STATE FINANCIAL CORPORATIONS ACT, 1951
(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 as the Central Government may, by notification in the official Gazette, appoint.
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;(b) “Financial Corporation” means the Financial Corporation established under Section 3 and includes a Joint Financial Corporation established under Section 3-A;(c) “Industrial Corporation” means any concern engaged or to be engaged in—(i) the manufacture, preservation or processing of goods,(ii) mining,(iii) the hotel industry,(iv) the transport of passengers or goods by road or by water or air,(v) the generation of distribution of electricity or any other form of power,(vi) the maintenance, repair, testing or servicing of machinery of any d
(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 notification.(2) The Financial Corporation shall be a body corporate b^ 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.
(1) Notwithstanding anything contained in Section 3, two or more States may, after consultation with the Development 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 the needs of those States under . such name as may be specified in the notification.(2) Any inter-State agreement under sub-section (1) among the participating 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 shall be divided, and the allocation among the participating States of theshares to be distributed under Clause (a) of sub-sectio
(1) The authorized capital of the Financial Corporation shall be such sum as may be fixed by the State Government in this behalf, but it shall in no case be less than fifty lakhs of rupees or exceed than crores of rupees.(2) The authorized capital shall be divided into such number of fully paid-up shares as the State Government may determine and shall be issued to the parries mentioned in sub-Section (3) at such times and in such manner as that Government may determine and each such share shall have the same face value.(3) The State Government shall, with the approval of the Central Government, determine the number of shares which may, respectively, be distributed among—(a) the State Government,(b) the Reserve Bank,(ba) the Development Bank,(c) scheduled banks, insurance companies (including the Life Insurance Corporation of India established un
(1) The State Government may in consultation with the Development Bank, specify from time to time such part of the un-issued 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 sub-section (1) shall be,— (a) divided into such number of shares of the same face value as the State Government, in consultation with the Development Bank, determine;(b) subscribed by the State Government and the Development Bank and they may do so in such proportion as may 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 in use only for such purposes, in such manner and for rendering assistance to such class or category of industrial concerns, as the Development B
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 preceding the specified date, shall stand transferred to, Development Bank.
The Reserve Bank shall be given by the Development Bank, in cash, for the transfer to, and vesting in, the Development Bank of the shares 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) The shares of the Financial Corporation shall not be transferable except to the State Government, the Development Bank or any other financial institution (or class of financial institutions) recognised in this behalf by the State Government:Provided that the shares subscribed for the parties referred to in Clause (d) of sub-section (3) of Section 4 shall be freely transferable.(2) Nothing contained in this section shall affect the provision of sub-section (5) of Section 4.
(1) The Shares of the Financial Corporation shall be guaranteed by the State Government as to the repayment of principal and the payment of annual dividend at such minimum rate as the State Government may, with the approval of the Central Government, fix by notification published in the official Gazette at the time of issuing the shares.(2) Notwithstanding anything contained in the Acts hereinafter mentioned in this sub-section, the shares of the Corporation shall be deemed to be included among the securities enumerated in Section 20 of the Indian Trusts Act, 1882 and also to be approved securities for the purposes of the Insurance Act, 1938 and the Banking Companies Act, 1949 [Now Banking Regulation Act, 1949].
(1) The Financial Corporation may, in consultation with the Development Bank, issue and sell bonds and debentures carrying interest for the purpose of increasing its working capital and such bonds and debentures shall be guaranteed by the State Government as to the repayment of the principal and the payment of interest at such rate as the State Government may, on the recommendation of the Board leased on the advice of the reserve Bank, fix at the time the bonds and debentures are issued.(2) 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 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 i
The rights and interests of the Financial Corporation (including any other rights incidental thereto) in relation to any loan or advance granted or any amount recoverable by it, may be transferred by the Financial Corporation either in whole or in part by the execution or issue of any instrument by endorsement or in any other manner in which the Rights and interests in relation to such loan or advance may be lawfully transferred, and the Financial Corporation may, notwithstanding such transfer, act as the trustee for the transferee:Provided that the Board may, if in its opinion it is necessary in the public interest so to do, permit the Managing Director to undertake, at the request of the Central Government or the State Government, or the Reserve Bank, such part-time honorary work as is not likely to interfere with his duties as Managing Director.
