INCORPORATION OF STATE FINANCIAL CORPORATIONS, THEIR CAPITAL AND MANAGEMENT The State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notification.2[3A. Establishment of Joint Financial Corporations.- Notwithstanding anything contained in section 3, two or more States may, after consultation with the 3[Development Bank], enter into an agreement that there shall be one Financial Corporation for the group of States participating in the agreement and if the agreement is published in the Official Gazette of each of those States, the Central Government may, by notification in the Official Gazette, establish a Joint Financial Corporation to serve the needs of those States under such name as may be specified in the notification.------------------------------------------------------------------------------------------------------------ 1. Subs, by Act 56 of 1956, sec. 3, for "acquire and to hold." 2. Ins. by Act 56 of 1956, sec. 4. 3. Subs. by Act 52 of 1975, sec. 24, for "Reserve Bank"(w.e.f.16-2-1976). 4. Ins. by Act of 1962, sec 3. 5. Clause (e) omitted by Act 43 of 1985, sec. 3. -------------------------------------------------------------------------------------------------------------- Any
reference in this Act to "State" in relation to a Joint Financial Corporation
established for two or more States, shall be construed as a reference to
each such State.]
The authorized capital of the Financial Corporation shall be such sum as may be fixed by the State Government in this behalf, 1[but is shall not be less than fifty lakhs of rupees or exceed fifty crores of rupees : Provided that the Central Government may, on the recommendationof the Development Bank, by notification in the Official Gazette, increase the authorized capital up to one hundred crores of rupees.]6[4A. Special class of shares.- 7[the State Government may, in consultation with the Development Bank, specify from time to time such part of the unissued capital of the Financial Corporation as shall be allocated for the issue of a special of shares.]------------------------------------------------------------------------------------------------------------ 1. Subs. by Act 43 of 1985, sec. 4, for certain words. 2. Subs. by Act 43 of 1985, sec. 4, for sub-section (2). 3. Ins. by Act 77 of 1972, sec, 3. 4. Ins. by Act 6 of 1962, sec. 4. 5. Subs by Act 43 of 1985, sec. 4, for sub-section (5). 6. Ins. by Act 77 of 1972, sec. 4. 7. Subs. by Act 52 of 1975, sec 26, for sub-section (1) (w.e.f.16-2-1976). ------------------------------------------------------------------------------------------------------- The special class of shares so allocated under sub-section (1) shall be - 2[Transfer of share capital to Development Bank.- On such date as the Central Government may, by notification in the Official Gazette, specify (hereinafter referred to as the specified date), all the shares of every Financial corporation subscribed by the Reserve Bank as on the date immediately preceding the specified date, shall, stand transferred to, and vested in, the Development Bank.(a) divided into such number of shares of the same face value as the State Government may, in consultation with the 1[Development Bank], determine;The funds representing the capital subscribed as aforesaid shall be used only for such purposes, in such manner and for rendering assistance to such class or category of industrial concerns, as the 1[Development Bank] may, in consultation with and after obtaining the advice of the State Government, specify in this behalf from time to time and nothing contained in section 47 or section 48 shall apply thereto. Payment of amount.-The Reserve Bank shall be given by the Development Bank, in cash, for the transfer to, and vesting in, the Development Bank of the shares of every Financial Corporation which have been subscribed by the Reserve Bank, an amount equal to the face value of the shares of the Financial Corporation so subscribed.] Restrictions on transfer of shares.-- The shares of the Financial Corporation shall not be transferable except to the State Government, the Reserve Bank 3[the Development Bank] or any other financial institution 4[or class of financial institutions] recognised in this behalf by the State Government 5[for other institutions notified under clause (c) of sub-section (3) of section 4] :Provided that the shares subscribed for by the parties referred to in clause (d) of sub-section (3) of section 4 shall be freely transferable.6[***]Shares to be guaranteed by the State Government and to be trust, or approved securities.- The shares of the Financial Corporation shall be guaranteed by the State Government as to the repayment of principal and the payment of annual dividend at such minimum rate as the State Government may, with the approval of the Central Government, fix by notification published in the Official Gazette at the time of issuing------------------------------------------------------------------------------------------------------------ 1. Subs. by Act 52 of 1975, sec. 26, for "Reserve Bank" (w.e.f.16-2-1976). 