 bill no 113 , 1_ the state financial corporations (ambndml!:nt), bnl,i985 a billfurther to amend the state financial corporationa act, 1951 be it enacted by parliament in the thirty-sixth year of the repubhci of india as foilows:-1 this act may be called the state financial corporations (amend-short ment) act, 1985 title 83 itf 1861 5 z in 'section 2 of the state financial corporations act, 1951 (herem-amend- after referred to as the principal act), in clause (c),-meat of sectlciil z (a) for sub-clause (ii), the following sub-elawle shall be substituted, namely:-10 " (ii), mining or development of mines;"; (b) in sub-clause (it»,after the words "or by air" the worda "or by ropeway or by lltt" shall be idberted; (e) for sub-clauie (mii) the following sub-clauae shall be iibstituted, name1y:-ci (viii) the setting up or development of an industrial area or industrial estate;"; (d) in sub-clause (i,r), ~ word "or" occurring at the end shall be omitted; (e) after sub-clause (x), the following aub-clauses shall be inserted, namely:-110 ci (zi) providing weigh bridge facilities; (zii) the research and development of any process or product in relation to any of the matters aforesaid; or (xii) the research and development of any process or product in relation to any of the matters aforesaid; oj" (xiii) such ether activity as may be approved by the development bank"; (1) the expzanatio"l shall be numbered as explanation 1 thereof and after explanation 1 as so numbered, the following explanation 5 shan be inserted, namely:-"explanation z-if any doubt arises as to whether a concem is an industrial concern or not, the same shall be referred to the development bank for its decision and the decision of 10 the development bank thereon shall be final  3 in section 3a of the principal act, in sub-section (2), clause (e) shall be omitted  amendment of aection ia4 in section 4 of the principal act,-amendment of aectioq • (a) in sub-section (1), for the words "but it shall in no case be 15 leas than fifty lakhs of rupees or exceed ten cl'ores of rupees", the following shall be substituted, namely:-"but it shall not be less than fifty lakhs of rupees or exceed ftfty crores of rupees: provided that the central government may, on the recom- 20 mendation of the development bank, by notification in the oftlcial gazatte, increase the authorised capital up to one hundred crores of rupees";  (b) for sub-section (2), the following sub-section shall be substituted, namely:-25 -(2) the authorised capital shall be divided into such number of fully p!dd-up shares of the same face value and shall be issued to the parties mentioned in 'sub-section (3) at such timet and in such manner a~ the state government may, by notification in the official gazette, determine: 30 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)"; (c) in sub-section (3), in clause (e), for the words "or other financial institutions,", the words ", other  financial institutions or 35 mch i')thcr institutions as the central government may notify in this behalf in the official gazette" shall be substituted; (d) for sub-section (5) :"the following sub-section shall be substituted, namely:-"(5) if any shtwes allocated to any of the parties referred 40 to in clau8el (e) and (d) of8u!bsec&n (3) remain un'subscribed, they shall be subscribed for equally by the state govemment and the development bank   (to be/as :1n:troduced in ie k $bha) j l' i ·1~ pj8~e·1,-- i ~ lines 21 and 22~ 2 page' 2;· line 22,-lcl: " c3?b t te"  ~ '''cb ze t te "  ' , 3 page 3, -agi1nst line 16 in the iiarg1n,-, qjd;u n 10 0 f 19lt9" -  page 6, line 18,-1!2r "1984" read~5u-· 5 yage 7, _j,ine--44r-,)'  nu:- "sub-section "'litlall'jeaa ~~ _~ge'8, against line 33 in ~in,-- ~ "41 of" ~ "4·3 of 19-61h 7 ?age 8, lin the    , 8 pa ~ 9, line 9,- m "sectiol) 49" rud "section 48 ii , 9 pa ge 11, ·line 11,-read "<brpora;t1on s " 10 page 19, against line 7 trom-bcfttom jn the-mrgin,-, ,  in s et t "11 0 f 1922 '! i: new """ui··  _ jjaua, ,   1'/    5 in section 5 of the principal act-5 (a) in sub-section (1), after the words "or any other dnancfal inatitution or class of financial institutions recognised in this behalf by the state government",' the words, brackets, letter and figures "or other institutions notified under clause (c) of su\)section (3) of section 4" e>hall be inserted; (b) sub-section (2) shall be omitted  6 in section 6 of the principal act, in sub-section' '(2)-| amead    ||----------|| mat      || of       || sec:rion || 6       |10 15 jo of 1949 (a) for the words -'''the shares of the corporation shall", the words "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 repaym~t of the principal and payment of interest, and receipts issued by it for such of the deposits as are guaranteed by the state govemment as to the repayment of the principal and payment of interest, shall" shall be substituted (b) for the words and figures "banking companies act 1949", the words and figures "bimking regulation act, 1949" shall be substituted   '1 in section 7 of the principal act,-ao (a) in sub-aection (1)',-ameud· meat of section 7  "j 25 (i) for the worc1s,,"shall be guaranteed by the state government", the words "s~ if so required by t~ financial corporation, be guaranteed by the state government" shall be substituted; (ii) the words "at the time the bonds a~d debentures are issued" ,!shall, be omitted; i ~ (b) in sub-section (2" in the proviso, for the words "ninety per cent of", the