State Financial Corporation Act, 1951
(1) This Act may be called the State Financial Corporations Act, 1951.
(2) It extends to the whole of India 1[x x x]
(3) It shall come into force in any State on such date2 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;
1[(aa) "Development Bank" means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);]
2[(b) "Financial Corporation" means a Financial Corporation established under section 3 and includes a Joint Financial Corporation established under section 3A;]
3[(c) "industrial concern" means any concern engaged or to be engaged in--
(i) the manufacture, preservation or processing of goods;
4[(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 5[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
(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 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 1[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 2[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 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) An 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 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
1[(1) The authorised capital of the Financial Corporation shall be such sum 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-section (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.
2[(1)The State Government may, in consultation with the 3[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 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 3[Small Industries Bank], determine;
(b) subscribed by the State Government and the 4[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 4[Small In
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, and vested in, the 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) On and after the commencement of the State Financial Corporations (Amendment) Act, 2000, the Financial Corporation may--
(a) issue redeemable preference shares on such terms and in such manner as the Board may decide; and
(b) convert, such number of equity shares as it may decide into redeemable preference shares, with the prior approval of the State Government and the Small Industries Bank, by a resolution passed in the general meeting of the shareholers:
Provided that such conversion shall in no case reduce the equity shares held by the parties referred to in clauses (a), (b) and (c) of sub-section (3) of section 4 to less than fifty-one per cent. of the issued equity capital of the Financial Corporation.
(2) The redeemable preference shares referred to in sub-section (1) shall--
(a) carry such fixed rate of dividend as the Financial Corporation may specify at the time of such issue or conversion; and
(b) neither be transferable nor ca
(1) The Financial Corporation, with the prior approval 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 any way.
(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced by--
(a) extinguishing or reducing the liability on any of its equity shares in respect of share capital not paid-up; or
(b) either with or without extinguishing or reducing 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.]
Every shareholder of the Financial Corporation holding equity shares shall have a right to vote in respect of such shares on every resolution and his voting right on a poll shall be in proportion to his share of the paid-up equity capital of the Financial Corporation:
Provided, however, that no shareholder, other than a shareholder referred to in clauses (a), (b) and (c) of sub-section (3) of section 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.]
In a general meeting referred to in clause (b) of sub-section (1) of section 4D and sub-section (1) of section 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.]
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 outstanding 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 Small Industries Bank.]
(1) Save as otherwise provided in sub-section (2), the shares of the Financial Corporation shall be freely transferable.
(2) Nothing contained in sub-section (1) shall entitle the parties referred to in clauses (a) (b) and (c) of sub-section (3) of section 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 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)
(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 not exceeding the face value of the shares held by him.
(2) The option referred to in sub-section (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 the shareholder within three months from the date of receipt of such option.
(3) The option exercised under sub-section (2) shall be final and shall not be altered or rescinded after it has been exercised.
(4) If, a shareholder exercises option for receiving the payment
(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 to 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 section 20 of the Indian Trusts Act, 1882 (2 of 1882) and also to be approved securities for the purpose of t
(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:
Provided further that the State Government may permit the Financial Corporation to accept deposits up to a higher limit not exceeding ten times the paid-up share capital of the Financial Corporation.
(2) Any depsoit accepted under sub-section (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.]
(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.
The Board of directors shall consist of the following, namely:--
(a) a director to be nominated as chairman under sub-section (1) of section 15;
(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 a Joint Financial Corporation, the director, who shall have special knowledge of, or exprience 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 Industrie
(1) A nominated director shall hold office during the pleasure of the authority nominating him.
(2) Subject to the provisions of sub-section (1), a nominated director shall hold office for such term not exceeding three 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 section 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 years.
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 has 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.
1[(1)] The 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.
2[(2) The shareholders, other than those mentioned in clauses (a), (b) and (c) of sub-section (3) of section 4, whose names are entered on the register of shareholders, may, after giving to the director a resonable 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 such shareholders, remove any director elected under clause (d) of section 10 and elect in his place another person to fill the vacancy so caused.]
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.
(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) 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 on such terms and conditions as the Small Industries Bank may 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 eligible for re-appointment as Chairman.
(2) The Chairman shall preside over the meetings of the Board and the general meetings of the Financial Corporation.]
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[(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[(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.]
3[(3) Notwithstanding anything contained in sub-section (1), the State Government, with prior
(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:
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 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.]
(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 regulation 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 second or casting vote.
(3) No director shall vote on any matter in which he is interested.
1[x x x x]
2[x x x x]
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[x x x x] authorised by the Chairman of the Board in writing shall preside at such meeting, but if the director so
(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.
The Financial Corporation may appoint 1[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.
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.].
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:
1[x x x x]
The Board in discharging its functions under this Act shall act on business principles, due regard being had by it be the interests of industry, commerce and the general public.
2[(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 or other financial institutions;
(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 t
The Financial Corporation shall have the right to acquire, by transfer or assignment, 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 loan or advance granted or any amount recoverable by such institution, either in whole or in part, by the execution or issue of any instrument or by the transfer of any instrument by endorsement or in any other manner:
Provided that such loan or advance or amount relates to any business which the Financial Corporation may transact under this Act.]
The Financial Corporation may receive gifts, grants, donations or benefactions from Government or any other source.]
On and from the commencement of the State Financial Corporations (Amendment) Act, 2000, the Financial Corporation shall not enter into any arrangements under clause (a), (d) or (h) of
sub-section (l) 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 underwriting agreements and the deferred payments guarantees is more than--
(i) five hundred lakhs of rupees in the case of a corporation established by or under any other law or a company as defined in section 3 of the Companies Act, 1956 (1 of 1956) or a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912) or any other law relating to co-operative societies for the time being in force; and
(ii) two hundred lakhs of rupees in an
(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 interests of the Financial Corporation and securing that the accommodation granted by it is put to the best use by the industrial concern.
