely for I Corporation 1994 (29) DRJ ncial Corporation generally or specialty authorised ict Judge to 'recover moneys due from an industrial Since under s. 31 any officer of the Fina fRegulation 59 framed under s. 4 by the Board may apply to the concerned Distr concern by sale of property secured therefor and by reason 0 plaints, written statements, vakalatnamas, affidavits. etc. may be signed and verified on behalt of the corporation by the managing Director or any other oilicer empowered under Regulation 58 to sign documents for and on behalf of the corporation and by a notification the Board of Directors have in exercise of the power under Regulation 58 authorised the secretary to sign or endorse der 5. 31 signed and preferred by the managing Director and number of documents, the petition un be maintainabie. Where the corporation in its petition under laimed the amount as up to petition could be included t more reliet than what is - the secretary in this case was held to s. 31 to recover moneys due from its constituent had calculated and c date of the petition. interest on agreed rate for period subsequent to the while granting relief. .ltis not possible to plead that the judge cannot gran sought.~—Gulab Ram Subhash Chander v. Kharaitilal AIR 1988‘ P&H 45 l inserted by Act 43 0(1985 r0 ’ L. . Qg‘ 283‘“ i731. central Manage." ( P G A) ""-1<‘Fi~ -=.-.,¢.,-~.__._,.”P I, Wan—awed“ gnaw- » -‘:"Wﬁi§€oﬂﬁ=ﬁm¥m§émwumm~a "5- - ..............._..a «. a-” -tﬂfp—wn ’W'Vh‘t—‘T‘ “W... .

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23 STATE FINANCIAL CORPORATIONS ACT, 1951S.32

32. Procedure of District Judge in respect of applications under section 31 (1) When the application is for the reliefs mentioned in clauses (a) and (c) of

sub-section (1) of section 31, the District Judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding liability of the industrial concern to the Financial Corporation, together with the costs of the proceed- ings taken under section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment.

I[(1A) When the application is for the relief mentioned in clause (aa) of sub-section (1) of section 31, the District Judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced.]

(2) When the application is for the relief mentioned in clause (b) of sub-section (1) of section 31, the District Judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show cause, ana date to be specified in the notice, why the management of the industrial concern should not be transferred to the Financial Corporation.

(3) Before passing any order under sub-section (1) or sub-section (2) l[or issuing il notice under sub-section (IA),] the District Judge may, if he thinks fit, examine the officer making the application.' .

2[(4) Atthesame time as he passes an order under sub-section (1), the DistrictJudge shall issue to the industrial concern or to the owner of the security attached a notice ,)ccompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunctionconfirmed. .

(4A) If no cause is shown on or before the date specified in the notice under S II b-section (1A), the District Judge shall forthwith order the enforcemen t of the JiabiJi tyof the surety.] .

(5) If no cause is shown on or before the date specified in the notice under sub-sections (2) and (4), the District Judge shall forthwith make the ad interim order absolute and direct the sale of the attached property or transfer the management of the industrial concern to the Financial Corporation or confirm the injunctions.

(6) It cause is shown, the District Judge shaH proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908 (5 of 1908), insofar as such provisions maybe applied thereto.

(7) After making an invest~gation under sub-section (6), the District Judge may-

(a) confirm the order of attachment and direct'the sa'f.' of the attached property; (b) vary the order of attachment so as to release a portion of the property from

attachment and direct the sale of the remainder of the attached property; (c) release the property from attachment; (d) confirm or dissolve the injunction; 3[* * *]

1 InsE'rted by Act 43 of 1985. 2 Substituted by Acl43 of 1985. 3 T'he word "or" on:itted by Act 43 of 19/15.

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l ? . ‘ Mtwrrxnf‘w’ Si 32 STATE FINANCIAL CORPORATIONS ACT 1951 23 industrial concern from transferring or removing its machinery, plant or equipment. [( 1A) When the application is for the relief mentioned in clause (aa) of sub-section (1) of section 31, the District Judge shall issue a notice calling upon the surety to show ca use on a date to be specified in the notice why his liability should not be enforced] (2) When the application is for the relief mentioned in clause (b) of sub-section (1) of section 31, the District Judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, why the management of the industrial concern should not be transferred . to the Financial Corporation. (3 Before assin an order under sub-section (1) or sub~section 2)1 or issuin P g Y 8 a notice under sub-section (1A),] the District Judge may, if he thinks fit, examine the officer making the application.‘ . 2[(4) At the same time as he passes an order undersub-section (1), the DistrictJudge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the ev' (4A) If no cause is shown on or befo (6) If cause is shown, the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908 (5 of 1908), insofar as such provisions may be applied thereto. (7) After making an investigation under sub-section (6), the DistrictJudge may— (a) confirm the order of attachmentand direct'the 52 He of the attached property; (b) vary the order of attachment so as to release a po ' (c) release the property from attachment; (d) confirm or dissolve the injunction; 3[" * *] A l Inserted by Act 43 of1985. 2 Substituted by Act 43 of 1985. 3 The word ”or" omitted by Act 43 of 1985. '\‘ sari-3:236 Lshri . KOV‘__Q .. ”an y” “¥a\vu‘\“m3‘9 Du. Genera! 511313;:ch ( s «11) sn"so::g-‘wwmer-aﬂ-yntuyrgeJ-z'vwiagvlpagr-zni 329354; w 4*.4 ....._ . ..

24 STATE FINANClALCORPORATIONS ACT, 1951 5.32

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1 Inserted by Act 43 of 1985. 2 Substituted for words and figure "under sub-section 5" by Act 43 of 1985.

l(da) direct the. enforcement of the liability of the surety or reject the claim made in this behalf; orj

(e) transfer the management 9f the industrial concern to the Financial Corporation or reject the claim' made in this behalf:

PROVIDED that when making an order under clause (c) 2(or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e),] the District Judge may make such further orders as he thinks necessary to protect the interests of the Financial Corporation and may apportion the costs of t~e proc~edings in such manner as he thinks fit:

PROVIDED FURTHER that unless the Financial Corporation intimates to the District Judzethat it will not appeal against any order releasing any property from attachment [or rejecting the claim to enforce the liability of the surety or rejecting the claim tb transfer the industrial concern to the Financial Corporation], such order shall not be given effect to, until the expiry of the period fixed under sub-section (9) within which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs until the appeal is disposed of.

(8) An order of attachment or sale or property under this Section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or sale of property in execution of a decree as if the

. Financial Corporation were the decree-holder. (8A) An order under this section transferring the management of an industrial. r

concern to the Financial Corporation shall be carried into effect, as far as may be i practicable, in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for I the possession of immovable property or the delivery of movable property in executionj of a decree, as if the Financial Corporation were the decree-holder. l

(9) Any party aggrieved by an order 2[under sub-section (4A), sub-section (5)] or f sub-section (7) may, within thirty days from the date of the order, appeal to the High ,1 Court, and upon such appeal the High Court may, after hearing the parties, pass such r orders thereon as it thinks proper. '

(10) Where proceedings for liquidation in respect of an industrial concern have? commenced before an application is made under sub-section (1) of section 31, nothing j in this section shall be construed as giving to the Financial Corporation any preferencef over the other creditors of the industrial concern not conferred on it by any other law. I

(11) The functions of a District Judge under this section shall be exercisable- 1 (a) in a presidency town, where there is a city civil court having jurisdiction'f

by a Judge of that court and in the absence of such court, by the High Courtii. and '

(b) elsewhere, also by an additional District Judge or by any Judge of thef principal court of Civil jurisaiction. i-

(12) For the removal of doubts it is hereby declared that any court competent to! grant an ad interim injunction under this section shall also have the power to appoint a~' Receiver and to exercise all the other powers incidental thereto. ~"

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24 STATE FINANCIAL CORPORATIONS ACT! 1951 . j . 1[(da) direct theenforcement of the liability of the surety or reject the claim made in this behalf; or] (e) transfer the management of the industrial concern to the Financial Corporation or reject the claim' made in this behalf: PROVIDED that when making an order under clause (c) 2[or making an order liability of the surety under clause (da) or making 'an fer the management of the industrial concern to the DistrictJudge may make such further orders at may rejecting the claim to enforce the order rejecting the claim to trans Financial Corporation under clause (e),] the as he thinks necessary to protect the interests of the Financial Corporation an apportion the costs of the proceedings in such manner as he thinks fit: PROVIDED FURTHER that unless the Financial Corporation intimates to the District Jud e that it will not appeal against any order releasing any property from attachment [or rejecting the claim to enforce the liability of the Surety or rejecting the claim to transfer the industrial concern to the Financial Corporation], such order shall not be given effect to, until the expiry of the period fixed under sub-section (9) within which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs until the appeal is disposed of. (8) An order of attachment or sale or property under this Section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or sale of property in execution of a decree as if the > Financial Corporation were the decree-holder. (8A) An order under this section transferring the management of an industria 'concern to the Financial Corporation shall be carried into effect, as far as may be practicable, in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the possession of immovable property or the d of a decree, as if the Financial Corporation were the decree-holder. (9) Any party aggrieved by an order 2[under sub-section (4A), sub-section (5)] or Sub-section (7) may, within thirty days from the date of the order, appeal to the High Court, and upon such appeal the High Court may, orders thereon as it thinks proper. ‘ (10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1) of section 31, nothing in this section shall be construed as giving to the Financial Corporation any preference g over the other creditors of the industrial concern not conferred on it by any other law. i (11) The functions of a District Judge under this section shall be exercisable— i ere there is a city civil court having jurisdiction}? d in the absence of such court, by the High Court; g, l (a) in a presidency town, wh by a Judge of that court an and (b) elsewhere, also by an additional District Judge or by any Judge of thei principal court of Civil jurisdiction. 1‘ (12) For the removal of doubts it is hereby declared that any court competent toé grant an ad interim injunction under this section shall also have the power to appoint a; Receiver and to exercise all the other powers incidental thereto. t i a. ____,_______.____—————'-—————' l Inserted by Act 43 of 1985. 2 Substituted for words and figure "under sub-section 5" by Act 43 of 1985. t‘to u _. nun-n! {PL-5,3,... , U .XQ“; xi- a) .-- Contact -,w..t.;..t (Sm/1) 3““ $9 *2 Ni g‘»w—-aa.g,=.n - - - A stamps,“ , ,. .,m:j«.«~m...-n.ue~ - ' , . i ‘1 -. «‘“""‘.‘,fﬁ' mm.” warp-2,3. :9?“ t ‘1 after hearing the parties, pass such i i - elivery of movable property in execution i. ' S i .47 . ~w§ier$xT¢3hL-.,.. u. ;..

