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THE NEGOTIABLE INSTRUMENTS ACT, 1881

Legal India — Sun, 31 May 2009 11:51:29 +0000

CHAPPRELIMINARY
PRELIMINARY

1.Short title.
1.Short title. This Act may be called the Negotiable Instruments
Act, 1881.Local extent. Saving of usages relating to hundis, etc. It extends to the whole of India but nothing herein contained affects the
Indian Paper Currency Act, 1871, (3 of 1871). section 21, or .affects any local usage relating to any instrument in an oriental language :
Provided that such usages may be excluded by any words in the body of the instrument which indicate an intention that the legal relations of the parties thereto shall be governed by this Act and it shall come into force on the first day of March, 1882.2.Commencement.
2.Commencement. [Repeal of enactments.] Rep. by the Amending Act,
1891 (12 of 1891), s. 2 and Sch. 1.
3.Interpretation-clause.
3.Interpretation-clause. In this Act-

3* * * * * *
4["banker" includes any person acting as a banker and any post office savings bank;]

5* * * * * *

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1 The words “except the State of Jammu and Kashmir”, which were subs.
by Act 3 of 1951 for ” except Part B States “, omitted by Act 62 of
1956, s. 2 and Sch.

2 Rep. by the Indian Paper Currency Act, 1923 (10 of 1923). See now the Reserve Bank of India Act, 1934 (2 of 1934), s. 31.3 Definition of the word ” India”, which was subs. by Act 3 of 1951.for the definition of the word ” State “, omitted by Act 62 of 1956, s. 2 and Sch.

4 Subs. by Act 37 of 1955, s. 2, for the definition of the word
“banker”.

5 Omitted by Act 53 of 1952, s. 16 (w.e.f. 14-2-1956).

Extended to Laccadive Minicoy and Amindivi Islands (w.e.f. 1-10-1967):
vide Reg. 8 of 1965, s. 3 & Sch.

Extended to Goa, Daman and Diu with modifications, by Reg. 12 of 1962.s. 3 & Sch.

Extended to and brought into force in Dadra and Nagar Haveli (w.e.f.
1-7-65) by Reg. 6 of 1963, s. 2 and Such. I.
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12.CHAP

OF NOTES, BILLS AND CHEQUES
OF NOTES, BILLS AND CHEQUES

4.”Promissory note”.
4. “Promissory note”. A ” promissory note” is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Illustrations
A signs instruments in the following terms

(a) “I promise to pay B or order Rs. 500.”
(b) ” I acknowledge myself to be indebted to B in Rs. 1,000
to be paid on demand, for value received.”

(d) I promise to pay B Rs. 500 and all other sums which shall be due to him.”
(e) I promise to pay B Rs. 500, first deducting thereout any money which he may owe me.”

(f) ” I promise to pay B Rs. 500 seven days after my marriage with C.”
(g) ” I promise to pay B Rs. 500 on Ds death, provided D
leaves me enough to pay that sum.”

(h) ” I promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next.”
The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g)
and (h) are not promissory notes.

5.”Bill of exchange”.
5.”Bill of exchange”. A “bill of exchange” is an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

A promise or order to pay is not ” conditional “, within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on ,the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.

The sum payable may be “certain”, within the meaning of this section and section 4, although it includes future interest or is pay-
able at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due.

The person to whom it is clear that the direction is given or that payment is to be made may be a “certain I person”, within the

13.meaning of this section and section 4, although he is mis-named or designated by description only.

6.”Cheque”.
6.”Cheque”. A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.
7.Drawer, Drawee.
7.Drawer, Drawee. The maker of a bill of exchange or cheque is called the drawer “; the person thereby directed to pay is called the
” drawee” .

Drawee in case of need. When in the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a ” drawee in case of need “.

Acceptor. After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called the ”
acceptor “.

Acceptor for honour.1[When a bill of exchange has been noted or protested for nonacceptance or for better security,] and any person accepts it supra protest for honour of the drawer or of any one of the endorsers , such person is called an ” acceptor for honour “.

Payee. The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the “payee”.
8.”Holder”.
8.”Holder”. The ” holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.
9.”Holder in due course”.
9.Holder in due course. ” Holder in due course ” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if 2[payable to order,]

before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

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1 Subs. by Act 2 of 1885, s. 2, for ” When acceptance is refused and the bill is protested for non-acceptance”.

2 Subs. by Act 8 of 1919, s. 2, for ” payable to, or to the order of, a payee,”.
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14.10.”Payment in due course”.
10.”Payment in due course”. “Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned.
11.Inland instrument.
11.Inland instrument. A promissory note, bill of exchange or cheque drawn or made in 1 [India], and made payable in, or drawn upon any person resident in, 1 [India] shall be deemed to be an inland instrument.

12.Foreign instrument.
12.Foreign instrument. Any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.
13.Negotiable instrument.
13.2[(1)Negotiable instrument. A " negotiable instrument "
means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Explanation (i).-A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation (ii).-A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation (iii).-Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be pay-
able to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.]

3[(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or -some of several payees.]
14.Negotiation.
14.Negotiation. When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.

15.Indorsement.
15.Indorsement. When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended

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1 Subs. by Act 36 of 1957, s. 3 and Sch. II, for ” a State”.
2 Subs. by Act 8 of 1919, s. 3, for the original sub-section.
3 Ins. by Act 5 of 1914, s. 2.———————————————————————
15.to be completed as a negotiable instrument, he is said to indorse the same, -and is called the ” indorser “.
16.Indorsement in “blank” and “in full”.
16.1[(1)] Indorsement in “blank” and “in full”. If the indorser signs his name only, the indorsement is said to be ” in blank,” and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be
” in full ” ; and the person so specified is called the ” indorsee ”
of the instrument.
1[(2)Indorsee. The provisions of this Act relating to a payee shall apply with the necessary modifications to an indorsee.]

17.Ambiguous instruments.
17.Ambiguous instruments. Where an instrument may be construed either as a promissory note or bill of exchange, the holder may at his election treat it as either, and the instrument shall be thenceforward treated accordingly.

18.Where amount is stated differently in figures and words.
18.Where amount is stated differently in figures and words. If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.
19.Instruments payable on demand.
19.Instruments payable on demand. A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand.
20.Inchoate stamped instruments.
20.Inchoate stamped instruments. Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in 2[India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount: provided that no person other than a holder in due course shall recover from the person delivering the instrument any thing in excess of the amount intended by him to be paid thereunder.

21.”At sight”. “On presentment”.
21. “At sight”. “On presentment”. In a promissory note or bill of exchange the expressions ” at sight ” and ” on presentment ” mean on demand. The expression

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1 Ins. by Act 5 of 1914, s. 3.2 Subs. by Act 3 of 1951, s. 3 and Sch., for “the States”.
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16.”after sight ” means, in a promissory note, after presentment for sight, and, in a bill of exchange, after acceptance, or noting for nonacceptance, or protest for non-acceptance.
22.”Maturity”
22. “Maturity”. The maturity of a promissory note or bill of exchange is the date at which it falls due.

Days of grace. Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable.
23.Calculating maturity of bill or note payable so many months afterdate or sight.
23. Calculating maturity of bill or note payable so many months after date or sight. In calculating the date at which a promissory note or bill of exchange, made payable a stated number of months after date or after sight, or after a certain event, is at maturity, the period stated shall be held to terminate on the day of the month which corresponds with the day on which the instrument is dated, or presented for acceptance or sight, or noted for non-
acceptance, or protested for nonacceptance, or the event happens, or, where the instrument is a bill of exchange made payable a stated number of months after sight and has been accepted for honour, with the day on which it was so accepted. If the month in which the period would terminate has no corresponding day, the period shall be held to terminate on the last day of such month.
Illustrations

(a) A negotiable instrument, dated 29th January 1878, is made payable at one month after date. The instrument is at maturity on the third day after the 28th February 1878.(b) A negotiable instrument, dated 30th August 1878, is made payable three months after date. The instrument is at maturity on the
3rd December 1878.(c) A promissory note or bill of exchange, dated 31st August
1878, is made payable three months after date. The instrument is at maturity on the 3rd December ,1878.24.Calculating maturity of bill or note payable so many days after dateor sight.
24. Calculating maturity of bill or note payable so many days after date or sight. In calculating the date at which a promissory note or bill of exchange made payable a certain number of days after date or after sight or after a certain event is at maturity, the day of the date, or of presentment for acceptance or sight, or of protest for non-acceptance, or on which the event happens, shall be excluded.

25.When day of maturity is a holdiay.
25. When day of maturity is a holdiay.When the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the next preceding business day.
17.Explanation.-The expression ” public holiday ” includes Sundays:
1** * and any other day declared by the 2[Central Government], by notification in the Official Gazette, to be a public holiday.

CHAPTER III

PARTIES To NOTES, BILLS AND CHEQUES

26.Capacity to make, etc., promissory notes, etc.

26. Capacity to make, etc., promissory notes, etc.Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque.

Minor. A minor may draw, indorse, deliver and negotiate such ins-
trument so as to bind all parties except himself.

Nothing herein contained shall be deemed to empower a corporation to make, indorse or accept such instruments except in cases in which, under the law for the time being in force, they are so empowered.

27.Agency.

27. Agency. Every person capable of binding himself or of being bound, as mentioned in section 26, may so bind himself or be bound by a duly authorized agent acting in his name.

A general authority to transact business and to receive and dis-
charge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal.

An authority to draw bills of exchange does not of itself import an authority to indorse.

28.Liability of agent signing.

28. Liability of agent signing. An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.

29.Liability of legal representative signing.

29. Liability of legal representative signing.A legal representative of a deceased person who signs his name to a promissory note., bill of exchange or cheque is liable

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1 The words “New Years day, Christmas day: if either of such days falls on a Sunday, the next following Monday ; Good-Friday;” omitted by Act 37 of 1955, s. 3 (w.e.f. 1-4-1956).

2 Subs. by the A.O. 1937, for “L.G.”.
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18.personally thereon unless he expressly limits his liability to the extent of the assets received by him as such.

30.

Liability of drawer.

30.Liability of drawer. The drawer of a bill of exchange or cheque is bound, in case of dishonour by the drawee or acceptor thereof, to compensate tile holder, provided due notice of dishonour has been given to, or received by, the drawer as hereinafter provided.

31.Liability of drawee of cheque.

31. Liability of drawee of cheque. The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in. default of such payment, must compensate the drawer for any loss or damage caused by such default.

32.Liability of maker of note and acceptor of bill.

32. Liability of maker of note and acceptor of bill. In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand.

In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.

33.Only drawee can be acceptor except in need or for honour.

33.Only drawee can be acceptor except in need or for honour. No person except the drawee of a bill of exchange, or all or some of several drawees, or a person named therein as a drawee in case of need, or an acceptor for honour, can bind himself by an acceptance.

34.Acceptance by several drawees not partners.

34. Acceptance by several drawees not partners. Where there are several drawees of a bill of exchange who are not partners, each of them can accept it for himself, but none of them can accept it for another without his authority.

35.Liability of indorser.

35. Liability of indorser. In the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity without, in such indorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonour, provided due notice of dishonour has been given to, or received by, such indorser as hereinafter provided.

19.Every indorser after dishonour is liable as upon an instrument payable on demand.

36.Liability of prior parties to holder in due course.

36. Liability of prior parties to holder in due course.Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.

37.Maker, drawer and acceptor principals.

37. Maker, drawer and acceptor principals. The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be.

38.Prior party a principal in respect of each subsequent party.

38. Prior party a principal in respect of each subsequent party.As between the parties so liable as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a principal debtor in respect of each subsequent party.

Illustration

A draws a bill payable to his own order on B, who accepts. A
afterwards indorses the bill to C, C to D, and D to E. As between E
and B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C and D are his sureties. As between E and C, C is the principal debtor and D is his surety.

39.Suretyship.

39. Suretyship.When the holder of an accepted bill of exchange enters into any contract with the acceptor which, under section 134 or
135 of the Indian Contract Act, 1872,(9 of 1872) would discharge the other parties, the holder may expressly reserve his right to charge the other parties, and in such case they are not discharged.

Discharge of indorsers liability.

40. Discharge of indorsers liability. Where the holder of a negotiable instrument, without the consent of the indorser, destroys or impairs the indorsers remedy against a prior party, the indorser is discharged from liability to the holder to the same extent as if the instrument had been paid at maturity.

Illustration

A is the holder of a bill of exchange made payable to the order of B, which contains the following indorsements in blank:-

First indorsement, ” B.”

Second indorsement, ” Peter Williams.”

Third indorsement, ” Wright & Co.”

Fourth indorsement, ” John Rozario.”

This bill A puts in suit against John Rozario and strikes out, without John Rozarios consent, the indorsements by Peter Williams and
Wright & Co. A is not entitled to recover anything from John Rozario.

20.41.Acceptor bound,although, indorsement forged.

41.Acceptor bound,although, indorsement forged. An acceptor of a bill of exchange already indorsed is not relieved from liability by reason that such indorsement is forged, if lie knew or had reason to believe the indorsement to be forged when he accepted the bill.

42.Acceptance of bill drawn in fictitious name.

42.Acceptance of bill drawn in fictitious name. An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawers order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an indorsement by the same hand as the drawers signature, and purporting to be made by the drawer.

43.Negotiable instrument made, etc., without consideration.

43.Negotiable instrument made, etc., without consideration. A
negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

Exception I.-No party for whose accommodation a negotiable instrument has been made, drawn, accepted or indorsed can, if he have paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation.

Exception II.-No party to the instrument who has induced any other party to make, draw, accept, indorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover thereon an amount exceeding the value of the considera-
tion (if any) which he has actually paid or performed.

44.Partial absence or failure of moneyconsideration.

44. Partial absence or failure of moneyconsideration. When the consideration for which a person signed a promissory note, bill of exchange or cheque consisted of money, and was originally absent in part or has subsequently failed in part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

Explanation.-The drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of a promissory note, bill of exchange or cheque stands in immediate relation with the payee, and the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder.

21.Illustration

A draws a bill on B for Rs. 500 payable to the order of A. B
accepts the bill, but subsequently dishonours it by non-payment. A
sues B on the bill, B proves that it was accepted for value as to Rs.
400, and as an accommodation to the plaintiff as to the residue. A
can only recover Rs. 400.

45.Partial failure of consideration not consisting of money.

45.Partial failure of consideration not consisting of money.
Where a part of the consideration for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

1[45.Holders right to duplicate of lost bill.

1[45A.Holders right to duplicate of lost bill. Where a bill of exchange has been lost before it is over-due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again.

If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.]

Title : THE NEGOTIABLE INSTRUMENTS ACT, 1881

Year : 1881

Act :

CHAPTER III

PARTIES To NOTES, BILLS AND CHEQUES

26.Capacity to make, etc., promissory notes, etc.

Minor. A minor may draw, indorse, deliver and negotiate such ins-
trument so as to bind all parties except himself.

27.Agency.

27. Agency. Every person capable of binding himself or of being bound, as mentioned in section 26, may so bind himself or be bound by a duly authorized agent acting in his name.

A general authority to transact business and to receive and dis-
charge debts does not confer upon an agent the power of accepting or indorsing bills of exchange so as to bind his principal.

An authority to draw bills of exchange does not of itself import an authority to indorse.

28.Liability of agent signing.

29.Liability of legal representative signing.

29. Liability of legal representative signing.A legal representative of a deceased person who signs his name to a promissory note., bill of exchange or cheque is liable

30.

Liability of drawer.

31.Liability of drawee of cheque.

32.Liability of maker of note and acceptor of bill.

In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.

33.Only drawee can be acceptor except in need or for honour.

34.Acceptance by several drawees not partners.

35.Liability of indorser.

19.Every indorser after dishonour is liable as upon an instrument payable on demand.

36.Liability of prior parties to holder in due course.

36. Liability of prior parties to holder in due course.Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.

37.Maker, drawer and acceptor principals.

38.Prior party a principal in respect of each subsequent party.

Illustration

39.Suretyship.

Discharge of indorsers liability.

Illustration

A is the holder of a bill of exchange made payable to the order of B, which contains the following indorsements in blank:-

First indorsement, ” B.”

Second indorsement, ” Peter Williams.”

Third indorsement, ” Wright & Co.”

Fourth indorsement, ” John Rozario.”

20.41.Acceptor bound,although, indorsement forged.

42.Acceptance of bill drawn in fictitious name.

43.Negotiable instrument made, etc., without consideration.

44.Partial absence or failure of moneyconsideration.

21.Illustration

45.Partial failure of consideration not consisting of money.

1[45.Holders right to duplicate of lost bill.

If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do so.]

