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THE SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (AMENDMENT) ACT, 2000

No. 7 of 2000

[27th March, 2000.]

An Act to amend the Small Industries Development Bank of India Act, 1989.

BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:—

Short title

1. This Act may be called the Small Industries Development Bank of India (Amendment) Act, 2000.

Amendment of section 2

2. In section 2 of the Small Industries Development Bank of India Act, 1989 (hereinafter referred to as the principal Act),—

(a) for clause (b), the following clause shall be substituted, namely:—

'(b) "chairman and managing director" means the chairman and managing director referred to in clause (a) of sub-section (7) of section 6;';

(b) in clause (e), for the words "Managing Director", the words "chairman and managing director and whole-time director" shall be substituted;

'(fa) "General Insurance Corporation" means the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972;' ;

(d) after clause (h), the following clause shall be inserted, namely:—

'(ha) "Life Insurance Corporation" means the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956;';

(e) clause (i) shall be omitted;

(f) after clause (/), the following clause shall be inserted, namely:—

'(la) "public sector bank" means the State Bank of India constituted under the State Bank of India Act, 1955, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980;'.

Substitution of new sections for sections 4 to 6 Authorised capital.

3. For sections 4 to 6 of the principal Act, the following sections shall be substituted, namely:—

'4. The authorised capital of the Small Industries Bank shall be one thousand crores of rupees divided into seventy-five crores fully paid-up equity shares of rupees ten each and twenty-five crores of fully paid-up redeemable preference shares of rupees ten each :

Provided that the Central Government may, on the recommendation of the Board, by notification, increase the authorised capital to an amount not exceeding two thousand crores of rupees consisting of such number of equity shares and redeemable preference shares as it may deem fit.

Conversion of equity shares into redeemable preference shares.

4A. (1) The Central Government may, at any time after the commencement of the Small Industries Development Bank of India (Amendment) Act, 2000, by notification, convert such number of equity shares held by the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, not exceeding twenty-five crores, as it may decide, into redeemable preference shares:

Provided that such conversion shall in no case reduce the equity shares held in aggregate by the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government to less than fifty-one per cent.

(2) The redeemable preference shares referred to in sub-section (1) shall—

(a) carry such fixed rate of dividend as the Central Government may specify at the time of such conversion, and

(b) neither be transferable nor carry any voting rights.

(3) The redeemable preference shares referred to in sub-section (1) shall be redeemed by the Small Industries Bank within three years from the date of such conversion in such instalments and in such manner as the Board may determine.

Transfer of capital.

4B. On such date as the Central Government may, in consultation with the Development Bank, by notification, specify (hereinafter referred to as "the specified date"), not less than fifty-one per cent, of the issued capital of the Small Industries Bank which has been subscribed by the Development Bank as on the date immediately preceding the specified date shall, stand transferred to, and vested in, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government in such proportion, manner and on such terms and conditions as may be determined by that Government.

Issued capital.

4C. (1) The issued capital, of the Small Industries Bank, of four hundred and fifty crores of rupees, immediately before the commencement of the Small Industries Development Bank of India (Amendment) Act, 2000, shall, on such commencement, stand divided into forty-five crores equity shares of rupees ten each.

(2) The Board may, from time to time, increase the issued equity share capital or redeemable preference share capital of the Small Industries Bank by allotment of shares to such persons and on such terms and conditions as the Board may determine:

Provided that no increase in the issued equity capital shall be made in such a manner that the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, hold in aggregate at any time, less than fifty-one per cent, of the issued equity share capital of the Small Industries Bank.

Reduction of share capital.

4D. (1) The Small Industries Bank may, with the prior approval of the Central Government, by a resolution passed in a general meeting of the shareholders, reduce its share capital in any way.

