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OIL INDUSTRY (DEVELOPMENT) ACT, 1974

OIL INDUSTRY (DEVELOPMENT) ACT, 1974

STATEMENT OF OBJECTS AND REASONS Following successive and steep increases in the international prices of crude oil and petroleum products since early 1973, the need for progressive self-reliance in petroleum based industrial raw materials has assumed great importance. It is essential that the programme for securing such self-reliance should be rapidly stepped up and also that the necessary resources for the execution of such programmes must be assured. It is, therefore, proposed to levy by way of access duties of excise on crude, oil and natural gas so as to create oil Industry Development Fund. This Fund would be used exclusively to provide financial assistance to the organisations engaged in development programmes of the oil industry in all its aspects from the exploration for and the production of crude oil to its refining further down-stream processing, distribution marketing etc. and research and development. To begin with, it is proposed to recover by way of access in the form of a duty of excise of Rs. 60 per tonne on crude oil produced in the country and delivered to the refineries. The access will be utilised for approved schemes in the fields of it exploration and production, and the refining marketing and distribution of petroleum products. In due course, the scope of the Fund will be extended to cover other sectors such as the down-stream processing of petroleum feed stocks. 2. The Bill seeks to achieve the above objects. The notes on clauses appended to the Bill explain in detail the various provisions thereof.-Gaz. of India, 27-7-1974. Pt. II S. 2. Ext. p. 658. Amending Act 45 of 1981. - The Oil Industry (Development) Act, 1974 provides for the establishment of a Board called the "Oil Industry Development Board" for the development of the oil industry and for that purpose to levy a duty of excise on crude oil and natural gas and for matters connected therewith. Sub-section (1) of section 15of the said Act. inter alias, empowers the Central Government to levy and collect a duty of excise on the crude oil at such rate not exceeding the rate set forth in the Schedule to the Act that is rupees one hundred per tone as the Central Government may by notification in the Official Gazette specify. According to the proviso to sub-section (1) of said section 15, the duty of excise in respect of the crude oil is to be levied at the rate of rupees sixty per tone until the rate is specified by notification. By issue of a notification on July 13, 1981, the Central Government specified that the rate of duty of excise in respect of the crude oil would be at the rate of rupees one hundred per tone which is the maximum rate at which the duty of excise may be collected. 2. It has now been decided to increase the above referred to maximum rate of duty on crude oil to rupees three hundred per tone. For the purpose of levy and collection the rate shall be specified from time to time by notification under sub-section (l) of said section l5. 3. The Bill seeks to achieve the above object.- Gaz. of India. 17-9-1981.Pt. II. An Act to provide for the establishment of a Board for the development of oil industry and for that purpose to levy a duty of excise on crude oil and natural gas and for matters connected therewith. Be it enacted by Parliament in the Twenty-fifth Year of the Republic of India as fallows:-

SECTION 01: SHORT TITLE AND EXTENT

(1) This Act may be called The Oil Industry (Development) Act, 1974.

(2) It extends to the whole of India.

SECTION 02: DEFINITIONS

In this Act, unless the context otherwise requires,-

(a) "assistance" means assistance rendered under section 6;

(b) "Board" means the OH Industry Development Board established under section 3-;

(d) "Court" means the High Court or the Court of Judicial Commissioner within the local limits of whose jurisdiction the defendant or respondent carries on the whole or a substantial part of his business, and where the Central Government has, by notification in the Official Gazette, and subject to such restrictions, limitations and conditions as it thinks fit empowered any court of civil jurisdiction subordinate to the High Court or. as the case may be, the Court of the Judicial Commissioner, to exercise all or any of the powers conferred by this Act, such court;

(e) "crude oil" means petroleum in its natural state before it is refined or otherwise treated but from which water and foreign substances have been extracted;

(f) "fertilisers" means such oil-based chemical compounds which when employed in agriculture provide either single or multiple plant nutrients in any one or more of the forms of nitrogen, phosphorus and potash;

(g) "member" means a member of the Board and includes the Chairman;

(h) "mineral oil" includes petroleum and natural gas;

(i) "natural gas" means gas consisting primarily of hydrocarbons obtained from oil wells or gas wells;

(j) "oil industrial concern" means any company, corporation or cooperative society, which is engaged or which is to engage in any activity referred to in clause (k);