25 COMMENTS

STATE FINANCIAL CORPORA TrONS ACT, 19515.321\

Where the debtor-industry had filed an appeal against the order dismissing its application for setting aside confirmation of sale of properties mortgaged to the Financial Corporation in execution of order of sale of mortgaged properties passed under s. 32, as the order of confirmation of sale had not become final due to pendency of appeal nor the right of redemption of the debtor had been e:<ting:J::;hedand the provisions of O. 34" r, 5 of the Civil Procedure Code were <:lpplicableduring the course of proceeding of execution of order for sale of mortgaged property passed under s. 32, the debtor would be entitled to redeem the mortgage by depositing decretal dues. There is no provision in the Act or any rule or order made thereunder stating that the effect of any action taken thereunder including the passing of orders of attachment and sale under ss. 31 and 32 thereof is to extinguish the right of redemption. In other words, there is nothing in the Act or in any rule or order made thereunder which may be inconsistent with s. 60 of the Transfer of Property .Act particularly the proviso thereto. Consequently, no provision in the Act can be read "in derogation" of the said s. 60. In this connection, it could not be said that s. 32(8) of the Act made the manner provided in the Code applicable only "as far as practicable" and there was neither a decree nor was the Financial Corporation a decree-holder in a suit for sale but was only deemed to be a decree-holder by legal fiction because of the expression "in execution of a decree as if the Financial Corporation were the decree-holder". As is apparent from the plain language of s. 32(8) Ihe legal fiction was created for the purpose of executing an order under s. 32 for sale of attached property as if such order was a decree in a suit ~o(sale and the Financial Corporation was Ihe decree-holder whereas the debtor was the Judgment-debtor. Consequently, the provisions of the Code of Civil Procedure with regard to execution of a decree 10rsale of mortgaged property contained in O. 21 of the Code inciudiny lhe righlto tile an appeal against such orders passed during the course of execution which are appealable shall apply mutatis mutandis to execution of an order under s. 32 unless some provision is not practicable to ,be applied. It cannot be disputed that the provisions contained in O. 34, r. 5 of the Code are attracted as is apparent from the plain language thereof during the proceedings in execution of a final decree for sale and are thus provisions contained in the Code with regard to and having a material bearing dn the execution of a decree as aforesaid. The provisions contained in O. 34, r. 5 of the Code in substance permit the judgment-debtor to redeem the mO/1gageeven at the slage contemplated by O. 34, r. 5 unless the equity of redemption has got extinguished. Since the contingency where under an equity of redemption gets extin- guished is contained in the proviso to s. 60 of the Transfer of Property Act and since in the instant case the equity ~f redemption had not extinguished there is no good ground to take the view that even though all the remaining provisions with regard to execution of a decree for sale of mortgaged property will apply to execution of an order under s. 32, the provision contained in O. 34, r. 5 of the Code shall not apply. Moreover, once the order under s. 32 for sale is made eXecutable by a District JUdge in his capacity as District JUdge and not persona designata the provisions of the Code which are exercisable by the District Judge in execution of a decree for sale of mortgaged property would get attracted.-Maganlal v. Jaiswa/ Industries AIR 1989 SC 2113

32A. Power of Financial Corporation to appoint Directol!' or administrators of an industrial concern when management is taken over

(1) When the management of an industrial concern is taken over by the Financial Corporation, the Financial Corporation may, by order notified in the Official Gazette, appoint a~ many persons as it thinks fit,"- '

(a) in any case in which the industrial concern is a company as defined in the Companies Act, 1956 (1 of 1956), to be Directors of that industrial concern; or

(b) in any other case, to be admi~ators of that indnstrial concern .

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5. 32A , STATE FINANCIALCORPORATIONS ACT, 1951 ___-_ 25 COMMENTS d—- . - . . . . Where the debtor-industry had filed an appeal against the order dismissmg its application for setting aside confirmation of sale of properties mortgaged to the Financial Corporation in execution of order of sale of mortgaged properties passed under s. 32, as the order of confirmation of sale had not become final due to pendency of appeal northe right of redemption of the debtor had been extinguished and the provisions of O. 34., rt 5 of the Civil Procedure Code were applicable during the course of proceeding of execution of orderfor sale of mortgaged property passed under s. 32, the debtor would be entitled to redeem the mortgage by depositing decretal dues. There is no provision in the Act or any rule or order made thereunder stating that the effect of any action taken thereunder including the passing of orders of attachment and sale under ss. 31 and 32 thereof is to extinguish the right of redemption. in other words, there is nothing in the Act or in any rule or order made thereunder which may be inconsistent with s. 60 0! the Transfer of Property Act particularly the proviso thereto. Consequently. no provision in the Act can be read “in derogation" of the said s. 60. In this connection, it could not be said that s. 32(8) of the Act made the manner provided in the Code applicable only "as far as practicable" and there was neither a decree nor was the Financial Corporation a decree-holder in a suit for sale but was only deemed to be a ‘ decree-holder by legal fiction because of the expression “in execution of a decree as if the Financial Corporation were the decree-hoidef’. As is apparent from the plain language of s. 32(8) the legal fiction was created for the purpose of executing an order under s. 32 for sale of attached property as if such order was a decree in a suit for sale and the Financial Corporation was the decree-holder whereas the debtor was the iudgment~debton Consequently, the provisions of the Code of Civil PFocedure with regard to execution of a decree for sale of mortgaged property contained in 0. 21 of the Code including the right to tile an appeal against such orders passed during the course of execution which are appealable shall apply mutatis mutandis to execution of an order under s. 32 unless some provision is not practicable to‘be applied. It cannot be disputed that the provisions get attracted.-——Maganla/ v. Jaiswal Industries AIR 1989 802113 V 1 32A. Power of Financial Corporation to appoint Directors or administrators of an industrial concern when management is taken over ‘ , ' (1) When the management of an industrial concém is taken over by the Financial Corporation, the Financial Corporation may, by order notified in the Official Gazette, appoint as many persons as it thinks fit,~ (b) in any other case, to be ad mini rators of that industrial concern. itumanmrwesmterse-sawtrvmtﬂ‘N-ze’m‘””We l t r .0...“ ,_- Wu v... ._ Now—w-v-"w w-V' - ,,ai ..~'.i—-Ms- M . ,w_.__.t_

26 STATE FINANCIAL CORPORA nONS ACT, 1951 S.32B

(2) The power to appoint Directors or Administrators under this section includes the power to appoint any individual, firm or company to be the managing agent or manager of the industrial concern on such terms and conditions as the Financial Corporation may think fit. .

(3) Nothing in the Companies Act, 1956(1of 1956)or in any other law for the time being in force or in any instrument relating to the industrial concern shall, insofar as it makes in relation to a Director, any provision for the holding of any share qualification, age limit, restriction on the number of Directorship, retirement by rotation or removal frc:i', office, apply to any Director appointed by the Financial Corporation under this section. 32B. Effect of notified order under section 32A

On the issue of a notified order under section 32A,- (a) in any case in which the industrial concern is a company as defined in the

Companies Act, 1956 (1 of 1956),all persons holding office as Directors of the industrial concern and in any other case, all persons holding any office having the powers of superintendence, direction and control of the industrial concern, immediately before the issue of the notified order, shall be deemed to have vacated their officeSas such;

(b) any contract of management between the industrial concern and any managing agent or any Director or manager thereof holding office as such immediately before the issue of the notified order shall be deemed to have terminated;

(c) in the case of an industrial concern which is a company as defined in the Companies Act, 1956 (1 of 1956), the managing agent, if any, appointed under section 32A shall be deemed to have been duly appointed in pursuance of the said Act and theMemorandum and Articles ofAssociation of the industrial concern and the provisions of the said Act and the Memorandum and Articles shall, subject to the other provisions contained in this Act, apply accordingly, butno such managing agent shall be removed from office except with the previous consent of the Financial Corporation;

(d) the Directors or the administrators appointed under section 32A shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims towhich the industrial concern is, or appears to be, entitl.ed and all the property and effects of the industrial concern shall be deemed to be in the custody of the Directors Or administrators, as the case may be, as from the date of the notified order;

(e) the Directors appointed under section 32A shall, for all purposes, be the Directors of the industrial concern duly constituted under the Companies Act, 1956 (1 of 1956), and such Directors or, as the case may be, the Administrators appointed under section 32A, shall alone be entitled to exercise all the powers of the Directors or, as the case may be, of the persons exercising powers of superintendence, direction and control, of the .ii. industrial concern, whether such powers are derived from the said Act or :: from the Memorandum or Articles of Association of the industrial concern t or from any other source whatsoever. f>

32C. Powers and duties of Directors and administrators' t,. (1) Subject to the control of the Financial Corporation, the Directors, or as the case

may be, the administrators appointed under section 32A, shall take such steps as may ,