(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced by—

(a) extinguishing or reducing the liability on any of its equity shares in respect of the share capital not paid-up;

(b) either with or without extinguishing or reducing liability on any of its equity shares, cancelling any paid-up share capital which is lost, or is unrepresented by available assets; or

(c) either with or without extinguishing or reducing liability on any of its equity shares, paying off any paid-up share capital which is in excess of the wants of the Small Industries Bank.

(3) In any general meeting referred to in sub-section (1), the resolution for reduction of share capital shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast in favour of the resolution are not less than three times the number of the votes, if any, cast against the resolution by shareholders so entitled and voting.

Restriction on exercising of voting right Management Constitution of Board.

4E. Every shareholder of the Small Industries Bank holding equity shares shall have a right to vote in respect of such shares on every resolution and his voting right on a poll shall be in proportion to his share of the paid-up equity share capital of the Small Industries Bank:

Provided, however, that no shareholder, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, shall be entitled to exercise voting rights in respect of any equity shares held by him in excess of ten per cent, of the issued equity share capital.

5. (1) The general superintendence, direction and management of affairs and business of the Small Industries Bank shall vest in a Board of Directors which may exercise all powers and do all such acts and things as may be exercised or done by the Small Industries Bank and are not by this Act expressly directed or required to be done by the Small Industries Bank in general meeting.

(2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in such cases and subject to such conditions, if any, as may be specified by it, by the chairman and managing director or the whole-time directors.

(3) Subject to the provisions of this Act, the Board in discharging its functions shall act on business principles with due regard to public interest.

6. (1) The Board shall consist of the following, namely:—

(a) a chairman and managing director appointed by the Central Government;

(b) two whole-time directors appointed by the Central Government;

(d) three directors to be nominated in the prescribed manner by the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government;

(e) three directors, including one Director from the officials of the State Financial Corporations, nominated by the Central Government from amongst the persons having special knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial co-operatives, law, industrial finance, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience, in, which would, in the opinion of the Central Government, be useful to the Small Industries Bank;

(f) such number of directors not exceeding four elected in the prescribed manner, by shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, whose names are entered in the register of shareholders of the Small Industries Bank ninety days before the date of the meeting in which such election takes place on the following basis, namely:—

(i) where the total amount of equity share capital issued to such shareholders is ten per cent, or less of the total issued equity share capital, two directors;

(ii) where the total amount of equity share capital issued to such shareholders is more than ten per cent, but less than twenty-five per cent of the total issued equity share capital, three directors; and

(iii) where the total amount of equity share capital issued to such shareholders is twenty-five per cent, or more of the total issued equity share capital, four directors:

Provided that if the percentage of holding of issued equity share capital with the shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, does not permit election of four directors or until the assumption of charge by the elected directors, the Board may at any time co-opt such number of directors, not exceeding four, from amongst the persons having Special knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial co-operatives, law, industrial finance, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in, which would, in the opinion of the Board, be useful to the Small Industries Bank for carrying out its functions, who shall hold office until the assumption of charge by the elected directors and an equal number of such coopted directors shall retire in the order of co-option.

(2) The chairman and managing director and the whole-time directors shall hold office for such term not exceeding five years as the Central Government may specify in this behalf and any person so appointed shall be eligible for reappointment.

(3) Notwithstanding anything contained in sub-section (1), the Central Government shall have the right to terminate the term of office of the chairman and managing director or the whole-time director, as the case may be, at any time before the expiry of the term specified under sub-section (2) by giving him notice of not less than three months in writing or three months' salary and allowances in lieu of such notice and the chairman and managing director or the whole-time director, as the case may be, shall also have the right to relinquish his office at any time before the expiry of the term specified under sub-section (2) by giving, the Central Government, notice of not less than three months in writing.

(4) The chairman and managing director and the whole-time directors shall receive such salary and allowances, as may be determined by the Central Government.

(5) The Central Government may, at any time, remove the chairman and managing director or the whole-time director, as the case may be, from office:

Provided that no person shall be removed from his office, under this subsection, unless he has been given an opportunity of showing cause against his removal.