THE LEGAL TENDER (INSCRIBED NOTES) ACT, 1964

Legal India — Mon, 25 May 2009 10:37:14 +0000

An Act to restrict the negotiability of currency and other notes inscribed with messages of a political character.BE it enacted by Parliament in the Fifteenth Year of the Republic of India as follows:-

1.Short title and extent.
1. Short title and extent. (1) This Act may be called the Legal
Tender (Inscribed Notes) Act, 1964.(2) It extends to the whole of India.
2.Notes bearing messages of a political character not to be legaltender.
2. Notes bearing messages of a political character not to be legal tender. Notwithstanding anything contained in the Reserve Bank of India Act, 1934 (2 of 1934), or in the Currency Ordinance,
1940 (Ord. 4 of 1940), or in any other law for the time being in force, a currency note of the Government of India, a bank note issued by the Reserve Bank of India, or a Government of India one-rupee note issued under the Currency Ordinance, 1940, which bears written upon it any extrinsic words or visible representations intended to convey or capable of conveying a message of a political character, shall not be legal tender ; and the Reserve Bank of India shall not be under any legal obligation to receive any such note, or to issue rupee coin or other coin or currency notes or bank notes in exchange for any such note, or to refund the value of any such note:

Provided that the Reserve Bank of India may refund as of grace the whole or part of the value of any such note.
3.Repeal and savings.
3. Repeal and savings. (1) The Legal Tender (Inscribed Notes)
Ordinance, 1942 (Ord. 59 of 1942), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under this Act as If this Act were in force on the day on which such thing was done or such action was taken.

BANKING REGULATION ACT, 1949

Legal India — Sat, 23 May 2009 06:06:16 +0000

PART 1 :- PRELIMINARY

1. Short title, extent and commencement
(1) This Act may be called the Banking 2[Regulation] Act, 1949.

3[(2) It extends to the whole of India 4[* * *]

(3) It shall come into force on such date5 as the Central Government may, by notification in the Official Gazette, appoint in this behalf.

2. Application of other laws not barred
The provisions of this Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the 6[Companies Act, 1956 (1 of 1956)], and any other law for the time being in force.

7[3. Act to apply to co-operative societies in certain cases
Nothing in this Act shall apply to-

(a) a primary agricultural credit society;

(b) a co-operative land mortgage bank; and

4. Power to suspend operation of Act
(1) The Central Government, if on a representation made by the Reserve Bank in this behalf it is satisfied that it is expedient so to do, may by notification in the Official Gazette, suspend for such period, not exceeding sixty days, as may be specified in the notification, the operation of all or any of the provisions of this Act, either generally or in relation to any specified banking company.

(2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the powers of the Central Government under sub-section (1) so however that the period of suspension shall not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be published in the Gazette of India.

(3) The Central Government may, by notification in the Official Gazette, extend from time to time the period of any suspension ordered under sub-section (1) or sub-section (2) for such period, not exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed one year.

(4). A copy of any notification issued under sub-section (3) shall be laid on the table of 8[Parliament] as soon as may be after it is issued.

5. Interpretation
9[In this Act], unless there is anything repugnant in the subject or context,-

10[(a) approved securities means-

(i) securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Indian Trust Act, 1882 (2 of 1882)

(ii) such of the securities authorised by the Central Government under clause (f) of section 20 of the Indian Trust Act, 1882 (2 of 1882), as may be prescribed];

(b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.

Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;

12[(ca) banking policy means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources;]

13[(CC) branch or branch office, in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transacted;]

14[(d) company means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;]

15[(da) corresponding new bank means a 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 Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]

(e) 16[* * *]

(f) demand liabilities means liabilities which must be met on demand, and time liabilities means liabilities which are not demand liabilities;

17[(ff) Deposit Insurance Corporation means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);]

15[(ffa) Development Bank means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964)

(ffb) Exim Bank means Export-Import Bank of India established under section 3 of the Export-Import Bank of India Act, 1981 (28 of 1981);]

18[(ffc) Reconstruction Bank means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);]

19[(ffd) National Housing Bank means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987;]

(g) gold includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;

12[(gg) managing agent includes-

(i) secretaries and treasurers,

(ii) where the managing agent is a company, any director of such company, and any member thereof who holds substantial interest in such company,

(iii) where the managing agent is a firm, any partner of such firm;]

14[(h) managing director, in relation to a banking company, means a Director who,by virtue of agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of Directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a Director occupying the position of a Managing Director, by whatever name called:]

20[PROVIDED that the Managing Director shall exercise his powers subject to the superintendence, control and direction of the Board of Directors;]

21[(ha) National Bank means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);]

(i) 22[* * *1

(j) prescribed means prescribed by rules made under this Act;

21[(ja) regional rural bank means a regional rural bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);]

(k) 23[* * *]

10[(l) Reserve Bank means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);]

(m) 24[* * *]

(n) secured loan or advances means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and unsecured loan or advance means a loan or advance not so secured;

27[(ni) Small Industries Bank means the Small Industries Development Bank of India established under s. 3 of the Small Industries Development Bank of India Act, 1989;]

12[(na) small-scale industrial concern means an industrial concern in which the investment in plant and machinery is not in excess of seven and a half lakh of rupees or such higher amount, not exceeding twenty lakhs of rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, having regard to the trends in industrial development and other relevant factors;]

15[(nb) Sponsor Bank has the meaning assigned to it in the Regional Rural Banks Act, 1976 (21 of 1976)

(nc) State Bank of India means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);]

26[(nd)] subsidiary bank has the meaning assigned to it in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)

27[(ne)] substantial interest:-

(i) in relation to a company, means the holding of a beneficial interest by an individual or his spouse or minor child, whether singly or taken together in the shares thereof, the amount paid-up on which exceeds five lakhs of rupees or ten per cent of the paid-up capital of the company, whichever is less;

(ii) in relation to a firm, means the beneficial interest held therein by an individual or his spouse or minor child, whether singly or taken together, which represents more than ten per cent of the total capital subscribed by all the partners of the said firm;

28[(o) all other words and expressions used herein but not defined and defined in the Companies Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.]

(2) 29[* * *]

28[5A. Act to override memorandum, articles, etc.
Save as otherwise expressly provided in this Act,

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a banking company, or in any agreement executed by it, or in any resolution passed by the banking company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959); and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of. this Act, become or be void, as the case may be.

PART II :- BUSINESS OF BANKING COMPANIES

6. Form and business in which banking companies may engage
(1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely,-

(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; and drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bill of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, travellers cheques and circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others; the negotiating of loan and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities;

(b) acting as agents for any government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a 30[Managing Agent or Secretary and Treasurer] of a company;

(d) the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue;

(e) carrying on and transacting every kind of guarantee and indemnity business;

(f) managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;

(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;

(h) undertaking and executing trusts;

(i) undertaking the administration of estates as executor, trustee or otherwise;

(j) establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts, and conveniences calculated to benefit employees or ex-employees of the company or the dependents or connections of such persons; granting pension and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent object or for any exhibition or for any public, general or useful object;

(k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purpose of the company;

(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;

(m) doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company;

(o) any other form of business which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage.

(2) No banking company shall engage in any form of business other than those referred to in sub-section (1).

9[7. Use of words bank, banker, banking or banking company
(1) No company other than a banking company shall use as part of its name 15[or, in connection with its business] any of the words bank, banker or banking and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words.

(2) No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or his name any of the words bank, banking or banking company.

(3) Nothing in this section shall apply to-

(a) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company;

(b) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).]

8. Prohibition of trading
Notwithstanding anything contained in section 6 or in any contract, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realization of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation or with such of its business as is referred to in clause (i) of sub-section (1) of section 6:

10[PROVIDED that this section shall not apply to any such business as is specified in pursuance of clause (o) of sub-section (1) of section 6.]

Explanation: For the purposes of this section, goods means every kind of movable property, other than actionable claims, stock, shares, money, bullion and specie and all instruments referred to in clause (a) of sub-section (1) of section 6.

9. Disposal of non-banking assets
Notwithstanding anything contained in section 6, no banking company shall hold any immovable property howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the acquisition thereof or from the commencement of this Act, whichever is later or any extension of such period as in this section provided, and such property shall be disposed of within such period or extended period, as the case may be:

PROVIDED that the banking company may, within the period of seven years as aforesaid, deal or trade in any such property for the purpose of facilitating the disposal thereof:

PROVIDED FURTHER that the Reserve Bank may in any particular case extend the aforesaid period of seven years by such period not exceeding five years where it is satisfied that such extension would be in the interests of the depositors of the banking company.

31[10. Prohibition of employment of Managing Agents and restrictions on certain forms of employment
(1) No banking company-

(a) shall employ or be managed by a Managing Agent; or

(b) shall employ or continue the employment of any person-

(i) who is, or at any time has been, adjudicated insolvent, or has suspended payment or has compounded, with his creditors, or who, is or has been, convicted by a criminal court of an offence involving moral turpitude; or

(ii) whose remuneration or part of whose remuneration takes the form of commission or of a share in the profits of the company:

14[PROVIDED that nothing contained in this sub-clause shall apply to the payment by a banking company of-

(a) any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual practice prevailing in banking business;

(b) any commission to any broker (including guarantee broker), cashier-contractor, clearing and forwarding agent, auctioneer or any other person, employed by the banking company under a contract otherwise than as a regular member of the staff of the company; or]

(iii) whose remuneration is, in the opinion of the Reserve Bank, excessive; or

14[(i) who is a Director of any other company not being-

(a) a subsidiary of the banking company, or

(b) a company registered under section 25 of the Companies Act, 1956 (1 of 1956):

PROVIDED that the prohibition in this sub-clause shall not apply in respect of any such Director for a temporary period not exceeding three months or such further period not exceeding nine months as the Reserve Bank may allow; or]

(ii) who is engaged in any other business or vocation; or

(iii) 9[whose term of office as a person managing the company is] for a period exceeding five years at any one time:

32[PROVIDED that the term of office of any such person may be renewed or extended by further periods not exceeding five years on each occasion subject to the condition that such renewal or extension shall not be sanctioned earlier than two years form the date on which it is to come into force:

PROVIDED ALSO that where the term of office of such person is for an indefinite period, such term, unless it otherwise comes to an end earlier, shall come to an end immediately on the expiry of five years from the date of his appointment or on the expiry of three months from the date of commencement of section 8 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963), whichever is later:]

PROVIDED FURTHER that nothing in this clause shall apply to a Director, other than the Managing Director, of a banking company by reason only of his being such Director.

Explanation : For the purpose of sub-clause (iii) of clause (b), the expression remuneration , in relation to a persons employed or continued in employment, shall include salary, fees and perquisites but shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in respect of the expenses actually incurred by him in the performance of his duties.

(2) In forming its opinion under sub-clause (iii) of clause (b) of sub-section (1), the Reserve Bank may have regard among other matters to the following:-

(i) the financial condition and history of the banking company, its size and area of operation, its resources, the volume of its business, and the trend of its earning capacity;

(ii) the number of its branches or offices;

(iii) the qualifications, age and experience of the person concerned;

(iv) the remuneration paid to other persons employed by the banking company or to any person occupying a similar position in any other banking company similarly situated; and

(v) the interests of its depositors.

(3) 33[***]

(4) 33[***]

(5) 33[***]

(6) Any decision or order of the Reserve Bank made under this section shall be final for all purposes.]

34[10A. Board of Directors to include persons with professional or other experience
(1) Notwithstanding anything contained in any other law for the time being in force, every banking company-

(a) in existence on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968, or

(b) which comes into existence thereafter,

shall comply with the requirements of this section:

PROVIDED that nothing contained in this sub-section shall apply to a banking company referred to in clause (a) for a period of three months from such commencement.

(2) Not less than fifty-one per cent of the total number of members of the Board of Directors of a banking company shall consist of persons, who-

(a) shall have special knowledge or practical experience in respect of one or more of the following matters, namely,-

(i) accountancy,

(ii) agriculture and rural economy,

(iii) banking,

(iv) co-operation,

(v) economics,

(vi) finance,

(vii) law,

(viii) small-scale industry,

(ix) any other matter the special knowledge of, and practical experience, which would, in the opinion of the Reserve Bank, be useful to the banking company:

PROVIDED that out of the aforesaid number of Directors, not less than two shall be persons having special knowledge or practical experience in respect of agriculture and rural economy, co-operation or small-scale industry; and

(b) shall not-

(1) have substantial interest in, or be connected with, whether as employee, manager or managing agent-

(i) any company, not being a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or

(ii) any firm,

which carries on any trade, commerce or industry and which, in either case, is not a small-scale industrial concern, or

(2) be proprietors of any trading, commercial or industrial concern, not being a small-scale industrial concern.

15[(2A) 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,-

(i) no Director of a banking company, other than its Chairman or whole-time Director, by whatever name called, shall hold office continuously for a period exceeding eight years;

(ii) a Chairman or other whole-time Director of a banking company who has been removed from office as such Chairman, or whole-time Director, as the case may be, under the provisions of this Act shall also cease to be a Director of the banking company and shall also not be eligible to be appointed as a Director of such banking company, whether by election or co-option or otherwise, for a period of four years from the date of his ceasing to be the Chairman or whole-time Director, as the case may be.]

(3) If, in respect of any banking company, the requirements, as laid down in sub-section (2), are not fulfilled at any time, the Board of Directors of such banking company shall re-constitute such Board so as to ensure that the said requirements are fulfilled.

(4) If, for the purpose of re-constituting the Board under sub-section (3), it is necessary to retire any Director or Directors, the Board may, by lots drawn in such manner as may be prescribed, decide which Director or Directors shall cease to hold office and such decision shall be binding on every Director of the Board.

(5) Where the Reserve Bank is of opinion that the composition of the Board of Directors of a banking company is such that it does not fulfil the requirements of sub-section (2), it may, after giving to such banking company a reasonable opportunity of being heard, by an order in writing, direct the banking company to so re-constitute its Board of Directors as to ensure that the said requirements are fulfilled and, if within two months from the date of receipt of that order, the banking company does not comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn in such manner as may be prescribed, the person who ought to be removed from the membership of the Board of Directors, remove such person from the office of the Director of such banking company and with a view to complying with provisions of sub-section (2), appoint a suitable person as a member of the Board of Directors in the place of the person so removed whereupon the person so appointed shall be deemed to have been duly elected by the banking company as its Director.

(6) Every appointment, removal or reconstitution duly made, and every election duly held, under this section shall be final and shall not be called into question in any court.

(7) Every Director elected or, as the case may be, appointed under this section shall hold office until the date up to which his predecessor would have held office, if the election had not been held, or, as the case may be, the appointment had not been made.

(8) No act or proceeding of the Board of Director of a banking company shall be invalid by reason only of any defect in the composition thereof or on the ground that it is subsequently discovered that any of its members did not fulfil the requirements of this section.

10B. Banking company to be managed by whole-time Chairman
35[(1) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking company in existence on the commencement of the Banking Regulation (Amendment) Act, 1994, or which comes into existence thereafter shall have one of its Directors, who may be appointed on a whole-time or a part-time basis as Chairman of its Board of Directors, and where he is appointed on a whole-time basis as Chairman of its Board of Directors, he shall be entrusted with the management of the whole of the affairs of the banking company:

PROVIDED that the Chairman shall exercise his powers subject to the superintendence, control and direction of the Board of Directors.

(1A) Where a Chairman is appointed on a part-time basis-

(i) such appointment shall be with the previous approval of the Reserve Bank and be subject to such conditions as the Reserve Bank may specify while giving such approval:

(ii) the management of the whole of the affairs of such banking company shall be entrusted to a Managing Director who shall exercise his powers subject to the superintendence, control and direction of the Board of Directors.]

(2) 35[Every Chairman of the Board of Directors who is appointed on a whole-time basis and every Managing Director] of a banking company shall be in the whole-time employment to such company and shall hold office for such period, not exceeding five years, as the Board of Directors may fix, but shall subject to the provision of this section, be eligible for re-election or re-appointment:

PROVIDED that nothing in this sub-section shall be construed as prohibiting a chairman from being a Director of a subsidiary of the banking company or a Director of a company registered cinder section 25 of the Companies Act, 1956 (1 of 1956).

(3) Every person holding office on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), as Managing Director of a banking company shall-

(a) if there is a Chairman of its Board of Directors, vacate office on such commencement, or

(b) if there is no Chairman of its Board of Directors, vacate office on the date on which the Chairman of its Board of Directors is elected or appointed in accordance with the provisions of this section.

(4) 35[Every Chairman who is appointed on a whole-time basis and every Managing Director of a banking company appointed under sub-section (1A)] shall be a person who has special knowledge and practical experience of-

(a) the working of a banking company or of the State Bank of India or any subsidiary bank or a financial institution, or

(b) financial, economic or business administration:

PROVIDED that a person shall be disqualified for being a 35[Chairman who is appointed on a whole-time basis or a Managing Director], if he-

(a) is a Director of any company other than a company referred to in the proviso to sub-section (2), or

(b) is a Partner of any firm which carries on any trade, business or industry, or

(d) is a Director, Manager, Managing Agent, Partner or Proprietor of any trading, commercial or industrial concern, or

(e) is engaged in any other business or vocation.

(5) 35[A Chairman of the Board of Directors appointed on a whole-time basis or a Managing Director] of a banking company may, by writing under his hand addressed to the company, resign his office 36[* * *].