word :: twice" shall be substituted; 30 (c) in sub-section (5), th~ words "at any time" shall be omitted and the followirig provisu shall be added at the end, nat:nely: -, "provided that the financial corporation may, with the prior appr~al of t~ development bank, exceed the aforesaid limit up to thirty times the amount of the paid-up share capital and reserve fund of the financial corporation" 35 40 8 in section 8 of the principal act,-ameacl (a) in sub-section (1), for the proviso, the following provisos meat c'!i i'" shall be substituted, namely:-section • "provided that the tot~ amount of such deposits shall not exceed twice the paid-up share capital of the financw corporation: provided further that the central government play permit the financial coreoration to • 8ccept dejlo1lits up ~ b higher  limit 'not exceeding ten times the paid-qp share c~pital of the  ', financial corporation "; 45 " (b) for "sub-section (2), the following sub-sectio~ shall be substituted, namely:-: -  " (2) any deposit accepted ul'lder sub-sectiori (1) other than a deposit from the ,state governp1e!lt shall, if so required by the fin~~ial cqrporation, be guaranteed by the st~ government as to the repayment of the principal and the payment of interest" amea4- meat of -=tlodl0 9 in section 10 of the princiral act, in clause (d) for the \vords "financial institutions", the words ccdnancial institutions and other institutions" shall be substituted 10 after section 10 of the principal act, the following section shall be inserted, namely:-5 1  11100 of new section loa vacation of oftlce by an elected dlncti,lr "loa the oftlce of a director elected under clause (d) of section 10 shall become vacant if he ceases to hold any oft1ce in the iche4u1ed bank, insurance company, investment trust, co-operative bank, financial or other institution in which he held any office at the time of his election as iuchdlrector 10 11 in section 15 of the principal act in sub-section (1),-amend-iiiei1t of l8ction u (a) the words \", not ljeing the managing director," shall be omitted; (b) after the proviso, the following proviso shall be inserted, namely: -i 15 "provided further that the same person may be appointed to function both as chairinan and as managing director" 12 in section 19 of the principal act, in sub-section (5), in clause (a), the words ", not being the managing director," shall be omitted ameradment of section 18 amendment ot aeetion 20 13 in section 20 of the principal act, in sub-section (2), for the 110 words "shall be laid", the worde "shall, after confirmation thereof at the next meeting of the executive committee, be laid" shall be substituted!" :: ;: ameddmeat of iidiad 21 14 in section 21 of the principal act for the words "one or more advisory committee or committees", the words "one or more committee !is or committees consisting wholly of directors o~ wholly of other persons or partly of directors and partly of other persons" shall be substituted  15 in section 25 of the principal act,- (4) in bub-section (1»)-amend-jii8dt of aeetlon ii (ii) in sub-clause (i\) of clause (a), after the words "state 30 co-operative banks", the words "or other financial institutions" shall be inserted; (ii) in clause (d), after the words "or arising out of, the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern", the words "or relat- 35 ing  to the business of the development bank, industrial finance corporation of india or finan~ial institution" shan be inserted; (iii) for clause (da), the following clause shall be substituted, namely:~  (cia) subscribing to, or purchasing of, the stock, shares, 40 bonds or debentures 01 an industrial concern or any other concern with the prior approval of the development bank;"; (iv) for clause (j), the fouowing clause shall be substituted, namely:-5 ,i (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;"; (v) in clause (g) ,-(a) in the first proviso for the words "provided that!', the following shall be substituted, namely:-10 "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"; (0) in the second proviso-(i) for the words "provided further that", the words "provided also that" shall be substituted; io (ii) for the words "convert such debentures or loans", the words "convert the amounts outstanding on such debentures or loans" shall be substituted';' (iii) the following explanation shall be inserted at the end, namely:-"erplanation,-in this clause, the expression "the amounts outstanding on such debentures or loans" shall mean the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted into stock or shares"; (vi) after clause (g), the following clauses shall be inserted, namely:-30 "(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; 35 (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 ('onnection with the development of any industry; (ge) providing technical and administrative assistance to any industrial c~cern or any person for the promotion, 1n8j1agement or expansion of any industry; (gel) planning and assisting in the promotion and development of industries; (ge) doing such other business as the development bank may authorise;"; (b) lulhec:tion (2) shall be omitted 18 after section 25 of the principal act, the fouowinl section aha1i be idjerted, namely:-"25a 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 5 (including any other rights inciderttal thereto) in relation to any loan or advance granted or any amount recoverable by such institu;-tion! either in whole or