(1) The Financial Corporation may accept from the State Government or, with the prior approval of the State Government, the Development Bank and Reserve Bank, a local authority or any other person, deposit repayable after the expiry of period which shall not be less than twelve months from the date of the making of the deposit and on such other terms as it thinks fit:Provided that the total amount of such deposits shall not at any time exceed the paid-up share capital of the Financial Corporation.(3) All deposits accepted under sub-section (1), other than the deposits from the State Government, shall be guaranteed by the State Government as to the repayment of the principal and the payment of interest.
The general superintendence, direction and management of the affairs and business of the Financial Corporation vest in the Board of Directors which, with the assistance of an Executive Committee and a Managing Director may exercise all the powers and discharge all the functions which may be exercised or discharged by the Financial Corporation.
The Board of Directors shall consist of the following, namely :(a) four Directors nominated by the State Government, of whom one Director shall be a person who has special knowledge 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, be agreement among themselves, think fit to nominate, each participating State Government nominating not 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 ;(b) two Directors nominated by the Reserve Bank ;
(1) A nominated Director shall hold office during the pleasure of the authority nominating him.(2) An elected Director other than a Director deemed to be elected under the first proviso to Section 10 shall hold office for four years :Provided that two out of the four Directors so elected shall retire at the end of two years after the first election and the other two at the end of four years after such election, the Directors so to retired being determined by lot.(3) Notwithstanding anything contained in sub-section (2) an elected Director shall continue in office until his successor is elected and shall also be eligible for re-election so, however, that no person elected as Director shall hold office for a continuous period exceeding eight years after the rotation of elected Directors has begun.
No person shall be a Director who—(a) except in the case of a Managing Director, is a salaried official of the Financial Corporation; or(b) is or at any time has been adjudged insolvent or his suspended payment of his debts or has compounded with his creditors; or(c) is found to be a lunatic or becomes of unsound mind; or(d) is or has been convicted of any offence involving moral turpitude.
The State Government may remove m 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 him, is absent without leave of the Board from more than three consecutive meetings of the Board.
(1) The Managing Director may, by giving notice in writing to the State Government, and any Director elected under Clause (d) or Clause (e) of Section 10 may, by giving notice in writing to the Chairman of the Board, resign his office and, on such resignation being accepted, shall be deemed to have vacated his office.(1-A) If the Managing Director is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the State Government may, after consultation with the Board, appoint another person to act in his place during his absence.(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.(3) No act or proceeding of the Board shall be questione
(1) The Chairman of the Board shall be one of the Directors, not being the Managing Director, nominated by the State Government, after considering, except in the case of the nomination of the first Chairman, the recommendation of the Board :Provided that the nomination of the Chairman for any period other than the first period shall be made only after the, vacancies in the office of Directors occurring by efflux of time in that period have been filled by nomination or election, as the case may be. (2) The Chairman shall hold office for two years or until his successor is nominated :Provided that a Chairman shall, so long as he remains a Director, be eligible for re-nomination as Chairman.
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.
(1) The Managing Director shall—(a) be a whole time officer of the Financial Corporation :Provided that the Board may, if in its opinion it is necessary in the public interest so to do, permit the Managing Director to undertake, at the request of the Central Government or the State Government or the Reserve Bank, such part-time honorary work as is not likely to interfere with his duties as Managing Director ;(b) perform such duties as the Board may, by regulations, entrust or delegate to him;(c) hold office for such term not exceeding four years as the Development Bank may specify and be eligible for re-appointment;(d) receive such salary and allowances and be subject to other terms and conditions of service as the Board, with the previous approval of the State Government, may determine:Provided that the first Managing Director shall receive s
(1) The Executive Committee shall consist of the Managing Director who shall be the Chairman of the Committee, and (the following) other Directors, chosen as follows :(a) four Directors elected by the nominated Directors, of whom two shall be from among the Directors nominated by the State Government and two from among the Directors nominated by the Reserve Bank and the Development Bank :Provided that in the case of a Joint Financial Corporation, in addition to the two Directors, elected from among the Directors nominated by the Reserve Bank and Development Bank, as many Directors as there are participating States shall be elected by the nominated Directors, one each from among the Directors nominated by each of the participating State Government;(b) one Director elected by the elected Directors.(2) A Director elected to be a member of the Executive Committee shall hold
(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 c*f votes of the members present, and, in the case of equality of votes, the Chair-man 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-A) If, for any reason, a Director nominated under Clause or Clause (c) of Section 10 is unable to attend any meeting of the Board, the State Government, the Reserve Bank or Development Bank established under the Industrial Finance Corporation of India Act, 1948 as the case may be, may depute any other person to attend the said meeting and such person shall,
(1) Subject to such general or special directions as the Board may from time to time give, tie Executive Committee may deal with any matter within the competence of the Board.(2) The minutes of every meeting of the Executive Committed shall be laid before the Board at the next following meeting of the Board.
