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PUBLIC DEBT ACT, 1944
18 of 1944
22nd November, 1944
STATEMENT OF OBJECTS AND REASONS "The great bulk of Government obligations in India have till very recently been expressed in the form of promissory notes which pass from hand to hand by endorsement and delivery. Stock certificates, i.e., certificates which are not negotiable themselves but merely record title, the actual transfers requiring registration in the books of the Public Debt Office, are of comparatively recent introduction. Not unnaturally, therefore, the law of Government securities in India, started as an appendage to the law of Negotiable Instruments, modifying it where necessary to meet the peculiar circum- stances of Government promissory notes such as (1) their validity for a period much longer than that of the ordinary negotiable instrument of commerce and the concomitant necessity of issuing separate instruments to replace the originals for the record of interest payments, and (2) their being held more widely than ordinary negotiable commercial instruments by various classes of investors in addition to the financial and business community. The fact that Government loans were almost entirely in the form of promissory notes meant that the special modifications of the law, effected from time to time to meet practical difficulties only related to Government obligations held in this form, with the result that when the previous legislation was revised in the Act of 1920, a clear distinction was not always drawn between those parts of the law which ought to relate to Government securities as a whole and those which merely related to promissory notes. A striking instance of this is provided by section 13(Act X of 1920) providing for the summary provisional settlement of disputes, which is confined only to promissory notes. Although logically imperfect, this position did not in the past lead to any practical difficulties as the holders of Government loans in the form of stock certificates were comparatively few. As a result of war conditions however, and the efforts of the Reserve Bank as agent of Government in the management of public debt to popularize stock certificate in the interest of safety and administrative convenience the proportion of Government loans held in the form of stock certificates or in special subsidiary ledger accounts, which the Bank has undertaken to maintain for large institutional holders, has substantially increased, and the time appears to be opportune for recasting the provisions of the Indian Securities Act, 1920so as to provide more satisfactorily for the management of Central public debt. Apart from the fact that section 13of the 1920 Act fails to provide for the summary provisional settlement of disputes regarding Government loans held otherwise than as promissory notes the machinery which it provides is in itself incomplete and there have been numerous cases where on account of disputant contenting himself with the mere issue of a notice of dispute to the Public Debt Office and abstaining from prosecuting his claim in a Court of law, or on account of vague stop orders emanating from Courts, the periodical payment of interest has been held up for unconscionably long periods, much to the annoyance and prejudice of the actual holder. There have also been numerous instances in which where the matter has been taken to Court, Government and the Reserve bank have been made parties to what was essentially a dispute between two private parties in the decision of which Government or the Bank had no interest. It is therefore, considered desirable to recase this part of the law so as to provide for a summary adjudication by the Reserve Bank of disputes as to the title to be the holder of a security, with a necessary safeguard by way of a guarantee of indemnity to ensure that the interests of the party who may ultimately succeed in establishing in a Court of law his right to hold the security are not prejudiced. The legislative competence of the Central Legislature extends, however, only to legislation affecting public debt of the Central Government, while the public debt of a Province is subject to legislation in the Provincial Legislature only. The Act of 1920, which regulates public debt of both kinds, is amenable to amendment by the Central Legislature only in so far as it deals with public debt of the Central Government. The present legislation, therefore, takes the form of a Bill to be enacted as a separate Act, applicable only to securities of the Central Government, which will reproduce the provisions of the 1920 Act with amendments designed to remedy the defects already referred to, and with certain other amendments the necessity or desirability of which is suggested by experience in the administration of the Act during last two decades. In this reproduction of the provisions of the 1920 Act, those provisions have been rearranged so as to group together sections dealing with the incidents common to the different forms in which loans of the Central Government are held and to relegate to separate sections the incidents peculiar to negotiable instruments."-Gaz. Of ind., 1943, Part V, page 162. Amendment Act 6 of 1949.