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INDUSTRIAL FINANCE CORPORATION ACT, 1948
15 of 1948
27th March 1948
An Act to establish the Industrial Finance. Corporation of India. WHEREAS it is expedient to establish an Industrial Finance Corporation for the purpose of making medium and long-term credits more readily available to industrial concerns in India, particularly in circumstances where normal banking accommodation is inappropriate or recourse to capital issue methods is impracticable ; It is hereby enacted as follows :-
SECTION 01: SHORT TITLE, EXTENT AND COMMENCEMENT
(1) This Act may be called the Industrial Finance Corporation Act, 1948.
(2) It extends to all the Provinces of India and shall extend to such acceding States as shall by their Instrument of Accession accept the subject- matter of this Act as a matter with respect to which the Dominion Legislature may make laws for such States.
(3) It shall come into force on such date as the Central Government may, by notification in the official Gazette, appoint.
SECTION 02: INTERPRETATION
-In this Act, unless there is anything repugnant in the subject or context,-
(a) " Board " means the Board of Directors of the Corporation ;
(b) " Corporation " means the Industrial Finance Corporation of India established by this Act ;
1(c) "industrial concern" means any limited company or co -operative society incorporated by a Central Act of an Act of the Legislature of a State or under any for the time being in force and registered in India Which is engaged or is to be engaged in.-
(i) the manufacture, preservation or processing of goods; (ii) shipping; (iii) mining; (iv) the hotel industry;
(v) the generation or distribution of electricity or any other form of power;
(vi) the transport of passengers or goods by road or by water or by ropeway or by lift;
(vii) the maintenance, repair, testing or servicing of machinery of any description or vehicles or vessels or motorboats or trailers or tractors;
(viii) assembling, repairing or packing any article with the aid of machinery or power;
(ix) the development of any contiguous area of land as in industrial estate;
(x) fishing or providing shore facilities for fishing or maintenance thereof;
(xi) Providing special or technical knowledge or other services for the promotion of industrial growth; or
(xii) the research and development of any process or product in relation to any of the matters aforesaid.
Explanation.- 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;
(d) " prescribed " means prescribed by rules or regulations made under this Act;
(e) " Reserve Bank " means the Reserve Bank of India ;
(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)-;
[**2*]
SECTION 03: ESTABLISHMENT AND INCORPORATION OF CORPORATION
(1) A Corporation to be called the Industrial Finance Corporation of India shall be established tor the purposes of this Act.
(2) The Corporation shall be a body corporate by the name of the Industrial Finance Corporation of India, having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire and hold property, both movable and immovable, and shall by the said name sue and be sued.
SECTION 04: SHARE CAPITAL AND SHAREHOLDERS
(1) The authorised capital of the Corporation shall be ten crores of rupees divided into twenty thousand fully paid up shares of five thousand rupees each of which ten thousand shares of the total value of five crores of rupees shall be issued in the First instance, and the remaining shares may be issued with sanction of the Central Government from time to time as and when the Corporation may deem fit.
(3) On application made before such date as may be notified by the Central Government in the official Gazette in this behalf, scheduled banks may subscribe for two thousand five hunderd shares, and insurance companies, investments trusts and other like financial institutions for two thousand five hundred shares, and co-operative banks for one thousand shares of the Corporation : Provided that no institution shall be allotted more than ten per cent, of the shares reserved for the class of institutions to which it belongs.
(4) The allotment of shares to the applicants mentioned in sub-section (3) shall be made by the Board in accordance with the regulations made in this behalf.
(5) If any shares referred to in sub-section (3) remain unallotted, they shall be subscribed for by the Cental Government and the Reserve Bank in such proportion as may be agreed on between them : Provided that the Central Government and the Reserve Bank may dispose of the shares subscribed for by them in pursuance of this sub-section to any scheduled hank, insurance company, investment trust or other like financial institution or any co-operative bank to which shares of the Corporation may be transferred under sub-section (7).
(6) If and when the remaining shares or any part thereof are issued, the Central Government and the Reserve Bank shall, and the institutions refer- red to in sub-section (3) of this section may ,subscribe for such shares in the same proportion as for the first issue, and the provisions of sub-sections (4) and (5) of this section shall also apply to such shares.