in part, by the execution or issue of any instru~ent or by the transfer of any instrument by endorsement oi; in any other manner: ' 1 0  provided that such loan or advanc~ or amount relates to any business which the financial corporation may transact under this act"  17 in ~tion 26 of the principal ~cti- -8idt f icctloa 16 (a) in sub-section (1),-15 \ (i) for the words, brackets and figures,' "state financial corporations (amendment) act, 1972", the words, brackets and 77 of 1972-ft~ures "state financial corporations (amendment) act, 1984" shall be substituted; "  ,i : ii, (ii) in clause (i) - for the words"thirty lakhs of rupees in 20 the case of", the words "sixty lakhs of rupees in the case of a corporation:-established by or under any other law or" shall be substituted; (iii) in clause (ii), for the words "fifteen lakhs", the words "thirty lakhs" shall be substituted; 25 (iv) the following proviso shall be inserted at the end, namely:-"provided that the financial corporation may, with the prior approval of the development bank, exceed t11e limit under clause (i) qr clause (ii) up to four times"; 30 (b-) sub-section (2) shall be omitted  aaud- 8iedt of iectioil 2b18 in section 28 of the principal act, in sub-section (1), in clause (d)'" for' the words "one crore of rupees", the words "three crores of rupees or' such higher amount not exeeeding thirty crores of rupees as the central government may, by notification in the oftlelal gazette, 35 specify" shall be sub~ituted 19 in section 31 of the principal act, in sub-section" '(1), after clause (a), the following clause shall be inserted, namely:-:-ie (44) for enforcing the uability of any surety; or" 20 in section 32 of the principal act,-ment of (ta) after sub-section (1), the following sub-section shall be section 31 inserted, namely:-"(1a) when the application is for the relief mentioned in 5 clause (aa) of sub-section (1) of section 31, the district judp shall issue a notice calling upon the surety to show cause od a date to be specified in the notice why his liability should not be e~forced"; (b) in !mlb-section (3), after the words, brackets and figure '10 '" "or sub-section (2) ,", the words, brackets, ,figure and letter "or issuing a notice under sub-section (la) ," shall be inserted; (c) fq1: sub-section (4), the following sub-sections shall be substituted, namely:-" (4) at the same time as he passes an order uhd~r sub-15 section (1) the district judge shall issue to theiniustrial ,concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim 20 order of attachment should not be made absolute or the injunction confirmed (4a) if no cause is shown on or before the date specified in the notice under sub-section (la), the district judge shall forthwith o~r the enforcement of the liability of the surety"; 25 (d) in sub-section (7) ,-(i) in clause (d), the word "or" occurring at ,the end shall be omitted; , (ii) after clause (d), the following clause shall be inserted, namely:-"(dc) direct the enforcement of the liability of the surety or reject the claim made in this behalf; or"; 35 (iii) in the first proviso, after the words, brackets and jetter "under clause (c)", the words, brackets and letters "or making an order rejecting the claim to enforce the liability of the surety under clause (m) or making an order rejecting the claim to transfer the management of the industrial concern to the finanelal corporation under clause (e)" shall be inserted; (i,,) in the recond proviso, after the words 'cfrom attach-, ment", the words "or rejecting the claim to enforce the liability of the surety or rejecting the clafm to transfer the industrial concern to the financial corporation," shall be inserted; (e) in sub-section (9), for the words hrackets and figure "under sub-sectton (")", the words, brackets, figures 8!nd letter "uilder subsem~  , (4a), sub-section (~, , shan be substituted 21 after section 32f of the principal act, the following section hall be inserted, namely:-insertion of new aectkm 320 recovery of amounts due to the financial corporation as an arrear of land revenue 1/320 where any amount is due to the financla1 corporation in respect of flny accommodation granted by it to any industrial concern, the financial corporation or any person authorised by it in 5 writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the state government for the recovery of the amount due to it, and if the state government or such authority, as that government may specify in this behalf, is satilfied, after following such procedure as may be prescribed, that any 10 amount is so due" it may issue a certificate for that amount to tile collector, and the collector shall proceed to recover that amount in the same manner as an arrear of land revenue" ameadment of section 33 zz in section '33 of the principal act, in sub-section (~), after the words brackets and figures "the banking companies (acquisition and is transfer of undertakings) act, 1970" the words, figures and brackets 5 of 1970 "or any of the banks specified in column 2 of the first schedule to the banking companies (acquisiffon and transfer of undertakil)gs) act, 40 of 1910 1980" shall be inserted 23 in section 35a of the principal act, in sub-section (i), the first 20 proviso shall be omitted amodl!