The Financial Corporation may appoint one or more advisory committee or committees 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.
The Financial Corporation shall establish its head office and other offices and agencies at such place 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.
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:Provided that the State Government may, in consideration with and after obtaining the advice of the Development Bank, specify the class or categories of posts in respect of which appointments may be made by the Board on such remuneration and other conditions of service as the Board may determine, and no regulation made under this Act shall apply to such posts in respect of matters as determined by the Board.
The Board in discharging its functions under this Act shall act on business principles, due regard being had by it to the interests of industry, commerce and the general public.
(1) The Financial Corporation may, subject to the provisions of this Act, carry on and transact any of the following kinds of business, namely,—(a) guaranteeing, on such terms and conditions as may be agreed upon,—(i) loans 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;(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;(ca) transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns;(d) acting
(1) On and from the commencement .of the State Financial Corporation (Amendment) Act, 1972, the Financial Corporation shall not enter into an arrangement under Clauses (a), (ca) or (g) of Section 25 with any industrial concern so that the total amount outstanding against that concern in respect of all such arrangements together with the amount of the face value of the shares and stocks of that concern whether subscribed or agreed to be subscribed and the outstanding liabilities on account of under-writing agreement and the deferred payment guarantees, is more than—(i) thirty lakhs of rupees in the case of a company as defined in Section 3 of the Companies Act, 1956 or a co-operative society registered under the Co-operative Societies Act, 1912 or any other law relating to co-operative societies for the time being in force; and(ii) fifteen lakhs of rupees in any other case.(2) Not
(1) In entering into any arrangement under Section 25 with an industrial concern, the financial corporation may impose such conditions as it may think necessary or expedient for protecting the interest of the financial corporation and securing that the accommodation granted by it is put to the best use by the industrial concern.(2) Where, any arrangement entered into by 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 contained to the contrary in the Companies Act, 1956, or in the memorandum, articles of association or any other instrument relating to the industrial concern, and any provision regarding the State, qualification, age, limit, number of directorshi
(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) Section 25 subscribe to the shares or stock of any company ;(c) grant by loan or advance on the security of its own shares;(d) grant any form of assistance to any industrial concert in respect of which the aggregate of the paid-up share capital and free reserves exceeds one crores of rupees.(2) The financial corporation shall not enter into any kind of business with any industrial concern of which any of the Directors of the financial corporation is a proprietor, partner, director, manager, agent, employee or guarantor, or in which one or more Directors of the financial corporation substantial interest:Provided that his section shall not apply to any industrial concern if any Director
(1) Where any industrial concern, which is under a liability to the financial corporation under an agreement, makes any default in repayment, 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 by the possession of both the industrial concern, as well as 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
Notwithstanding anything in any agreement to the contrary, the Financial Corporation 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 Corporation—(a) if it appears the Board that false or misleading information in any material particular was given by the industrial concern in its application for the loan or 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 loan or advance; or(c) if there is reasonable apprehension that the industrial concern is unable to pay its debts or that proceedings for liquidation may be commenced in respect thereof; or(d) if the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan
(1) Where an industrial concern, in breach of any 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 or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance undek1 Section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of Section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 any officer of the Financial Corporation, generally or specially authorized by the Board in this behalf, may apply to the District Judge within the limit of whose jurisdiction industrial concern carries on the whole or a substantial part of its business for one or more of the following re
Section 31 of the State Financial Corporations (SFC) Act, 1951, provides a special statutory mechanism for the enforcement of claims by financial corporations against defaulting industrial concerns, including the sale of mortgaged or hypothecated assets. It aims to facilitate quick recovery and enforcement without resorting to lengthy civil suits, thus serving as a specialized remedy tailored for financial institutions.