S. 328 26 STATE FINANCIAL CORPORATIONS ACT! 1951 ctors or Administrators under this section includes 1, firm or company to be the managing agent or on such terms and conditions as the Financial . l (2) The power to appoint Dire the power to appoint any individua manager of the industrial concern Corporation may think fit. (3) Nothing in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in any instrument relating to the industrial concern shall, insofar as it i makes in relation to a Director, any provision for the holding of any share qualification, ‘ age limit, restriction on the number of Directorship, retirement by rotation or removal from office, apply to any Director appointed by the Financial Corporation under this i. section. , 328. Effect of notified order under section 32A i' On the issue of a notified order under section 32A,— (a) in any case in which the industrial concern is a company as defined in the i Companies Act, 1956 (1 of 1956), all persons holding officeas Directors of the industrial concern and in any other case, all persons holding any office ' having the powers of superintendence, direction and control of the industrial concern, immediately before the issue of the notified order, shall be deemed to have vacated their offices as such; gement between the industrial concern and any Director or manager thereof holding office as such f the notified order shall be deemed to have i i l l l eater-+7; -5;« A ,.._. l l l (b) any contract of mana i managing agent or any immediately before the issue 0 I terminated; t (c) in the case of an industrial concern which is a company as defined in the l 5 Act, 1956 (1 of 1956), the managing agent, if any, appointed be deemed to have been duly appointed in pursuance of the said Act and the Memorandum and Articles of Association of the industrial concern and the provisions of the said Act and the I Memorandum and Articles shall, subject to the other provisions contained in this Act, apply accordingly, but no such managing agent shall be removed from office except with the previous consent of the Financial Corporation; (1 under section 32A shall take Q (d) the Directors or the administrators appointe , such steps as may be necessary to take into their custody or under their 1 control all the property, effects and actionable claims to which the industrial concern is, or appears to be, entitled and all the property and effects of the industrial concern shall be deemed to be in the custody of the Directors or administrators, as the case may be, as from the date of the notified order; . (e) the Directors appointed under section 32A shall, for all purposes, be the Directors of the industrial concern duly constituted under the Companies : Act, 1956 (1 of 1956), and such Directors or, as the case may be, the l '/ Administrators appointed under section 32A, shall alone be entitled to I . exercise all the powers of the Directors or, as the case may be, of the persons I exercising powers of superintendence, direction and control, of the ; industrial concern, whether such poWers are derived from the said Act or i - from the Memorandum or Articles of Association of the industrial concern or from any other source whatsoever. 32C. Powers and duties of Directors and administrators ' (1) Subject to the control of the Financial Corporation, the Directors, or as the case . may be, the administrators appointed under section 32A, shall take such steps as may T. 2'" res-71:"??? ‘-¥cu‘, ._ . Companie under section 32A shall \K\V . ,(558 A639) ‘ . (’uﬂrﬁQyu ‘ - '.E‘=€!al Manage,- ( 9 5,3,) tit-NW . .1 ....~ugtm..t...mte;a$ 7‘:

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STATE FINANCIAL CORPORA nONS ACT, 1951S.32F

be necessary for the purpose of efficiently managing the business of the industrial concern and shall exercise such powers and have such duties as may be prescribed.

(2) Without prejudice to the generality of the powers vested in them under sub-section (I), the Directors or, as the case may be, the administrators appointed under section 32A, may, with the previous approval of the Financial Corporation, make an applicatif')i1coa .court for the purpose of cancelling or varying any contract or agreement entered into at any time before the issue of the notified order under section 32A, between the industrial concern and any other person and the court may, if satisfied after due inquiry that such contract or agreement had been entered into in bad faith and is detrimental to the interests of the industrial concern, make an order cancelling or varying (either unconditionally or subject to such conditions as it may think fit to impose) that contract or agreement and the contract or agreement shall have effect accordingly. 32D. No right to compensation for termination of contract of Managing Agent,

Managing Director, etc. (1) Notwithstanding anything to the contrary contained in any contract or in any

law for the time being in force, no Managing agent, Managing Director or any other Director or a manager or any person in charge of management of an industrial concern shall be entitled to any compensation for the loss of office or for the premature termination under this Act of any contract of management entered into by him with such concern.

(2) Nothing contained in sub-section (1) shall affect the right of any such manag- ing agent or Managing Director, or any ,other Director or manager or any such person in charge of management to recover from the industrial concern, moneys recoverable otherwise than by way of such compensation. 32E. Application of Act 1 of 1956

(1) Where the management of an industrial concern, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the Financial Corporation, then, notwithstanding anything contained in the said Act or in the Memorandum or Articles of Association of such concern,-

(a) it shall not be lawful for the shareholders of such concern or any other person to nominate or appoint any person to be a Director of the concern;

(b) no resolution passed at any meeting of the shareholders of such concern shall be given effect to unless approved by the Financial Corporation;

(c) no proceeding for the winding up of such concern or for the appointment of receiver in respect thereof shall lie in any court, except with the consent of the Financial Corporation.

(2) Subject to the provisions contained in sub-section (1) and to the other provis- ions contained in this Act and subject to such other exceptions, restrictions and limita- tions, if any, as the Central Government jn consultation with the State Government may, by notification in the Official Gazette, speCifyin this behalf, the Companies Act, 1956 (1 of 1956), shall continue to apply to such concern in the same manner as it applied thereto before the issue of the notified order under section 32A. 32F. Restriction on filing of suits for dissolution, etc. o~an industrial concern not

being a company when its management is taken over (1) Where the management of an industrial concern not being a company as

defined in the Companies Act, 1956 (1 of 1956), is taken over by the Financial Corpora- tion, no suit or proceedings for dissolution or for partition shall, insofar as it relates to

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. .. . .., H,“ mum» ‘ ‘:r- "1‘5“ .mwwM—qw.-mmmmml . ' 32F. Restriction on filing of suits for dissolution, S. 32F STATE FINANCIAL CORPORATIONS ACT 1951 . 27 M be necessary for the purpose of efficiently managing the business of the industrial concern and shall exercise such powers and have such duties as may be prescribed. (2) Without prejudice to the generality of the powers vested in them under sub-section (1), the Directors or, as the case may be, the administrators appointed under section 32A, may, with the previous approval of the Financial Corporation, make an application to a'court for the purpose of cancelling or varying any contract or agreement entered into atany time before the issue of the notified order under section 32A, between the industrial concern and any other person and the court may, if satisfied after due inquiry that such contract or agreement had been entered into in bad faith and is detrimental to the interests of the industrial concern, make an order cancelling or varying (either unconditionally or subject to such conditions as it may think fit to impose) that contract or agreement and the contract or agreement shall have effect accordingly. 32D. No right to compensation for termination of contract of Managing Agent, Managing Director, etc. (1) Notwithstanding anything to the contrary contained in any contract or in any law for the time being in force, no Managing agent, Managing Director or any other Director or a manager or any person in charge of management of an industrial concern shall be entitled to any compensation for the loss of office or for the premature termination under this Act of any contract of management entered into by him with such concern. ' (2) Nothing contained in sub-section (1) shall affect the right of any such manag- ing agent or Managing Director, or any other Director or manager or any such person in charge of management to recover from the industrial concern, moneys recoverable otherwise than by way of such compensation. 32E. Application of Act 1 of 1956 (1) Where the management of an industrial concern, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the Financial Corporation, then, notwithstanding anything contained in the said Act or in the Memorandum or Articles of Association of such concern,~ such concern or any other person to nominate or appoint any person to be a Director of the concern; (b) no resolution passed at any meeting of the shareholders of such concern I] be given effect to unless approved by the Financial Corporation; (c) no proceeding for the winding up of such concern or for the appointment of receiver in respect thereof shall lie in any court, except with the consent of the Financial Corporation. (2) Subject to the provisions contained in subsection (1) and to the other provis- ions contained in this Act and subject to such other exceptions, restrictions and limita- tions, if any, as the Central Government in consultation with the State Government may, by notification in the Official Gazette, specify in this behalf, the Companies Act, 1956 (1 of 1956), shall continue to apply to such concern in the same manner as it applied thereto before the issue of the notified order under section 32A. etc. of an industrial concern not being a company when its management is taken over (1) Where the management of an industrial concern not being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the «Financial Corpora- tion, no suit or proceedings for dissolution or for partition shall, insofar as it relates to

~.",J." :;'~m~~' me " ; *1 11 'W , .aiB

that industrial concern, lie in any cou~t or before any tribunal or other authority except with the consent of the Financial Corporation. '

(2) No proceeding for the appointment uf any official assignee or receiver in relation to any in~ustrial concern the management ofwhich has been taken over by the Financial Corporation shall lie in any court except with consent of the Financial Corpo- ~~ . 1[32G. Recovery of amounts due to the Financial Corporation as an arrear oi land

revenue Where any amount is due to the Financial Corporation in respect of any accommo-

dation granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that governmen tmay specify in this behalf, is satisfied, after following such proced ure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as a1;\arrear of land revenue.]

S.32GSTATE FINANCIAL CORPORA TraNS ACT, 1951

CHAPTER IV INVESTMENTOF FUNDS, ACCOUNTS AND AUDIT j.

33. Funds of the Financial Corporation t., (1) Every Financial Corporation shall have its own fund, and all receipts of the ~

Financial Corporation shall be carried thereto and all payments by the Corporation shall ti; be made therefrom. I.:::.••..

(2) All moneys belonging to the fund shall be deposited in the Reserve Bank or the State Bank of India or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38.of 1959) or in any of the banks specified in column 2 of !! the First Schedule to the Banking Companies (Acquisition and Transfer of Undertak- 1 ings) Act, 1970 (5of 1970) l[or any ofthe banks specified in column 2of the First Schedule t to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of I,'.'. 1980) or, in consultation with the Reserve Bank, ina scheduled bank or a State Co-oper- i ative Bank.] , 2[34 .. Investment of funds,

The Financial Corporation may invest its funds in accordance with applicable l:' guidelines and prudential norms as may be prescribed and in such securities as the I Board may decide from time to time.] . I: 35. Disposal of profits .

(1) The Financial Corporation shall establish a reserve fund. <1; (2) After making provision for bad and doubtful debts, depreciation of assets and f1'..I.i.

all other matters which are usually provided for by banking companies, the Financial . Corporation may out of its net annual profits declare a dividend.

3["",,]

1 Inserted by Act 43of 1985, 2 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5.9.2000. 3 Proviso omitted by SFC(Amendment) Act, 2000 (Act No, 39 of 2000), dt. 5-9-2000.