(k) "oil industry" includes all activities by way of prospecting or exploring for or production of mineral oil, refining, processing, transportation, storage, handling and marketing, of mineral oil, production and marketing of all products, down-stream of an oil refinery and the production of fertilisers and petrochemicals and all activities directly or indirectly connected therewith;

(l) "petro-chemicals" means chemicals whether organic or inorganic, derived from petroleum including crude oil, natural gas, condensates, refined petroleum fractions and refinery gases;

(m) "petroleum product" means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, un cracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas, gasoline, naphtha, distillate gasoline, kerosene, bitumen, asphalt and tat, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by products derived from oil or gas and blends or mixtures of two or more liquid products or by-products derived from oil condensate and gas or petroleum hydrocarbons not specified hereinbefore;

(n) "prescribed" means prescribed by rules made under this Act.

SECTION 03: ESTABLISHMENT AND CONSTITUTION OF THE BOARD

(1) With effect from ouch date as the Central Government may, by notification in the Official Gazette, appoint in this behalf, there shall be established for the purposes of this Act, a Board to be called the Oil Industry Development Board.

(2) The Board shall be a body corporate by the name aforesaid having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall by the said name sue and be sued.

(3) The Board shall consist of the following members, namely :-

(a) not more than three members to be appointed by the Central Government to represent the Ministry or Ministries of the Central Government dealing with petroleum and chemicals;

(b) two members to be appointed by the Central Government to represent the Ministry of the Central

Government dealing with finance;

(c) not more than five members to be appointed by the Central Government to represent the Corporations, being Corporations owned or controlled by the Central Government, engaged in activities referred to in clause

(k) of section 2;

(d) two members of whom one shall be appointed by the Central Government from amongst persons who, in the opinion of that Government, have special knowledge or experience of oil industry and the other shall be appointed by that Government to represent labour employed in the oil industry;

(e) the Secretary to the Board, ex officio.

(4) The Central Government shall appoint the Chairman of the Board.

(5) The term of office of the members of the Board (other than the members appointed by virtue of office) and the manner of filling vacancies among, and the procedure to be followed in the discharge of their functions by, the members shall be such as may be prescribed.

(6) Subject to such conditions and restrictions as may be prescribed, the Board may constitute Standing Committees or ad hoc Committees for exercising any power or discharging any duty of the Board or for inquiring into, reporting and advising on, any matter which the Board may refer to them: Provided that a Standing Committee shall consist exclusively of members of the Board.

(7) No act or proceeding of the Board or of any Committee constituted under sub-section (6) shall be invalidated merely by reason of-

(a) any vacancy in, or any defect in the constitution of, the Board or such Committee; or

(b) any defect in the appointment of a person acting as a member of the Board or such Committee; or

SECTION 04: CONDITIONS OF SERVICE OF MEMBERS

Every person appointed as a wholetime member of the Board shall be entitled to such salary and allowances and such conditions of service in respect of leave, pension, provident fund and other matters as may, from time to time, be fixed by the Central Government and the other members of the Board and such of the members of any ad hoc committee constituted under subsection (6) of section 3-as are not members of the Board shall be entitled to such allowances, if any, and such other conditions of service, as may be prescribed.

SECTION 05: SECRETARY, OFFICERS, CONSULTANTS AND EMPLOYEES OF THE BOARD

(1) The Central Government shall appoint a Secretary to the Board.

(2) Subject to rules made in this behalf, the Secretary shall exercise such powers and perform such duties as may be prescribed or as may be delegated to him by the Board.

(3) The Secretary shall be entitled to such salary and allowances and such conditions of service in respect of leave, pension, provident fund and other matters as may, from time to time, be fixed by the Central Government.

(4) Subject to such conditions and restrictions as may be prescribed, the Board may appoint such consultants as may be necessary for the performance of its functions on such terms and conditions as it may determine from time to time.

(5) Subject to such conditions and restrictions as may be prescribed, the Board may appoint such other officers and employees as may be necessary for the performance of its functions and pay them such salaries and allowances as it may determine from time to time.

SECTION 06: FUNCTIONS OF THE BOARD

(1) Subject to the provisions of this Act and the rules made thereunder, the Board shall render, in such manner, to such extent and on such terms and conditions as it may deem fit, financial and other assistance for the promotion of all such measures as are, in its opinion, conducive to the development of oil industry.