- "Until 1946the Indian Securities Act, 1920, governed the securities issued by both the Central and the Provincial Governments. The working of this Act disclosed certain defects and it was considered necessary to amend it, particularly in the context of the very large increase of the public debt during the war years. Under the Government of India Act, 1935, the Central Legislature was competent to change only the law in respect of central securities and the provisions of the Indian Securities Act, 1920, were accordingly replaced, so far as the Central public debt was concerned, by a comprehensive new Act, the Public debt (Central Government) Act, 1944, which was brought into effect from the 1st May, 1946 leaving the Provincial securities to be regulated by the Indian Securities Act, 1920. As the money market is common to the whole country and the public debt of the Central and Provincial Governments is administered by a single agency namely, the Reserve Bank, it is obviously desirable to have uniform legislation for regulating the public debt of both. The Provincial Governments concur in this view and the Chambers of the Legislatures of all the Provinces in India have passed resolutions recommending that the securities issued by their respective Governments and their public debt should be regulated by an Act of the Dominion Legislature. It is accordingly proposed to amend the public Debt (Central Government) Act so as to extend it to cover the public debt of all the Provincial Governments".-S.O.R. Gaz. of Inda.. 1949. Pt. V. p. 37. Amendment Act 57 of 1956.- "The public debt and securities of the Union and Part A States are at present administered by the Reserve Bank of India in accordance with the Public Debt Act, 1944, and the rules made thereunder. The Act at present does not extend to securities created and issued by the Governments of Part B States. Some of these States have their own Public Debt laws while others have acquired public debt only recently and have no regular law on the subject. Securities issued by the Governments of Pan B States are circulating in all parts of the country and the public- debt of Part B States is also being administered by the Reserve Bank of India. It is, therefore, desirable that there should be uniformity of procedure in respect of the public debt of the Union and all Part A and Part B States and that the Public Debt Act, 1944 should apply to securities issued by the Government of Part B States as it applies to securities issued by the Central Government or a Part A State. The Legislatures of Part B States other than that of the State of Jammu and Kashmir have passed resolutions in pursuance of Article 252 of the Constitution empowering Parliament to pass the necessary legislation on the subject. The Bill, accordingly amends the Public Debt Act, 1944, so as to make it applicable to securities issued by the Governments of Part B States other than the Government of Jammu and Kashmir and makes certain other minor and incidental amendments in that Act".-S.O.R. Gaz. ofind., 27-8-1956, Pt. II, S. 2, Ext., p. 772. Amendment Act 44 of 1959.-"Ten-Year
Treasury Savings Deposit Certificates and 15-Year Annuity Certificates which are sold and discharged through the Reserve Bank of India are governed by the provisions of the Public Debt Act, 1944Section 7 of that Act provides that if the face value of the Government securities belonging to a deceased holder exceeds Rs. 5,000, the executors or administrators of the deceased holder and the holder of a succession certificate shall be the only persons who may be recognised by the Reserve Bank as having any title of these securities. 2. Suggestions have been made from time to time that as the production of legal proof of succession involves considerable delay and expense, the holders of Ten-year Treasury Savings Deposit Certificates and 15-Year Annuity Certificates may be allowed the right to nominate a person or persons to whom the amount due on the certificate could be paid in the event of the death of the holders without the production
of succession certificate or other proof of title. This Bill accordingly seeks to allow the facility of nomination to holders of the aforementioned certificates."-S.O.R. Gaz. ofind., 27-8-1959, Pt. 11,S. 2, Extra, page 878. Amending Act 44 of 1972.- The public debt and the securities of the Central and State Governments, other than the Government of the State of Jammu and Kashmir, are at present administered by the Reserve Bank of India in accordance with the provisions of the Public Debt Act, 1944. and the rules made thereunder. In 1956, the Legislatures of the erstwhile Part B States, other
Legislatures of the erstwhile Part B States, other than that of the State of Jammu and Kashmir, passed resolutions in pursuance of Article 252(1) of the Constitution empowering Parliament to amend the Public Debt Act, 1944, so as to make it applicable to securities issued by the Governments to those States and to their public debt. The Government of Jammu and Kashmir proposes to raise public loans from this year for augmenting resources for financing its developmental outlays and has requested that the Public Debt Act, 1944 may be made applicable to securities to be issued by it and to its public debt. The Legislative Assembly and the Legislative Council of the State of Jammu and Kashmir have passed resolutions in pursuance of Article 252(1) of the Constitution empowering Parliament to amend the Public Debt Act, 1944, with a view to make the provisions thereof applicable to securities issued by the Government of the State of Jammu and Kashmir and to its public debt. The Bill seeks to amend the Public Debt Act, 1944 for the aforesaid purpose.-S.O.R.-Gaz. of ind., 8-8-1972, Pt. II, S. 2, Ext.. p. 672.