',I';

28i .i

28 STATE FINANCIAL CORPORATIONS ACT , 1951 _ 5. 32C that industrial concern, lie in any court or before any tribunal or other authority except with the consent of the Financial Corporation. (2) No proceeding for the appointment of any official assignee or receiver in relation to any industrial concern the management of which has been taken over by the Financial Corporation shall lie in any court except with consent of the Financial Corpo- ‘ i l ! ration. l 1[326. Recovery of amounts dueto the Financial Corporation as an arrear of land { revenue ' Where any amount is due to the Financial Corporation in respect of any accommo— l dation granted by it to any industrial concern, the Financial Corporation or any person I authorised by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount : due to it, and if the State Government or such authority, as that government may specify i in this behalf, is satisfied, after following such proced ure as may be prescribed, that any , amount is so due, it may issue a certificate for that amount to the Collector, and the i Collector shall proceed to recover that amount in the same manner as an arrear of land 1 revenue] CHAPTER IV - INVESTMENT or FUNDS, ACCOUNTS AND AUDIT 33. Funds of the Financial Corporation (1) Every Financial Corporation shall have its own fund, and all receipts of the Financial Corporationshall be carried thereto and all payments by the Corporation shall be made therefrom. to the fund shall be deposited in the Reserve Bank or (2). All moneys belonging the State Bank of India or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or in any of the banks specified in column 2 of the First Schedule to the Banking Companies (Acquisition and Transfer of Undertak- ings) Act, 1970 (5 of 1970) 1[or any of the banks specified in column 2 of the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) or, in consultation with the Reserve Bank, in a scheduled bank or a State Co-oper— ative Bank] 2[34.' Investment of funds The Financial Corporation may inv guidelines and prudential norms as may Board may decide from time to time] 35. Disposal of profits (1) The Financial Corporation shall establish a reserve fund. depreciation of assets and a, the Financial est its funds in accordance with applicable t be prescribed and in such securities as the l (2) After making provision for bad and doubtful debts, all other matters which are usually provided for by banking companies, : Corporation may out of its net annual profits declare a dividend. t 3[ux-] 1 Inserted by Act 43 of 1985. 2 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 3 Proviso omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5‘9-2000. _ _ U Maytahﬂmmmmmvw Dy. Central Mar-age: (P E. A) '

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1[35A. Special reselVe fund (1) The Financial Corporation may establish a special reserve fund, to which shall

be transferred such portion of the dividends accruing to the State Government, Devel- opment Bank and the Small Industries Bank on the shares of the Financial Corporation as may be fixed by agreement between the State Government, Development Bank and the Small Industries Bank: .

PROVIDED that after the notified date this sub-section shall have effect as if for the words "the State Government, the Development Bank and the Small Tndustries Bank", the words" the State Government and the Small Industries Bank" have been substituted except as regards all dividends accruing in respect of any completed accounting period prior to the notified date.

(2) No shareholder of the Financial Corporation, other than the State Government or the Small Industries Bank, shall have any claim to the special reserve fund.

(3) The amount standing to the credit of the special reserve fund may be utilised by the Financial Corporation for only such purposes as are approved by the State Government and the Small Industries Bank.] 36. General meetings

(1) A general meeting (hereinafter referred to as the annual general meeting) shall be held annually at a place in the State where there is an office of the Financial Corporation within 2[four months] from the date on which the annual accounts of the Financial Corporation are closed, and a general meeting may be convened by the Board a t any other time.

1[(2) The shareholders present at the annual general meeting shall be entitled to discuss and adopt- .

(a) the balance-sheet and profit and loss account of the Fir.ancial Corporation made up to the date on which its accounts are closed and balanced;

(b) the report of working of the Financial Corporation for the period covered bv the accounts; .- ,

(c) the auditor's report on the balance-sheet and accounts; and (d) proposals for declaration of dividend and capitalisation of reserves.

(3) The shareholders present at an annual general meeting may also discuss any_ other matter to be transacted a t such meetings in accordance with the provisions of this Act.] 37. Audit

1[(1) The accounts of the Financial Corporation shall be audited by auditors duly . qualified to act as the auditors under sub-sec. (1) cifsec. 226 of the Companies Act, 1956, who shall be appointed by the Financial Corporation in genoral meeting of shareholders out of the panel of auditors approved by the Reserve Bank of India for such terms and on such remuneration as the Reserve Bank may fix.]

(2) Every auditor shall be supplied with a copy of the annual balance sheet of the Financial Corporation, and it shall be his duty to examine it, together with the accounts and vouchers relating thereto, and every Auditor shall have a list delivered to him of all bool<s kept by the Financial Corporation and shall at all reasonable times have access

29STATEFINANCIALCORPORATIO.NSACT,195:;'5.37

-=! ••':e..i ./

----------0 -.----- 1 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 2 Substituted for words "three months" by,Aft 43 of 1985.

..., *4 .. .. .‘uu... ..__,r-,...~....,;,m~tw,_n”new“-“smuggle” ,. «w m I S. 37 STATE FINANCIAL CORPORATIONS ACT, 1951 29 1[3.‘5A. Special reserve fund (1) The Financial Corporation may establish a special reserve fund, to which shall be transferred such portion of the dividends accruing to the State'Government, Devel- opment Bank and the Small Industries Bank on the shares of the Financial Corporation as may be fixed by agreement between the State Government, Development Bank and the Small Industries Bank: ’ . PROVIDED that after the notified date this sub-section shall have effect as if for the words ”the State Government, the Development Bank and the Small Tndustries Bank”, the words ” the State Government and the Small Industries Bank" have been substituted except as regards all dividends accruing in respect of any completed accounting period prior to the notified date. (2) No shareholder of the Financial Corporation, other than the State Gwemment or the Small Industries Bank, shall have any claim to the special reserve fund. (3) The amount standing to the credit of the special reserve fund may be utilised by the Financial Corporation for only such purposes as are approved by the State Government and the Small Industries Bank] 36. General meetings (1) A general meeting (hereinafter referred to as the annual general meeting) shall be held annually at a place in the State where there is an office of the Financial Corporation within 2[four months] from the date on which the annual accounts of the Financial Corporation are closed, and a general meeting may be convened by the Board at any other time. 1[(2) The shareholders present at the annual general meeting shall be entitled to discuss and adopt— (a) the balance-sheet and profit and loss account of the Financial Corporation made up to the date on which its accounts are closed and balanced; (b) the report of working of the Financial Corporation for the period covered . by the accounts; ' (c) the auditor’s report on the balance-sheet and accounts; and (d) proposals for declaration of dividend and capitalisation of reserves. (3) The shareholders present at an annual general meeting may also discuss any» other matter to be transacted at such meetings in accordance with the provisions of this Act.] 37. Audit . -l[(1) The accounts of the Financial Corporation shall be audited by auditors duly qualified'to act as the auditors under sub-sec. (1) of sec. 226 of the Companies Act, 1956, who shall be appointed by the Financial Corporation in general meeting of shareholders out of the panel of auditors approved by the Reserve Bank of India for such terms and on such remuneration as the Reserve Bank may fix.] (2) Every auditor shall be supplied with a copy of the annual balance sheet of the Financial Corporation, and it shall be his duty toexamine it, together With the accounts and vouchers relating thereto, and every Auditor shall have a list delivered to him of all books kept by the Financial Corporation and shall at all reasonable times have access 1 Substituted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 2 Substituted for words "three months" by‘Act 43 of 1985. array—wayawqu-ue—u-"aw—r“... ..-...,..v..~-—». .. »

S.37A

'1 .1

i STATE FINANCIAL GORPORATIONS ACT, 1951

1 to the books, accounts and "thpr docurJents of the Financial Corporation and may in . relation to such accounts examint: any D1rector or officer of the Financial Corporation.

(3) The auditor shall make a repoi,t to the shareholders upon the annual,balance sheet and accounts, and in every such report they shall state whether in their opinion the balance sheet is a full and fair balanc~ sheet containing all necessary particulars and properly drawn up so as to exhibit a tru~ and correct view of the State of affairs of the Financial Corporation, and in case they had called for ailYexplanation or information from the Board, whether it has been giv~n and whether it is satisfactory .

. 1

(4) The State Government may, in tonsultation with the Comptroller and Auditor I

General of India, at any time issue directions to the auditor requiring them to report to it upon the adequacy of measures taken 9Y the Financial Corporation for the protection of its shareholders and creditors or upon the sufficiency of their procedure in auditing the affairs of the Financial Corporation a~d may enlarge or extend the scope of the audit or direct that a different procedure in: audit be adopted, or direct that any other examination be made by the auditors, if in its opinion public interest so requires.

(5) The Financial Corporation shall send a copy of every report of the auditors to the Comptroller and Auditor General bf India at least one month before it is placed before the shareholders. i

(6) Notwithstanding anything contained in the preceding sub-sections, the Comptroller and Auditor General of Indi~ may, either of his own motion or on a request received in this behalf from a State Goverrment, undertake such audit and at such times as he may consider necessary: ,

P~OVIDED that where the State Gdvernment is required to make any payment on account of the guarantee given by it under section 60r section 7 or section 8, as the case may be, such audit shall be undertaken b~ the Comptroller and Auditor General ofIndia.

(7) Every audit report under suo-section (6) shall be forwarded to the State Government and the government shall ~ause the same to be laid befC?rethe legislature of the State. . . ' 37A. Inspection I

(1) The 1[Small Industries Bank) atiany time may, with the approval of the Central: Government, and on being directed s~ to do by that government shall, cause an inspection to be made by one or more 9f its officers of the working of any Financial , Corporation and its books and accounts; find the 1[Small Industries Bank] shall send the' report of such inspection to the Central Government and to the State Government and shall supply a copy thereof to the Financial Corporation.

I (2) It shall be the duty of every DIrector or every officer of the Financial Corpo-

ration to produce to any officer making an inspection under sub-section (1) all such books, accounts and other documents inihis custody or power and to furnish him with any statement and information relating tb the affairs of the Financial Corporation as the said officer may require of him within such time as the said officer may specify.