37[(5A) 35[A Chairman of the Board of Directors appointed on a whole-time basis or a Managing Director] whose term of office has come to an end, either by reason of his resignation or by reason of expiry of the period of this office, shall, subject to the approval of the Reserve Bank, continue in office until his successor assumes office.]

(6) Without prejudice to the provisions of section 36AA,where the Reserve Bank is of opinion that any person who is, or has been elected to be, the 35[Chairman of the Board of Directors who is appointed on a whole-time basis or the Managing-Director] of a banking company is not a fit and proper person to hold such office, it may, after giving to such person and to the banking company a reasonable opportunity of being heard, by order in writing, require the banking company to elect or appoint any other person as the 35[Chairman of the Board of Directors who is appointed on a whole-time basis or the Managing-Director] and if, within a period of two months from the date of receipt of such order, the banking company fails to elect or appoint a suitable person as 35[Chairman of the Board of Directors who is appointed on a whole-time basis or the Managing Director], the Reserve Bank may, by order, remove the first-mentioned person from the office, of the 35[Chairman of the Board of Directors who is appointed on a whole-time basis or a Managing Director] of the banking company and appoint a suitable person in his place whereupon the person so appointed shall be deemed to have been duly elected or appointed, as the case may be, as the 35[Chairman of the Board of Directors who is appointed on a whole-time basis or the Managing Director] of such banking company and any person elected or appointed as Chairman under this sub-section shall hold office for the residue of the period of the person in whose place he has been so elected or appointed.

(7) The banking company and any person against whom an order of removal is made under sub-section (6) may, within thirty days from the date of communication to it or to him of the order, prefer an appeal to the Central Government and the decision of the Central Government thereon, and subject thereto, the order made by the Reserve Bank under sub-section (6), shall be final and shall not be called into question in any court.

(8) Notwithstanding anything contained in this section, the Reserve Bank may, if in its opinion it is necessary in the public interest so to do, permit the 35[Chairman of the Board of Directors who is appointed on a whole-time basis or a Managing Director] to undertake such part-time honorary work as is not likely to interfere with his duties as 35[such Chairman or Managing Director.]

(9) Notwithstanding anything contained in this section, where a person 35[appointed on a whole-time basis, as Chairman of the Board of Directors or Managing Director] dies or resigns or is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or other wise in circumstances not involving the vacation of his office, the banking company may, with the approval of the Reserve Bank, make suitable arrangements for carrying out the 35[duties of Chairman or Managing Director] for a total period not exceeding four months.

FOREIGN TRADE (REGULATION) RULES, 1993

Legal India — Sat, 23 May 2009 06:03:20 +0000

Act : In exercise of the powers conferred by section 19 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), the Central Government hereby makes the following rules, namely: -

1. Short title and commencement
(1) These rules may be called the Foreign Trade (Regulation) Rules, 1993.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions
In these rules, unless the context otherwise requires,-

(a) Act, means the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992)

(b) charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;

(c) importer or exporter, means a person who imports or exports goods and holds a valid Importer-Exporter Code Number granted under section 7;

(d) licensing authority, means an authority authorised by the Director-General under sub-section (2) of section 9 to grant or renew a licence under these rules;

(e) policy means the export and import policy formulated and announced by the Central Government under section 5;

(f) Schedule, means a Schedule appended to these rules;

(g) section, means a section of the Act;

(h) special licence, means a licence granted under sub-section (2) of section 8;

(i) value has the meaning assigned to it in clause (41) of section 2 of the Customs Act, 1962 (52 of 1962)

(j) words and expressions used in these rules and not defined, but defined in the Act shall have the meanings respectively assigned to them in the Act.

3. Grant of special licence
(1) Where the Importer-Exporter Code Number granted to any person has been suspended or cancelled under sub-section (1) of section 8, the Director-General may, having regard to the following factors, grant to him a special licence, namely:-

(1) that the denial of a special licence is likely to affect the foreign trade of India adversely; or

(2) that the suspension or cancellation of the Importer-Exporter Code Number is likely to lead to non-fulfilment of any obligation by India under any international agreement;

(2) The special licence granted to any person under sub-rule (1) shall be non-transferable.

4. Application for grant of licences
A person may make an application for the grant of a licence to import or export goods in accordance with the provisions of the policy or an order made under section 3.

5. Fee
(1) Every application for a licence to import shall be accompanied by the fee specified in the Schedule.

(2) The mode of deposit of fee shall be as specified in the Schedule.

(3) No fee shall be payable in respect of any application made by:

(a) the Central Government, a State Government, a State Government or any department or any office of the Government;

(b) any local authority for the bona fide import of goods required by it for official use;

(c) any institution set up for educational, charitable or missionary purposes, for the import of goods required for its use;

(d) an applicant for the import of any goods (other than a vehicle), if the import of the goods is for his personal use which is not connected with trade or manufacture.

(4) The fee once received will not be refunded except in the following circumstances, namely:-

(i) where the fee has been deposited in excess of the specified scale of fee; or

(ii) where the fee has been deposited but no application has been made; or

(iii) where the fee has been deposited in error but the applicant is exempt from payment of fee.

6. Conditions of licence
(1) It shall be deemed to be a condition of every licence for export that:

(i) no person shall transfer or acquire by transfer any licence issued by the licensing authority except in accordance with the provisions of the policy;

(ii) the goods for the export of which the licence is granted shall be the property of the licensee at the time of the export.

(2) The licensing authority may issue a licence for import subject to one or more of the following conditions, namely:-

(a) that the goods covered by the licence shall not be disposed of except in accordance with the provisions of the policy or in the manner specified by the licensing authority in the licence;

(b) that the applicant for a licence shall execute a bond for complying with the terms and conditions of the licence.

(3) It shall be deemed to be a condition of every licence for import that:-

(a) no person shall transfer or acquire by transfer any licence issued by the licensing authority except in accordance with the provisions of the policy;

(b) the goods for the import of which a licence is granted shall be the property of the licensee at the time of import and up to the time of clearance through customs;

(d) that the goods covered by the licence for import shall not be exported without the written permission of the Director-General.

(4) Any person importing goods from the United States of America in accordance with the terms of the Indo-U.S. Memorandum of Understanding on Technology Transfer shall also comply with all the conditions and assurances specified in the import certificate issued in terms of such Memorandum, and such other assurances given by the person importing those goods to the Government of the United States of America through the Government of India.

7. Refusal of licence
(1) The Director-General or the licensing authority may, for reasons to be recorded in writing, refuse to grant or renew a licence, if-

(a) the applicant has contravened any law relating to customs or foreign exchange;

(b) the application for the licence does not substantially conform to any provision of these rules;

(d) it has been decided by the Central Government to canalise the export or import of goods and distribution thereof, as the case may be, through special or specialised agencies;

(e) any action against the applicant is for the time being pending under the Act or Rules and orders made thereunder;

(f) the applicant is or was a managing partner in a partnership firm, or is or was a director of a private limited company, having a controlling interest, against which any action is for the time being pending under the Act or Rules and orders made thereunder;

(g) the applicant fails to pay any penalty imposed on him under the Act;

(h) the applicant has tampered with a licence;

(i) the applicant or any agent or employee of the applicant with his consent has been a party to any corrupt or fraudulent practice for the purposes of obtaining any other licence;

(j) the applicant is not eligible for a licence in accordance with any provision of the policy;

(k) the applicant fails to produce any documents called for by the Director-General or the licensing authority;

(l) in the case of a licence for import, no foreign exchange is available for the purpose;

(m) the application has been signed by a person other than a person duly authorised by the applicant under the provisions of the policy;

(n) the applicant has attempted to obtain or has obtained cash compensatory support, duty drawback, cash assistance benefits allowed to registered exporters or any other similar benefits from the Central Government or any agency authorised by the Central Government in relation to exports made by him on the basis of any false, fraudulent or misleading statement or any document which is false or fabricated or tampered with.

(2) The refusal of a licence under sub-rule (1) shall be without prejudice to any other action that may be taken against an applicant by the licensing authority under the Act.

8. Amendment of licence
The licensing authority may of its own motion or on an application by the licensee, amend any licence, in such manner as may be necessary or to rectify any error or omission in the licence.

9. Suspension of a licence
(1) The Director-General or the licensing authority may, by an order in writing, suspend the operation of a licence granted to-

(a) any person, if an order of detention has been made against such person under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974); or

(b) a partnership firm or a private limited company, if the person referred to in clause (a) is a partner or a whole-time director or managing director, as the case may be, of such firm or company:

PROVIDED that the order of suspension shall cease to have effect in respect of the aforesaid person or, as the case may be, the partnership-firm or company, when the order of detention made against such person,-

(i) being an order of detention to which the provisions of section 9 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974), do not apply, has been revoked on the report of the Advisory Board under section 8 of that Act or before receipt of the report of the Advisory Board or before making a reference to the Advisory Board; or

(ii) being an order of detention to which the provisions of section 9 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974), apply, has been revoked on the report of the Advisory Board under section 8 read with sub-section (2) of section 9 of that Act or before receipt of such report;

(iii) has been set aside by a court of competent jurisdiction.

(2) The Director-General or the licensing authority may, by an order in writing, suspend the operation of any licence granted under these rules, where proceedings for cancellation of such licence have been initiated under rule 10.

10. Cancellation of a licence
The Director-General or the licensing authority may, by an order in writing, cancel any licence granted under these rules, if-

(a) the licence has been obtained by fraud, suppression of facts or misrepresentation; or

(b the licensee has committed a breach of any of the conditions of the licence; or

(d) the licensee has contravened any law relating to customs or foreign exchange or the rules and regulations relating thereto.

11. Declaration as to value and quality of imported goods
On the importation into, or exportation out of, any customs ports of any goods, whether liable to duty or not, the owner of such goods shall, in the bill of entry or the shipping bill or any other documents prescribed under the Customs Act, 1962, state the value, quality and description of such goods to the best of his knowledge and belief and in case of exportation of goods, certify that the quality and specification of the goods as stated in those documents are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe to a declaration of the truth of such statement at the foot of such bill of entry or shipping bill or any other documents.

12. Declaration as to importer-exporter code number
On the importation into, or exportation out of, any customs port of any goods, the importer or exporter shall, in the bill of entry or shipping bill or, as the case may be, in any other documents prescribed by rules made under the Act or the Customs Act, 1962 (52 of 1962), state the importer-exporter code number allotted to him by the Competent Authority.

13. Utilisation of imported goods
(1) No person shall use any imported goods allotted to him by the State Trading Corporation of India or any other agency recognised by the Central Government in a manner and for the purpose, otherwise than as declared by him in his application for such allotment or in any document submitted by him in support of such application.

(2) No person shall dispose of any goods imported by him against a licence except in accordance with the terms and conditions of such licence.

14. Prohibition regarding making, signing of any declaration, statement or documents
(1) No person shall make, sign or use or cause to be made, signed or used any declaration, statement or document for the purposes of obtaining a licence or importing any goods knowing or having reason to believe that such declaration, statement or document is false in any material particular.

(2) No person shall employ any corrupt or fraudulent practice for the purposes of obtaining any licence or importing or exporting any goods.

15. Power to enter premises and inspect, search and seize goods, documents, things and conveyances
(1) Any person authorised by the Central Government under sub-section (1) of section 10 (hereinafter called the authorised person) may, at any reasonable time, enter any premises in which-

(i) any imported goods or materials which are liable to confiscation under the provisions of the Act; or

(ii) any books of account or documents or things which, in his opinion, will be useful for, or relevant to, any proceedings under the Act, are suspected to have been kept or concealed and may inspect such goods, materials, books of account, documents or things and may take such notes or extracts therefrom as he may think fit.

(2) If the authorised person has reason to believe that-

(i) any imported goods or materials liable to confiscation under the Act; or

(ii) any books of account or documents or things which, in his opinion, will be useful for, or relevant to, any proceedings under the Act, are secreted in any premises he may enter into and search such premises for such goods, materials, books of account, documents or things.

(3) (a) If the authorised person has reason to believe that any imported goods or materials are liable to confiscation under the Act, he may seize such goods or materials together with the package, covering or receptacle, if any, in which such goods or materials are found to have been mixed with any other goods or materials:

PROVIDED that where it is not practicable to seize any such goods or materials, the authorised person may serve on the owner of the goods or materials an order that he shall not remove, part with or otherwise deal with the goods or materials except with the previous permission of the authorised person.

(b) Where any goods or materials are seized under clause (a) and no notice in respect thereof is given within six months of the seizure of the goods or materials, the goods or materials shall be returned to the person from whose possession they were seized:

PROVIDED that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Director-General for a further period not exceeding six months.

(c) The authorised person may seize any books of account or documents or things which in his opinion, will be useful for, or relevant to, any proceedings under the Act.

(d) The person from whose custody any documents are seized under this sub-rule, shall be entitled to make copies thereof or take extracts therefrom in the presence of the authorised person.

(e) If any person legally entitled to the books of account or other documents or things seized under this sub-rule objects, for any reason, to the retention by the authorised person of the books of account or the documents or things, he may move an application to the Central Government stating therein the reasons for such objection, request for the return of the books of account or documents or things.

(f) On receipt of the application under clause (e), the Central Government may, after giving the applicant an opportunity of being heard, pass such order as it may think fit.

(g) Where any document is produced or furnished by any person or has been seized from the custody or control of any person under the Act or has been received from any place outside India in the course of the investigation for any contravention referred to in section 11 by any person and such document is tendered in evidence against the person by whom it is produced or from whom it was seized or against such person or any other person who is jointly proceeded against, the adjudicating authority, shall, notwithstanding anything to the contrary contained in any other law for the time being in force,-

(i) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person of which the adjudicating authority may reasonably assume to have been signed by or to be in the handwriting of any particular person, is under the person$s handwriting, and in the case of a document executed or attested, it was executed or attested by the person by whom it purports to have been so executed or attested;

(ii) admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence.

(4) The authorised person, may, if he has reason to suspect that any conveyance or animal is being or is about to be used for the transportation of any imported goods or material which are liable to confiscation under the Act, and that by such transportation any provision of the Act has been, is being or is about to be contravened at any time, stop such conveyance or animal or in the case of aircraft, compel it to land, and-

(a) rummage and search the conveyance or any part thereof;

(b) examine and search any goods or material in the conveyance or on the animal;

(c) if it becomes necessary to stop any conveyance or animal, he may use all lawful means for stopping it and where such means fail, the conveyance or animal may be fired upon, and where he is satisfied that it is necessary so to do to prevent the contravention of any provision of the Act or of the rules and orders made thereunder or the policy or condition of any licence, he may seize such conveyance or animal.

Explanation: Any reference in this rule to a conveyance shall, unless the context otherwise requires, be construed as including a reference to an aircraft, vehicle or vessel.

16. Settlement
(1) The adjudicating authority may determine the amount of settlement to be paid by the person to whom a notice has been issued and who has opted for settlement, and has admitted the contravention specified in the notice, in the following cases, namely:-

(i) where it is of the opinion that the contravention of any provision of the Act or these rules or the policy has been made without mens rea or without wilful mistake or without suppression of facts, or without any collusion, or without fraud and forgery, or without an intent to cause loss of foreign exchange ; or .

(ii) where the person importing the goods has not met the requirements of the actual user conditions as specified in the policy and has not misutilised the said imported goods; or

(iii) where the person importing the goods has not fulfilled the export obligation and has not misutilised the said imported goods.

(2) Where a person has opted for settlement under sub-rule (1), the settlement made by the adjudicating authority shall be final.

17. Confiscation and redemption

(1) Any imported goods or materials in respect of which-

(a) any condition of the licence, or letter of authority under which they were imported, relating to their utilisation or distribution; or

(b) any condition, relating to their utilisation or distribution, subject to which they were received from or through an agency recognised by the Central Government; or

has been, is being, or is attempted to be, contravened, shall together with any package, covering or receptacle in which such goods are found, be liable to be confiscated by the adjudicating authority, and where such goods or materials are so mixed with any other goods or materials that they cannot be readily separated, such other goods or materials shall also be liable to be so confiscated:

PROVIDED that where it is established to the satisfaction of the adjudicating authority that any goods or materials which are liable to confiscation under this rule, had been imported for personal use, and not for any trade or industry, such goods, or materials shall not be ordered to be confiscated.

(2) The adjudicating authority may permit the redemption of the confiscated goods or materials upon payment of redemption charges equivalent to the market value of such goods or materials.

18. Confiscation of conveyance
(1) Any conveyance or animal which has been; is being, or is attempted to be used, for the transport of any goods or materials that are imported and which are liable to confiscation under rule 17, shall be liable to be confiscated by the adjudicating authority unless the owner of the conveyance or animal proves that it was, is being, or is about to be so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance or animal and that each of them had taken all reasonable precautions against such use.

(2) The adjudicating authority shall permit redemption of the confiscated conveyance or animal used for the transport of goods or passengers for hire upon payment of redemption charges equivalent to the market value of such conveyance or animal.