Section 31 authorizes officers of the financial corporation, duly empowered, to approach a District Judge for reliefs such as sale of pledged/mortgaged property, transfer of management, or injunctions, in cases of default by an industrial concern. It establishes a procedure for initiating proceedings, investigating claims, and executing orders, but explicitly states that these proceedings do not amount to a suit or a decree for money.
"Nature of Proceedings" - Proceedings under Section 31 are summary enforcement measures, not a suit or decree for money; orders are akin to execution proceedings. [Gujarat State Financial Corporation v. Natson Mfg. (1978) SC 1765]
"Enforcement Against Guarantors" - Section 31(1)(aa), as amended, authorizes enforcement against guarantors, including sale of mortgaged properties, without exhausting remedies against principal debtors. [Maharashtra State Financial Corpn. v. Jaycee Drugs, 2004]
"No Decree for Money" - Orders under Section 31 do not amount to a money decree; they are executive in nature and do not create a debt or liability in the civil sense. [Rajasthan Finance Corpn. v. SpotLaw]
"Jurisdiction of District Judge" - The District Judge's jurisdiction is limited to enforcement of security; he cannot adjudicate on the validity of contracts or claim amounts as in a civil suit. [Delhi Financial Corporation v. Ram Prashad, 1981]
"Summary Nature" - The proceedings are summary, aimed at quick recovery, and do not bar the corporation from initiating civil suits for the same claim later. [Gujarat State Financial Corporation v. Natson Mfg. (1978) SC 1765]
"Order of Sale" - The order for sale of mortgaged or pledged property is not a decree but an execution order, which can be challenged if statutory procedures are violated. [Rajasthan Finance Corpn. v. SpotLaw]
"Proceedings against Guarantors" - Post-amendment, proceedings can be initiated against guarantors, including sale of mortgaged properties, without prior exhaustion of remedies against principal debtor. [Maharashtra State Financial Corpn. v. Jaycee Drugs, 2004]
"Scope of Investigation" - The investigation under Section 32(6) is limited to the claim of the financial corporation; courts are not to examine the validity of the underlying contract or agreement. [State Bank of India v. Union of India, 1994]
"Limitation" - Proceedings under Section 31 are subject to limitation, and claims invoked after the prescribed period are barred, similar to civil suits. [Tamil Nadu Industrial Investment Corp. v. S. S. Subramanian, 1994]
"Appeal and Maintenance" - Orders under Section 31 are not decree or judgments; appeals are limited, and deposit of amount may not be mandatory for appealability. [Gujarat State Financial Corporation v. Natson Mfg., 1978]
"Procedure and Formalities" - The section prescribes a specific procedure involving notice, investigation, and execution, emphasizing adherence to statutory mandates; failure to follow procedures can lead to orders being set aside. [Karnataka State Financial Corporation v. M. S. Raghunath, 2008]
"Enforcement of Security" - The primary aim is to enforce security by sale or transfer, not to adjudicate on contractual disputes or claim validity. [Maharashtra State Financial Corpn. v. Jaycee Drugs, 2004]
"No Preference over Other Creditors" - Section 31 proceedings do not confer priority or preference over other creditors; they are enforcement measures within the creditor hierarchy. [Rajasthan Finance Corpn. v. SpotLaw]
"Legal Nature" - Orders under Section 31 are akin to execution orders, not judgments; hence, they do not create a debt or liability enforceable as a decree. [Gujarat State Financial Corporation v. Natson Mfg., 1978]
"Protection of Natural Justice" - The courts have held that violations of principles of natural justice, such as non-service of notice, can invalidate proceedings or sales. [State Bank of India v. Union of India, 1994]
"Interplay with Civil Law" - While Section 31 provides a quick remedy, civil suits for recovery remain available, and the proceedings are not a substitute but a supplement. [Karnataka State Financial Corporation v. M. S. Raghunath, 2008]
Section 31 of the SFC Act is a specialized, summary procedure designed for the quick enforcement of security interests, such as sale of mortgaged or hypothecated assets, transfer of management, or injunctions. It does not amount to a civil suit or judgment for money, and orders passed are execution-like. The proceedings are subject to procedural safeguards, principles of natural justice, and limitations. They are intended to supplement, not replace, civil remedies, and courts have consistently emphasized strict adherence to statutory procedures and the non-declaratory nature of orders under this section.