(7) Shares of the Corporation shall not be transferable except to the Central Government. the Reserve Bank, any scheduled bank, any insurance company, any investment trust or any other like financial institution or any co-operative bank in accordance with the regulations made in this be- half.
SECTION 05: GUARNTEE BY CENTRAL GOVERNMENT
-The shares of the Corporations shall be guaranteed by the Central Government as to the repayment of the principal and the payment of the annual dividened at such. minimum rate as may be fixed by the Central Government by notification published in the official Gazette at the time of issuing the shares.
SECTION 06: MANAGEMENT
(1) The general superintendence and direction of the affairs and business of the Corporation shall be entrusted to a Board of Directors which, with the assistance of an Executive Committee and a Managing Director, may exercise all powers and do all acts and things which may be exercised or Gone by the Corporation.
(2) The Board in discharging its functions shall act on business principles due regard being had by it to the interests of industry, commerce and the general public.
(3) In the discharge of its said functions, the Board shall be guided by such instructions on questions of policy as may be given to it by the Central Government.
(4) If any dispute arises between the Central Government and the Board as to whether a question is or is not a question of policy, the decision of the Central Government shall be final.
(5) If the Board fail to carry out the instructions on the question of policy laid down by the Central Government, the Central Government shall have the power to supersede the Board and appoint a new Board in its place to function until a properly coastituted Boar is set up. The decision or' the Central Government as to the grounds for superseding the Board shall not be questioned in any Court of law.
SECTION 07: POWERS OF EXECUTIVE COMMITTEE
(1) Subject to such general or special directions as the Board may from time to time give, the Executive Committee shall be competent to deal with any matter within the competence of the Board.
(2) The minutes of every meeting of the Executive Committee shall be laid before the Board at its next following meeting.
SECTION 08: ADVISORY COMMITTEE
The Corporation may from time to time appoint one or more Advisory Committee or Committees for the purpose of assisting the Corporation in the efficient discharge of its functions and in particular for the purpose of securing that those functions are exercised with due: regard to the circumstances, conditions prevailing in and requirements of particular area.
SECTION 09: MANAGING DIRECTOR
- The Managing Director shall-
(a) be a whole time officer of the Corporation ;
(b) perform such duties as the Board may, by regulations entrust delegate to him ;
(c) hold office for four years and be eligible for re-appointment ;
(d) receive such salary and allowances as the Board, with the approval of the Central Government:, may determine.
SECTION 10: BOARD OF DIRECTORS
- The Board of Directors shall consist of the following, namely:--
(a) three Directors nominated by the Central Government ;
(b) two Directors nominated by the Central Board of the Reserve Bank;
(c) two Directors elected in the prescribed manner by the scheduled banks who are shareholders of the Corporation ;
(d) two Directors elected in the prescribed manner by the share holders of the Corporation, other than the Central Government, the Reserve Bank, the scheduled banks and co-operative banks ;
(e) two Directors elected in the prescribed manner by the co-operative banks who are shareholders of the Corporation ;
(f) one Managing Director appointed by the Central Government after consideration of the recommendation-
(i) in the case of the first appointment, of the Central Board of the serve Bank;
(ii) in the case of subsequent appointments, of the Board : Provided that on the first constitution of the Board the Directors referred to in clauses (c), (d) and (e) shall be nominated by the Central Government to represent the classes of share-holders respectively specified in the said clauses, and Directors nominated under this proviso shall for the purposes of this Act be deemed to be elected Directors : Provided further that all Directors of the Board first
constituted other than the Managing Director shall retire at the end of the first year.
SECTION 11: FERM OF OFFICE AND RETIREMENT OF DIRECTORS
(1) A nominated Director shall hold office during the pleasure of the Central Government.
(2} An elected Director shall hold office for four years : Provided that one out of the two directors elected to represent the share-holders referred to in each of the clauses (c), (,d) and (e) of section to shall retire at the end of two years after the first election; the directors so to retire shall be determined by lot : Provided further that an elected Director shall be required to continue in his office until his successor has been elected : Provided further that a Director shall be eligible for re-election for not more than full consultative terms after the rotation of elected Directors has begun.