SCHEDULE
[See rule 5]
The following fee shall be leviable in respect of the application for an import licence, etc.:

SCALE OF FEE

S.No. Particulars Amount of fee
(1) (2) (3)
1. Where the value of goods specified in application does not exceed rupees fifty thousand Rupees two hundred
2. Where the value of the goods specified in the application exceeds rupees fifty thousand, but not exceed rupees one crore Rupees two per thousand or part thereof subject to a minimum of rupees two hundred
3. Where the value of the goods specified in the application exceeds rupees one crore Rupees two per thousand or part thereof subject to a maximum of rupees one lakh and fifty thousand
4. Application for grant of duplicate licence Rupees two hundred
5. In case where import licence and other correspondence are required by speed post Rupees two hundred
6. Application for issue of an identity card Rupees two thousand
7. Application for issue of duplicate identity card in the event of loss of original card Rupees one hundred
8. Extension of the period of shipment of an import licence Rupees two hundred
9. Application for grant of split-up licences Rupees one thousand per split-up licence.

INDUSTRIAL TRIBUNAL (CENTRAL PROCEDURE) RULES, 1954

Legal India — Sat, 23 May 2009 05:55:21 +0000

1.These rules may be called the Industrial Tribunal (Central) (Procedure) Rules, 1954.

2. In these rules-

(a) the Act means the Industrial Disputes Act, 1947 (14 of 1947)

(b) Chairman means the Chairman of the Tribunal;

(d) section means a section of the Act;

(e) Tribunal means the Industrial Tribunal constituted under section 7 consisting of two or more members.

3. In the case of a Tribunal where it consists of two or more members, the Chairman may sit alone or with one or more members to hear an application or complaint in writing under section 33 or section 33A, as the case may be, for inquiry and report to the Tribunal or entrust any such application or complaint to one or more members, as he deems fit, for such enquiry and report.

4. The Chairman may withdraw any case or matters referred to one or more members, under rule 3 and transfer the same to himself or any other member or members.

5. The report under rule 3, where the enquiry is made by one or more members, shall be submitted to the Chairman and where the enquiry is by the Chairman sitting alone or with one or more members, the report shall be submitted to the Tribunal:
PROVIDED that in all cases, the final order on such application or complaint shall be passed by the Tribunal after taking into consideration the report submitted to it by the Chairman sitting singly or with one or more members or by any other member or members.

6. The Tribunal shall, after considering the report submitted to the Chairman under rule 5 and making such further enquiry, if any, as if thinks fit, give its decision or award as the case may be.

7. For the purposes of making an enquiry under these rules the Chairman or member or members, as the case may be, shall have all the powers of the Tribunal under section 11 and the provisions of rules 14 to 21, 24, 30 and 31 of the Industrial Disputes (Central) Rules, 1947, shall apply to such enquiry as if the Chairman or member or members by themselves constituted the Tribunal.

SECURITISATION ACT 2002

Legal India — Sat, 23 May 2009 05:50:09 +0000

THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002

An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:-

CHAPTER I

Preliminary

1. Short title, extent and commencement.-

(1) This Act may be called the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 21st day of June, 2002.

2. Definitions.-

(1) In this Act, unless the context otherwise requires,-

(a) Appellate Tribunal means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)

(b) asset reconstruction means acquisition by any securitisation company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance;

(i) a banking company; or

(ii) a corresponding new bank; or

(iii) the State Bank of India; or

(iv) a subsidiary bank; or

(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;

(d) banking company shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)

(e) Board means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992)

(f) borrower means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;

(g) Central Registry means the registry set up or cause to be set up under sub-section (1) of section 20;

(h) corresponding new bank shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)

(i) Debts Recovery Tribunal means the Tribunal established under sub-section (1) of section 3 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (51 of 1993)

(j) default means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor in accordance with the directions or guidelines issued by the Reserve Bank;

(k) financial assistance means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;

(l) financial asset means debt or receivables and includes-

(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or

(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or

(iii) a mortgage, charge, hypothecation or pledge of movable property; or

(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or

(v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or

(vi) any financial assistance;

(m) financial institution means-

(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956)

(ii) any institution specified by the Central Government under sub-
clause (ii) of clause (h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)

(iii) the International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges ) Act, 1958 (42 of 1958)

(iv) any other institution or non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by notification, specify as financial institution for the purposes of this Act;

(n) hypothecation means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallisation of such charge into fixed charge on movable property;

(o) non-performing asset means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or under guidelines relating to assets classifications issued by the Reserve Bank;

(p) notification means a notification published in the Official Gazette;

(q) obligor means a person liable to the originator, whether under a contract or otherwise, to pay a financial asset or to discharge any obligation in respect of a financial asset, whether existing, future, conditional or contingent and includes the borrower;

(r) originator means the owner of a financial asset which is acquired by a securitisation company or reconstruction company for the purpose of securitisation or asset reconstruction;

(s) prescribed means prescribed by rules made under this Act;

(t) property means-

(i) immovable property;

(ii) movable property;

(iii) any debt or any right to receive payment of money, whether secured or unsecured;

(iv) receivables, whether existing or future;

(v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature;

(u) qualified institutional buyer means a financial institution, insurance company, bank, state financial corporation, state industrial development corporation, trustee or any asset management company making investment on behalf of mutual fund or provident fund or gratuity fund or pension fund or a foreign institutional investor registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder, or any other body corporate as may be specified by the Board;

(v) reconstruction company means a company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of asset reconstruction;

(w) Registrar of Companies means the Registrar defined in clause (40) of section 2 of the Companies Act, 1956 (1 of 1956)

(x) Reserve Bank means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)

(y) scheme means a scheme inviting subscription to security receipts proposed to be issued by a securitisation company or reconstruction company under that scheme;

(z) securitisation means acquisition of financial assets by any securitisation company or reconstruction company from any originator, whether by raising of funds by such securitisation company or reconstruction company from qualified institutional buyers by issue of security receipts representing undivided interest in such financial assets or otherwise;

(za) securitisation company means any company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of securitisation;

(zb) security agreement means an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor;

(zc) secured asset means the property on which security interest is created;

(zd) secured creditor means any bank or financial institution or any consortium or group of banks or financial institutions and includes-

(i) debenture trustee appointed by any bank or financial institution; or

(ii) securitisation company or reconstruction company; or

(iii) any other trustee holding securities on behalf of a bank or financial institution;

in whose favour security interest is created for due repayment by any borrower of any financial assistance;

(ze) secured debt means a debt which is secured by any security interest;

(zf) security interest means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;

(zg) security receipt means a receipt or other security, issued by a securitisation company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitisation;

(zh) sponsor means any person holding not less than ten per cent. of the paid-up equity capital of a securitisation company or reconstruction company;

(zi) State Bank of India means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955)

(zj) subsidiary bank shall have the meaning assigned to it in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).

(2) Words and expressions used and not defined in this Act but defined in the Indian Contract Act, 1872 (9 of 1872) or the Transfer of Property Act, 1882 (4 of 1882) or the Companies Act, 1956 (1 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall have the same meanings respectively assigned to them in those Acts.

CHAPTER IIRegulation of securitisation and reconstruction of financial assets of banks and financial institutions

3. Registration of securitisation companies or reconstruction compnaies.-

(1) No securitisation company or reconstruction company shall commence or carry on the business of securitisation or asset reconstruction without-

(a) obtaining a certificate of registration granted under this section; and

(b) having the owned fund of not less than two crore rupees or such other amount not exceeding fifteen per cent. of total financial assets acquired or to be acquired by the securitisation company or reconstruction company, as the Reserve Bank may, by notification, specify:

Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of securitisation companies or reconstruction companies:

Provided further that a securitisation company or reconstruction company, existing on the commencement of this Act, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this sub-section may continue to carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to it or, as the case may be, rejection of application for registration is communicated to it.

(2) Every securitisation company or reconstruction company shall make an application for registration to the Reserve Bank in such form and manner as it may specify.

(3) The Reserve Bank may, for the purpose of considering the application for registration of a securitisation company or reconstruction company to commence or carry on the business of securitisation or asset reconstruction, as the case may be, require to be satisfied, by an inspection of records or books of such securitisation company or reconstruction company, or otherwise, that the following conditions are fulfilled, namely:-

(a) that the securitisation company or reconstruction company has not incurred losses in any of the three preceding financial years;

(b) that such securitisation company or reconstruction company has made adequate arrangements for realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified institutional buyers or other persons;

(c) that the directors of securitisation company or reconstruction company have adequate professional experience in matters related to finance, securitisation and reconstruction;

(d) that the board of directors of such securitisation company or reconstruction company does not consist of more than half of its total number of directors who are either nominees of any sponsor or associated in any manner with the sponsor or any of its subsidiaries;

(e) that any of its directors has not been convicted of any offence involving moral turpitude;

(f) that a sponsor, is not a holding company of the securitisation company or reconstruction company, as the case may be, or, does not otherwise hold any controlling interest in such securitisation company or reconstruction company;

(g) that securitisation company or reconstruction company has complied with or is in a position to comply with prudential norms specified by the Reserve Bank.

(4) The Reserve Bank may, after being satisfied that the conditions specified in sub-section (3) are fulfilled, grant a certificate of registration to the securitisation company or the reconstruction company to commence or carry on business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose.

(5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the conditions specified in sub-section (3) are not fulfilled:

Provided that before rejecting the application, the applicant shall be given a reasonable opportunity of being heard.

(6) Every securitisation company or reconstruction company, shall obtain prior approval of the Reserve Bank for any substantial change in its management or change of location of its registered office or change in its name:

Provided that the decision of the Reserve Bank, whether the change in management of a securitisation company or a reconstruction company is a substantial change in its management or not, shall be final.

Explanation.-For the purposes of this section, the expression substantial change in management means the change in the management by way of transfer of shares or amalgamation or transfer of the business of the company.

4. Cancellation of certificate of registration.-

(1) The Reserve Bank may cancel a certificate of registration granted to a securitisation company or a reconstruction company, if such company-

(a) ceases to carry on the business of securitisation or asset reconstruction; or

(b) ceases to receive or hold any investment from a qualified institutional buyer; or

(d) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (3) of section 3; or

(e) fails to-

(i) comply with any direction issued by the Reserve Bank under the provisions of this Act; or

(ii) maintain accounts in accordance with the requirements of any law or any direction or order issued by the Reserve Bank under the provisions of this Act; or

(iii) submit or offer for inspection its books of account or other relevant documents when so demanded by the Reserve Bank; or

(iv) obtain prior approval of the Reserve Bank required under sub-section (6) of section 3:

Provided that before cancelling a certificate of registration on the ground that the securitisation company or reconstruction company has failed to comply with the provisions of clause (c) or has failed to fulfil any of the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is of the opinion that the delay in cancelling the certificate of registration granted under sub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the securitisation company or the reconstruction company, shall give an opportunity to such company on such terms as the Reserve Bank may specify for taking necessary steps to comply with such provisions or fulfilment of such conditions.

(2) A securitisation company or reconstruction company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government:

Provided that before rejecting an appeal such company shall be given a reasonable opportunity of being heard.

(3) A securitisation company or reconstruction company, which is holding investments of qualified institutional buyers and whose application for grant of certificate of registration has been rejected or certificate of registration has been cancelled shall, notwithstanding such rejection or cancellation, be deemed to be a securitisation company or reconstruction company until it repays the entire investments held by it (together with interest, if any) within such period as the Reserve Bank may direct.

5. Acquisition of rights or interest in financial assets.-

(1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitisation company or reconstruction company may acquire financial assets of any bank or financial institution,-

(a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or

(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.

(2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the securitisation company or the reconstruction company, such securitisation company or reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.

(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers-of-attorney, grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the securitisation company or reconstruction company, as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, securitisation company or reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of securitisation company or reconstruction company, as the case may be.

(4) If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the securitisation company or reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be.

6. Notice to obligor and discharge of obligation of such obligor.-

(1) The bank or financial institution may, if it considers appropriate, give a notice of acquisition of financial assets by any securitisation company or reconstruction company, to the concerned obligor and any other concerned person and to the concerned registering authority (including Registrar of Companies) in whose jurisdiction the mortgage, charge, hypothecation, assignment or other interest created on the financial assets had been registered.

(2) Where a notice of acquisition of financial asset under sub-section (1) is given by a bank or financial institution, the obligor, on receipt of such notice, shall make payment to the concerned securitisation company or reconstruction company, as the case may be, and payment made to such company in discharge of any of the obligations in relation to the financial asset specified in the notice shall be a full discharge to the obligor making the payment from all liability in respect of such payment.

(3) Where no notice of acquisition of financial asset under sub-section (1) is given by any bank or financial institution, any money or other properties subsequently received by the bank or financial institution, shall constitute monies or properties held in trust for the benefit of and on behalf of the securitisation company or reconstruction company, as the case may be, and such bank or financial institution shall hold such payment or property which shall forthwith be made over or delivered to such securitisation company or reconstruction company, as the case may be, or its agent duly authorised in this behalf.

7. Issue of security by raising of receipts or funds by securitisation company or reconstruction company.-

(1) Without prejudice to the provisions contained in the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992), any securitisation company or reconstruction company, may, after acquisition of any financial asset under sub-section (1) of section 5, offer security receipts to qualified institutional buyers (other than by offer to public) for subscription in accordance with the provisions of those Acts.

(2) A securitisation company or reconstruction company may raise funds from the qualified institutional buyers by formulating schemes for acquiring financial assets and shall keep and maintain separate and distinct accounts in respect of each such scheme for every financial asset acquired out of investments made by a qualified institutional buyer and ensure that realisations of such financial asset is held and applied towards redemption of investments and payment of returns assured on such investments under the relevant scheme.

(3) In the event of non-realisation under sub-section (2) of financial assets, the qualified institutional buyers of a securitisation company or reconstruction company, holding security receipts of not less than seventy-five per cent. of the total value of the security receipts issued by such company, shall be entitled to call a meeting of all the qualified institutional buyers and every resolution passed in such meeting shall be binding on the company.

(4) The qualified institutional buyers shall, at a meeting called under sub-section (3), follow the same procedure, as nearly as possible as is followed at meetings of the board of directors of the securitisation company or reconstruction company, as the case may be.

8. Exemption from registration of security receipt.-Notwithstanding anything contained in sub-section (1) of section 17 of the Registration Act, 1908 (16 of 1908),-

(a) any security receipt issued by the securitisation company or reconstruction company, as the case may be, under sub-section (1) of section 7, and not creating, declaring, assigning, limiting or extinguishing any right, title or interest, to or in immovable property except in so far as it entitles the holder of the security receipt to an undivided interest afforded by a registered instrument; or

(b) any transfer of security receipts,

shall not require compulsory registration.

9. Measures for assets reconstruction.-

Without prejudice to the provisions contained in any other law for the time being in force, a securitisation company or reconstruction company may, for the purposes of asset reconstruction, having regard to the guidelines framed by the Reserve Bank in this behalf, provide for any one or more of the following measures, namely:-

(a) the proper management of the business of the borrower, by change in, or take over of, the management of the business of the borrower;

(b) the sale or lease of a part or whole of the business of the borrower;

(d) enforcement of security interest in accordance with the provisions of this Act;

(e) settlement of dues payable by the borrower;

(f) taking possession of secured assets in accordance with the provisions of this Act.

10. Other functions of securitisation company or reconstruction company.-

(1) Any securitisation company or reconstruction company registered under section 3 may-

(a) act as an agent for any bank or financial institution for the purpose of recovering their dues from the borrower on payment of such fees or charges as may be mutually agreed upon between the parties;

(b) act as a manager referred to in clause (c) of sub-section (4) of section 13 on such fee as may be mutually agreed upon between the parties;

Provided that no securitisation company or reconstruction company shall act as a manager if acting as such gives rise to any pecuniary liability.

(2) Save as otherwise provided in sub-section (1), no securitisation company or reconstruction company which has been granted a certificate of registration under sub-section (4) of section 3, shall commence or carry on, without prior approval of the Reserve Bank, any business other than that of securitisation or asset reconstruction:

Provided that a securitisation company or reconstruction company which is carrying on, on or before the commencement of this Act, any business other than the business of securitisation or asset reconstruction or business referred to in sub-section (1), shall cease to carry on any such business within one year from the date of commencement of this Act.

Explanation-For the purposes of this section, securitisation company$$ or reconstruction company$$ does not include its subsidiary.

11. Resolution of disputes.-

Where any dispute relating to securitisation or reconstruction or non-payment of any amount due including interest arises amongst any of the parties, namely, the bank or financial institution or securitisation company or reconstruction company or qualified institutional buyer, such dispute shall be settled by conciliation or arbitration as provided in the Arbitration and Conciliation Act, 1996 (26 of 1996), as if the parties to the dispute have consented in writing for determination of such dispute by conciliation or arbitration and the provisions of that Act shall apply accordingly.