(3) Notwithstanding anything coAtained in the Indian Evidence Act; 1872 (1 of 1872), or in any other law for the time beiAgin force, no court, tribunal or other authority shall have power to require the l[Small Industries Bank] or any of its officers to produceI . '

(~~ 1 I j

,4. , .r~~.-u;-~.-u 30 STATE FINANCIAL CORPORATIONS ACT, 1951 5. 37A . I to the books, accounts and other documients of the Financial Corporation and may in - relation to such accounts examine any Director or officer of the Financial Corporation. (3) The auditor shall make a reporit to the shareholders upon the annualbalance sheet and accounts, and in every such report they shall state whether in their opinion the balance sheet is a full and fair balancd sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the State of affairs of the Financial Corporation,-and in case they had called for any explanation or information from the Board, whether it has been givein and whether it is satisfactory. (4) The State Government may, in consultation with the Comptroller and Auditor General of India, at any time issue directions to the auditor requiring them to report to it upon the adequacy of measures taken by the Financial Corporation for the protection of its shareholders and creditors or upon the sufficiency of their procedure in auditing the affairs of the Financial Corporation and may enlarge or extend the scope of the audit "' ) or direct that a different procedure in: audit be adopted, or direct that any other examination be made by the auditors, if in its opinion public interest so requires. ' (5) The Financial Corporation shall send a copy of every report of the auditors to the Comptroller and Auditor General of India at least one month before it is placed before the shareholders. I (6) Notwithstanding anything centained in the preceding sub-sections, the Comptroller and Auditor General of India may, either 'of his own motion or on a request I received in this behalf from a State Goverhment, undertake such audit and at such times as he may consider necessary: PROVIDED thatwhere the State Golvernment is required to make any payment on ‘ account of the guarantee given by it under section 6. or section 7 or section 8, as the case i may be, such audit shall be undertaken by the Comptroller and Auditor General of India. , (7) Every audit report under sub-section (6) shall be forwarded to the State ~ Government and the government shall cause the same to be laid before the legislature _ of the State. . . 37A. Inspection l (1) The 1[Small Industries Bank] atiany time may, with the approval of the Central Government, and on being directed so to do by that government shall, cause inspection to be made by one or more of its officers of the working of any Financial i ' ' Corporation and its books and accounts; land the 1[Small Industries Bank] shall send the ‘ report of such inspection to the Central Government and to the State Government and j shall supply a copy thereof to the Financlial Corporation. ‘ (2) It shall be the duty of every Director or every officer of the Financial Corpo- ration to produce to any officer making' an inspection under Sub-section (1) all such: books, accounts and other documents in'his custody or power and to furnish him with any statement and information relating t the affairs of the Financial Corporation as the said officer may require of him within such time as the said officer may specify. ‘ . . . l . . (3) Notwrthstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), or in any other law for the time being in force, no court, tribunal or other authority shall have power to require the 1[Small Industries Bank] or any of its officers to produce 1 Substituted for ”Development Bank” by SFC (Amendment) Act, 2000 (Act No. 39 of 2000),dt. 5-9-2000 ' San-is ‘Lahri . Jim‘- two. $13“. Q‘jélﬁgml,ﬁ.éﬁ:l‘ ‘; -_ , . a. i w“. .. '.'=>':- - :7;-

I, --------,.-.-----.-.~--.- "~.4 ~ ••• ~-- •. _

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5.40 STATE FINANCIAL CORPORA nONS ACT, 1951 31

:e,

before such court, tribunal or other authority the report of the inspection made by it under sub-section (1) or any copy thereof.

(4) !he State Government ~, after considering.3~y report ~ent t.9~~ ..~~~_er1 sub-sectiQ!!J!J<,give suc!:!ln~t~.£ti01!S to tl.!eB.o~.rd ~a~i~~onsi~s ~e~!s~a!.y~n? It snaIl .!:.~u!Y....o.!.!~~_~~~r~~c.?.~?Il1R.ly with suchi~s~u~,tions.l . .~ .. 38. Returns

1[(1) The Financial Corporation shall furnish to the State Government, the 2[Small Ind ustries Bank] and Reserve Bank such statements and returns in such form as the State Government, the 2[Small Industries Bank] or the Reserve Bank may require from time to time.

(3) The Financial Corporation shall furnish to the State Government, the 2[Small Industries Bank] and the Reserve Bank within four months of the close of each financial year a statement in the prescribed form of its assets and liabilities as at the close of that year, together with a profit and loss account for the year, the auditors' report and a report of the working of the Financial Corporation during the year and copies of the said statement, account and reports shall be published in the Official Gazette and shall also be laid before the Legislature of the State.

CHAPTER V MISCELLANEOUS

39. Power to give instructions to Financial Corporation on questions of policy (1) In the discharge of its functions, the Board shall be gt:ided by such instructions

on questions of policy as may be given to it by the State Government in consultation 'with and after obtaining the advice of the 2[Small Industries Bank].

(2) If any dispute arises between the State Government and the Board as to whether a question is or is not a question of policy, the decision of the State Government shall be final.

3[(2A) Nothing c~ntained in sub-section (1) and sub-so (2) shall apply in a case where a State Government holds less than fifty-one per cent. of the equity shares in the Financial Corporation.

. (2B) Notwithstanding the equity share holding of a Financial Corporation by a Sta te Governmen t, the Sta te GovecJ)ment may advise the Financial Corpora tipns on the matters of policy.]

(3) If the Board fails to carry out the instructions on the question of policy laid down by the State Government under sub-section (1) of this section or the instructions given to the Board under sub-section (4) of section 37A, the State Government shall have the power to' supersede the Board and appoint a new Board in its place to function until a properly constituted Board is set up, the decision of the State Government as to the grounds for superseding the Board shall not be questioned in any court. 40. Declaration of fidelity and secrecy

4[(1) The Financial Corporation shall not, except as otherwise required by this Act. or any other law for the time being in force, divulge any information relating to, or to'

1 Substituted by Act43 of 1985. 2 Substituted [or "Development Bank" by SFC(Amendment) Act, 2000 (Act No. 39 0(2000), dt. 5-9-2000. 3 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 ~20oo), dt. 5-9-2000.

4 IM~t'" by A" 48011983. ~ r-.V

. ~\ r~r;;~~(;'~j;~ri , i\V~:?.j\;i;}\ Cy. GenualManilgcr ( p & t.)

- -~,:: ~. . y!.{\ ..~..~ ;.;"\'\ I. I _-:*'MIt" ..•..- _. ::10--=:"-_ -- .• =--"".-- --,-,--.-:_. ~. \,!,~t;trt!..--..':;:~~::::..~ ._ ".-_UC .

S. 40 ' STATE FINANCIAL CORPORATIONS ACT, 1951 31 M before such court, tribunal or other authority the report of the inspection made by it under sub-section (1) or any copy thereof. (4) The State Government may, after considering _a_ny report sent tpgitjuunder sub-sectignj ‘I )A‘give suchinstrggtions to the Board as it considEi's necessaryand it shall be the duty of the Board to comply with suchcinstruétions.‘ i W 1...»..-gm a»..- -u ., —-- 38. Returns A A ][(1) The Financial Corporation shall furnish to the State Government, the 2[Small Industries Bank] and Reserve Bank such statements and returns in such form as the State Government, the 2[Small Industries Bank) or the Reserve Bank may require from time to time. (3) The Financial Corporation shall furnish to the State Government, the 2[Small Industries Bank] and the Reserve Bank within four months of the close of each financial year a statement in the prescribed form of its assets and liabilities as at the close of that j year, together with a profit and loss account for the year, the auditors’ report and a report 2 of the working of the Financial Corporation during the year and copies of the said statement, account and reports shall be published in the Official Gazette and shall also be laid before the Legislature of the State. : CHAPTER v * NHSCELLANEOUS 39. Power to give instructions to Financial Corporation on questions of policy (1) In the discharge of its functions, the Board shallbe guided by such instructions on questions of policy as may be given to it by the State Government in consultation -with and after obtaining the advice of the 2[Small Industries Bank]. (2) If any dispute arises between the State Government and the Board as to whether a question is or is not a question of policy, the decision of the State Government shall be ﬁnal. 3[(ZA) Nothing contained in sub-section (1) and sub where a State Government holds less th Financial Corporation. ' (ZB) Notwithstanding the equity share holdin State Government, the State Government ma matters of policy] (3) If the Board fails to carry out the instructions on the question of policy laid down by the State Government under sub-section (1) of this section or the instructions given to the Board under sub-section (4) of section 37A, the State Government shall have the power to-supersede the Board and appointa new Board in its place to function until i a properly constituted Board is set up, the decision of the State Government as to the , grounds for superseding the Board shall not be questioned in any court. 40. Declaration of fidelity and secrecy 4_-_.. a..- —s. (2) shall apply in a case an fifty-one per cent. of the equity shares in the g of a Financial Corporation by a y advise the Financial Corporations on the I “[(1) The Financial Corporation shall not, except as otherwise required by this Act. 3 or any other law for the time being in force, divulge any information relating to, or to' ‘ . Substituted by Act 43 of 1985. Substituted for ”Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5.9-2000 Inserted by SFC (Amendment) Act, 2000 (A ct No. 39 of 2000), dt. 5-9-2000. Inserted by Act 48 of 1983. 3 l a -' 1 ‘ 3‘9 "(hagg- Gy.GenrralManagcr . ' k -~' _ _ _, ”M. 1,:me a __.._-a v— —.._’.,...< awn—- -61"- .. -1.

1 32 STATE FINANCIAL CORPORATIONS ACT, 1951 S.41

2 3 4

the affairs of, its constituents except in circumstances in which it is, in accordance with the law or practice and usage, cU5t0mary among bankers, necessary or approptiate for the Financial Corporation to divulge such information.