-meat of eeetlod 3 sa x in section 36 of the principal act, in sub-section (1) , for the words "three months", the words "four months" shall be substituted amendment of section 36 amendment of section 31 25 in section 38 of the principal act, for sub-sections (1) and (2), the following sub-section shall be substituted, namely:-lis " (1) the financial corporation shall furnish to the state government, the development bank and the 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" 30 amendmentof section 43 26 in section 43 of the principal act, for the words and fi~\l~e;c/i;'-' dian income-tax act, 1922", the words and figures "income-tax act 1961" shall be substituted 11 of 1922 43 of 27 in section 43a of the principal act, after the word's "financial corporation", the words "or to any committee appointed under sectfon 35 21" shall be inserted ' amendment of  acetion 43a 28 after section 43a of the principal act, the f?l1owfnl! section shall be inserted, namely:-rnsertion of dew iection 438 reports to tbt board "43b (1) the minut~ of every meeting of the committee appointed under section 21 shall, after confirmation thereof at the next 4:> meeting of the committee be laid before the 130rtrd at the next fo1-lowing meeting of the board (2) every action taken hv the managinp,' <"tfr~ctor and any other oftieer of the financial corporation shall a~ soo" as may be after ft is taken by them, be reported to the b~ard"  ;; 29 in section 46 of the principal act, in sub-section (1),-amendment of (a) for the wqrds "any institution in existence at the commensection 46 cement of this act", the words "any institution established by a state government" shall be substituted; 5 (b) the following proviso shall be inserted at the end, namely:-"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" 30 in section 49 of the principal act, in sub-~ection (2) ,-amendment of iectjon 41 10 (a) clause (h) shall be omitted; (b)' in clause (m), for the words "advisory committees for technical and other advice", the word "committees" shall be subliu-tuted the financial corporations established under the state financial corporations act 1951, have been conceived as regional development banks for acrelerating the industriftl growth in various states by providing tinanciai assistance mainly to small and smaller of the medium scale industries in the light of the experience ,:tained over the past 30 years, it has become necessary to effect certain amendments to the act most of these amendments are for providing more operational flexibility to the financial corporations for functioning as developmental agencies 2 the main proposals for amendments are as follows: -- (a) jt is proposed to widen  the definition· of "industrial conrem" as contained in the act so as to enable the financial corporations to finance all kinds of industrial activities, with the exception of shipping, beinji( financed by the all-india financial institutions (b) in "jew of the constantly expanding business of the financial corporations, it is proposed to raise the authorised share capital of a financial corporation from rs 10 crores to rs 50 crores or such higher nmount within an overall limit of rs 100 crores (c) in order to establish an organic link between financial· and promotional bodies, it is proposed to make promotional agencies like state industrial development/investment corporations, small industries corporations, etc, eligible to subscribe to the shares of the financial cor:oorations and thus get formally associated with them (d) at present financial corporations can issue bon'ds and debentures and raise dt'posits only if these are guaranteed by the state governments it is proposed to allow them to mobilise resources by iesuinlz bonds, debentures and raising deposits which may not be guaranteed by the state governments, to enable such of the financial corporations which are in a position to raise resources on the stl'e!~gth of their efficiency and profitability fe) the act !'it present limits the borrowing by the financial corporations from the reserve bank against securities to ninety per cent of their paid-up share' capital this limit is proposed to be raised to the extent of twice the paid up share capital to enahle them to augm-mt their resour(,e5 through borrowing (n the total amount of deposits which the financial corporations can mobhise at present ('annot exceed the paid-up share capital of the financial corporations it is proposed to raise this limit of deposits to the extent of twice the amount of paid:"up share capital which could be increased up to ten timed the paid-up share capital with the approval of the centr&l government this will facilitate the financial corporations to mob~ ~dequate ~pm,its to meet their financial requirements  (g) it is propose'rl to expand the list of business which the financial corporations could undertake this will, inter lilia, enable them to undertake research and service relating to marketing and investment, carry out techno-economic studies, provide technk:al and administraiivc assistance to industrial concerns, plan ,and assist in the promotion and development of industries, discount bills of exchange/ promissory notes, etc the said expansion will enable them to undertake promotional and developmental work and play the role of regional development banks (it) it is proposed to change the present security-oriented approach of the financial corporation to project -oriented approach this will ena ble the financial corporations to grant loans, like bridge loans, which are not fully secured (i) at present, the financial corporations can extend financial assistance tll the extent of rs; 30 lakhs