12. Power of Reserve Bank to determine policy and issue directions.-

(1) If the Reserve Bank is satisfied that in the public interest or to regulate financial system of the country to its advantage or to prevent the affairs of any securitisation company or reconstruction company from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such securitisation company or reconstruction companay, it is necessary or expedient so to do, it may determine the policy and give directions to all or any securitisation company or reconstruction company in matters relating to income recognition, accounting standards, making provisions for bad and doubtful debts, capital adequacy based on risk weights for assets and also relating to deployment of funds by the securitisation company or reconstruction company, as the case may be, and such company shall be bound to follow the policy so determined and the directions so issued.

(2) Without prejudice to the generality of the power vested under sub-section (1), the Reserve Bank may give directions to any securitisation company or reconstruction company generally or to a class of securitisation companies or reconstruction companies or to any securitisation company or reconstruction company in particular as to-

(a) the type of financial asset of a bank or financial institution which can be acquired and procedure for acquisition of such assets and valuation thereof;

(b) the aggregate value of financial assets which may be acquired by any securitisation company or reconstruction company.

CHAPTER IIIEnforcement of security interest

13. Enforcement of security interest.-

(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b) take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset;

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.

(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors:

Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):

Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen$s dues with the liquidator in accordance with the provisions of section 529A of that Act:

Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen$s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen$s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen$s dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator:

Provided also that in case the secured creditor deposits the estimated amount of workmen$s dues, such creditor shall be liable to pay the balance of the workmen$s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:

Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen$s dues, if any.

Explanation.-For the purposes of this sub-section,-

(a) record date means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date;

(b) amount outstanding shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor under or by this section the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act.

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.

14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-

(1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him-

(a) take possession of such asset and documents relating thereto; and

(b) forward such asset and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.

15. Manner and effect of takeover of management.-

(1) When the management of business of a borrower is taken over by a secured creditor, the secured creditor may, by publishing a notice in a newspaper published in English language and in a newspaper published in an Indian language in circulation in the place where the principal office of the borrower is situated, appoint as many persons as it thinks fit-

(a) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), to be the directors of that borrower in accordance with the provisions of that Act; or

(b) in any other case, to be the administrator of the business of the borrower.

(2) On publication of a notice under sub-section (1),-

(a) in any case where the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), all persons holding office as directors of the company and in any other case, all persons holding any office having power of superintendence, direction and control of the business of the borrower immediately before the publication of the notice under sub-section (1), shall be deemed to have vacated their offices as such;

(b) any contract of management between the borrower and any director or manager thereof holding office as such immediately before publication of the notice under sub-section (1), shall be deemed to be terminated;

(c) the directors or the administrators appointed under this section shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the business of the borrower is, or appears to be, entitled and all the property and effects of the business of the borrower shall be deemed to be in the custody of the directors or administrators, as the case may be, as from the date of the publication of the notice;

(d) the directors appointed under this section shall, for all purposes, be the directors of the company of the borrower and such directors or as the case may be, the administrators appointed under this section, shall alone be entitled to exercise all the powers of the directors or as the case may be, of the persons exercising powers of superintendence, direction and control, of the business of the borrower whether such powers are derived from the memorandum or articles of association of the company of the borrower or from any other source whatsoever.

(3) Where the management of the business of a borrower, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the secured creditor, then, notwithstanding anything contained in the said Act or in the memorandum or articles of association of such borrower,-

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

(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the secured creditor;

(c) no proceeding for the winding up of such company or for the appointment of a receiver in respect thereof shall lie in any court, except with the consent of the secured creditor.

(4) Where the management of the business of a borrower had been taken over by the secured creditor, the secured creditor shall, on realisation of his debt in full, restore the management of the business of the borrower to him.

16. No compensation to directors for loss of office.-

(1) Notwithstanding anything to the contrary contained in any contract or in any other law for the time being in force, no managing director or any other director or a manager or any person in charge of management of the business of the borrower 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 the borrower.

(2) Nothing contained in sub-section (1) shall affect the right of any such managing director or any other director or manager of any such person in charge of management to recover from the business of the borrower, moneys recoverable otherwise than by way of such compensation.

17. Right to appeal.-

(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may prefer an appeal to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken.

(2) Where an appeal is preferred by a borrower, such appeal shall not be entertained by the Debts Recovery Tribunal unless the borrower has deposited with the Debts Recovery Tribunal seventy-five per cent. of the amount claimed in the notice referred to in sub-section (2) of section 13:

Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.

(3) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

18. Appeal to Appellate Tribunal.-

(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.

(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

19. Right of borrower to receive compensation and costs in certain cases.-

If the Debts Recovery Tribunal or the Appellate Tribunal, as the case may be, on an appeal filed under section 17 or section 18, holds the possession of secured assets by the secured creditor as wrongful and directs the secured creditor to return such secured assets to the concerned borrower, such borrower shall be entitled to payment of such compensation and costs as may be determined by such Tribunal or Appellate Tribunal.

CHAPTER IVCentral Registry

20. Central Registry.-

(1) The Central Government may, by notification, set up or cause to be set up from such date as it may specify in such notification, a registry to be known as the Central Registry with its own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest under this Act.

(2) The head office of the Central Registry shall be at such place as the Central Government may specify and for the purpose of facilitating registration of transactions referred to in sub-section (1), there may be established at such other places as the Central Government may think fit, branch offices of the Central Registry.

(3) The Central Government may, by notification, define the territorial limits within which an office of the Central Registry may exercise its functions.

(4) The provisions of this Act pertaining to the Central Registry shall be in addition to and not in derogation of any of the provisions contained in the Registration Act, 1908 (16 of 1908), the Companies Act, 1956 (1 of 1956), the Merchant Shipping Act, 1958 (44 of 1958), the Patents Act, 1970 (39 of 1970), the Motor Vehicles Act, 1988 (59 of 1988) and the Designs Act, 2000 (16 of 2000) or any other law requiring registration of charges and shall not affect the priority of charges or validity thereof under those Acts or laws.

21. Central Registrar.-

(1) The Central Government may, by notification, appoint a person for the purpose of registration of transactions relating to securitisation, reconstruction of financial assets and security interest created over properties, to be known as the Central Registrar.

(2) The Central Government may appoint such other officers with such designations as it thinks fit for the purpose of discharging under the superintendence and direction of the Central Registrar, such functions of the Central Registrar under this Act as he may, from time to time, authorise them to discharge.

22. Register of securitisation, reconstruction and security interest transactions.-

(1) For the purposes of this Act, a record called the Central Register shall be kept at the head office of the Central Registry for entering the particulars of the transactions relating to-

(a) securitisation of financial assets;

(b) reconstruction of financial assets; and

(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Central Registrar to keep the records wholly or partly in computer, floppies, diskettes or in any other electronic form subject to such safeguards as may be prescribed.

(3) Where such register is maintained wholly or partly in computer, floppies, diskettes or in any other electronic form, under sub-section (2), any reference in this Act to entry in the Central Register shall be construed as a reference to any entry as maintained in computer or in any other electronic form.

(4) The register shall be kept under the control and management of the Central Registrar.

23. Filing of transactions of securitisation, reconstruction and creation of security interest.-

The particulars of every transaction of securitisation, asset reconstruction or creation of security interest shall be filed, with the Central Registrar in the manner and on payment of such fee as may be prescribed, within thirty days after the date of such transaction or creation of security, by the securitisation company or reconstruction company or the secured creditor, as the case may be:

Provided that the Central Registrar may allow the filing of the particulars of such transaction or creation of security interest within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten times the amount of such fee.

24. Modification of security interest registered under this Act.-

Whenever the terms or conditions, or the extent or operation, of any security interest registered under this Chapter, are, or is, modified, it shall be the duty of the securitisation company or the reconstruction company or the secured creditor, as the case may be, to send to the Central Registrar, the particulars of such modification, and the provisions of this Chapter as to registration of a security interest shall apply to such modification of such security interest.

25. Securitisation company or reconstruction company or secured creditors to report satisfaction of security interest.-

(1) The securitisation company or reconstruction company or the secured creditor as the case may be, shall give intimation to the Central Registrar of the payment or satisfaction in full, of any security interest relating to the securitisation company or the reconstruction company or the secured creditor and requiring registration under this Chapter, within thirty days from the date of such payment or satisfaction.

(2) The Central Registrar shall, on receipt of such intimation, cause a notice to be sent to the securitisation company or reconstruction company or the secured creditor calling upon it to show cause within a time not exceeding fourteen days specified in such notice, as to why payment or satisfaction should not be recorded as intimated to the Central Registrar.

(3) If no cause is shown, the Central Registrar shall order that a memorandum of satisfaction shall be entered in the Central Register.

(4) If cause is shown, the Central Registrar shall record a note to that effect in the Central Register, and shall inform the borrower that he has done so.

26. Right to inspect particulars of securitisation, reconstruction and security interest transactions.-

(1) The particulars of securitisation or reconstruction or security interest entered in the Central register of such transactions kept under section 22 shall be open during the business hours for inspection by any person on payment of such fee as may be prescribed.

(2) The Central Register referred to in sub-section (1) maintained in electronic form, shall also be open during the business hours for the inspection by any person through electronic media on payment of such fee as may be prescribed.

CHAPTER VOffences and penalties

27. Penalties.-

If a default is made-

(a) in filing under section 23, the particulars of every transaction of any securitisation or asset reconstruction or security interest created by a securitisation company or reconstruction company or secured creditor; or

(b) in sending under section 24, the particulars of the modification referred to in that section; or

every company and every officer of the company or the secured creditor and every officer of the secured creditor who is in default shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues.

28. Penalties for non-compliance of direction of Reserve Bank.-

If any securitisation company or reconstruction company fails to comply with any direction issued by the Reserve Bank under section 12, such company and every officer of the company who is in default, shall be punishable with fine which may extend to five lakh rupees and in the case of a continuing offence, with an additional fine which may extend to ten thousand rupees for every day during which the default continues.

29. Offences.-

If any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

30. Cognizance of offence.-

No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try any offence punishable under this Act.

CHAPTER VIMiscellaneous

31. Provisions of this Act not to apply in certain cases.-

The provisions of this Act shall not apply to-

(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;

(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 1872)

(c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 1934 (24 of 1934)

(d) creation of security interest in any vessel as defined in clause (55) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958)

(e) any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created;

(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930 (3 of 1930)

(g) any properties not liable to attachment or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure, 1908 (5 of 1908)

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;

(i) any security interest created in agricultural land;

(j) any case in which the amount due is less than twenty per cent. of the principal amount and interest thereon.

32. Protection of action taken in good faith.-

No suit, prosecution or other legal proceedings shall lie against any secured creditor or any of his officers or manager exercising any of the rights of the secured creditor or borrower for anything done or omitted to be done in good faith under this Act.

33. Offences by companies.-

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Explanation.-For the purposes of this section,-

(a) company$$ means any body corporate and includes a firm or other association of individuals; and

(b) director$$, in relation to a firm, means a partner in the firm.

34. Civil court not to have jurisdiction.-

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).

35. The provisions of this Act to override other laws.-

The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

36. Limitation.-

No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963).

37. Application of other laws not barred.-

The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.

38. Power of Central Government to make rules.-

(1) The Central Government may, by notification and in the Electronic Gazette as defined in clause (s) of section 2 of the Information Technology Act, 2000 (21 od 2000), 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 all or any of the following matters, namely:-

(a) the form and manner in which an application may be filed under sub-section (10) of section 13;

(b) the manner in which the rights of a secured creditor may be exercised by one or more of his officers under sub-section (12) of section 13;

(d) the manner in which the particulars of every transaction of securitisation shall be filed under section 23 and fee for filing such transaction;

(e) the fee for inspecting the particulars of transactions kept under section 22 and entered in the Central Register under sub-section (1) of section 26;

(f) the fees for inspecting the Central Register maintained in electronic form under sub-section (2) of section 26;

(g) any other matter which is required to be, or may be, prescribed, in respect of which provision is to be, or may be, made by rules.

(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 prejudice to the validity of anything previously done under that rule.

39. Certain provisions of this Act to apply after Central Registry is set-up or cause to be set-up.-

The provisions of sub-sections (2), (3) and (4) of section 20 and sections 21, 22, 23, 24, 25, 26 and 27 shall apply after the Central Registry is set up or cause to be set up under sub-section (1) of section 20.

40. Power to remove difficulties.-

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as may appear to be necessary for removing the difficulty:

Provided that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

41. Amendments of certain enactments.-

The enactments specified in the Schedule shall be amended in the manner specified therein.

42. Repeal and saving.-

(1) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 (2 of 2002) is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be deemed to have been done or taken under the corresponding provisions of this Act.

THE SCHEDULE

(See section 41)

Year Act No. Short title Amendment

1956 42 The Securities

Contracts

(Regulation)

Act, 1956.
In section 4A, in sub-section (1), after clause (vi), insert the following:-

(vii) the securitisation company or reconstruc-tion company which has obtained a certificate of registration under sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002.

1986 1 The Sick Industrial

Companies (Special

Provisions) Act,

1985.
In section 2, in clause (h), after sub-clause (ib), insert the following:-

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002..

1956 1 The Companies Act, 1956.
In section 15, in sub-section (1), after the proviso, insert the following:-

Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act:

Provided also that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act..

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993

Legal India — Sat, 23 May 2009 05:30:16 +0000

Act : CHAPTER I: PRELIMINARY

1. Short title, extent, commencement and application
(1) This Act may be called the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall be deemed to have come into force on the 24th day of June, 1993.

(4) The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify.

2. Definitions
In this Act, unless the context otherwise requires,-

(a) Appellate Tribunal means an Appellate Tribunal established under sub-section (1) of section 8;

(b) Application means an application made to a Tribunal under section 19;

(c) Appointed day, in relation to a Tribunal or an Appellate Tribunal, means the date on which such Tribunal is established under sub-section (1) of section 3 or, as the case may be, sub-section

(1) of section 8;

(d) Bank means-

(i) a banking company;

(ii) a corresponding new bank;

(iii) State Bank of India;

(iv) a subsidiary bank; or

(v) a Regional Rural Bank;

(e) Banking company shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)

1[(ea) Chairperson means a Chairperson of an Appellate Tribunal appointed under section 9;]

(f) Corresponding new bank shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)

2[(g) Debt means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application.]

(h) Financial institution means-
(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956)

(ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India, by notification, specify;

(i) Notification means a notification published in the Official Gazette;

(j) Prescribed means prescribed by rules made under this Act;

1[ja) Presiding Officer means the Presiding Officer of the Debts Recovery Tribunal appointed under sub-section (1) of section 4;]

(k) Recovery Officer means a Recovery Officer appointed by the Central Government for each Tribunal under sub-section (1) of section 7;

(l) Regional Rural Bank means a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976)

(m) State Bank of India means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955)

(n) Subsidiary bank shall have the meaning assigned to it in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)

(o) Tribunal means the Tribunal established under sub-section (1) of section 3.

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993

Year : 1993

Act :

CHAPTER II

ESTABLISHMENT OF TRIBUNAL AND APPELLATE TRIBUNAL

3. Establishment of Tribunal
(1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.

(2) The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it.

4. Composition of Tribunal
(1) A Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer) to be appointed, by notification, by the Central Government.

(2) Notwithstanding anything contained in sub-section (1), the Central Government may authorise the Presiding Officer of one Tribunal to discharge also the functions of the Presiding Officer of another Tribunal.

5. Qualifications for appointment as Presiding Officer

A person shall not be qualified for appointment as the Presiding Officer of a Tribunal unless he is, or has been, or is qualified to be, a District Judge.

6. Term of office
The Presiding Officer of a Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 3[sixty-two years], whichever is earlier.

7. Staff of Tribunal
(1) The Central Government shall provide the Tribunal 4[with one or more Recovery Officers] and such other officers and employees as that government may think fit.

(2) 5[The Recovery Officers] and other officers and employees of a Tribunal shall discharge their functions under the general superintendence of the Presiding Officer.

(3) The salaries and allowances and other conditions of service of the 6[Recovery Officers] and other officers and employees of a Tribunal shall be such as may be prescribed.

8. Establishment of Appellate Tribunal

(1) The Central Government shall, by notification, establish one or more Appellate Tribunals, to be known as the Debts Recovery Appellate Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.

(2) The Central Government shall also specify in the notification referred to in sub-section (1) the Tribunals in relation to which the Appellate Tribunal may exercise jurisdiction.

1[(3) Notwithstanding anything contained in sub-sections (1) and (2), the Central Government may authorise the Chairperson of one Appellate Tribunal to discharge also the functions of the Chairperson of other Appellate Tribunal.]

9. Composition of Appellate Tribunal
An Appellate Tribunal shall consist of one person only (hereinafter referred to as 7[the Chairperson of the Appellate Tribunal] to be appointed by notification, by the Central Government.