Note: The interpretation and application of Section 31 have evolved through judicial pronouncements, emphasizing its procedural nature, the limits of jurisdiction, and the importance of following statutory procedures to ensure legality and fairness of enforcement actions.
(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 proceedings taken under Section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment.(2) When the application is for the relief mentioned in Clauses (b) of the 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 industri
(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 as many persons as it thinks fit,—(a) in any case in which the industrial concern is a company defined in the Companies Act, 1956, to the Directors of that industrial concern; or(b) in any other case, to be Administrators of that industrial concern.(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 or in any other law for the time being in force or in any instrument relating to the industrial concern shall, in so far as it makes in relation to a
On the issue of a notified order under Section 32-A,—(a) in any case in which the industrial concern is a company as defined in the Companies Act, 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 0f the notified order, shall be deemed to have vacated their offices as 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, the managing agent, if any appointed under Section 32-A shall be deemed to have been duly appo
(1) Subject to the control of industrial concern, the Directors, or as the case may be, the Administrators appointed under Section 32-A, shall take such steps as may 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 32-A, 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 at any time before the issue of the notified order under Section 32-A, 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
(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 managing agent or Managing Director, or any other Director or manager or any such person in charges of management to recover from the industrial concern, moneys recoverable otherwise than by way of such compensation.
(1) Where the management of an industrial concern, being a company as defined in the Companies Act, 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 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 provisions contained in this Act and subject to such o
(1) Where the management of an industrial concern not being a company as defined in the companies Act, 1956, is taken over by the financial corporation, no suit or proceedings for dissolution or for partition shall, in so far as it relates to 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 the consent of the financial corporation.
(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 be made therefrom.(2) All moneys belonging to the fund shall be deposited in the Reserve Bank or in any of the Banks specified in Column 2 of the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or, in consultation with a Reserve Bank, in a scheduled bank or a State Co-operative Bank.
The financial corporation may invest its funds in the securities of the Central Government or of any State Government.
(1) The financial corporation shall establish a reserve fund.(2) After making provision for bad and doubtful debts, depreciation of assets and all other matters which are usually provided for by banking companies, the financial corporation may out of its net annual profits declare a dividend :Provided that for so long as the reserve fund is less than the paid-up share capital of the financial corporation and until there has been repaid to the State Government such sum, if any, as that Government may have paid under guarantee given in pursuance of Section 6 or Section 7 or Section 8 the rate of such dividend shall not exceed the rate guaranteed by the State Government under Section 6.(3) [Omitted by the State Financial Corporations (Amendment) Act, 1972.]
(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, the Reserve Bank and the Development Bank on the shares of the financial corporation as may be fixed by agreement between the State Government and the Reserve Bank :Provided that the total amount in the said fund shall, at no time, exceed twenty five per cent of the paid-up share capital of the financial corporation :Provided further that after the specified date this sub-section shall have effect as if for the words “the State Government, the Reserve Bank and the Development Bank”, the words “the State /Government and the Development Bank” have been substituted except as regards all dividends accruing in respect of any completed accounting period prior to the specified date.(2) No shareholder of the financial corporati
(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 three 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.(2) The shareholders present at the annual general meeting shall be entitled to discuss the annual accounts, the report of the Board on the working of the financial corporation throughout the year and the auditor’s report on the annual balance-sheet and accounts.