1[(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 to the contrary contained in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the industrial concern, and any provision regarding share qualification, age limit, number of directorships, removal
1[(1)] The Financial Corporation shall not--
2[(a) except as provided in section 8, accept deposits;
(b) except as provided in clauses 3[(da)], (f) and (g) of sub-section (1) of section 25, subscribe to the shares or stock of any company;]
(c) grant any loan or advance on the security of its own shares;
4[(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 amount not exceeding thirty crores of rupees as the State Government, on the recommendation of the Small Industries Bank, may, by notification in the Official Gazette, specify.]
3[(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, o
(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 1[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 2[right to take over the management orpossession or both of the industrial concerns], as well as the 3[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 4[x x x x] under sub-section (1), shall vest in the transferee all rights in or to the property transferred 5[as if the transfer] had been made by the owner of the property.
(3) The
Notwithstanding any thing 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 to 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 a 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 or advance is not insured and kept insured by the industrial concern to the sati
(1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof 1[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 under section 30 and the industrial concern fails to make such repayment, 2[then, without prejudice 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 on the whole or a substantial part of its business for one or more of the following reliefs, namely:--
(a) for
(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.
1[(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 3
(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 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 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.]
2[(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, in so far as it makes in relation to a director, any provision for the holding of
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 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 (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 the memorandum and artic
(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 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 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,
(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 charge 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 (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 ot 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 other exceptions, restrictions and limitations, if any,
(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 Corporation, no suit or proceedings for dissolution or for partition shall, insofar 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 consent of the Financial Corporation.]
Where any amount is due to the Financial Corporation in respect of any accommodation 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 Government may specify in this behalf, is satisfied, after following such procedure 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 an arrear of land revenue.]
(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 1[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)] 2[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 (5 of 1970) 3[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)] 4[or, in consultation with the Reserve Bank, in a scheduled bank or a State Co-operative Bank].
The Financial Corporation may invest its funds in accordance with applicable guidelines and prudential norms as may be prescribed and in such securities as the Board may decide from time to time.]
(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:
1[x x x x]
2[x x x x]
(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 Development Bank and the Small Industries Bank on the shares of the Financial Coporation 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 Industries 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
(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 1[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.
2[(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 discus
1[(1) The accounts of the Financial Corporation shall be audited by auditors duly qualified to act as the auditors under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 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 to examine 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 to the books, accounts and other documents of the Financial Corporation and may in relation to such accounts examine any director or officer of the Financial Corporation.
(3) The auditors shall make a repor
(1) The 3[Small Industries 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 books and accounts; and the 2[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.
(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 anything contained in the Indian Evidence A
1[(1) The Financial Corporation shall furnish to the State Government, the 2[Small Industries Bank] and the 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 3[to the State Government, the 2[Small Industries Bank] and the Reserve Bank] within 4[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.
(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 1[in consultation with 2[and after obtaining the advice of,] the 3[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.
4[(2A) Nothing contained in sub-section (1) and sub-section (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 State Government, the State Government may advise the Financial Corporations 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
1[(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 the affairs of, its constituents except in circumstances in which it is, in accordance with the law or practice and usage, customary among bankers, necessary or appropriate 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--
(a) the Central Government;
(b) the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955), any subsidiary bank within the meaning of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking
(1) Every director shall be indemnified by the Financial Corporation against all losses as are caused by his own wilful act or default.
(2) A director shall not be responsible for any director or for any officer or other 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 the wrongful act of any person under obligation to the Financial Corporation or by anything done in good faith in the execution of the duties 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 32A for anything which is in good faith done or intended to be done by him as such director, administrator, managing agent or manager.]
(1) Notwitstanding 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 in the prescribed manner, the amount due on such deposits, bonds or securities shall, on the death of the depsoitor 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 the provisions of sub-section (1) shall constitute a full discharge to the Financial Corporation of its liability in respect of such depsoits, bonds or securities.]
(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 Corporation authorised by the Board in this behalf.
For the purposes of the 1[Income-tax Act, 1961(43 of 1961)], the Financial Corporation 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[x x x x] 3[section 7 or section 8] shall not be treated as the income, profits and gains of the Financial Corporation and any interest on debentures, 4[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 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 5[his] income from "interest on securities" 6[and the income-tax shall be payable thereon as if it were the interest receivable on an
The Board may, by general or special order, delegate to the managing director or to any other officer of the Financial Corporation 2[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.]
(1) The minutes of every meeting of the committee appointed under section 21 shall, after confirmation thereof at the next meeting of the committee, be laid before the Board at the next following meeting of the Board.
2[x x x x]]
The Financial Corporation shall be deemed to be a bank for the purposes of the bankers' Books Evidence Act 1891 (XVIII of 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 of the provisions of this Act shall, subject to such exceptions and restrictions as may be specified, apply to 1[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 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[Provided that 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 notifica
(1) Where a Financial Corporation has been established for any State 2[and one or more other States not served in whole or in part by a Financial Corporation] desires that the Financial Corporation 3[should serve the needs of those States or of any area therein], and the States, after consultation with the 4[Small 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 a notification in the Official Gazette by the Central Government, serve the needs of those States 5[or, as the case may be, of the area therein] in terms of the agreement 5[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].
4[(1A) Any agreement entered into under sub-sectio
1[x x x x]
(1) The Board may, after consultation with the 1[Small Industries 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 and duties of shareholders;
<
2[x x x x] and every regulation made under section 48 shall be laid, as soon as may be after it is made, before the State Legislature.]
(1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power such rules may provide for the procedure for filing and hearing of appeals under sub-section (5) of section 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 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 prejudi
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 1
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.
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