10. Qualifications for appointment as 8[Chairperson of the Appellate Tribunal]
A person shall not be qualified for appointment as 9[the Chairperson of an Appellate Tribunal] unless he-

(a) is, or has been, or is qualified to be, a Judge of a High Court; or

(b) has been a member of the Indian Legal Service and has held a post in Grade I of that service for at least three years; or

11. Term of office
9[The Chairperson of an Appellate Tribunal] shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of 10[sixty-five years], whichever is earlier.

12. Staff of the Appellate Tribunal
The provisions of section 7 (except those relating to Recovery Officer) shall, so far as may be, apply to an Appellate Tribunal as they apply to a Tribunal and accordingly references in that section to Tribunal shall be construed as references to Appellate Tribunal and references to Recovery Officer shall be deemed to have been omitted.

13. Salary and allowances and other terms and conditions of service of Presiding Officers

The salary and allowances payable to, and the other terms and conditions of service (including pension, gratuity and other retirement benefits) of 11[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall be such as may be prescribed:

PROVIDED that neither the salary and allowances nor the other terms and conditions of service of 12[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal shall be varied to his] disadvantage after appointment.

14. Filling up of vacancies
If, for any reason other than temporary absence, any vacancy occurs in the office 11[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal], then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Tribunal or the Appellate Tribunal from the stage at which the vacancy is filled.

15. Resignation and removal
(1) 11[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] may by notice in writing under his hand addressed to the Central Government, resign his office:

PROVIDED that 13[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(2) 11[The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall not be removed from his office except by an order made by the Central Government on the ground of proved misbehaviour or incapacity after inquiry,

(a) in the case of the Presiding Officer of a Tribunal made by a Judge of a High Court;

(b) in the case of 14[the Chairperson of an Appellate Tribunal], made by a Judge of the Supreme Court,

in which 15[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] the Presiding Officer concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.

(3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of 16[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal].

16. Orders constituting Tribunal or an Appellate Tribunal to be final, and not to invalidate its proceedings
No order of the Central Government appointing any person as 11[The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] shall be called in question in any manner, and no act or proceeding before a Tribunal or an Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Tribunal or an Appellate Tribunal.

Act :

CHAPTER III

JURISDICTION, POWERS AND AUTHORITY OF TRIBUNALS

17. Jurisdiction, powers and authority of Tribunals
(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.

(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

1[17A. Power of Chairperson of Appellate Tribunal

(1) The Chairperson of an Appellate Tribunal shall exercise general power of superintendence and control over the Tribunals under his jurisdiction including the power of appraising the work and recording the annual confidential reports of Presiding Officers.

(2) The Chairperson of an Appellate Tribunal having jurisdiction over the Tribunals may, on the application of any of the parties or on his own motion after notice to the parties, and after hearing them, transfer any case from one Tribunal for disposal to any other Tribunal.]

18. Bar of jurisdiction
On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in section 17.

Title : RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993

Year : 1993
CHAPTER IV
PROCEDURE OF TRIBUNALS
2[19. Application to the Tribunal
(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction-

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or

(2) Where a bank or a financial institution, which has to recover its debt from any person, has filed an application to the Tribunal under sub-section (1) and against the same person another bank or financial institution also has a claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that Tribunal.

(3) Every application under sub-section (1) or sub-section (2) shall be in such form and accompanied by such documents or other evidence and by such fee as may be prescribed:

PROVIDED that the fee may be prescribed having regard to the amount of debt to be recovered:

PROVIDED FURTHER that nothing contained in this sub-section relating to fee shall apply to cases transferred to the Tribunal under sub-section (1) of section 31.

(4) On receipt of the application under sub-section (1) or sub-section (2), the Tribunal shall issue summons requiring the defendant to show cause within thirty days of the service of summons as to why the relief prayed for should not be granted.

(5) The Tribunal shall, at or before the first hearing or within such time as the Tribunal may permit, present a written statement of his defence.

(6) Where the defendant claims to set-off against the applicant$s demand any ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written statement containing the particulars of the debt sought to be set-off.

(7) The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off.

(8) A defendant in an application may, in addition to his right of pleading a set-off under sub-section (6), set up, by way of counter-claim against the claim of the applicant, any right or claim in respect of a cause of action accruing to the defendant against the applicant either before or after the filing of the application but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not.

(9) A counter-claim under sub-section (8) shall have the same effect as a cross-suit so as to enable the Tribunal to pass a final order on the same application, both on the original claim and on the counter-claim.

(10) The applicant shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Tribunal.

(11) Where the defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but in an independent action, the applicant may, at any time before issues are settled in relation to the counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, the Tribunal may, on the hearing of such application make such order as it thinks fit.

(12) The Tribunal may make an interim order (whether by way of injunction or stay or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal.

(13) (A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him,

(i) is about to dispose of the whole or any part of his property; or

(ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or

(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,

the Tribunal may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Tribunal, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of debt, or to appear and show cause why he should not furnish security.

(B) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed by the applicant as the properties secured in his favour or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt.

(14) The applicant shall, unless the Tribunal otherwise directs, specify the property required to be attached and the estimated value thereof.

(15) The Tribunal may also in the order direct the conditional attachment of the whole or any portion of the property specified under sub-section (14).

(16) If an order of attachment is made without complying with the provisions of sub-section (13), such attachment shall be void.

(17) In the case of disobedience of an order made by the Tribunal under sub-sections (12), (13) and (18) or breach of any of the terms on which the order was made, the Tribunal may order the properties of the person guilty of such disobedience or breach to be attached and may also order such person to be detained in the civil prison for a term not exceeding three months, unless in the meantime the Tribunal directs his release.

(18) Where it appears to the Tribunal to be just and convenient, the Tribunal may, by order,-

(a) appoint a receiver of any property, whether before or after grant of certificate for recovery of debt;

(b) remove any person from the possession or custody of the property;

(d) confer upon the receiver all such powers, as to bringing and defending suits in the courts or filing and defending applications before the Tribunal and for the realization, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents as the owner himself has, or such of those powers as the Tribunal thinks fit; and

(e) appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale thereof.

(19) Where a certificate of recovery is issued against a company registered under the Companies Act, 1956, the Tribunal may order the sale proceeds of such company to be distributed among its secured creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and to pay the surplus, if any, to the company.

(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice.

(21) The Tribunal shall send a copy of every order passed by it to the applicant and the defendant.

(22) The Presiding Officer shall issue a certificate under his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of the amount of debt specified in the certificate.

(23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated:

PROVIDED that in case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it.

(24) The application made to the Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within one hundred and eighty days from the date of receipt of the application.

(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.]

20. Appeal to the Appellate Tribunal
(1) Save as provided in sub-section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter.

(2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:

PROVIDED that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty five days if it is satisfied that there was sufficient cause for not filing it, within that period.

(4) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal.

(6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.

21. Deposit of amount of debt due, on filing appeal
Where an appeal is preferred by any person from whom the amount of financial debt is due to a bank or a financial institution or a consortium of banks or financial institutions, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under section 19:

PROVIDED that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.

22. Procedure and powers of the Tribunal and the Appellate Tribunal
(1) The Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely,-

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

(d) issuing commissions for the examination of witnesses or documents;

(e) reviewing its decisions;

(f) dismissing an application for default or deciding it ex parte;

(g) setting aside any order of dismissal of any application for default or any order passed by it ex parte;

(h) any other matter which may be prescribed.

(3) Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860), and the Tribunal or the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

23. Right to legal representation and Presenting Officers
(1) A bank or a financial institution making an application to a Tribunal or an appeal to an Appellate Tribunal may authorise one or more legal practitioners or any of its officers to act as Presenting Officers and every person so authorised by it may present its case before the Tribunal or the Appellate Tribunal.

(2) The defendant may either appear in person or authorise one or more legal practitioners or any of his or its officers to present his or its case before the Tribunal or the Appellate Tribunal.

24. Limitation
The provisions of the Limitation Act, 1963, (36 of l963) shall, as far as may be, apply to an application made to a Tribunal.

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993

Year : 1993

Act :

CHAPTER V

RECOVERY OF DEBT DETERMINED BY TRIBUNAL

25. Modes of recovery of debts
The Recovery Officer shall, on receipt of the copy of the certificate under sub-section (7) of section 19, proceed to recover the amount of debt specified in the certificate by one or more of the following modes, namely,-

(a) attachment and sale of the movable or immovable property of the defendant;

(b) arrest of the defendant and his detention in prison;

26. Validity of certificate and amendment thereof
(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.

(2) Notwithstanding the issue of a certificate to a Recovery Officer, the Presiding Officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer.

(3) The Presiding Officer shall intimate to the Recovery Officer any order withdrawing or cancelling a certificate or any correction made by him under sub-section (2).

27. Stay of proceedings under certificate and amendment or withdrawal thereof
(1) Notwithstanding that a certificate has been issued to the Recovery Officer for the recovery of any amount, the Presiding Officer may grant time for the payment of the amount, and thereupon the Recovery Officer shall stay the proceedings until the expiry of the time so granted.

(2) Where a certificate for the recovery of amount has been issued, the Presiding Officer shall keep the Recovery Officer informed of any amount paid or time granted for payment, subsequent to the issue of such certificate to the Recovery Officer.

(3) Where the order giving rise to a demand of amount for recovery of debt has been modified in appeal and, as a consequence thereof the demand is reduced, the Presiding Officer shall stay the recovery of such part of the amount of the certificate as pertains to the said reduction for the period for which the appeal remains pending.

(4) Where a certificate for the recovery of debt has been received by the Recovery Officer and subsequently the amount of the outstanding demands is reduced 1[or enhanced] as a result of an appeal, the Presiding Officer shall, when the order which was the subject-matter of such appeal has become final and conclusive, amend the certificate or withdraw it, as the case may be.

28. Other modes of recovery
(1) Where a certificate has been issued to the Recovery Officer under sub-section (7) of section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in section 25, recover the amount of debt by any one or more of the modes provided under this section.

(2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct, from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer:

PROVIDED that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908).

(3) (i) The Recovery Officer may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the defendant or to any person who holds or may subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either forthwith upon the money becoming due or being held or within the time specified in the notice (not being before the money becomes due or is held), so much of the money as is sufficient to pay the amount of debt due from the defendant or the whole of the money when it is equal to or less than that amount.

(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the defendant jointly with any other person and for the purposes of this sub-section the shares of the joint holders in such amount shall be presumed, until the contrary is proved, to be equal.

(iii) A copy of the notice shall be forwarded to the defendant at his last address known to the Recovery Officer and in the case of a joint account to all the joint holders at their last addresses known to the Recovery Officer.

(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank, financial institution, or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like to be made before the payment is made notwithstanding any rule, practice or requirement to the contrary.

(v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.

(vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or the part thereof is not due to the defendant or that he does not hold any money for or on account of the defendant, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant on the date of the notice, or to the extent of the defendant$s liability for any sum due under this Act, whichever is less.

(vii) The Recovery Officer may, at any time or from time to time, amend or revoke any notice under this sub-section or extend the time for making any payment in pursuance of such notice.

(viii) The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the defendant to the extent of the amount so paid.

(ix) Any person discharging any liability to the defendant after the receipt of a notice under this sub-section shall be personally liable to the Recovery Officer to the extent of his own liability to the defendant so discharged or to the extent of the defendant$s liability for any debt due under this Act, whichever is less.

(x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were a debt due from him, in the manner provided in sections 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 25.

(4) The Recovery Officer may apply to the court in whose custody there is money belonging to the defendant for payment to him of the entire amount of such money, or if it is more than the amount of debt due, an amount sufficient to discharge the amount of debt so due.

1[(4A) The Recovery Officer may, by order, at any stage of the execution of the certificate of recovery, require any person, and in case of a company, any of its officers against whom or which the certificate of recovery is issued, to declare on affidavit the particulars of his or its assets.]

(5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income Tax Act, 1961 (43 of 1961).

29. Application of certain provisions of Income Tax Act
The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961), and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income Tax Act:

PROVIDED that any reference under the said provisions and the rules to the assessee shall be construed as a reference to the defendant under this Act.

2[30. Appeal against the order of Recovery Officer
(1) Notwithstanding anything contained in section 29, any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.

(2) On receipt of an appeal under sub-section (1), the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such enquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive).]

Title : RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993Year : 1993

Act :

CHAPTER VI

MISCELLANEOUS

31. Transfer of pending cases
(1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:

PROVIDED that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court.

(2) Where any suit or other proceeding stands transferred from any court to a Tribunal under sub-section (1):

(a) the court shall, as soon as may be after such transfer, forward the records of such suit or other proceeding to the Tribunal; and

(b) the Tribunal may, on receipt of such records, proceed to deal with such suit or other proceeding, so far as may be, in the same manner as in the case of an application made under section 19 from the stage which was reached before such transfer or from any earlier stage 17[***] as the Tribunal may deem fit.

1[31A. Power of Tribunal to issue certificate of recovery in case of decree or order
(1) Where a decree or order was passed by any court before the commencement of the Recovery of Debts Due to Banks and Financial Institutions (Amendment) Act, 2000 and has not yet been executed, then, the decree-holder may apply to the Tribunal to pass an order for recovery of the amount.

(2) On receipt of an application under sub-section (1), the Tribunal may issue a certificate for recovery to a Recovery Officer.

(3) On receipt of a certificate under sub-section (2), the Recovery Officer shall proceed to recover the amount as if it was a certificate in respect of a debt recoverable under this Act.]

2[32. Chairperson, Presiding Officer and staff of Appellate Tribunal and Tribunal to be public servants
The Chairperson of an Appellate Tribunal, the Presiding Officer of a Tribunal, the Recovery Officer and other officers and employees of an Appellate Tribunal and a Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).]

33. Protection of action taken in good faith
No suit, prosecution or other legal proceeding shall lie against the Central Government or against 11[the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal] or against the Recovery Officer for anything which is in good faith done or intended to be done in pursuance of this Act or any rule or order made thereunder.

34. Act to have overriding effect
(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), and 18[the Sick Industrial Companies (Special Provisions) Act, 1985 and the Small Industries Development Bank of India Act, 1989.]

35. Power to remove difficulties
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing the difficulty:

PROVIDED that no such order shall be made after the expiry of the period of three years from the date of commencement of this Act.

(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.

36. Power to make rules
(1) The Central Government may, by notification, make rules to carry out the provisions of this Act.

(2) Without prejudice to the generality of the foregoing powers, such rules may provide for all or any of the following matters, namely,-

(a) the salaries and allowances and other terms and conditions of service of 19[the Chairpersons, the Presiding Officers], Recovery Officers and other officers and employees of the Tribunal and the Appellate Tribunals under sections 7, 12 and 13;

(b) the procedure for the investigation of misbehaviour or incapacity of 20[the Chairpersons of Appellate Tribunals and the Presiding Officers of the Tribunals] under sub-section (3) of section 15;

(c) the form in which an application may be made under section 19, the documents and other evidence by which such application shall be accompanied and the fees payable in respect of the filing of such application;

(d) the form in which an appeal may be filed before the Appellate Tribunal under section 20 and the fees payable in respect of such appeal;

(e) any other matter which is required to be, or may be, prescribed.

2[(3) Every Notification issued under sub-section (4) of section 1, section 3 and section 8 and every rule made by the Central Government 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 notification or rule or both Houses agree that the notification or rule should not be issued or made, the notification or rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification or rule.]

37. Repeal and saving
(1) The Recovery of Debts Due to Banks and Financial Institutions Ordinance, 1993 (Ord. 25 of 1993), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the corresponding Ordinance, shall be deemed to have been done or taken under the corresponding provisions of this Act.

FOOT NOTES

1 Inserted by Amendment Act, 2000, w.e.f. 17th. January, 2000.

2 Substituted by Amendment Act, 2000, w.e. f. 17th. January, 2000.

3 Substituted by Amendment Act, 1995 for the words sixty years.

4 Substituted by Amendment Act, 2000, for the words with a Recovery Officer, w.e.f. 17th. January, 2000.

5 Substituted by Amendment Act, 2000, for the words the Recovery Officer, w.e.f. 17th. January, 2000.

6 Substituted by Amendment Act, 2000, for the words Recovery Officer, w.e.f. 17th. January, 2000.

7 Substituted by Amendment Act of 2000, for the words the Presiding Officer of the Appellate Tribunal, w.e.f. 17th. January, 2000.

8 Substituted for the words Presiding Officer of the Appellate Tribunal by Amendment Act of 2000, w.e.f. 17th. January, 2000.

9 Substituted by Amendment Act of 2000, for the words the Presiding Officer of an Appellate Tribunal, w.e.f. 17th. January, 2000.

10 Substituted for the words sixty-two years by Amendment Act, 1995.

11 Substituted by Amendment Act of 2000, for the words the Presiding Officer of a Tribunal or an Appellate Tribunal, w.e. f. 17th. January, 2000.

12 Substituted by Amendment Act of 2000, for the words the said Presiding Officers shall be varied to their w.e.f. 17th. January, 2000.

13 Substituted for the words the said Presiding Officer by Amendment Act of 2000, w.e.f. 17th. January, 2000.

14 Substituted for the words the Presiding Officer of an Appellate Tribunal by Amendment Act of 2000, w.e.f. 17th. January, 2000.