to companiesico-operative societies and rs 15 lakhs in case of partnership firms and other concerns these limits are proposed to be increased to rs 60 lakhs and rs 30 lakhs respectively the provision ill the act restricts granting of assistance only to induc;tri~l concerns having aggregate of paid-up share capital and free reserves up to rs 1 crore this limit is proposed to be raised to rs 3 crores or such higher limit up to rs 301 ('rores as may be specified by the central government these increases will enable the financial corporations to assist the larger and medium projects in participation with other institutions and banks (j) it ir proposed to provide for recovery of any outstanding liability as if such liability were arrears of land revenue the amendment would provide a simple and effective remedy for dealing with the problem of overdues (k) at pl'e!lent the provisions of the state financial corporations act, 1951 can be made applicable only to an institution in existence at the commencement of the said act and which had for its objects the financing of industrial concerns it is proposed to delete the condition that the institution should have been in existence at the commencement of the said act this will enable to apply the provisions of the act to institutions which have come into existence after the commencement of the act this will establish an organic link between these imtitutions and the industrial development hank of india 3 it is also proposed to make certain other minor and consequential amendments in the act 4 the bill seeks to achieve the above objects new delhi; , vishwanath pratap singh the 29th april, 1985  annexure extracts from the state financial" corporations al:t, 1951deftnltiolll (63 of 1951) - - - - - z in this act, unless the context otherwise requires,-- - - •• - (e) "industrial concern" means any concern engaged or to be engaged in-- - - - - (ii) mining; - - - - - (iv) the transport of passengers or goods by road or by water or by air; - -  - - (viii)  the development of any contiguous area of land as ad industria~ estate; (ix) fishing or providing shore facilities for fishing or maintenance thereof; or  (x), providing special or technical lmowledge or other services for the promotion of industrial growth explancitlon-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 j - - - - - 3a (1) - - - - - (2) an inter-state ag·reement under sub-section (1) among ,the bllabush· modt o( joint finaadal corpor8tio111 participati~g states may-- - - - - (e) provide for the division aniong the participating states of the surplus profits payable by the joint financial corporation under sub-section (3) of section 35; - - - - - shbr capital add share--holden 4  (1) the authorised capital of the financial corporation shall be such sum as may be fixed by the state government in this behalf, but it shall in no case be less than fifty lakhs of rupees or exceed ten crores of rupees  (2) the authorised capital shall be divided into such number of fully paid-up shares a's the state government may determine and shall be issued to the parties mentioned in sub-section (3) at such times and in sueh manner as that government may determine and each such share shall have the same face value (3) the state government shall, with the approval of the central government, determine the number of shares which may, respectively, be distributed among-' - - - - 31 of 19s6 (c) scheduled banks, insurance companies (including the life in'surance corporation of india established under section 3 of the life insurance corporation act, 1956), investment trusts, co-operative banks or other financial institutions, and - - - - - (5) if any shares allocated to any of the parties referred to in ~lauses (c) and (d) of sub-section (3) remain unsubscribed, they shall be sulm-cribed for by the state government, but the state government may at any time ,thereafter dispose of the shares so su:bscribed for to any party who was eligible to subscribe for it in the first instance - - - - - restrictions on transfer of ibares 5 (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: provided that the shares subscribed for by the parties referred to in clause (d) of subsection (3) of section 4 shall be ~ly transferable (2) nothing contained in this section shall affect the provisions of sub-section (5) of section 4  6 (1)  ' - - - - shares 10 (2) notwithstanding anything contained in the acts hereinafter mentioned in tl),is sub-section, the shares of the corporation shall be deemed to be included among the securities enumerated in section 20 of the indian trusts act, 1882 and also to ,be approved securities for the pw:poses of the insurance act, 1938 and 1he banking companies act, 1949 :~ 2 of 1882 "of 1938 10 of j949 7 (1) 'l'hefinancial corporation may; in consultation with the development bank and the reserve bank, issue and sell bonds and debentures carrying interest for the pllrpose of increasing its working capital and such bonds and debentures shall be guaranteed by the state government as to the repayment of the principal and the payment of interest at such rate as the state government may, on the recommendabe uaranteed by the slate governmeat· and to be ttust or approved securities additional capital of the financlal corporation add its borrow-· jqpowen, ;tion of the board based on the advice of the reserve bank, fix at th~ time the bonds and debentures are issued (2) the financial corporation may, for the purposes