(2) The Financial Corporation may, for the purpose 'of efficient discharge of its functions under this Act, collect from, or furnish, to-

(J) the Central Government; (b) the State Bank of India constituted "fider section 3 of the State Bank of India

Act 1955, any subsidiary bank within the meaning of the State Bank oflndia (Subsidiary Banks)Ad, 1959, any corresponding new bank constituted under section3oftheBankingCompnies (Acquisitionand Transfer ofUndertakings) Act, 1970 or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, any other scheduled bank, any l[5tate co-operative bank, the Small Industries Bank or the Development Bank],

such credit information or other information as it may consider useful for the purpose, in such manner and at such time as it may think fit.

Explanation; For the purposes of this sub-section, the expression "credit informa- tion" shall have the same meaning as i.nclause (c) of section 45A of the Reserve Bank of India Act, 1934 (2of 1934) subject to the modification that the banking company referred to therein shall mean a bank referred tc in clause (b) of this sub-section.]

2[(3) Every Director, auditor, officeror other employee of the Financial Corporation shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Schedule.

3[(4) Nothing contained in this section 9hil11apply to the credit information dis- closed under the Credit Information Companies (Regulation) Act, 2005.] 41. Tndemnity of Directors

(1) Every Director shall be indemnified by the Financial Corporation against all losses and expenses incurred by him in the discharge of his duties except such as are caused by his own wilful act or default.

(2) ADirectorshall not be responsible forany other Directoror for any officeror other employee of the Financial Corporation or for any loss or expenses resulting to the Financial Corporation by the insufficiencyor deficiencyofvalue ofor title to '1nyproperty or security acquired or taken on behalf of the FinancialCorporati~n or by anything done in good faith in the execution of the duties of his officeor in relation thereto. 41A. Protection of action taken by persons appointed under section 27or section 32A

No suit, prosecution or other legal proceeding shall lie.against any person appointed as Director, administrator, managing agent or manager by the Financial Corporation in ~. pursuance ofsection 27or section 32Afor anything which is in good faith done or intended f to be done by him as such Director, administrator, managing agent or manager. , 4[41B. Nomination in respect of deposits, bonds, ~tc. I

. (1) Notwithstanding anything contain~d in any other law for the time being in I" force, where a nomination in respect of any d~posits, bonds or other securities is made . J

Substituted for "State Co-operative Bank or the Development Bank" by SFC (Amendment) Act. 2000 (Act No. 39 of 2000), dt. 5-9-2000. . Sec. 40 renumbered as sub-so (3) thereof by Act 48 of 1983. Inserted by Credit Information Companies (Regulation) Act, 1005, dt. 23-6-2005. Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5.Y-2000.

.i,

32 STATE FINANCIAL CORPORATIONS ACT, 1951 ‘ . the affairs of, its constituents except in circumstances in which it is, in accordance with 3 the law or practice and usage, customary among bankers, necessary or appropriate for : 7 the Financial Corporation to divulge such information. 6 ’ ‘ ' V (2) The Financial Corporation may, for the purpose'of efficient discharge of its functions under'this Act, collect from, or furnish to— (a) the Central Government; (b) the State Bank of India constituted under section 3 of the State Bank of India Act, 1955, any subsidiary bank within the meaning of the State Bank of India ! (Subsidiary Banks) Ar. t, 1959, any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, any other scheduled bank, any 1[State co-operative bank, the Small Industries Bank or the Development Bank], such credit information or other information as it may consider useful for the purpose, in such manner and at such time as it may think fit._ _ ‘Mrkﬁww--'<v————~Aww:._.t .2. b-section, the expression ”credit informa- Explanation : For the purposes of this su (c) of section 45A of the Reserve Bank of tion" shall have the same meaning as in clause India Act, 1934 (2 of 1934) subject to the modification that the banking company referred i to therein shall mean a bank referred to in clause (b) of this sub-section.) 2[(3) Every Director, auditor, officer or other employee of the Financial Corporation ) shall, before entering upon his duties, make a declaration of fidelity and secrecy in the l form set out in the Schedule. 3[(4) Nothing contained in this section shall apply to the credit information dis- closed under the Credit Information Companies (Regulation) Act, 2005.] 41. Indemnity of Directors l i . I (1) Every Director shall be indemnified by the Financial Corporation against all losses and expenses incurred by him in the discharge of his duties except such as are caused by his own wilful act or default. ble for any other Director or for any officer or other (2) A Director shall not be responsi employee of the Financial Corporation or for any loss or expenses resulting to the Financial Corporation by the insufficiency or deficiency of value of or title to any property or security acquired or taken on behalf of the Financial Corporation or by anything done in good faith l in the execution of the duties of his office or in relation thereto. . 41A. Protection of action taken by persons appointed under section 27 or section 32A No suit, prosecution or other legal proceeding shall lieagainst any person appointed as Director, administrator, managing agent or manager by the Financial Corporation in pursuance of section 27 or section 32A for anything which is in good faith done or intended to be done by him as such Director, administrator, managing agent or manager. / 4[4113. Nomination in respect of deposits, bonds, etc. ' q (1) Notwithstanding anything contained in any other law for the time being in force, where a nomination in respect of any deposits, bonds or other securities is made l Substituted for ”State Co-operative Bank or the Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), ch. 5-9-2000. Sec. 40 renumbered as sub-s. (3) thereof by Act 48 of 1983. Inserted by Credit Information Companies (Regulation) Act, 2005, dt. 23-6-2005. Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), (It. 5-9-2000. t ';l. . when- . 553,953!- ” . . Dy; Genrial tartar. . town)

in the prescribed manner, the amount due on such deposits, bonds or securities shaH, on the death of the depositor or holder thereof, vest in, and be payable to, the nominee subject to any right, title or int'erest of any other person to su~h deposits, bonds or securities.

(2) Any payment by the Financial Corporation in accordance with provisions of sub-so (!)shall constitute a full discharge to the Financial Corporation of its liability in respect of such deposits, bonds or securities.] 42. Offences

(1) Whoever, in any bill of lading, warehouse receipt or other document given to the Financial Corporation, whereby security is given or is purported to be given to the Financial Corporation for any accommodation granted by it under this Act, wilfully makes any false statement or knowingly permits any false statement to be made shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to two thousand rupees, or with both.

(2) Whoever, without the consent in writing of the Financial Corporation, uses the name of the Financial COFporation in any prospectus or advertisement shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

(3) No court shall take cognizance of any offence punishable under this Act otherwise than on a complaint in writing signed by an officer of the Financial Corpora- tion authorised by the Board in'this behalf. 43. Provisions relating to income-tax and super-tax

For the purposes of the l{Income Tax Act, 1961 (43of 1961)],the Financial Corpo- ration shall be deemed to be a company within the meaning of that Act and shall be liable to income-tax and super-tax accordingly on its income, profits and gains:

PROVIDED that any sum paid by the State Government under the guarantee given in pursuance of 2[***] section 7 or section 8 shall not be treated as the income, profits and gains of the FinancialCorporation and any interest on debentures, bonds or deposits paid by the Financial Corporation out of such sum shall not be treated as expenditure incurred by it:

PROVIDED FURTHER that in the case of any shareholders such portion of a dividend as has been paid out of any such sum advanced by the State Government shall be deemed to be his income from "interest on securities" and the income-tax shall be payable thereon as if it were the interest receivable on any security of a State Government issued income-tax free within the meaning of section 8 of that Act. 43A. Delegation of powers

The Board may, by general or special order, delegate to the Managing Director or to any other officer of the Financial Corporation 3[or to any committee appointed under section 21] subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and duties under this Act as it may deem necessary.

j ~- \ \

S.43A STATE FINANCIAL CORPORATIONS ACT, 1951 33

,..•.

'"',-

1 Substituted by Act 43 ofl985, for words "Indian Income Tax Act, 1922(11of 1922)". 2 Words "section 6 or" omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000),dt. 5-9-2000. 3 Inserted by Act 43 of 1985.

_" .•..••.•_R"' __--~- •...__ ...._~~...~_. . - .....:.,.

‘ .- .inwmumwmwetnwu - -- - . VVVVVV ‘ F iti'WWesmsesisamtee-t: am we: era-zen»: muw r : 5. 43A STATE FINANCIAL CORPORATIONS ACT, 1951 33 g { in-the prescribed manner, the amount due on such deposits, bonds or securities shall, on the death of the depositor or holder thereof, vest in, and be payable to, the nominee subject to any right, title or interest of any other person to such deposits, bonds or securities. (2) Any payment by the Financial Corporation in accordance with provisions of sub-s. (1).shall constitute a full discharge to the Financial Corporation of its liability in respect of such deposits, bonds or securities] ' 42. Offences . (1) Whoever, in any bill of lading, warehouse receipt or other document given to the Financial Corporation, whereby security is given or is purported to be given to the Financial Corporation for any accommodation granted by it under this Act, wilfully makes any false statement or knowingly permits any false statement to be made shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to two thousand rupees, or with both. (2) Whoever, without the consent in writing of the Financial Corporation, uses the name of the Financial Corporation in any prospectus or advertisement shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both. , (3) No court shall take cognizance of any offence punishable under this Act otherwise than on a complaint in writing signed by an officer of the Financial Corpora- tion authorised by the Board in'this behalf. 43. Provisions relating to income-tax and super-tax For the purposes of the 1{Income Tax Act, 1961 (43 of 1961)], the Financial Corpo- _ ration shall be deemed to be a company within the meaning of that Act and shall be liable to income-tax and super-tax accordingly on its income, profits and gains: PROVIDED that any sum paid by the State Government under the guarantee given in pursuance, of 2["’*’*] section 7 or section 8 shall not be treated as the income, profits and gains of the Financial Corporation and any interest on debentures, bonds or deposits é ' paid by the Financial Corporation out of such sum shall not be treated as expenditure is incurred by it: ' , g i: g PROVIDED FURTHER that in the case of any shareholders such portion of a ’ dividend as has been paid out of any such sum advanced by the State Government shall ' be deemed to be his income from ”interest on securities” and the income-tax shall be payable thereon as if itwere the interest receivable on any security of a State Government issued income-tax free within the meaning of section 8 of that Act. 43A. Delegation of powers ' . The Board may, by general or special order, delegate to the Managing Director or to any other officer of the Financial Corporatibn 3[or to any committee appointed under section 21] subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and duties under this Act as it may deem necessary. ”'9‘th . . ; ...i...i . 9.. t.“ y y: -. "1‘“- __:L..__.__...__..._..—_.—_. 1 Substituted by Act 43 of 1985, for words "Indian Income Tax Act, 1922 (11 of 1922)". ‘ 2 Words "section 6 or" omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), (it. 5-9-2000. - 3 lrserted by Act 43 of 1985. healer-ugesvwe. .1 «yr. ML. -..... .,‘_‘ -.,r~v. f7? ' - WW“mumqtrW ' t . V ,. ./ “W393 ' "‘ ” "' ‘ ..-.____ ~~.»-—..«. . _ I turn}. .:.f{y.-Wip.w .-. . Elia . :1