An Act to consolidate and amend the law relating to Government securities 2[* * *] and to the management by the Reserve Bank of India of the public debt of3'[the Government]. WHEREAS it is expedient to consolidate and amend the law relating to Government securities 2[* * *] and to the management by the Reserve Bank of India of the public debt of "[the Government]; It is hereby enacted as follows:-
SECTION 01: SHORT TITLE AND COMMENCEMENT
(1) This Act may be called the Public Debt "[x] Act, 1944.
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(3) It shall come into force on such 'date as the Central Government may, by notification in the official Gazette, appoint in this behalf.
SECTION 02: DEFINITIONS
In this Act, unless there is anything repugnant in the subject or context, -
(1) "the Bank" means the Reserve Bank of India;
9[(1A) "the Government" in relation to any Government security means the Central or State Government issuing the security;]
(2) "Government security" means-
(a) a security, created and issued,10[by the Government] for the purpose of raising a public loan, and having one of the following forms, namely :-
(i) stock transferable by registration in the books of the Bank; or
(ii) a promissory note payable to bearer; or
(iv) a form prescribed in this behalf;"
(b) any other security created and issued by11 [the Government] in such form" and for such of the purposes of this Act as may be prescribed;
(3) "prescribed" means prescribed by rules made under this Act;
(4) "promissory note" includes a treasury bill.
SECTION 03: TRANSFER OF GOVERNMENT SECURITIES
(1)14'[Subject to the provisions of Section 5-, a transfer of a Government security shall be made only in the manner prescribed for the making of transfers of securities of the classic which it belongs, and no transfer of a Government security which-
(i) is made after the 30th April, 1946, in the case of a security issued by the Central Government,
(ii) is made after the 31st March, 1949, in the case of a security issued by the Government of a Part A State,
(iii) is made after the 14th October, 1956, in the case of a security issued by the Government of a Part B State other than Jammu and Kashmir,16 [*],
(iv) is made on or after the 1st day of November, 1956, in the case of a security issued on or after that day by the Government of any State other than Jammu and Kashmir, shall be valid if-]16[and]
(a) it does not purport to convey the full title to the security, or
(b) it is of such a nature as to affect the manner in which the security was expressed by [the Government] to be held,
16[(v) is made on or after the 1st day of September, 1972, in the case of a security issued on or after that day by the Government of the State of Jammu and Kashmir.]
(2) Nothing in this section shall affect any order made by the Bank under this Act, or any order made by a Court upon the Bank.
SECTION 04: TRANSFEROR OF GOVERNMENT SECURITIES NOT LIABLE FOR AMOUNT THEREOF
Notwithstanding anything contained in the Negotiable Instruments Act, 1881-, a person shall not, by reason only of his having transferred a Government security, be liable to pay any money due either as principal or as interest thereunder.
SECTION 05: HOLDING OF GOVERNMENT SECURITIES BY HOLDERS OF PUBLIC OFFICES
(1) In the case of any public office to which17[the Government] may by notification18in the official gazette, declare this sub-section to apply, a Government security in the form of stock or of a promissory note may be held in the name of the office.
(2) When a Government security is so held, it shall be deemed to be transferred without any or further endorsement or transfer deed from each holder of the office to the succeeding holder of the office on and from the date on which the latter takes charge of the office.
(3) When the holder of the office transfers to a party not being his successor-in -office a Government security so held, the transfer shall be made by the signature of the holder of the office and the name of the office in the manner and subject to the conditions laid down in section 3-.
(4) This section applies as well to an office of which there are two or more joint holders as to an office of which there is a single holder.
SECTION 06: NOTICE OF TRUST NOT RECEIVABLE
(1) No notice of any trust in respect of any Government security shall be receivable by 19[the Government], nor shall19[the Government] be bound by any such notice even though expressly given, nor shall '[the Government] be regarded as trustee in respect of any Government security.
(2) Without prejudice to the provisions of sub-section (1), the Bank may, as an act of grace and without any liability to the Bank or to 19[the Government], record in its books such directions by the holder of stock for the payment of interest on, or of the maturity value of, or the transfer of, or such other matters relating to, the stock as the Bank thinks fit.