of carryin, out its functions under this act, boi'l'ow money from the reserve bank-(a) repayable on demand or on the expiry of a fixed pertod not exceeding ninety qays 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 (is are fully guaran~ as to the repayment of the principal and payment of interest 'by a state government; (b) repayable on the expiry ofa fixed period not exceeding eightt!en mon_ths from the date on which the money is so borrowed, against securities of the central government or of any state government of any maturity, or subject to the previous approval of the state government, against bonds and debentures iss~d 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 ninety per cent ·of the paid-up share capi·tal the~eof - - - - - (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 liabi1iti~ of the financial corporation in the form of guarantees given by it or underwriting agreemt!nts entered into by it shall not at any time exceed ten times the amount of the paid-up share capital and the reserve fund of the financial corporation -  - - - depciiiu with the pidaodal car   8 (1) the financial corporation may a~cept 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 ~riod which shall not be lela than twelve months from the date of the making of the deposit and on such other terms as it thinks fit: provided -that the total amount of such deposits shall not at any time exceed the paid-up share capital of the financial corporation (2) all deposits accepted under liub-section (1), other than the depaslts from the state government'shall be guaranteed by the state government as to the repayment of the principal and the payment of interest - - - - board of directors 10 the board of directors shall consist of the following, namely:-- - - - - (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 shau be elected f10 represent scheduled banks, another to represent co-operative banks and the hurd to represent the remaining financial institutions; - - - - - chairman of the  board, 15 (1) the chairman of the board shall be one of the directors, nat being the managing director, nominated by the state government, after considering, except in the case of the nomination of the first chairman, the recommendation of the board: provided that the nomination of the chairman for any period other than the first period shall be made only after the vacancies in the office of, directors occurring by efflux of time in that period have b~n filled by nomination or election as the 'case may be - - - - - 19 (1) - - - - - (5) if for any reason the chairman of the board or the chairman of the executive committee is unable to attend any meeting of the board or, as the case may be, of the executive committee,-meetinas of the board and committee, (a) in the case of the meeting of the board, a director, not being the managing ditector, authorised by the chaitman of the board in writing shall preside at such meeting, but if the director so authorised is absent or if no such authorisation has been made, the board may elect a director to preside at that meeting; and -  - - - 120 (1)  - - - - powers of executive committee (2) the minutes of every meeting of the executive committee shall be laid before the board at the next following meeting of the board:, 21 the financial corporation may appoint one or more advisory advisory committee ~ommittee or committees for the purpose of assisting the financial corporation in the efficient discharge of its functions and, in particular, for the purpose of securing that those functions are exercised with due regard 10 the circumstances and conditions prevailing in, and the re-' quirements of, particular areas or industries - ' - - - 25 (l) the financial corporation may, subject to the provision's of busines,a this act, carryon and transact any of the foi1owing kinds of business, which namely: -financial and condiotions as may be corporation may transact - - scheduled (a) guaranteeing, on such terms agreed upon,-- - • - (ii) loans raised by industrial banks or state co-operative banks; - - - concern~ from \ - r,r~ - (4) acting as agent of the central government or the ,state government or the development bank or the industrial finance corporation of india established under the industrial finance corporation , act, j9-l8, or any other financial institution notified in this 'behalf by 15 of 1948 the central government in respect o( any matter connected with, or arising out of, the grant of loans or advances to an industrial conce,m, or 'subscription to debentures of an industrial concern; , (cia) subscribing to the stocks, shares, bonds or debentures of ad industrial concern from out of the funds representing the, capital subscribed in accordance with the provision of section 4a; ' - - -  ,1 , (f) retaining as part of its, assets any stock, shares, bonds or debentures of an industrial concern which it may have to take in fulfilment of its underwriting liabilities, so however, that it disposes of the stock, shares, 'bonds or debentures so acquired as early as practicable, but in no case the stock, shares; bonds ~r debentures so acquired shall be retained beyond a period of 'seven years from tthe date of such acquisition, except with the prior permission of the development bank: provided that the financial corporation may subscribe tn stock or' shares of the industrial concern if such concern increases its 10f 1956 subs~ribed capital by the issue of further stock or shares in