(3) A casual vacancy in the office of an elected Director shall be filled by election and a Director so elected shall hold office for the unexpired portion of the term of his predecessor. Provided that no casual vacancy occurring within3[Six months]of the date of expiry of the normal term of office of an elected Director need be filled under this sub-section.
(4) Directors other than the Managing Director and not being servants of the Government, shall be paid such fees for attending meetings of the Board and if they are members thereof, of the Executive Committee, as may be prescribed.
(5) No act or proceeding of the Board shall be questioned on the ground merely of the existence of any vacancy in, or any defect in the constitution of, the Board.
SECTION 12: DISQUALIFICATION
-No person shall be a Director who-
(a) is a salaried official of the Corporation other than a Managing Director or
(b) is, or at any time has been, adjudicated insolvent or has suspended payment or has compounded with his creditors ; or
(c) is found to be a lunatic or become'' of unsound mind , or
(d) is or has been convered of any offence involving moral turpitude
SECTION 13: DIRECTOR'S ABSENCE FROM THEIR CONSECATIVE MEETINGS
-A person shall cease to be a Director if he absents himself from three consecutive meetings of the Board without leave of absence.
SECTION 14: APPOINTMENT OF OFFICERS, ADVISERS,ETC
--The Corporation may appoint such officers, advisers and enployees as it considers necessary for the efficient performance of its functions.
SECTION 15: CHAIRMAN OF THE BOARD
(1)The Chairman of the Board shall be one of the Directors (not being the Managing Director ) nominated in this behalf by the Central Government after considering, except in the case of the nomination of the first Chairman the recommendation of the Board : Provided that the nomination of the Chairman for any period (other than the first period) shall be made only after the vacancies in the office of Directors occurring by efflux of time in that period have been filled by nomination or election, as the case may be.
(2) The Chairman shall hold office for two years or until his successor is nominated:: Provided that a Chairman shall, so long as he remains a Director, be eligible for renomiation as Chairman.
SECTION 16: STAFF OF CORPORATION
4-- The Corporation may appoint such number of officers and other employees as it considers necessary or desirable for the efficient performance of its functions and determine the terms and conditions of their appointment and service.
SECTION 17: MEETINGS OF BOARD AND CEMMITIEE
- (1) Meetings of the Board and of the Executive Committee shall be held at such times and at such places as may be prescribed: Provided that until regulations have been made in this behalf's such meetings shall be convered by the Managing Director.
(2) To constitute a quorum at a meaning of
(a) the Board ,not less than five Directors shall be present, of whom not less than two shall be nominated Directors and at least one an elected. Director:
(b) the Executive Committee, not less than three members shall be present, of whom at least one shall be a nominated Director and one an elected Director.
(3) At a meeting of the Board or of the Executive Committee, each Director or member of the Committee, as the case may be, shall have one vote, and in the event of an equality of votes, the Chairman shall have a second or casting vote.
(4) No Director shall vote or, any matter concerning an 'industrial concern in which he is directly or indirectly interested.
(5) It for any reason the Chairman is unable to be present at a: meeting-
(a) of the Board, a Director (other than Managing Director) authorised by the Chairman in writing in this behalf shall preside at that meeting and in default of such authorisetion the Board may elected a Chairman to preside at that meeting ;
(b) of the Executive Committee, a member authorised in writing by the Managing Director shall preside at that meeting and in default of such authorisation the Executive Committee may elect a Chairman to preside at that meeting.
SECTION 18: OFFICES AND AGENCIES
The Corporation shall establish its head office in Delhi and offices in Bombay, Calcutta, Kannpur and .Madras, and may, with the previous sanction of the Central Government, establish offices or agencies in other places in India.
SECTION 19: DEPOSIT ACCOUNTS
The Corporation may open Deposit Accounts with the Reserve Bank or with any agency of the Reserve Bank other than a Government treasury.
SECTION 20: INVESMENT OF FUNDS
--The Corporation may invest its funds in the securities of the Central Government or of any Provincial Government.
SECTION 21: BORROUING POWERS
(1) The Corporation may issue and sell bonds and debentures carrying interest for the purpose of raising its working capital: [**5*]
(2) Bonds and debentures of the Corporation shall be guaranteed by the Central Government as to the repayment of principal and the payment of interest at such rate as may be fixed by the Central Government on the recommendation of the Board at the time the bonds and debentures are issued.