(2) Without prejudice to the generality of the provisions of sub-section (1), the Board may render assistance under that sub-section by-

(a) making grants or advancing loans to any oil industrial concern or other person who is engaged or is to engage in any activity referred to in clause (k) ofsection 2-;

(b) guaranteeing on such terms and .conditions as may be agreed upon loans raised by any oil industrial concern or other person which are repayable within a period not exceeding twenty five years and are floated in the market or loans raised by an oil industrial concern or other person from any bank which is a scheduled bank, or a State co-operative bank, as defined in the Reserve Bank of India Act, 1934-;

(c) guaranteeing on such terms and conditions as may be agreed upon deferred payments due from any oil industrial concern or other person in connection with import of capital goods from outside India or in connection with purchase of capital goods within India by such concern or other person.

(d) guaranteeing on such terms and conditions as may be agreed upon loans raised from, or credit arrangements made with, any bank or financial institution in any country outside India by any oil industrial concern or other person in foreign currency : Provided that no such guarantee shall be given without the prior approval of the Central Government;

(e) underwriting the issue of stock, shares, bonds or debentures by any oil industrial concern and retaining as part of its assets any stock, shares, bonds or debentures which it may have to take up in fulfillment of its obligations thereto;

(f) acting as agent for the Central Government or, with its approval, for any overseas financial organisation or credit agency in the transaction of any business with any oil industrial concern in respect of loans or advances granted, or debentures subscribed by the Central Government or such organisation or agency;

(g) subscribing to the stock or shares of any oil industrial concern

(h) subscribing to the debentures of any oil industrial concern repayable within a period not exceeding twenty - five years from the date on which they are subscribed to; Provided that nothing contained in this clause shall be deemed to preclude the Board from subscribing to the debentures of any industrial concern, the amounts outstanding thereon may be convertible at the option of the Board into stock or shares of that concern within the period the debentures are repayable.

(3) Without prejudice to the generality of the provisions of sub-section ( 1 ), the measures for the promotion of which the Board may render assistance under that sub-section may include measures for or by way of-

(a) prospecting for and exploration of mineral oil within India (including the continental shelf thereof) or outside India;

(b) the establishment of facilities for production, handling, storage and transport of crude oil;

(d) the manufacture and marketing of petrochemicals and fertilisers;

(e) scientific technological and economic research which could be directly or indirectly, useful to oil industry;

(f) experimental or pilot studies in any field of oil industry;

(g) training of personnel, whether in India or outside, engaged or to be engaged in any field of oil industry and such other measures as may be prescribed.

(4) The Board may Board such fees or receive such commission as it may deem appropriate for any services rendered by it in the exercise of its functions.

(5) The Board may transfer for consideration any instrument relating to loans or advances granted by it to any oil industrial concern or other person.

(6) The Board may do all such things as may be incidental to or consequential upon the discharge of its functions under this Act.

SECTION 07: PRINCIPLES AND CONDITIONS OF ASSISTANCE

(1) Before rendering any assistance to any oil industrial concern of other person, the Board shall have regard to such directions as the Central Government may issue in this behalf and shall satisfy itself that- (a) such assistance is not contrary to such directions; and (b) such assistance is necessary as a matter of priority in the interests of the development of oil industry.

(2) In rendering any assistance to any oil industrial concern or other person, the Board shall impose such conditions as may be prescribed and may also impose such additional conditions as it may think necessary or expedient for protecting the interests of the Board and for securing that the assistance rendered by it is put to the best use by such concern or other person.

SECTION 08: POWER TO CALL FOR REPAYMENT BEFORE AGREED PERIOD

Notwithstanding anything in any agreement to the contrary, the Board may, by notice in writing require any oil industrial concern or other person to which or to whom it has rendered any assistance to discharge forthwith in full its or his liabilities to the Board-

(a) if it appears to the Board that false or misleading information in any material particulars was given in the application for such assistance; or

(b) if the concern or other person has failed to comply with the terms of its or his contract with the Board in the matter of such assistance; or

(c) if there is a reasonable apprehension that the concern or other person is unable to pay its or his debts or that proceedings for liquidation or in insolvency may be commenced in respect of such concern or person; or

(d) if the property pledged, mortgaged, hypothecated or assigned to the Board as security is not insured and kept insured by the concern or other person to the satisfaction of the Board; or depreciates in value to such an extent that, in the opinion of the Board, further security to the satisfaction of the Board should be given and such security is not given; or

(e) if, without the permission of the Board, any machinery, plant or other equipment (whether or not forming part of the security), is removed from the premises of the concern or other person without being replaced; or

(f) if for any reason it is necessary to protect the interests of the Board.