(1) The affairs of the financial corporation shall be entitled by auditors duly qualified to act as auditors of companies under sub-section (1) Section 226 of the Companies Act, 1956, who shall be appointed by the State Government in consultation with the Comptroller and Auditor-General of India and the financial corporation shall pay the auditors so appointed such remuneration as the State Government may fix :Provided that where such other auditors are to be elected for the first time after the establishment of the financial corporation, the Board may appoint such auditor or auditors who shall hold office until the election is held.(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
(1) The Development Bank at any time may, with the approval of the Central Government, and on being directed so to do by that Government shall cause an inspection to be made by one or more of its officers of the working of any Financial Corporation and its book and accounts ; and the Development 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.(2) It shall be the duty of every Director or every officer of the Financial Corporation 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 to 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 a
(1) The Financial Corporation shall furnish a statement, in the prescribed form, of its assets and liabilities as at the close of business on the last Friday of each month, or, if that day is a public holiday under the Negotiable Instruments Act, 1881, as at the close of business on the preceding working day to the State Government, the Development Bank or the Reserve Bank within ten days from the date to which the statement relates.(2) The Financial Corporation shall furnish in the prescribed form to the State Government, or the Development Bank or to the Reserve Bank once every three months or, as frequently as the State Government or the Reserve Bank may require, a statement showing the classification of its loans and investments and of all loans guaranteed by it and underwriting agreements entered into by it.(3) The Financial Corporation shall furnish to the State Government, the Dev
(1) In the discharge of its functions, the Board shall be 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 Development 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) 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 sub-section (4) of Section 37-A the State Government shall have the power to supersede the Board in set up, and the decision of the State Government as to the grounds for superseding the Board shall not be questioned in any Court.
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 form set out in the Schedule.
(1) Every Director shall be indemnified by the Financial Corporation against all losses expenses incurred by him in the discharge of his duties except such as are caused by his own wilful act or default.(2) A, Director sha11 not be responsible for any other Director or for any other employee of the Financial Corporation or for any loss or expenses resulting 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 Corpora ion or by the wrongful act of any person under obligation to the Financial Corporation or by anything done in good faith in the execution of the dunes of his office or in relation thereto.
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 of Section 27 or Section 32-A for anything which is in good faith done or intended to be done by him as such Director, Administrator, managing agent or manager.
(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 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
For the purposes of the Indian Income-tax Act, 1922 [Now The Income-tax Act, 1961], the Financial Corporation shall be deemed to be 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 Section 6 or Section 7 or Section 8 shall not be treated as the Income profits and gains of the Financial Corporation and any Merest on Dentures bonus or deposits paid by the Financial Corporation out of such sum shall not be treated a expenditure incurred by it :Provided further that in the case of any shareholder 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 inte
The Board may, by general or special order, delegate to the Managing Director or to any other officer of the Financial Corporation 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.
The Financial Corporation shall be deemed to be a bank for the purposes of the Bankers’ Books Evidence Act, 1891.
No provision of law relating to the winding up of companies 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.
(1) The Central Government may, by notification in the official Gazette, direct that all or any the provisions of this Act shall, subject to such exceptions and restrictions as may be specified, apply to any institution in existence at the commencement of this Act which has for its object the financing of industrial concerns, and on the issue of such notification shall be deemed to be a Financial Corporation established by the State Government for the State within the meaning of this Act, and the provisions of this Act shall become applicable thereto according to the tenor of the notification.(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.
(1) Where a Financial Corporation has been established 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 any area therein and the States, after consultation with the Development 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 a notification in the official Gazette by the Central Government serve the needs of those States or, as the case may be, of the areas 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 Financial Corporations of States and in relation to different areas of the States.(1-A) Any agreement entered into under sub-section (1) may be
The provisions of this Act and of any rules 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.
The State Government may make rules not inconsistent with the provisions of this Act to give effect to the provisions of this Act and particulars. Such rules may provide for the limitation on the voting rights of a shareholder and the manner in which such voting rights may be exercised and where there is any inconsistency between the rules and the regulations made under this Act, the rules shall prevail.
(1) The Board may, after consultation with the Development Bank and with the previous sanction of the State Government, make regulations not inconsistent with this Act arid 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 foreging powers, 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
If any difficulty arises in giving effect to the provisions of this Act, as amended by the Public Financial Corporations Laws (Amendment) Act, 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.
SCHEDULE
[See Section 40] Declaration of fidelity and secrecyI,..................do hereby declare that I faithfully, truly and to the best of myskill 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,Signature Signed before me________
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