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STATE FINANCIAL CORPORA TION~ ACT, 1951

___ T

S.43B

1[43B. Reports to the Board (1) The minutes of every meeting of the committee appointed under section 21

shaU, after confirmation thereof at the next meetir'b of tlilecommittee, be laid before the Board at the.next following meeting of the Board. '

2[*,,*] 44. Act 18 of 1891 to apply to the books of the Financjal Corporation

The Financial Corporation shall be deemed to be:a bank for the purposes of the Bankers Books Evidence Act, 1891 (18 of 1891). 45. Liquidation of Financial Corporation

No provision of law relating to the winding up of Fompanies or corporations shall apply to the Financial Corporation, and the Financial Corporation shall not be placed in liquidation, save by order of the State Government and in such manner as it may

direct, 46. power to apply Act to certain financial institutions in existence at commencement

of Act (1) The Central Government may by notificatiqn in the Official Gazette, direct

that all or any of the provisions of this Act shall, subject to such exceptions and restrictions as may be specified, apply to 3[any institution established by a State Government] which has for its object the financing of industrial concerns, and on the issue of such notification, the institution shall be deerrled to be a Fin?-ncialCorporation established by the State Government for the State within the mea~ing of this Act, and the provisions of this Act shall become applicable thereto according to the tenor of the

notification: 1(PROVIDEDthat no notification shall be issued:under this sub-section in respect

of any institution unless a request is made in that behalf by the State Government

concerned.] (2) Any notification issued under sub-section (1) may suspend the operation of

any enactment applicable to any such institution immediately before the issue of the

notification. 46A. Extension of jurisdiction of the Financial Corporation to other States by

agreement (1) Where a Financial Corporation has been eslabiished for any State and one or

more other States not served in whole or in part by a financial Corporation desires that the Financial Corporation should serve the needs of those States or of any area therein, . and the States, after consultation with the ~[SmaUIndustries Bank], enter into an agreement which is published in the Official Gazettes of each of those States, then the Financial Corporation shaU, on the issue of notification in the Official Gazette by the Central Government, serve the needs of those State$ or, as the case may be, of the area therein in terms of the agreement and any Financial Corporation or any State may enter into separate or successive agreements as aforesai4i with one another or with other Financial Corporations of States and in relation to dWerent areas of the States.

Inserted by Act 43 of 1985. Sub-so (2) omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000.

Substituted by Act 43 of 1985,Substitu ted for "Development Bank" by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000.

~ ,:1

;

, :

1 2 3 4

i i i i i . 1; _ . ; 'g 34 STATE FINANCIAL CORPORATIONS ACT, 1951 s. 433 i . t a l 1[4313. Reports to the Board committee appointed under section 21 (1) The minutes of every'meeting of the erect at the next meeting of the committee, be laid before the ting of the Board. shall, after confirmation th Board at the. next following mee 'ZVau-l ' books of the Financial Corporation 44. Act 18 of 1891 to apply to the a bank for the purposes of the A‘ The Financial Corporation shall be deemed to be; 891 (18 of 1891). Bankers Books Evidence Act, 1 4S. Liquidation of Financial Corporation w relating to the winding up of compa and the Financial Corporation shall not be placed State Government and in such manner as it may No provision of la nies or corporations shall apply to the Financial Corporation, in liquidation, save by order of the direct. 46. Power to apply Act to of Act (1) The Central Govern that all or any of the provisi certain financial institutions in existence at commencement ment may by notification in the Official Gazette, direct ons of this Act shall, subject to such exceptions and restrictions as may be specified, apply to 3[any institution established by a State ' bject the financing of industrial concerns, and on the GOvernment] which has for its 0 issue of such notification, the institution shall be deenied to be a Financial Corporation tate within the meaning of this Act, and established by the State Government for the S the provisions of this Act shall become applicable thereto according to the tenor of the notification 2 1[PROVIDED that no notification shall be issuedgunder this sub-section in respect of any institution unless a request is made in that behalf by the State Government concerned] . (2) Any notification issued tapplicable to any suc suspend the Operation of under sub-section (1) may ly before the issue of the h institution immediate any enactmen notification. 46A. Extension of jurisdiction of the Financial Corporation to other States by agreement established for any State and one or rporation has been whole or in part by a Financial Corporation desires that 1d serve the needs of those States or of any area therein, - and the States, after consultation with the {[Srnali Industries Bank], enter into an agreement which is published in the Official Gazettes of each of those States, then the Financial Corporation shall, on the issue of notification in the'Official Gazette by the Central Government, serve the needs Of those States or, as the case may be, of the area therein in terms of the agreement and any Financial Corporation or any State may enter into separate or successive agreements as aforesaid with one another or with other I i . Financial Corporations of States and in relation to different areas of the States. ________r_,________.———-———- inserted by Act 43 of 1985. E Sub-s, (2) omitted by SEC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 1 2 3 Substituted by Act 43 of 1985. 4 Substituted for ”Development Bank" by S _ (1) Where a Financial Co 5 more other States not served in the Financial Corporation shou FC (Amendment) Act, 2000 (ActNo. 39 of 2000), dt. 5—9-2000. “@0396 aniay Lahri Baccarat-teaeﬁcrwaftl ‘ . J étﬁ’ﬁ'ﬁi‘ﬁiﬁﬁ .

(lA) Any agreement entered into under sub-section (1) may be modified or re scinded by mutual agreement between the parties thereto and every such mutual agreement shall also provide for the apportionment of assets and liabilities.

(2) An inter-State agreement among the participating States may, as far as may be, make all such provisions as are referred to in sub-section (2) of section 3A.

~. Effe('t r.f Act on other laws

The provision of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the Memorandum or Articles of Association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.

1[**"J 48. Power of Board to make regulations

(1) The Board may, after consultation with the 2[SmallIndustries Bank) and with the previous sanction of the State Government, make regulations not inconsistent with this Act and the rules made thereunder to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for-

(a) the holding and conduct of elections under this Act, including the final decision on doubts or disputes regarding the validity of elections;

(b) the manner in which, and the conditions subject to which, the first allotment of the shares of the Financial Corporation shall be made;

(c) the manner in which, and the conditions subject to which, the shares of the Financial Corporation may be held and transferred and generally all matters relating to the rights an~ duties of shareholders;

3[(ca) the maintenance of register ofshareholders, particulars tobe entered in such register, the safeguards to be observed in the maintenance of register of shareholders on computer floppies or diskettes, compact disk or any other electronic form the inspection and closure of the register of shareholders and all other matters connected therewith under sec. 6;

(cb) the manner of nomination of directors under clause (d) of sec. 10; (cc) the entrusting or delegation of duties to the managing director by the Board

under clause (c) of sub-sec. (1)of sec. 17; (cd) the functions of Executive Committee under sub-sec. (2) of sec. 18i (ce) the guidelines and prudential norms in accordance with which investment

may be made under sec. 34; (d) the manner in whiCh nomination may be made under section 41B;and (cg) the investment (whether by way of,deposits in bank or otherwise) of the

amounts which are not for the time being required for transaction of business.]

. ",

35STATE FINANCIAL CORPORATIONS ACT, 1951 5.48

;~ ~""

I' 1 Sec. 47 omitted by SFC (Amendment) Act, fOOO(Act No, 39 of 2000), dt, 5-9-2000. . 2 Substituted (or "Development Bank" by SFC~Amendment) Act, 2000 (Act No. 39 o{2000), dt. 5-9.2000. 3 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 o{2000), dt. 5-9-2000.

Wmmguammarmw» : vmmws M»- ' S. 48 STATE FINANCIAL CORPORATIONS ACT 1951 35 A“ (1A) Any agreement entered into under sub-section (1) may be modified or re- scinded by mutual agreement between the part' agreement shall also provide for the apportionme (2) An inter-State agreement among the pa be, make all such provisions as are referred to in s W. Effect of Act on otherlaws rticipating States may, as far as may ub-section (2) of section 3A. 48'. Power of Board to make regulations (1) The Board may, after conSultation with'the 2[Small Industries Bank] and with the previous sanction of the State Government, make regulations not inconsistent with I this Act and the rules made thereunder to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for—— (a) the holding and conduct of elections under this Act, including the final decision on doubts or disputes regarding the validity of elections; _ (b) the manner in which, and the conditions subject to which, the first allotment ' of the shares of the Financial Corporation shall be made; (c) the manner in which, and the conditions subject to which, the shares of the Financial Corporation may be held and transferred and generally all matters relating to the rights and duties of shareholders; 3[(ca) the maintenance of register of shareholders, particulars to be entered in such register, the safeguards to be observed in the maintenance of register of shareholders on computer ﬂoppies or diskettes, compact disk or any other electronic form the inspection and closure of the register of shareholders '3 ' and all other matters connected therewith under sec. 6; (cb) the manner of nomination of directors under clause (d) of sec. 10; (cc) the entrusting or delegation of duties to the managing director by the Board under clause (c) of sub-sec. (1) of sec. 17; (ed) the functions of Executive Committee under sub-sec. (2) of sec. 18; (ce) the guidelines and prudential norms in accordance with which investment may be made under sec. 34; (cf) the manner in which nomination may be made under section 418,- and (cg) the investment (whether by way of, deposits in bank or otherwise) of the amounts which are not for the time being required for transaction of business.) ‘ v— M 1 Sec. 47 omitted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. ‘ 2 Substituted [or "Development Bank” by SFC (Amendment) Act, 2000 (Act No. 39 of 2000;, dt. 5-9.2ooo_ I i 3 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. ; Sania Lair ri Yaw-$359M Q a - '0“. , 1 ': ‘Eﬂ'?:".".' r“! W 5;. €535” ' 5533‘}? 5 SEN) 4 :

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S.48A STATE FINANCIAL CORPORA 1hONS ACT, 1951

1 Clause (h) omitted by Act 43 of 1985. 2 Substituted by Act 43 of 1985. . 3 Word "and" omitted by SFC (Arndt.) Act, 2000 (Act No. 31 of 2000), dt. 5-9-2000. '.i.:;.,>' 4 Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. 5 Inserted by Act 401 1986,w.e.f. 15-5-1986. I 1). 6 Words "Every rule made under section 47 and" omitted by SFC (Amendment) Act, 2000 (Act No. 39 ~ '!,

.2000), dt. 5.9-2000. . r ~~f'.