15 Substituted by Amendment Act, 2000, for the words the Presiding Officer concerned, w.e.f. 17th. January, 2000.

16 Substituted by Amendment Act, 2000, for the words the aforesaid Presiding Officer, w.e.f. 17th. January, 2000.

17 The words or de novo omitted by Amendment Act, 2000, w.e.f. 17th. January, 2000.

18 Substituted by Amendment Act 2000, for the words, brackets and figures the Sick Industrial Companies (Special Provisions) Act, 1985, w.e.f. 17th. January, 2000.

19 Substituted for the words the Presiding Officers by Amendment Act, 2000, w.e.f. 17th. January, 2000.

20 Substituted for the words the Presiding Officers of the Tribunals and Appellate Tribunals by Amendment Act, 2000, for the words the Presiding Officers of the Tribunals and Appellate Tribunals, w.e.f. 17th. January, 2000.

STATE FINANCIAL CORPORATIONS ACT, 1951

Legal India — Sat, 23 May 2009 05:29:03 +0000

CHAPTER I
PRELIMINARY

1. Short title, extent and commencement
(1) This Act may be called the State Financial Corporations Act, 1951.

(2) It extends to the whole of India.

(3) It shall come into force in any State on such date 1 as the Central Government may, by notification in the Official Gazette, appoint.

2. Definitions
In this Act unless the context otherwise requires-

(a) Board means the Board of Directors of the Financial Corporation;

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

(b) Financial Corporation means a Financial Corporation established under section 3 and includes a Joint Financial Corporation established under section 3A;

(i) the manufacture, preservation or processing of goods;

2[(ii) mining or development of mines;]

(iii) the hotel industry;

(iv) the transport of passengers or goods by road or by water or by air 3[or by ropeway or by lift];

(v) the generation or distribution of electricity or any other form of power;

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

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

2[(viii) the setting up or development of an industrial area or industrial estate;]

(ix) fishing or providing shore facilities for fishing or maintenance thereof; 4[***]

(x) providing special or technical knowledge or other services for the promotion of industrial growth;

3[(xi) providing weighbridge facilities;

(xii) the research and development of any process or product in relation to any of the matters aforesaid; or

(xiii) such other activity as may be approved by the Development Bank.]

5[Explanation 1]: The expression processing of goods includes any art or process for producing, preparing or making an article by subjecting any material to a manual, mechanical, chemical, electrical or any other like operation.]

3[Explanation 2: If any doubt arises as to whether a concern is an industrial concern or not, the same shall be referred to the Development Bank for its decision and the decision of the Development Bank thereon shall be final.]

(d) prescribed means prescribed by rules or regulations made under this Act;

(e) Reserve Bank means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934 (2 of 1934)

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

(ff) State Co-operative Bank shall have the meaning assigned to it in clause (f) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934)

(fff) State Government, in relation to a Union Territory, means the Administrator thereof;

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

CHAPTER II
INCORPORATION OF STATE FINANCIAL CORPORATIONS, THEIR CAPITAL AND MANAGEMENT

3. Establishment of State Financial Corporations
(1) The State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the 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 acquire, hold and dispose of property and shall by the said name sue and be sued.

3A. Establishment of Joint Financial Corporations
(1) Notwithstanding anything contained in section 3, two or more States may, after consultation with the 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 and needs of those States under such name as may be specified in the notification.

(2) An inter-State agreement under sub-section (1) among the 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 the guarantee under section 6 or section 7 or section 8;

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

(e) [Omitted by Act No. 43 of 1985]

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

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

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

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

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

4. Share capital and shareholders
(1) The authorised capital of the Financial Corporation shall be such sum as may be fixed by the State Government in this behalf, 2[but it shall be less than fifty lakh of rupees or exceed fifty crores of rupees:

PROVIDED that the Central Government may, on the recommendation of the Development Bank, by notification in the Official Gazette, increase the authorised capital up to one hundred crores of rupees.]

2[(2) The authorised capital shall be divided into such manner of fully paid up shares of the same face value and shall be issued to the parties mentioned in sub-section (3) at such times and in such manner as the State Government may, by notification in the Official Gazette, determine:

PROVIDED that no such notification shall be necessary when the shares are to be issued to the parties mentioned in clauses (a) and (ba) of sub-section (3).

(3) The State Government shall, with the approval of the Central Government, determine the number of share 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 under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956)], investment trusts, co-operative banks, 2[other financial institutions or such other institutions as the Central Government may notify in this behalf in the Official Gazette], and

(d) parties other than those referred to in clauses (a), (b), (ba) and (c):

PROVIDED that the number of shares which may be allocated to the parties referred to in clause (d) shall in no case exceed twenty-five per cent of the total number of shares.

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

2[(5) If any shares allocated to any of the parties referred to in clause (c) and (d) of sub-section (3) remain unsubscribed, they shall be subscribed for equally by the State Government and the Development Bank.]

4A. Special class of shares
(1) The State Government may, in consultation with the Development Bank, specify from time to time such part of the Unicode 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 Development Bank determine;

(b) subscribed by the State Government and the Development 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 Development Bank may, in consultation with and after obtaining the advice of the State Government, specify in this behalf from time to time and nothing contained in section 47 or section 48 shall apply thereto.

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

(5) Nothing contained in sub-section (2) to (5) of section 4, section 5, and sub-section (1) of section 6, shall apply to the special class of shares.

4B. Transfer of share capital to Development Bank
On such date as the Central Government may, by notification in the Official Gazette, specify (hereinafter referred to as the specified date), all the shares of every Financial Corporation subscribed by the Reserve Bank as on the date immediately preceding the specified date, shall, stand transferred to, and vested in, the Development Bank.

4C. Payment of amount
The Reserve Bank shall be given by the 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.

5. Restrictions on transfer of shares.
(1) The shares of the Financial Corporation shall not be transferable except to the State Government, the Reserve Bank, the Development Bank] or any other financial institution or class of financial institutions recognised in this behalf by the State Government 3[for other institutions notified under clause (c) of sub-section (3) of section 4:

PROVIDED that the shares subscribed for by the parties referred to in clause (d) of sub-section (3) of section 4 shall be freely transferable.

6[***]

6. Shares to be guaranteed by the State Government and to be trust or approved securities
(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, 2[the shares of the Financial Corporation, and such of the bonds and debentures issued by it 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 Trust Act, 1882 (2 of 1882) and also to be approved securities for the purposes of the Insurance Act, 1938 (4 of 1938) and the 7[Banking Regulation Act, 1949 (10 of 1949)].

7. Additional capital of the Financial Corporation and its borrowing powers
(1) The Financial Corporation may, in consultation with the Development Bank and the Reserve Bank, issue and sell bonds and debentures carrying interest for the purpose of increasing its working capital and such bonds and debentures 8[shall, if so required by the Financial Corporation, 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 based on the advice of the Reserve Bank fix 6[***].

(2) The Financial Corporation may, for the purpose 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 invest trust money by any law for the time being in force in India, or

(ii) such bills of exchange and promissory notes as are eligible for purchase or rediscount by the Reserve Bank or as are fully guaranteed as to the repayment of the principal and payment of interest by the State Government;

(b) repayable on the expiry of a fixed period not exceeding eighteen months from the date on which the money is so borrowed, against securities of the Central Government or of any State Government of the maturity, or subject to the previous approval of the State Government, against bonds and debentures issued by the Financial Corporation and maturing within a period not exceeding eighteen months from the date on which the money is so borrowed and every such bond and debenture shall be guaranteed by the State Government:

PROVIDED that the amount borrowed by the Financial Corporation under clause (b) shall not at any time exceed in the aggregate 9[twice] the paid up share capital thereof.

(2A) No money shall be borrowed by the Financial Corporation from the Reserve Bank under sub-section (2), except with the previous approval of the Development Bank.]

(3) The Financial Corporation may, for the purposes of carrying out its functions under this Act, borrow money from the State Government in consultation with the Development Bank and] the Reserve Bank on such terms and conditions as may be agreed upon.

(4) The Financial Corporation may, with the prior approval of the Development Bank, also borrow money from any financial institution notified in this behalf by the Central Government on such terms and conditions as may be agreed upon.

(5) The total amount of bonds and debentures issued and outstanding, the amounts borrowed by the Financial Corporation under clause (b) of sub-section (2), sub-section (3) and sub-section (4) and of the contingent liabilities of the Financial Corporation in the form of guarantees given by it or underwriting agreements entered into by it shall not 10[* * *] exceed ten times the amount of the paid up share capital and the reserve fund of the Financial Corporation:

3[PROVIDED that the Financial Corporation may, with the prior approval of the Development Bank, exceed the aforesaid limit up to thirty times the amount of the paid up capital and the reserve fund of the Financial Corporation.]

7A. Power to transfer rights
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 or by transfer of any instrument by endorsement or in any other manner in which the rights and interest 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.

8. Deposits with the Financial Corporation
(1) The Financial Corporation may accept from the State Government or, with the prior approval of the State Government, the Development Bank and the Reserve Bank, 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 it thinks fit:

2[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 Central 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[(2) Any deposit accepted under sub-section (1), other than a deposit from the State Government shall, if so required by the Financial Corporation, be guaranteed by the State Government as to the repayment of the principal and the payment of interest.]

9. Management of Financial Corporations
The general superintendence, direction and management of the affairs and business of the Financial Corporation shall vest in a 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.

10. Board of Directors
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 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 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) one Director nominated by the Reserve Bank;

(d) three Directors elected in the prescribed manner by the parties referred to in clause (c) of sub-section (3) of section 4, one of whom shall be elected to represent scheduled banks, another to represent co-operative banks and the third to represent the remaining 11[financial institutions and other institutions];

(e) one Director elected in the prescribed manner from among themselves by the parties referred to in clause (d) sub-section (3) of section 4 who are shareholders of the Financial Corporation;

(f) a Managing Director appointed by the State Government in consultation with and after obtaining the advice of the Development Bank and, except in the case of first appointment, also with the Board:

PROVIDED that on the first constitution of the Board the Directors referred to in clauses (d) and (e) shall be nominated by the State Government and the Directors so nominated shall, for the purpose of this Act, be deemed to be elected Directors:
CHAPTER III
POWERS AND DUTIES OF THE BOARD

24. General duty of 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.

25. Business which Financial Corporation may transact
(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 concern from scheduled banks or State co-operative banks 3[or other financial institutions];

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

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

(d) acting as agent of the Central Government or the State Government or the Development Bank or the Industrial Financial Corporation of India established under the Industrial Financial Corporation Act, 1948 (15 of 1948), or any other financial institution notified in this behalf by the Central Government in respect of any matter connected with, or arising out of, the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern] 3[or relating to the business of the Development Bank, Industrial Financial Corporation of India or financial institution];

2[(da) subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern or any other concern with the prior approval of the Development Bank;]

(e) receiving in consideration of the services mentioned in the preceding clauses such commission as may be agreed upon;

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

(g) granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding 20 years from the date on which they are granted or subscribed to, as the case may be:

13[PROVIDED that the Financial Corporation may, with the prior approval of the Development Bank, exceed the said limit of twenty years up to a further period of ten years:

PROVIDED FURTHER that nothing contained in this clause shall be deemed to preclude the Financial Corporation from granting loans or advances to, or subscribing to debentures of, an industrial concern to which may be attached an option to convert such debentures or loans into stock or shares of the industrial concern:

14[PROVIDED ALSO that] the Financial Corporation may, in the exercise of such option 15[convert the amounts outstanding on such debentures or loans] into stock or shares of the industrial concern and may also subscribe to stock or shares of the industrial concern if such concern increases its subscribed capital by the issue of further stock or shares in accordance with, and subject to, the provisions of section 81 of the Companies Act, 1956 (1 of 1956).

3[Explanation : In this clause, the expression the amounts outstanding on such debentures or loans shall means the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted into stock or shares;]

3[(ga) accepting or discounting promissory notes and bills of exchange made, drawn, accepted or endorsed by industrial concerns or by any person selling capital goods manufactured by one industrial concern to another industrial concern;

(gb) undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic studies or other activities in connection with the development of any industry;

(gc) providing technical and administrative assistance to any industrial concern or any person for the promotion, management or expansion of any industry;

(gd) planning and assisting in the promotion and development of industries;

(ge) doing such other business as the Development Bank may authorise;]

(h) generally, the doing of such acts and things as may be incidental to, or consequential upon, the exercise of its powers or the discharge of its duties under this Act.

(2) [Omitted by Act No. 43 of 1985]

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

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

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

3[25A. Power to acquire rights
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.]

26. Limit of accommodation
(1) On and from the commencement of the 16[State Financial Corporations (Amendment) Act, 1985 (43 of 1985), the Financial Corporation shall not enter into any arrangements under clause (a), (ca) or (g) of] sub-section (1) 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) 2[Sixty 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) 17[thirty lakhs] of rupees in any other case:]

3[PROVIDED that the Financial Corporation may, with the prior approval of the Development Bank, exceed the limit under clause (i) or clause (ii) up to four times.]

(2) [Omitted by Act No. 43 of 1985.]

27. Power to impose conditions for accommodation
(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.

(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 of office of Directors and such like conditions contained in any such law or instrument aforesaid shall not apply to any Director appointed by the Financial Corporation in pursuance of the arrangement as aforesaid.

(3) Any Director appointed in pursuance of sub-section (2) shall-

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

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

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

28. Prohibited business
(1) The Financial Corporation shall not-

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

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

(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 18[three crores of rupees or such higher amount not exceeding thirty crores of rupees as the Central Government may by notification in the Official Gazette, specify].

(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 together hold substantial interest:

PROVIDED that this section shall not apply to any industrial concern if any Director of the Financial Corporation-

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

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

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

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

(i) shall not apply to any transaction relating to the business entered into prior to the commencement of the State Financial Corporations (Amendment) Act, 1972 (77 of 1972), and all such business and any transaction in relation thereto may be implemented or continued as if that Act had not come into force;

(ii) shall apply only so long as the conditions precedent to such disability as set out in the sub-section continue.

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

(2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property.

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

(4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs charges and expenses which in the opinion of the Financial Corporation have been properly incurred by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.

(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of the concern.

CHAPTER IV :
INVESTMENT OF FUNDS, ACCOUNTS AND AUDIT

33. Funds of the Financial Corporation
(1) Every Financial Corporation shall have its own fund, and all receipts of the Financial 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 the State Bank of India or a subsidiary bank as defined in the State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959) or in any of the banks specified in column 2 of the First Schedule to the Banking Companies (Acquisition and Transfer of 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) or, in consultation with the Reserve Bank, in a scheduled bank or a State Co-operative Bank.]

34. Investment of funds
The Financial Corporation may invest its funds in the securities of the Central Government or of any State Government.

35. Disposal of profits
(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]

35A. Special reserve fund
(1) The Financial Corporation may establish a special reserve fund, to which shall be transferred such portion of the dividends accruing to the State Government, the Reserve Bank and the Development Bank on the shares of the Financial Corporation as may be fixed by agreement between the State Government, the Reserve Bank and the Development Bank;

20[***]

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 Corporation, other than the State Government, the Reserve Bank and the Development Bank, shall have any claim to the special reserve fund.

(3) The amount standing to the credit of the special reserve fund may be utilised by the Financial Corporation for only such purposes as are approved by the State Government, the Reserve Bank and the Development Bank.

36. General meetings
(1) A general meeting (hereinafter referred to as the annual general meeting) shall be held annually at a place in the State where there is an office of the Financial Corporation within 21[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) 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.

37. Audit
(1) The affairs of the Financial Corporation shall be audited by auditors duly qualified to act as auditors of companies under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 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 to the auditors so appointed such remuneration as the State Government 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 auditor shall make a report to the shareholders upon the annual balance sheet and accounts, and in every such report they shall state whether in their opinion the balance sheet is a full and fair balance sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the State of affairs of the Financial Corporation, and in case they had called for any explanation or information from the Board, whether it has been given and whether it is satisfactory.

(4) The State Government may, in consultation with the Comptroller and Auditor General of India, at any time issue directions to the auditor requiring them to report to it upon the adequacy of measures taken by the Financial Corporation for the protection of its shareholders and creditors or upon the sufficiency of their procedure in auditing the affairs of the Financial Corporation and may enlarge or extend the scope of the audit or direct that a different procedure in audit be adopted, or direct that any other examination be made by the auditors, if in its opinion public interest so requires.

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

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

PROVIDED that where the State Government is required to make any payment on account of the guarantee given by it under section 6 or section 7 or section 8, as the case may be, such audit shall be undertaken by the Comptroller and Auditor General of India.

(7) Every audit report under sub-section (6) shall be forwarded to the State Government and the government shall cause the same to be laid before the legislature of the State.