2. Ins. by Act 52 of 1975, sec. 27 (w.e.f. 16-2-1976). 3. Ins. by Act 52 of 1975, sec. 28 (w.e.f. 16-2-1976). 4. Ins. by Act 56 of 1956, sec. 5. 5. Ins. by Act 43 of 1985, sec. 5. 6. Sub-section 92) omitted by Act 43 of 1985, sec, 5. ---------------------------------------------------------------------------------- Notwithstanding anything contained in the Acts hereafter mentioned in this sub-section, 1[the shares of the Financial Corporation, and such of the bonds and debentures issued by it as are guaranteed by the State Government as to the repayment of the principal and payment of interest, and receipts issued by it for such of deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882) and also to be approved securities for the purposes of the Insurance Act, 1938 (4 of 1938) and the 2[Banking Regulation Act, 1949 (10 of 1949)].3[Additional capital of the Financial Corporation and its borrowing powers- The Financial Corporation may, in consultation with 4[the Development Bank and] the Reserve Bank, issue and sell bonds and debentures carrying interest for the purpose of increasing its working capital and such bonds and debentures 5[shall, if so required by the Financial Corporation, be guaranteed by the State Government] as to the repayment of the principal and the payment of interest at such rate as the State Government may, on the recommendation of the Board 6[based on the advice of the Reserve Bank] fix 7[***].------------------------------------------------------------------------------------------------------------ 1. Subs. by Act 43 of 1985, sec. 5, for certain words. 2. Subs. by Act 43 of 1985, sec. 5, for "Banking Companies Act. 1949". 3. Subs. by Act 6 of 1962, sec. 5, for sections 7 and 8. 4. Ins. by Act 52 of 1975, sec. 29 (w.e.f. 16-2-1976). 5. Subs. by Act 43 of 1985, sec. 7, for "shall be guaranteed by the State Government". 6. Subs. by Act 77 of 1972, sec. 5, for "and with the approval of the Central Government." 7. Certain words omitted by Act 43 of 1985, sec. 7. 8. Subs. by Act 77 of 1972, sec. 5, for certain words. 9. Ins. by Act 77 of 1972, sec. 5. --------------------------------------------------------------------------------- 6[Power to transfer rights.-The rights and interest of the Financial Corporation (including any other rights incidental thereto) in relation to any loan or advance granted or any amount recoverable by it, may be transferred by the Financial CorporationProvided that the amount borrowed by the Financial Corporation under clause (b) shall not at any time exceed in the aggregate 1[twice] the paid-up share capital thereof.2[ No money shall be borrowed by the Financial Corporation from the Reserve Bank under sub-section (2), except with the previous approval of the Development Bank.] either in whole or in part, by the execution or issue of the instrument or by transfer of any instrument by endorsement or in any other manner in which the rights and interests in relation to such loan or advance may be lawfully transferred, and the Financial Corporation may, notwithstanding such transfer, act as the trustee for the transferee.] Deposits with the Financial Corporation.- The Financial Corporation may accept from the State Government or, with the prior approval of 7[the State Government, the Development Bank and the Reserve Bank], a local authority or any other person deposits repayable after the expiry of a period which shall not be less than twelve months from the date of the making of the deposit and on such other terms as it thinks fit : 8[Provided that the total the amount of such deposits shall not exceed twice the paid-up share capital of the Financial Corporation : Provided further that the Central Government may permit the Financial Corporation to accept deposits up to a higher limit not exceeding ten times the paid-up share capital of the Financial Corporation.]------------------------------------------------------------------------------------------------------------ 1. Subs by Act 43 of 1985, sec. 7, for "ninety per cent of". 2. Ins. by Act 52 of 1975, sec. 29 (w.e.f. 16-2-1976). 3. Subs. by Act 52 of 1975, sec. 29, for "Reserve Bank" (w.e.f.16-2-1976). 4. The words "at any time" omitted by Act 43 of 1985, sec. 7. 5. Ins. by Act 43 of 1985, sec. 7. 6. Ins. by Act 77 of 1972, sec. 6. 7. Subs by Act 52 of 1975, sec. 30, for "the State Government and the Reserve Bank" (w.e.f. 16-2-1976). 8. Subs. by Act 43 of 1985, sec. 8, for the proviso. -------------------------------------------------------------------------------------------------- 1[Any deposit accepted under sub-section (1), other than a deposit from the State Government shall, if so required by the Financial Corporation, be guaranteed by the State Government as to the repayment of the principal and the payment of interest.]Management of Financial Corporation.