accordance with and subject to the pl'ovisions of section 81 of the companies act 1956, but the stock or shares so subscribed shall not be retained after the stock 0,1' shares of the industrial concern take in fulfilment of its underwriting liabilities· are disposed of; (g) grantim~ loans or advances to, or subscribinf1; to debentures of, an industrial concern, repayable within a period not exceeding 20 years from the date on which they are granted 01; subscribed to, as the case may be: provided that nothing contained in this clause shall be deemed to preclude the financial corporation from grantin~ 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: provided fu;rthel' that the financial corporation may, in the exercise of such option convert 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 it~ subscri~ ed capital by the issue of further stock or shares in accordance with, and subj'ect to, the provisions of section 81 orthe oompanies act 1958; lofl951  ' -  -  (2) no (lccommodation flhall he given under clauses (a) (b) and (g) of sub-section (1) unless it is sufficiently secured by a pledge mortgage, hypothecation, or assignment of govemment or other securities stock~ shares, or secu~d debentures, bullion, movable or irmnovable property or other tangible assets in the manner orescribed by r~l7ulation's or unless it is guaranteed as :to the repayment of' th~ 'p!incipal and the payment of interer;tby the state governmpnt, a schedu~d bank ar a state co-operative bank of unless it is covered by a guaranrtee falling under anv credit guarantee s~eme ,fram~d by the central government o~ such oth~ government or financial institution as the central government may notify in this behalf  - - - - - '17 of 1972 | limit    ||----------|| accommo- || dation  |26 (t) on and from the commencernellt of the state financial corpo;-rations (amendment) act, 1972, 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 6f tbe shares and stocks of that concern whether subscribed or agreed to be subscribed and the outstamiing liabilities on account of underwriting agreements and ·the deferred payments guarantees is more than- 1 of 1956 2 of 1912 (i) thirty la~hs of rupees in the case of a company 8s defined in section 3 of the companies act, 1956 or' a co-operative society registered under the co-operative· societies act, 1912 or any other law relating to co-operative societies for the time being in force; and (ii) fifteen lakhs of rupees in 'any '?'ther case 77 of 1972 (2) nothing contained in sub-section (1) shall apply to any transaction entered into by a financial corporation with any industrial cq:qcem before the commencement of the state financial corporations (amendment) act 1972, and in relation to every such transaction, section 26 of the principal act shall continue to apply as if the said section had not been amended by the first-mentioned act - - - -  prohibited business 28 (1) the financial corporation shall not-- - - - - (d) grant any form of assistance to any industria~ concern in respect of which the aggregate of the paid-up share capital and free reserves exceeds one crore of rupees --- - - - - special provisions for enforcement of claims by financial corporl tion ~of 1882 31 (1) where an industrial aoncern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the corporation or otherwise ,fails to comply with the terms of its agreement with ·the financial corporation or where the financial corporation requires an industrial concern to make immediate l'epayment of , any loan or advance under section 30 and the industrial concern fails to make such repayment then, without prejudice to the provisions of sertion 29 or'this act and of section 69 of the transfer of property act, 1882, any officer of the financial corporation, generally or specially authorised by the board in this behalf, may apply to the district judge within the limits of whose jurisdiction the industrial concern catries on the whole era substantial part of its business for one or more of the following rel,jefs, namely: -  (a) for an order for the sale of the property pledged, mortgaged, hyjlothecated or assigned to the financial corporation as' securi17 for the loan or advance; or - - - - - 32 (1) - - - - - (3~ before passing any order un~er sub-section (1) or sub-section (2), the district judge may, if he thinks fit, ,examine the officer ni8kin, the application procedure of district judge in respe,et of applications under ~ection 31 (4) at the same time as he passes an order under sub-section (1), the district judge sha~l issue to the industrial concern a notice accompanied by copies of tbe order, the application and the evidence, 1f any, l'ec;orde~ by him calling upon it to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed - - - - - (7) after making an investigation under sub-section (6), the district judge may-(a) confirm the order of attachment and direct the sale of the attached property; (b) vary the order of attachment so as to release a po,rtion of the 'property from attachment and direct the sale of the remaindet' of the attached property; (c) release the p,roperty from attachment; (d) confirm or dissolve the injunction; or (e) transfer the management of the industrial concern to the financial corporation or reject the claim made in this behalf: providl!d that when making an order under clause (c), the district judge may make such further orders as he thinks necessary to pr~tect, the interests of the financial corporation