SECTION 22: DEPOSITS WITH THE CORPORATION
-The Corporation may accept de- posits from the public repayable after the expiry of a period which shall not be less than five years from the date of the mating 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 ten crores of rupees.]
SECTION 23: BUSINESS WHICH THE CORPORATION MAY TRANSACT
- (1) The Corporation shall, subject to the provisions of this Act, be authorised to carry on and transact the following kinds of business, namely:-
(a) guaranteeing, on such terms and conditions may be agreed upon, loans raised by industrial concerns which-
(i) are repayable within a period not exceeding twenty-five years, and
(ii) are floated in the public market ;
(b) uncerwriting the issue of stock, shares, bonds or debentures by industrial concerns;
(c) receiving in consideration of the services mentioned in clauses (a) and (6) such commission as may be agreed upon ;
(d) retaining as part of its assets any stock, shares, bonds or debentures which it may have to take up in fulfilment of its underwriting liabilities, so however that it disposes of the stock, shares, bonds or debentures so acquired as early as practicable and in any case within a period of seven years from the date of such acquisition ;
(e) granting loans or advances to, or subscribing to debentures of, industrial concerts, repayable within a period not exceeding twenty-five years from the date on which they are granted or subscribed to, as the case may be; and
(f) generally, the doing of all such matters 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) No accommodation shall be given under sub-clauses (a) and (e), unless it is secured by a sufficient pledge, mortgage, hypothecation or assignment of Government or other securities, stocks, shares or secured debentures, bullion, movable or immovable property or other tangible assets in the manner prescribed by regulations.
SECTION 24: LIMIT OF ACCOMMODATION
The Corporation shall not enter into any arrangement under clauses (a) and (e) of sub-section (1) of section 23-with a single industrial concern for an amount equivalent in the aggregate to more than ten per cent. of the paid up share capital of the Corporation but in no case exceeding fifty lakhs of rupees.
SECTION 25: POWER TO IMPOSE CONDITIONS FOR ACCOMMADATION
(1) In entering into any arrangement under section 23-with an industrial concern, the Corporation may impose such conditions as it may think necessary or expedient for protecting the interests of the Corporation, and securing that the accommodation granted by it is put to the best use by the industrial concern.
(2) Where one of the conditions imposed is that a Director shall be appointed by the Corporation on the Board of Directors of the industrial concern to protect :the interests of the Corporation, such conditions shall be valid notwithstanding anything contained inthe Indian Companies Act, 1913 (7 of 1913)-, or .any other law for the time being in force.
SECTION 26: PROHIBITED BUSINESS
The Corporation shall not-
(a) accept deposits except as provided by this Act ;
(b) subscribe directly to the shares or stock of any company having limited liability: Provided that nothing in clause (6) shall affect the right of the Corporation to acquire any shares, bonds or debentures of a company having limited liability in fulfillment of any underwriting agreement entered into by the Corporation.
SECTION 27: LOANS IN FOREIGN CURRENCY
(1) The Corporation may, for the purpose of making loans or advances to industrial concerns requiring to be financed in foreign currency, borrow, with the previous consent of the Central Government, such currency through the International Bank for Reconstruction and Development or otherwise, and may pledge, mortgage, hypothecate or assign to the said Bank or other foreign lender all or any part of the security taken by the Corporation from the industrial concerns for the loans or advances granted in foreign currency.
(2) All loans and advances made to industrial concerns in foreign currency shall be repaid in the currency in which they are made or its equivalent in Indian currency at the rate of exchange prevailing at the time of repayment.
SECTION 28: RIGHTS OF CORPORATION IN CASE OF DEFAULT
(1) Where any industrial concern which is under a liability to the Corporation under an agreement makes any default in repayment or otherwise fails to comply with the terms of its agreement with the Corporation, the Corporation shall have the right to take over the management of the concern, as well as the right to sell and realise the properly pledged, mortgaged, hypothecated or assigned to the Corporation.
(2) Any transfer of property made by the Corporation in exercise of its powers of sale and realization under sub-section (i) shall vest in the transferee all rights in or to the property transferred as if the sale had been made by the owner of the property.