-The general superintendence, direction and management of the affairs and business of the Financial Corporation shall vest in a Board of directors which, with the assistance of an Executive Committee and a managing director may exercise all the powers and discharge all the functions which may be exercised or discharged by the Financial Corporation. Board of Directors.-The Board of Directors shall consist of the following, namely :- 2[four] director nominated by the State Government 3[of whom one director shall be a person who has special knowledge of or experience in small-scale industries:] 4[Provided that in the case of a Joint Financial Corporation, the number of directors shall be such as the State Government of the participating States may, be agreement among themselves, think fit to nominate each participating State Government nominating not more than two directors:]3[Provided further that in the case of a Joint Financial corporation, the director, who shall have special knowledge of, or experience in, small-scale industries, shall be nominated by that participating State which, according to the terms of agreement between the participating States, is entitled to make such nomination;]------------------------------------------------------------------------------------------------------------ 1. Subs. by Act 43 of 1985, sec. 7, for sub--section (2). 2. Subs. by Act 52 of 1975, sec. 31, for "these" (w.e.f. 16-2-1976). 3. Ins. by Act 52 of 1975, sec. 31, (w.e.f. 16-2-1976). 4. Ins. by Act 56 of 1956, sec. 7. 5. The words "the Central Board of" Omitted by Act 6 of 1962, sec. 6. 6. Subs. by Act 77 of 1972, sec. 7, for clause (c). 7. Subs. by Act 52 of 1975, sec. 31, for "one director' (w.e.f. 16-2-1976). 8. The words 'from among themselves" omitted by Act 56 of 1956, sec. 7. 9. Subs. by Act 43 of 1985, sec. 9, for "financial institutions". 10. Subs by Act 6 of 1962, sec. 6, for clause (f). 11. Ins. by Act 77 of 1972, sec. 7. 12. Subs. by Act 52 of 1975, sec. 31, for "Reserve Bank" (w.e.f. 16-2-1976). ------------------------------------------------------------------------------------------------ 1[Vacation of office by an elected director.-The office of a director elected under clause 9d) of section 10 shall become vacant if he ceased to hold any office in the scheduled bank, insurance company, investment trust, co-operative bank, financial or other institution in which he held office at the time of his election as such director.] Term of office and retirement of directors.- A nominated director shall hold office during the pleasure of the authority nominating him.Disqualifications for being a director.-No person shall be a director who- except in the case of a managing director, is a salaried official of the Financial Corporation; orRemoval of director from office.-The state Government may remove from office any director who- is, or has become, subject to any of the disqualifications mentioned in section 12; orResignation of office by director and filling up of casual vacancies.- 3[The managing director may, by giving notice in writing to the State Government, and any director elected under clause (d) or clause (e) of section 10 may, by giving notice in writing to the Chairman of the Board, resign his office], and on such resignation being accepted, shall be deemed to have vacated his office.------------------------------------------------------------------------------------------------------------ 1. Ins by Act 43 of 1985, sec. 10. 2. Subs by Act 77 of 1972, sec, 8, for "for not more than two full consecutive terms" 3. Subs. by Act 77 of 1972, sec. 9, for certain words. ----------------------------------------------------------------------------------------------- 1[(1A) If the managing director is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the State Government may, after consultation with the Board, appoint another person to act in his place during his absence.]Chairman of the Board.- The Chairman of the Board shall be one of the directors 2[***], nominated by the State Government, after considering, except in the case of the nomination of the first chairman the recommendation of the Board.Provided that the nomination of the Chairman for any period other than the first period shall be made only after the vacancies in the office of directors occurring by efflux of time in that periodhave been filled by nomination or election as the case may be :3[Provided further that the same person may be appointed to function both as Chairman and as managing director.]4[Remuneration of director.-The directors other than the managing director and not being servants of the Government shall be paid such fees as may be prescribed for attending meetings of the Board and, if they are members of the Executive Committee, or any other committee appointed by the Financial Corporation, for attending meetings of such committee.] Managing director.