37A. Inspection
(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 books 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 anything contained in the Indian Evidence Act, 1872 (1 of 1872), or in any other law for the time being in force, no court, tribunal or other authority shall have power to require the Development Bank or any of its officers to produce before such court, tribunal or other authority the report of the inspection made by it under sub-section (1) or any copy thereof.

(4) The State Government may, after considering any report sent to it under sub-section (1), give such instructions to the Board as it considers necessary and it shall be the duty of the Board to comply with such instructions.

38. Returns
2[(1) The Financial Corporation shall furnish to the State Government, the Development Bank and Reserve Bank such statements and returns in such form as the State Government, the Development Bank or the Reserve Bank may require from time to time.

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

CHAPTER V :
MISCELLANEOUS

39. Power to give instructions to Financial Corporation on questions of policy
(1) In the discharge of its functions, the Board shall be 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 under sub-section (4) of section 37A, the State Government shall have the power to supersede the Board and appoint a new Board in its place to function until a properly constituted Board is set up, the decision of the State Government as to the grounds for superseding the Board shall not be questioned in any court.

40. Declaration of fidelity and secrecy
22[(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 Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) any other scheduled bank, any State co-operative bank or the Development Bank,

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

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

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

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

(2) A Director shall not be responsible for any other 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 anything done in good faith in the execution of the duties of his office or in relation thereto.

41A. Protection of action taken by persons appointed under section 27 or section 32A
No suit, prosecution or other legal proceeding shall 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.

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

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

(3) No court shall take cognizance of any offence punishable under this Act otherwise than on a complaint in writing signed by an officer of the Financial Corporation authorised by the Board in this behalf.

43. Provisions relating to income tax and super-tax
For the purposes of the 24[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 section 6 or section 7 or section 8 shall not be treated as the income, profits and gains of the Financial Corporation and any interest on debentures, bonds or deposits paid by the Financial Corporation out of such sum shall not be treated as expenditure incurred by it:

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

43A. Delegation of powers
The Board may, by general or special order, delegate to the Managing Director or to any other officer of the Financial Corporation 3[or to any committee appointed under section 21] subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and duties under this Act as it may deem necessary.

3[43B. Reports to the Board
(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) Every action taken by the Managing Director and any other officer of the Financial Corporation shall, as soon as may be after it is taken by them, be reported to the Board.]

44. Act 18 of 1891 to apply to the books of the Financial Corporation
The Financial Corporation shall be deemed to be a bank for the purposes of the Bankers Books Evidence Act, 1891 (18 of 1891).

45. Liquidation of Financial Corporation
No provision of law relating to the winding up of 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.

46. Power to apply Act to certain financial institutions in existence at commencement of Act
(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 2[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:

3[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 notification.

46A. Extension of jurisdiction of the Financial Corporation to other States by agreement
(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 of 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 notification in the Official Gazette by the Central Government, serve the needs of those States or, as the case may be, of the area therein in terms of the agreement and any Financial Corporation or any State may enter into separate or successive agreements as aforesaid with one another or with other Financial Corporations of States and in relation to different areas of the States.

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

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

46B. Effect of Act on other laws
The provision of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the Memorandum or Articles of Association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.

47. Power of State Government to make rules
The State Government may 25[by notification in the Official Gazette,] make rules not inconsistent with the provisions of this Act to give effect to the provisions of this Act and in particular, 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.

48. Power of Board to make regulations
(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 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;

(d) the manner in which general meetings shall be convened, the procedure to be followed thereat and the manner in which voting rights may be exercised;

(e) the calling of meetings of the Board, and of the Executive Committee, fees for attending meetings thereof and the conduct of business thereat;

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

(g) the conditions which the Financial Corporation may impose in granting loans or advances;

26[***]

(i) the forms of returns and statements required under this Act;

(j) the duties and conduct of officers, other employees, advisers and agents of the Financial Corporation.

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

(l) the taking over of the management of any industrial concern on a breach of its agreement with the Financial Corporation;

(m) the appointment of 2[committees] for the purposes of this Act, fee for attending meetings thereof and the conduct of business thereat; and

(n) generally, the efficient conduct of the affairs of the Financial Corporation.

(3) All regulations made under this section shall be published in the Official Gazette and any such regulation shall have effect from such earlier or later date as may be specified in the regulations.

25[48A. Laying of rules and regulations before State Legislature
Every rule made under section 47 and every regulation made under section 48 shall be laid, as soon as may be after it is made, before the State Legislature.]

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

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

THE SCHEDULE : DECLARATION OF FIDELITY AND SECRECY
22[Section 40(3)]

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

Foot Notes

1 The appointed date is 1st. August, 1952 (in the whole of India except the State of Jammu and Kashmir), vide Notification No. SRO 1317, dated 28th. July, 1952.

2 Substituted by Act No. 43 of 1985.

3 Inserted by Act No. 43 of 1985.

4 The word or omitted by Act No. 43 of 1985.

5 Former Explanation renumbered as Explanation 1 by Act No. 43 of 1985.

6 Omitted by Act No. 43 of 1985.

7 Substituted for the words Banking Companies Act, 1949 by Act No. 43 of 1985.

8 Substituted for the words shall be guaranteed by the State Government by Act No. 43 of 1985.

9 Substituted by Act No. 43 of 1985, for the words ninety per cent of.

10 The words at any time omitted by Act No. 43 of 1985.

11 Substituted for the words financial institutions by Act No. 43 of 1985.

12 Substituted for the words shall be laid by Act No. 43 of 1985.

13 Substituted by Act No. 43 of 1985, for the words Provided that.

14 Substituted by Act No. 43 of 1985, for the words Provided further that.

15 Substituted by Act No. 43 of 1985, for the words convert such debentures or loans.

16 Substituted by Act No. 43 of 1985, for the words State Financial Corporations (Amendment) Act, 1972.

17 Substituted for the words fifteen lakhs by Act No. 43 of 1985.

18 Substituted for the words one crore of rupees by Act No. 43 of 1985.

19 Substituted for the words and number under sub-section 5 by Act No. 43 of 1985.

20 The first proviso omitted by Act No. 43 of 1985.

21 Substituted for the words three months by Act No. 43 of 1985.

22 Inserted by Act No. 48 of 1983.

23 Section 40 renumbered as sub-section (3) thereof by Act No. 48 of 1983.

24 Substituted by Act No. 43 of 1985, for the words Indian Income Tax Act, 1922 (11 of 1922)

25 Inserted by Act No. 4 of 1986, w.e.f. 15th. May, 1986.

26 Clause (h) omitted by Act No. 43 of 1985.

THE ALLIANZ UND STUTTGARTER LIFE INSURANCE BANK (TRANSFER) ACT, 1950

Legal India — Sat, 23 May 2009 05:28:46 +0000

ACT NO. 62 OF 1950

[1st December, 1950.]
An Act to provide for the transfer of the business of the Allianz
Und Stuttgarter Life Insurance Bank, Limited, to the United India Life
Assurance Company, Limited, and for matters connected therewith.
BE it enacted by Parliament as follows:-

1.Short title and commencement.

1.Short title and commencement.(1) This Act may be called the
Allianz Und Stuttgarter Life Insurance Bank (Transfer) Act, 1950.

(2) It shall be deemed to have come into force on the 1st day of September, 1950.
2.Definitions.
2.Definitions.In this Act, unless the context otherwise requires,-

(a) “the Act” means the Insurance Act, 1938 (4 of
1938.)

(b) “transferee company” means the United India Life
Assurance Company, Limited, having its registered office in
Madras ;

(c) “transferor company” means the Allianz Und Stuttgarter
Life Insurance Bank, Limited.
3.Transfer of assets and liabilities of the transferor company to thetransferee company.
3.Transfer of assets and liabilities of the transferor company to the transferee company. All the assets and liabilities of the transferor company which relate to or arise out of the life insurance business of the transferor company carried on immediately before the commencement of this Act by Messrs. A. F. Ferguson & Company, Chartered Accountants of Bombay, under the Defence of India Rules shall, by virtue of this Act, stand transferred to and vest in the transferee company, subject to the provisions of this Act and to the terms and conditions specified in the First Schedule.
4.Effect of transfer of assets and liabilities to transferee company.
4.Effect of transfer of assets and liabilities to transferee company.(1) Every contract of life insurance, entered into between the transferor company and the holder of any life policy before the com-
mencement of this Act, shall have effect as from such commencement as if the transferee company had been a party to the contract instead of the transferor company, and for any reference (however worded and whether express or implied) to the transferor company there were substituted as respects anything falling to be done on or after such

10.commencement, a reference to the transferee company, and with such other modifications as may be necessary to transfer rights, liabilities and obligations under the contract so far as unperformed, from the transferor company to the transferee company:

Provided that no provision in any such contract for the payment of any bonus, profit, interest or dividend on any life policy shall have effect against the transferee company except on the basis of an actuarial valuation of the business of the transferor company made after the commencement of this Act and to the extent, if any, that may be recommended by the actuary.

(2) For the removal of doubts it is hereby declared that notwithstanding any decision or rule of law to the contrary, no contract of life insurance as is referred to in sub-section (1) shall be deemed to have been dissolved merely by reason of the declaration that war had broken out between the Government of the United Kingdom and Germany.
5.Cessation of payment of commission to past insurance agents.
5.Cessation of payment of commission to past insurance agents.(1)
Notwithstanding anything to the contrary contained in the Act or in any other law for the time being in force or in any contract, all contracts of agency entered into before the 31st day of July, 1942, between an insurance agent, a special agent or a chief agent (by what-
ever name called) and the transferor company, and any appointment made before the said date whereby remuneration is payable to any person in the form of commission or bonus, shall be deemed to have been terminated with effect from the said date and no commission or bonus due to such agent or person, whether on renewal premiums or otherwise, shall be payable to him in respect of any life policies procured by or through him before the said date.

(2) Notwithstanding anything to the contrary contained in any law for the time being in force, no compensation shall be payable to any person for the termination, in pursuance of this section, of any contract of agency or other appointment.
6.Provision for facilitating transfer.
6.Provision for facilitating transfer.The Central Government may, by order notified in the Official Gazette, make such incidental, supplementary or consequential provisions as, in its opinion, are necessary to secure that the transfer of the assets and liabilities of the transferor company to the transferee company are fully and effectively carried out, and in particular and, without prejudice to the generality of such power, provision may be made by order notified in the Official Gazette-

(a) for adapting the terms of contracts entered into between the transferor company and any other person before the commencement of this Act, so as to conform to the changes

11.Consequent on the passing of this Act in the circumstances in which the contracts will fall to be performed after such commencement ;
(b) for requiring any person concerned with the keeping of the register of the holders of any securities or investments now transferred to the transferee company, to forthwith register the transferee company therein and to issue to the transferee company the appropriate documents of title relating to the securities or investments transferred to it ;

(c) for the continuation by or against the transferee company of any legal proceedings pending by or against the transferor company.
7.Power to give directions.
7.Power to give directions.(1) If any difficulty arises in giving effect to the Provisions of this Act, the Controller of Insurance may, with the approval of the Central Government, give such directions to the transferee company as he may consider necessary and the transferee company shall be bound to comply with such directions.

(2) If the transferee company fails to comply with any direction given to it under sub-section (1) it shall be deemed to have committed an offence punishable under section 102 of the Act.
8.Repeals.
8.Repeals.(1) The Allianz Und Stuttgarter Life Insurance Bank
(Transfer) Ordinance, 1950, (24 of 1950.) is hereby repealed.

(2) The notifications specified in the Second Schedule shall cease to have effect on the commencement of this Act, except as respects things done or omitted to be done before such commencement.

SCHE

(See section 3)Terms and conditions relating to the transfer of the business of thetransferor company
THE FIRST SCHEDULE

(See section 3)
Terms and conditions relating to the transfer of the business of the transferor company
1. The transferee company shall maintain a separate account in which shall be shown the business of the transferor company which has been transferred to it and a separate valuation thereof shall be made from time to time with a view to ascertaining whether profits appertaining to such business and divisible among holders of life policies exist.

2. The transferee company shall be bound to pay in full all claims arising out of any life policy issued by the transferor company and
12.remaining to be paid at the commencement of this Act or falling to be paid at any time after such commencement.

3. Notwithstanding anything contained in notification No.
168/I(23)-W/41 of the Government of India in the Commerce Department, dated the 27th day of June, 1942, the transferee company shall be liable to make good in respect of every policy of life insurance which had fallen due for payment before the commencement of this Act the difference between the amounts actually paid to the holder thereof by or on behalf of the transferor company in pursuance of the said notification and the full amount which would have been payable if that notification had not been issued.

4. If the transferee company recovers or receives any money from outside India which relate to the assets now transferred to the transferee company the same shall be applied by the transferee company for the benefit of the life policies of the transferor company issued in India.

SCHE

(See section 8)Repeals
THE SECOND SCHEDULE
(See section

Repeals
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Notification No. and date Contents of Notification

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1. No. 288-OR/39, dated the 14th Authorizing Messrs. A.F.Fer-
December, 1939, of the Government guson and Company, Chartered of India, Defence Co-ordination Accountants of Bombay, to
Department. carry on the business of the transferor company under rule
113A of the Defence of India
Rules, since continued in force by the Trading with the Enemy
(Continuance of Emergency Pro-
visions) Act, 1947 (16 of
1947.)

2. No. 168-1(2)-W/39, dated the 22nd Granting exemptions to Messrs.
February, 1941, of the Government A.F. Ferguson and Company from of India, Department of Commerce. the operation of certain pro-
visions of the Act.

3. No. 168-1 (23)-W/41, dated the Exempting Messrs. A.F. Fer-
27th June, 1942, of the Government guson and Company from the of India, Department of Commerce. obligation imposed by any contract of insurance in res-
pect of so much thereof as is in excess of 80 per cent. of the liability arising there-
from.

THE ASIAN DEVELOPMENT BANK ACT, 1966

Legal India — Sat, 23 May 2009 05:27:07 +0000

An Act to implement the international agreement for the establishment and operation of the Asian Development Bank and for matters connected therewith.

BE it enacted by Parliament in the Seventeenth Year of the
Republic of India as follows:–
1.Short title, extent and commencement.
1. Short title, extent and commencement. (1) This Act may be called the Asian Development Bank Act, 1966.(2) It extends to the whole of India.

(3) It shall come into force on such date1* as the Central
Government may, by notification in the Official Gazette, appoint.
2.Definitions.
2. Definitions. In this Act, unless the context otherwise requires,–

(a) “Agreement” means the Agreement for the establishment and operation of the international body known as the
Asian Development Bank;

(b) “Bank” means the Asian Development Bank established under the Agreement.
3.Payments to Bank.
3. Payments to Bank.- (1) There shall be paid out of the
Consolidated Fund of India, after due appropriation made by Parliament by law in this behalf, all such sums as may, from time to time, be required for the purpose of paying,–

(a) the subscriptions payable by the Central Government to the Bank under paragraphs 1, 2 and 3 of Article 5 of the Agreement;

(b) any commission, fees or other charges payable by the
Central Government to the Bank under Article 16 of the
Agreement;

(2) The Central Government may, if it thinks fit so to do, create and issue to the Bank, in such form as it thinks fit, any such non-
interest bearing and non-negotiable notes or other obligations as are provided for by paragraph 3 of Article 6 of the Agreement.
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1. 19-12-1966: vide Notifn. No. S.O. 3803 dt. 8-12-1966, Gaz. of
India, Pt. II, sec. 3(ii), p. 3416.200
4.Reserve Bank to be depository for Bank.
4. Reserve Bank to be depository for Bank.- The Reserve Bank of
India shall be the depository of the Indian currency holdings of the
Bank.
5.Conferment of status and certain immunities, exemptions and privilegeson Bank and confernment of certain immunities, exemptions andprivileges on its officers and employees.
5. Conferment of status and certain immunities, exemptions and privileges on Bank and conferment of certain immunities, exemptions and privileges on its officers and employees.- (1) Notwithstanding anything to the contrary contained in any other law, the provisions of the Agreement set out in the Schedule shall have the force of law in
India:

Provided that nothing in Article 56 of the Agreement shall be construed as–

(a) entitling the Bank to import into India goods free of any duty of customs without any restriction on their subsequent sale therein; or

(b) conferring on the Bank any exemption from duties or taxes which form part of the price of goods sold; or

(c) conferring on the Bank any exemption from duties or taxes which are in fact no more than charges for services rendered.

(2) The Central Government may, by notification in the Official
Gazette, amend the Schedule in conformity with any amendments, duly made and adopted, of the provisions of the Agreement set out therein.
6.Power to make rules.
6. Power to make rules.- The Central Government may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act.
7.Notifications issued under section 5 and rules made under section 6 tobe laid before Parliament.
7. Notifications issued under section 5 and rules made under section 6 to be laid before Parliament.- Every notification issued under sub-section (2) of section 5 and every rule made under section 6.shall be laid as soon as may be after it is issued or 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 1*[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 notification or, as the case may be, in the rule, or both Houses agree that the notification or rule should not be issued or made, the notification or rule shall thereafter have effect only in such modified form or be of no effect as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification or rule.
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