(3) The Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of security held by it, as it had with respect to the original goods.
(4) Where the Corporation takes over the management of a concern under the provisions of sub-section (i), it shall be deemed to be the owner of such concern for purposes of suits by or against such concern and shall sue and be sued in the name of the owner of the concern.
SECTION 29: POWER TO CALL FOR REPAYMENT BEFORE, AGREED PERIOD
-Notwithstanding any agreement to the contrary, the Corporation may, by notice require any industrial concern, to which it has granted any loan or advance, forth- with to discharge in full its liabilities to the Corporation-
(a) if it appears to the Board that false or misleading information in any material particular was given in the application for the loan or advance; or
(b) if the industrial concern has failed to comply with the terms of its contract with the Corporation in the matter of the loan or advance ;or
(c) if there is a reasonable apprehension that the industrial concern is unable to pay its debts or that proceedings for liquidation may be commenced in respect thereof; or
(d) if the property pleged, mortgaged, hypothecated or assigned to the Corporation as security for the loan or advance is not insured and kept insured by the industrial concern to the satisfaction of the Corporation ; or depreciates in value, in the opinion of the Board, by more than twenty per cent, and further security to the satisfaction of the Board is not given; or
(e) if, without the permission of the Board, machinery or other equipment, whether forming part of the security or otherwise, is removed from the premises of the industrial concern without being replaced ;or
(f) if for any reason it is necessary in the opinion of the Board to protect the interests of the Corporation.
SECTION 30: SPECIAL, PROVISIONS FOR ENFORSEMENT OF CLAIMS BY THE CORPORATION
- (1) Where by reason of the breach of any condition of an agreement between the Corporation and an industrial concern the Corporation becomes entitled to call for the immediate payment of any loan or advance granted by it, before the due date or where the due date has expired, and the industrial concern fails to repay such loan or advance, any officer of the Corporation generally or especially authorised by the Board in this behalf may apply to the District Judge within the local limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely :-
(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Corporation as security for the loan or advance, or
(b) for transferring the management of the industrial concern to the Corporation, or
(c) for an ad interim injunction where there is apprehension of the machinery or
the equipment being removed from the premises of the industrial concern without the permission of the Board.
(2) An application under sub-section (i) shall state the nature and extent of the liability of the industrial concern to the Corporation, the pound on which it is made and such other particulars as may be prescribed.
(3) When the application is for the reliefs mentioned in sub-clauses (a)
and (c) of sub-section (i) the District Judge shall pass an ad interim order attaching the security or so much of the property of the industrial concern as would on being sold realise in his estimation an amount equivalent in value to the outstanding liability of the industrial concern to the corporation together with the costs of the proceedings taken under this section with or without an .id interim injunction restraining the industrial concern from transferring or removing its machinery or equipment.
(4) Where the application is for the relief mentioned in sub-clause (b) of sub-section (i) the District Judge shall grant an ad interim induction restraining the industrial concern from transferring or removing its machinery or equipment and issue a notice calling upon the industrial concern to show cause on a date to be specified in the notice why the management of the industrial concern should not be transferred to the Corporation.
(5) Before passing any order under sub-section (3) or sub-section (4), the District Judge may, if he thinks fit, examine the officer making the application.
(6) At the same time as he passes an order under sub-section (3) the District Judge shall issue to the industrial concern a notice accompanied by copies of the order, the application and the evidence, if any, recorded 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) If no cause is shown on or before the date specified in the notice under sub-sections (4) and (6), the District Judge shall forthwith make the ad interim order absolute and direct the sale of the attached property transfer the management of the industrial concern to the Corporation or confirm the injunction.
(8) If cause is shown the District Judge shall proceed to investigate the claim of the Corporation and the provisions of the Code of Civil Procedure (5 of 1908)-, shall as far as practicable apply to such proceedings.
(9) On an investigation made under sub-section (8) the District Judge shall pass an order-
(a) confirming the order of attachment and directing the sale of the attached property, or
(b) varying the order of attachment so as to release a portion of the property from attachment and directing the sale of the remainder of the attached property, or
(c) releasing [he property from attachment if he is satisfied that it is no
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