SECTION 09: SPECIAL PROVISIONS FOR ENFORCEMENT OF CLAIMS BY THE BOARD

(1) Where an oil industrial concern or other person in breach of any agreement, makes any default in repayment of any loan or advance or any installment thereof or in meeting its or his obligations in relation to any other assistance rendered by the Board or otherwise fails to comply with the terms of the agreement with the Board or where the Board requires an oil industrial concern or other person to make immediate repayment of any loan or advance and the concern or other person fails to make such repayment, then, without prejudice to the provisions of section 69 of the Transfer of Property Act, 1882-, any officer of the Board generally or specially authorised by the Board in this behalf may apply to the court 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 Board as security for the loan or advance; or

(b) for an ad interim injunction where there is apprehension of the machinery or the equipment being removed from the premises of the oil industrial concern or other person without the permission of the Board; or

(2) An application under sub-section ( 1 ) shall state the nature and extent of the liability of the oil industrial concern or other person to the Board, the ground on which it is made and such other particulars as may be prescribed.

(3) When the application is for the relief mentioned in clause (a) or clause (b) of sub-section ( 1 ), the court shall pass an ad interim order attaching the property or so much of the property of the oil industrial concern or other person as would on being sold realise in the estimation of the court an amount equivalent in value to the outstanding liability of the concern or other person, to the Board together with costs of the proceedings taken under this section with or without an ad interim injunction restraining the oil industrial concern or other person from transferring or removing any machinery or equipment. (4) Where the application is for the relief mentioned in clause (c) of sub-section ( 1 ), the court shall grant an ad interim injunction restraining the oil industrial concern from transferring or removing its machinery and equipment and issue a notice calling upon the concern to show cause on a date to be specified in the notice why the management, of the concern should not be transferred to the Board.

(5) Before passing any order under sub-section (3) or sub-section (4), the court may, if it thinks fit, examine the officer making the application. of Civil Procedure, 1908-for the possession of immovable property or the delivery of movable property in execution of a decree, as if the Board were the decree-holder.

(12) Any party aggrieved (by) an order under subsection (7), or sub-section (9) may, within thirty days from the date of the order, appeal to the court empowered to hear appeals from the decisions of the court which passed the order and the appellate court may, after hearing the parties, pass such orders as it thinks proper.

(13) Nothing in this section shall be construed, where proceedings for liquidation or in insolvency in respect of the oil industrial concern or other person have commenced before an application is made under sub-section (1) as giving to the Board any preference over the other creditors of the concern or other person not conferred on it by any other law.

(14) For the removal of doubts, it is hereby declared that any court competent to grant an ad interim injunction under this section shall also have the power to appoint a receiver and to exercise all other powers incidental thereto.

SECTION 10: POWER OF BOARD TO APPOINT DIRECTORS OF OIL INDUSTRIAL CONCERN

When the management of oil industrial concern is taken over by the Board, the Board may, by order notified in the Official Gazette appoint as many persons as it thinks fit to be the Directors of that concern and nothing in the Companies Act, 1956-or in any law or instrument relating to the concern, in so far as it makes, in relation to a Director, any provision for the holding of any share qualification, age limit, restrictions on the number of directorships, retirement by rotation or removal from office shall apply to any Director appointed by the Board under this section.

SECTION 11: EFFECT OF NOTIFIED ORDER APPOINTING DIRECTOR

On the issue of a notified order under section 10

(a) all persons holding office as Director of the oil industrial concern or in charge of the

mangement of such concern immediately before the issue of the notified order shall be deemed to have vacated their offices as such;

(b) the Directors appointed under section 10-shall take such steps as may be necessary to take into their custody or under their control the property, effects and actionable claims to which the oil industrial concern is, or appears to be, entitled and all the property and effects of the concern shall be deemed to be in the custody of the Directors as from the date of the notified order;

(c) the Directors appointed under section 10-shall for purposes be the Directors of the oil industrial concern duly constituted under the Companies Act, 1956-and shall alone be entitled to exercise all the powers of the Directors of the concern, whether such powers are derived from the said Act or from the memorandum or articles of association of the concern or from any other source.

SECTION 12: POWERS AND DUTIES OF THE DIRECTORS<

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