SECTION 07: PERSONS WHOSE TITLE TO A GOVERNMENT SECURITY OF A DECEASED SOLE HOLDER MAY BE RECOGNISED BY THE BANK
Subject to the provisions of section 9-the executors or administrators of a deceased sole holder of a Government security and the holder of a succession certificate issued under Part X of the Indian Succession Act, 1925-, shall be the only persons who may be
recognised by the Bank as having any title to the Government security : Provided that nothing in this section shall bar the recognition by the Bank of the manager or the sole surviving male member of a Hindu undivided family governed by the Mitakshara Law as having a title to a Government security when the security appears to the Bank to stand in the name of a deceased member of the family and an application is made by such manager or sole surviving member for recognition of his title and is supported by a certificate signed by such authority and after such inquiry as may be prescribed to the effect that the deceased belonged to a Hindu undivided family governed by the Mitakshara Law, that the Government security formed part of the joint property of the family, and that he applicant is the managing or sole surviving male member of the family. Explanation.- The expression "Hindu undivided family governed by the Mitakshara Law" shall, for the purposes of this section, be deemed to include a Malabar tarwad.
SECTION 08: RIGHT OF SURVIVORS OF JOINT HOLDERS OR SEVERAL PAYEES
Notwithstanding anything contained in section 45 of the Indian Contract Act, 1872-- (a) when a Government security is held by two or more persons jointly and either or any of them dies, the title to the security shall vest in the survivor or survivors of those 'persons, and (b) when a Government security is payable to two or more persons severally and either or any of 490 [Ss 9-9B] them dies, the security shall be payable to the survivor or survivors of those persons or to the representative of the deceased or to any of them :
Provided that nothing contained in this section shall affect any claim which any representative of a deceased person may have against the survivor or survivors under or in respect of any security to which this section applies. Explanation.- For the purposes of this section20[a body incorporated or deemed to be incorporated under the Companies Act, 1956-] or the Co-operative Societies Act, 1912, or any other enactment for the time being in force whether within or without21[India], relating to the incorporation of the associations of individuals, shall be deemed to die when it is dissolved. In clause (b) "we have restored the wording employed in clause (b) of sub-section (1)of section 4 of the Act of 1920, which speaks of a security 'payable to two or more persons severally' and provides merely for that security 'becoming payable' to the survivor. The proviso which is intended to govern the whole clause has been clarified by the substitution of the words 'in this section' for he word 'herein' and has now been printed separately as an addendum to the clause as a whole instead of being included in sub-clause (b)."-S.C.R. Gaz. ofind., 1944, Part V, page 85.
SECTION 09: SUMMARY PROCEDURE ON DEATH OF HOLDER OF GOVERNMENT SECURITIES NOT EXCEEDING FIVE THOUSAND RUPEES FACE VALUE
Notwithstanding anything contained in section 7-, if within six months of the death of a person who was the holder of a Government security or securities the face value of which does not in the aggregate exceed five thousand rupees, probate of his will or letters of
administration of his estate or a succession certificate issued under Part X of the Indian Succession Act, 1925-, is not produced to the Bank, or proof to the satisfaction of the Bank that proceedings have been instituted to obtain one of these is not furnished, the Bank may determine who is the person entitled to the security or securities, or to administer the estate of the deceased and may make an order vesting the security or securities in the person so determined.
SECTION 09A: APPLICATION OF SECTIONS 9B, 9C, ETC
Notwithstanding anything contained in section 1-A-, the provisions of sections 9-B-and9-C-and the power to make rules in relation to any of the matters referred to in sections 9-B-and9-C-shall apply only to such classes of Government securities created and issued by the Central Government, whether before or after the commencement of the Public Debt (Amendment) Act, 1959, as that Government may, by notification' in the Official Gazette, specify, and in relation to such classes of securities the provisions of sections 7-and9- shall have effect subject to the provisions contained in sections 9-B-and9-C-]
SECTION 09B: NOMINATIONS BY HOLDERS OF GOVERNMENT SECURITIES
(1) Notwithstanding anything contained in any law for the time being in force or in any disposition whether testamentary or otherwise, in respect of a Government security, where a nomination made in the prescribed manner purports to confer on any person the right to receive payment of the amount for the time being due on the security on the death of the holder thereof the nominee shall, on the death of the holder of the security, become entitled to the security and to payment thereon to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner,
(2) Any nomination referred to in sub -section (1) shall become void if the nominee predeceases, or where there are two or more nominees all the nominees predecease, the holder of the security making the nomination.