- 5[ The managing director shall- ]------------------------------------------------------------------------------------------------------------be a whole-time office of the Financial Corporation :6[Provided that the Board may, if in its opinion it is necessary inthe public interest so to do, permit the managing director to undertake, at the request of the Central Government or the State Government 7[or the Development Bank,] or the Reserve Bank, such part-time honorary work as is not likely to interfere with his duties as managing director;] 1. Ins. by Act 56 of 1956, sec. 8. 2. Certain words omitted by Act 43 of 1985, sec. 11. 3. Ins. by Act 43 of 1985, sec. 11. 4. Subs by Act 6 of 1962, sec. 7, for section 16. 5. Section 17 renumbered as sub-section (1) of that section by Act 56of 1956, sec. 9. 6. Ins. by Act 77 of 1972, sec. 10. 7. Ins. by Act 52 of 1975, sec. 32 (w.e.f. 16-2-1976). --------------------------------------------------------------------------------------------------------------- Executive Committee.-1[hold office for such term not exceeding four years as the State Government may specify and be eligible for re--appointment;]4[The State Government may, after consulting the Board, remove the managing director from office : Provided that no managing director shall be so removed unless he has been given an opportunity of showing cause against his removal.] The Executive Committee shall consist of the managing director who shall be the Chairman of the Committee, and 5[the following] other directors, chosen as follows :-Meetings of the Board and Committee.-6[four director elected by the nominated directors, of whom two shall be from among the directors nominated by the State Government and two] from among the directors nominated by the Reserve Bank and 7[the Development Bank] : 8[Provided that in the case of a Joint Financial Corporation, in addition to the 6[two directors elected] from among the directors nominated by the Reserve Bank and 9[the Development Bank], as many directors as there are participating States shall be elected by the nominated directors, one each from among the directors nominated by each of the participating State Government;]A directors elected to be a member of the Executive Committee shall hold office as such for the rest of his term of office as director. The Board and the Executive Committee shall meet at such times and places and shall observe such rules of procedure in regard to transaction of business at its meetings as may be provided by regulations made under this Act.------------------------------------------------------------------------------------------------------------ 1. Subs. by Act 6. of 1962, sec. 8, for clause (c). 2. Ins. by Act 77 of 1972, sec. 10. 3. The words "shall hold office for such term and "omitted by Act 6 of 1962, sec. 8. 4. Ins. by Act 56 of 1956, sec. 9. 5. Subs. by Act 56 of 1956, sec. 10. for "three". 6. Subs. by Act 52. of 1975, sec. 33 (w.e.f. 16-2-1976) 7. Subs. by Act 77 of 1972 , sec 11, for certain words. 8. Added by Act 56 of 1956, sec. 10. 9. Susb. by Act 77 of 1972, sec 11. for "the Industrial Finance Corporation of India". ---------------------------------------------------------------------------------------------------------- 1[If, for any reason, a director nominated under clause (a) or clause (b) or clause (c) of section 10 is unable to attend any meeting of the Board, the State Government, 2[the Reserve Bank or 3[the Development Bank]], as the case may be, may depute any other person to attend the said meeting and such person shall, for all purposes of the said meeting, be deemed to be a director nominated under clause (a) or clause (b) or clause (c), as the case may be, of the said section.]Powers of Executive Committee.- Subject to such general or special directions as the Board may from time to time give, the Executive Committee may deal with any matter within the competence of the Board.Advisory Committee.- The Financial Corporation may appoint 7[one or more committee or committee consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons] for the purpose of assisting the Financial Corporation in the efficient discharge of its functions and, in particular, for the purpose of securing that those functions are exercised with due regard to the circumstances and conditions prevailing in, and the requirements of, particular areas or industries. 8[Offices
and agencies.- The Financial shall establish its head office and other
offices and agencies at such places as
------------------------------------------------------------------------------------------------------------
Officers
and other employees of the Financial Corporation.-The Financial Corporation
may appoint such officers, advisers and
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