(6) Every Director nominated under clauses (c), (d) and (e) of sub-section (1), shall hold office during the pleasure of the authority nominating him.

(7) Subject to the provisions of sub-section (6),—

(a) every Director nominated under clauses (d) and (e) of sub-section (1) shall hold office for such term not exceeding three years as the Central Government, or the authority nominating him, as the case may be, may specify in this behalf and thereafter until his successor assumes office, and shall be eligible for re-nomination:

Provided that no such Director shall hold office continuously for a period exceeding six years; and (b) every Director elected under clause (f) of sub-section (1) shall hold office for three years and thereafter until his successor assumes office and shall be eligible for re-election:

Provided that no such director shall hold office continuously for a period exceeding six years.

(8) The shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government may, after giving the director a reasonable opportunity of being heard in the manner as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the aggregate not less than one-half of the equity share capital held by such shareholders, remove any director elected under clause (f) of sub-section (1) and elect another director in his place to fill the vacancy so caused;

(9) (i) A meeting of the Board shall be held at least once in every three months and at least four meetings shall be held every year and the meetings may be held at such places as may be prescribed.

(ii) Notice of every meeting of the Board shall be given in writing to every Director for the time being in India, and at his usual address in India to every other Director.

(10) Subject to the provisions contained in this Chapter, the Board may meet at such times and places and shall observe such rules of procedure in regard to transaction of its business including the manner of adoption of resolutions as may be prescribed.

(11) The chairman and managing director, if for any reason, is unable to attend a meeting of the Board, any other Director nominated by the chairman and managing director in this behalf and in the absence of such nomination, any director elected by the directors present from among themselves, shall preside at the meeting.

(12) All questions which come up before any meeting of the Board shall be decided by a majority of votes of the directors present and voting, and in the event of an equality of votes, the chairman and managing director, or in his absence, the person presiding, shall have a second or casting vote.

(13) Save as provided in sub-section (12), every Director of the Board shall have one vote.'.

Omission of section 7.

4. Section 7 of pal Act shall be omitted.

Substitution of new sections for sections 8 and 9.

5. For sections 8 and 9 of the principal Act, the following sections shall be substituted, namely:—

Disqualifications of directors.

"8. A person shall not be eligible for being elected as a director under clause (f) of sub-section (/) of section 6, if he—

(a) has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;

(b) is an undischarged insolvent;

(d) has been convicted by a court of competent jurisdiction, of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence; or

(e) has not paid any call in respect of shares of the Small Industries Bank held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call.

Vacation and resignation of office by directors.

9. (1) The office of a director shall become vacant if he—

(a) becomes subject to any of the disqualifications mentioned in section 8; or

(b) resigns his office by giving notice in writing under his hand and the resignation is accepted; or

(2) Notwithstanding anything contained in clause (a) of sub-section (1), the disqualifications referred to in that clause shall not take effect—

(a) for thirty days from the date of the adjudication, sentence or order;

(b) where any appeal or petition is preferred within thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or

(c) here within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction or order and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of.".

Omission of sections 10 and 11

6. Sections 10 and 11 of the principal Act shall be omitted.

Substitution of new sections for section 12.

7. For section 12 of the principal Act, the following sections shall be substituted, namely:—

Executive Committee and other committees

"12. (1) The Board shall constitute an Executive Committee consisting of the chairman and managing director, the whole-time directors and such other directors as it may deem fit.

(2) The Executive Committee shall discharge such functions as may be prescribed or as may, without prejudice to the provisions contained in section 34, be delegated to it by the Board.

(3) The Board may constitute such other committees whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons for such purpose or purposes as it may think fit.

(4) The Executive Committee or any other committee constituted under this section shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

Fees and allowances of directors and members of committees.

12A. The directors and the members of a committee shall be paid such fees and allowances as may be prescribed for attending the meetings of the Board or of any committee constituted in p

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