(3) A transfer of a Government security made in the prescribed manner shall automatically cancel a nomination previously made Provided that where a Government security is held by or on behalf of any person as a pledge or by way of security for any purpose such holding shall not have the effect of cancelling a nomination, but the right of the nominee shall be subject to the right of the person so holding it.
(4) Where the nominee is a minor it shall be lawful for the holder of a security to appoint in the prescribed manner any person to receive the amount for the time being due on the security in the event of his death during the minority of the nominee, and, where any such appointment has been made, the Government security shall, after the death of the holder and during the minority of the nominee, be deemed to be vested in that person as representing the minor.]
SECTION 09C: PAYMENT OF DEATH OF HOLDER
(1) If a person dies and he is at the time of his death the holder of a Government security and there is in force at the time of his death a nomination in favour of any person, the amount for the time being due on the security shall be paid to the nominee.
(2) Where the nominee is a minor, the amount for the time being due on the Government security shall be paid-
(a) in any case where a person has been appointed to receive it under sub-section (4) of section 9-B-, to that person; and
(b) where there is no such person, to the guardian of the minor for the use of the minor.
(3) Where the amount due for the time being on a Government security is payable to two or more nominees and either or any of them is dead, the title to the security shall vest in the survivor or survivors of those nominees and the amount for the time being due thereon shall be paid accordingly.
(4) Nothing contained in this section shall be deemed to require any person to accept payment of the amount due on a Government security before it has reached maturity or otherwise than in accordance with the terms of the security.
(5) Any payment made in accordance with the provisions of this section of the amount due for the time being on a Government security shall be a full discharge in respect of the security: Provided that nothing contained in this section or in section 9-B shall affect any right or claim which any person may have against the person to whom any payment is made under this section.]
SECTION 10: GOVERNMENT SECURITIES NOT EXCEEDING FIVE THOUSAND RUPEES FACE VALUE BELONGING TO MINOR OR INSANE PERSON
When a Government security or securities belong to a minor or a person who is insane and incapable of managing his affairs and the value of the security or securities does not in the aggregate exceed five thousand rupees, the Bank may make such order as it thinks Fit for the vesting of such security or securities in such person as it considers represents the minor or insane person.
SECTION 11: ISSUE OF DUPLICATE SECURITIES AND OF NEW SECURITIES ON CONVERSION, CONSOLIDATION, SUB-DIVISION OR RENEWAL
(1) If the person entitled to a Government security applies to the Bank alleging that the security has been lost, stolen or destroyed, or has been defaced or mutilated, the Bank may, on proof to its satisfaction of the loss, theft, destruction, defacement or mutilation of the security, subject to such conditions and on payment of such fees as may by prescribed order the issue of a duplicate security payable to the applicant.
(2) If the person entitled to a Government security applies to the Bank to have the security converted into a security of another form, or into a security issued in connection with another loan or to have it consolidated with other like securities, or to have it sub -divided, or to have it renewed, the Bank may, subject to such conditions and on payment of such fees as may be prescribed, cancel the security and order the issue of a new security or securities.
(3) The person to whom a duplicate security or a new security is issued under this section shall be deemed for the purposes of section 19-to have been recognised by the Bank as the holder of the security; and a duplicate security or new security so issued to any person shall be deemed to constitute a new contract between27[.the Government] and such person and all persons deriving title thereafter through him.
SECTION 12: SUMMARY DETERMINATION BY THE BANK OF TITLE TO GOVERNMENT SECURITY IN CASE OF DISPUTE
(1) If the Bank is of opinion that a doubt exists as to the title to a Government security, it may proceed to determine the person who shall for the purposes of the Bank be deemed to be the person entitled thereto.
(2) The Bank shall give notice in writing to each claimant of whom it has knowledge, staling the name's of all other claimants and the time when and the officer of the Bank by whom the determination of the Bank will be made.
(3) The Bank shall give notice in writing to each claimant of the result of the determination so made.
(4) On the expiry of six months from the issue of
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