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!lie):,<

-. ~ ?,' ""'~:i"i"~;;)fjit;s.;~~!.~'~.dU..2;' '. jay Lahri '- ~ ~_.~",~m"

Oi.C:t:~cr~~MUr~l):(f{ ~~ A}

(d) the manner in which general meetings1shall be convened, the procedu~e to be followed thereat and the manner in which voting rights may be exerCised;

(e) the calling of meetings of the Boald, and of the Execu~ve Committee, fees for attending meetings thereof and tb~ conduct of bus mess thereat;

(f) the manner and the terms of issue and repayment of bonds and debentures by the Financial Corporation;, ..'

(g) the conditions which the Financial Corporation may Impose 10 grantmg loans or advances; 1[* * *]

(i) the forms of returns and statements r~quired under this Act; ; ii G) the duties and conduct of officers, other employees, advis'ers and agents of

the Financial Corporation; , (k) the establishment and maintenance of provident or other benefit funds for

employees of the Financial Corporati<i>n; (1) the taking over of the management of ~ny industrial concern on a breach of

its agreement with the Financial CorPoration; : (m) the appointment of 2[committees] for the purposes of this Act, fee for ;

attending meetings thereof and the conduct of business thereat;3[xxx] ~ (n) ~enerally, the efficient conduct of the affairs of the Financial Corporation t.

[;and]' '81 4[(0) the form and manner in which the balance-sheet and the accounts of the ~t:

Financial Corporation shall be prepared; . ~i: (p) any other matter which is to be, or may be, prescribed.] I~:'

(3) All regulations made under this section shall be published in the Official .:, Gazette and any such regulation shall have effectifl'omsuch earlier or later date as may 1, be specified in the regulations. .Jt: 5[48A. Laying of rules and regulations before State Legislature ': ..•~'.

6[***] EverY,regulation made under section 48 shall be laid, as soon as may be after:: it is made, before the State Legislature.] . ~~. 3[48B. Power to make rules

(1) The Central Government may, by notification in the Official Gazette, make rules L for carrying out the provisions of this Act.. , .r

(2) In particular, and without prejudice to the generality of the foregoing power ;1: such rules may provide forthe procedure for filing and hearing of appeals under sub-so l (5) of sec. 5.

(3) Every rule made under this'Act shall be laid.,as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if,. before the expiry of the session immediately following the session or the successive .' sessions aforesaid, both Houses agree in making any modification in the rule or both;: :

•.•. -•.••.•.•.::,.~ . '_: •.--K.l'",,".".~-ed •., "_

, ;

r 4. mm -. . L335} wmaaumussmusn, S. 48A «36 I STATE FINANCIAL CORPORA'IlIONS ACT, 1951 (d) the manner in which general meetings! shall be convened, the procedure to be followed thereat and the manner in Which voting rights may be exercrsed; (e) the calling of meetings of the Board, ahd of the Executive Committee, fees for attending meetings thereof and the conduct of business thereat; (f) the manner and the terms of iSSue and repayment of bonds and debentures by the Financial Corporation; . . . (g) the conditions which the Financial Corporation may impose in granting loans or advances; ‘ ' 1? a at] . (i) the forms of returns and statements required under this Act; (j) the duties and conduct of officers, other employees, advisers and agents of the Financial Corporation; 3 (k) the establishment and maintenance of provident or other benefit funds for employees of the Financial Corporation; (1) the taking over of the management of :an its agreement with the Financial Corporation; (m) the appointment of 2[committees] for the purposes of this cht, fee for attending meetings thereof and the cenduct of business thereat;‘ [xxx] (n) generally, the efficient conduct of the affairs of the Financial. Corporation ;and] 4[(0) the form and manner in which the balance- Financial Corporation shall be prepared; (p) any other matter which is to be, or may be, prescribed] (3) All regulations made under this section shall be published (in the Official Gazette and any such regulation shall have effecti from such earlier Or later date as may be specified in the regulations. 5[48A. Laying of rules and regulations before State Legislature 5 #5 6PM] Everyregulation made under section 48 shall be laid, as’ soon as may be after \ it is made, before the State Legislature] ' ' ' 3[483. Power to make rules. 1 (1) The Central Government may, by notifica for carrying out the provisions of this Act.‘ . (2) In particular, and without prejudice to the generality of the foregoing powér such rules may provide forthe procedure for filing and hearing of appeals under sub-s. (5) of sec. 5. - ' (3) Every rule made under this‘Act shall be laid, as soon as may be after it is made, 9. ' before each House of Parliament, while it is in session, for a total period of thirty days" which may be comprised in one session or in 'twO or more successive sessions, and if,‘ t: beforethe expiry of the session immediately following the session or the successive? sessions aforesaid, both Houses agree in making any modification in the rule or both 5 y industrial concern on a breach of sheet and the accounts of the tion in the Official Gazette, make rules i Clause (h) omitted by Act 43 of 1985. Substituted by Act 43 of 1985. Word "and" omitted by SFC (Amdt.) Act, 2000 (Act No.81 of 2000), (it. 5-9-2000. Inserted by SFC (Amendment) Act, 2000 (Act No. 39 of 2000), dt. 5-9-2000. Inserted by Act 4 of 1986,_w.e.f. 15-5-1986. i Words "Every rule made under section 47 and” omitted by SFC (Amendment) Act, 2000 (Act No. 39 .2000), Clt. 5-9-2000. 3"Jluwav—I -‘ 'tsawumumamaamuamm-L ';~

1 I

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Signature

"'. '~~ •••••• ,:,." •••••__ ••, •••' -::_•••••.~. ~.v

S,mjay Lahri Oll. C::clleral MilRilgcr ( pat.)

STATE FINANCIAL CORPORATIONS ACT, 1951

Signed before me :

Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.] 49. Power to remove difficulty

If any difficulty arises in giving effect to the provisions of this Act, as amended by the Public Financial Institutions Laws (Amendment) Act, 1975,(52of 1975), the Central Government may, by order, do anything, not inconsistent with such provisions, for the purpose of removing the difficulty:

PROVIDED that no such order shall be made after the expiration of three years from the commencement of the said Amendment Act.

o THE SCHEDULE , 1rSection 40(3)]

DECLARATION OF FIDELITYAND SECRECY 1, do hereby declare that I will faithfully, truly and to the best of my

skill and ability execute and perform the duties required of me as a Director, officer, employee or auditor (as the case may be) of the Financial Corporation and which properly relate to any office or position in the said Financial Corporation held by me.

I further declare that I will not communicate or allow to be Communicated to any person not legally entitled thereto any informa tion relating to the affairs of the Financial Corporation, nor will I allow any such person to inspect or have access to any books or documents belonging to or in the possession of the Financial Corporation and relating to the business of the Financial Corporation.

5.49

l I,- 1

S.ubstitu ted by Act 48011983.

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,1 7x- -2 :-u “i d mwi‘i‘ izgggwsrthwy unins--:1='g,v;.n;:-:.-,;1;-' .. 1‘.- i.‘ 3""E|!|lll‘)|’~‘$l-€'-1'E.l "-32: ~ ’ - ' w» ”my. ‘wwvm' v.» . ,‘ :—.~ 5 ~ ~ ' ,. ..5,{WE‘HSP‘MM‘EWWWW‘f‘WﬁWﬂ-i 1.- S. 49 STATE FINANCIAL CORPORATIONS ACT, 1951 . Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule] 49. Power to remove difficulty If any difficulty arises in giving effect to the provisions of this Act, as amended by the Public Financial Institutions Laws (Amendment) Act, 1975, (52 of 1975), the Central Government may, by order, do anything, not inconsistent with such provisions, for the purpose of removing the difficulty: PROVIDED that no such order shall be made after the expiration of three years from the commencement of the said Amendment Act. ‘ THE SCHEDULE - V 1[Section 40(3)} DECLARATION OF FIDELITY AND SECRECY I, ........................ do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as a Director, officer, employee or auditor (as the case may be) of the Financial Corporation and which properly relate to any office or position in the said Financial Corporation held by me. I further declare that I will not communicate or allow to be Communicated to any person not legally entitled thereto any information relating to the affairs of the Financial Corporation, nor will I allow any such person to inspect or have access to any books or documents belonging to or in the possession of the Financial Corporation and relating to the business of the Financial Corporation. Signed before me : Signature \K A l? ‘ ' Saniay Lahri Dy. General Manager ( P a it.) a (else?) 1 Spbstituted by Act 48 of 1983. i :‘I l l l t l c l \ g 'er~—-r—.~—->v~.v.-.r~v~_..~ .. ‘i‘ru‘m‘ ... - «mmwhmn~.um,ﬁmm. w. < A wags-WWW «an. ”C 4,”;

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Rajasthan act 63 of 1951 : The State Financial Corporations Act, 1951

SECTIONS X

SECTIONS