and may apportion the costs of the proceedings in such manner as he thinks fit: provided further that unl~, the financial corporation intimates to the district judge that it will not appeal against any order releasing any property from atta~hment, such order shall not be g~ven effect to, until the expiry of the period fixed under 'sub-section (9) within which an appeal may be preferred or, if an appeal is preferred, un1ess the high court otherwise directs until the appeal is disposed of - - - - - (9) any party aggrieved by an order under sub-section (5) or subsection (7) may, within thirty days from the date of the order, appeal to the high court, and upon such appeal the high court may, after hearing the parties, pass such orders thereon as it thinks ~roper  - - - - - funds of the financial corporatiel& 33 (1) - - ' - - (2) all moneys belonging to the fund shall be deposited in the reserve bank or the state bank of i~l(iia or a subsidia,ry bank as defined in the state bank of india (subsidiary banks) act, 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 or, in consultation with the reserve bank in a scheduled bank or n state co-operative bank - - - - - 35a (1) the financial corporation may establish a special reserve special fund, to which shall be transferred such portion of the dividends accruing reserve to the state government, the reserve bank and the develop~ent bank fund on the shares of the financial corporation as may be fixed by agreement between "the ~tate government, the reserve bank and the development bank: provided that the total amount in the said fund shall at no time exceed twenty-five per cent of the paid-up share capital of the financial corporation: provided further that after the specified date this sub-section shall have effect as if for the words "the state government the reserve bank  , and the development bank", the words "the state government and the development bank" have been substituted except as regards all dividends accruing in respect of any completed accounting period prior to the specified date general meetin, 36 (1) a general meeting (hereinafter referred to as the annual general meeting) shall be held annually at a place in the state where there is an office of the financial corporation within three months from the date on which the annual accounts of the financial corporation are closed, and a general meeting may ·be convened by the board at any other time  " return • 26 of 1881 38 (1) the financial corporation shall futnish a statement, in the prescribed form, of its assets and liabilities as at the close of business on' the last friday of each month of, jf that day is a public holiday under the negotiable instruments act, 1881, as at the close of business on the preceding working day to the state government, the development bank and the reserve 'bank within ten days from the date to which the statement relates (2) the financial corporation shau furnish in the prescribed form to the state gove,rnment, the development bank and the reserve bank once every three months or, as frequently as the state government or the development bank or the reserve bank may require, a statement showing the classification of its loans and investmenls and of allloans guaranteed by it and underwriting agreements entered into by it : - - - - - 43 for the purposes of the indian income-tax act, 1922, tlje finandal 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: provisions relating to incometax and super-tax 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 ~eated as the income, profits and gains of the financial corporation and any interest on debentures, bonds or deposits paid by the financial corporatic-n out of such sum shall not be treated as expenditure incurred by it: provided further that in the case of any shareholder such portion of a dividend as has been paid out of any s,uch 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 delegation of powers «ia the board may, by general or special order, delegate to the managing director or to any other officer of the financial corporation subject to such conditions and limitations, if any, as may be specified in the order such of its powers and duties under thi's act as it may deem necessary -  - - - power to apply ad to eertain financial institutions in existence at com mencement of act 46 (1) the central government may, by notification in the official gazette, direct that all or any of th'e provisions of this act shall, subject to such exceptions and restrictions as may be specified, apply to any institution in existence at the commencement of this act which has for its object the financing of industrial concerns, and on the issue of such notification, 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 provisione of this act shall· become applicable thereto according to the tenor of the notification - - - - - 48 (1) - - - - - power of board to make regulations (2) in particular, and without prejudice to the generality of the fore-,oing power, such regulations may provide £or-- - - - - (k) the manner of determining the sufficiency of the security taken under sub-section (2) of section 25; - - - - - (m) the appointment of advisory committees for technical and other advice for the purposes of this act, fees for attending meetlnp thereof and the conduct of business thereat; and - - -  -  a billfurther to amend the state financial corporations act, 1951 (shti vishwanath pratap singh, minister of finance) 