³[Business which Financial Corporation may transact.-

The Financial Corporation may, subject to the provisions of this Act, carry on and transact any of the following kinds of business, namely :-

guaranteeing, on such terms and conditions as may be agreed upon,-

loans raised by industrial concerns which are repayable within a period not exceeding twenty years, and are floated in the public market;
loans raised by industrial concerns from scheduled banks or State co-operative banks ⁴[or other financial institutions];

guaranteeing, on such terms and conditions as may be agreed upon, deferred payments due from any industrial concern in connection with its purchase of capital goods within India;
underwriting of the issue of stock, shares, bonds or debentures by industrial concerns;
⁵[transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns;]
acting as agent of the Central Government or the State Government ⁵[or the Development Bank] or the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948) or any other financial institution notified in this behalf by the Central Government 6[in respect of any matter connected with, or arising out of , the grant of loans or advances to an industrial concern, or subscription to debentures of an industrial concern] ⁴[or relating to the business of the Development Bank, Industrial Finance Corporation of India or financial institution];

¹[subscribing to, or purchasing of, the stock, shares bonds or debentures of an industrial concern or any other concern with the prior approval of the Development Bank;]
receiving in consideration of the services mentioned in the preceding clauses such commission as may be agreed upon;
²[retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfilment of its underwriting liabilities and disposing of the stock, shares, bonds or debentures so acquired;]
granting loans or advances to, or subscribing to debentures of, an industrial concern, repayable within a period not exceeding 20 years from the date on which they are granted or subscribed to, as the case may be :³[Provided that the Financial Corporation may, with the prior approval of the Development Bank, exceed the said limit of twenty years up to a further period of ten years : Provided further that nothing contained in this clause shall be deemed to preclude the Financial Corporation from granting loans or advances to, or subscribing to debentures of, an industrial concern to which may be attached an option to convert such debentures or loans into stock or shares of the industrial concern : ⁴[Provided also that] the Financial Corporation may, in the exercise of such option, ⁵[convert the amounts outstanding on such debentures or loans] into stock or shares of the industrial concern and may also subscribe to stock or shares of the industrial concern if such concern increases its subscribed capital by the issue of further stock or shares in accordance with and subject to, the provisions of section 81 of the Companies Act, 1956 (1 of 1956):⁶[Explanation.-In this clause the expression "the amounts outstanding on such debentures or loans" shall mean the principal, interest and other charges payable on such debentures or loans as at the time when the amounts are sought to be converted into stock or shares;]
⁶[accepting or discounting promissory notes and bills of exchange made, drawn, accepted or endorsed by industrial concerns or by any person selling capital goods manufactured by one industrial concern to another industrial concern;
undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic studies or other activities in connection with the development of any industry;
providing technical and administrative assistance to any industrial concern or any person for the promotion, management or expansion of any industry;

planning and assisting in the promotion and development of industries;
doing such other business as the Development Bank any authorise;]
generally, the doing of such acts and things as may be incidental to, or consequential upon, the exercise of its powers or the discharge of its duties under this Act. ¹[***]

Subject to provisions of sub-section (5) of section 7, the aggregate of contingent liabilities of the Financial Corporation under clauses (a), (b)² [(c) and (ca)] of sub-section (1) shall not at any time exceed twice the paid-up share capital and reserve fund of the Corporation except with the prior approval of the State Government and in consultation with the ³[Development Bank] but in no case shall exceed thrice the paid-up share capital and reserve fund of the Corporation.]
⁴[Nothing contained in this section shall entitle any Financial Corporation to hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent, of the subscribed share capital of that company or thirty per cent of its own paid-up share capital an free reserves. whichever is less.
If, on the commencement of the State Financial Corporations (Amendment) Act. 1972(77 of 1972), any Financial Corporation is holding shares in excess of the limits specified in sub-section (4), the Corporation shall report the matter forthwith to the Reserve Bank and shall, within such period as the Reserve Bank may allow, so reduce its share holding as to conform to the provisions of that sub-section.]

⁶[Limit of accommodation.-

⁷[⁸[On and from the commencement of the ⁹[State Financial corporation (Amendment) Act. 1985 (43 of 1985)] the Financial Corporation shall not enter into any arrangements under clause (a), (ca) or (g) of] sub-section (1) of section 25 with any industrial concern so that the total amount outstanding against that concern in respect of all such arrangements ¹⁰[together with the amount of the face value of the shares and stock of that concern whether subscribed or agreed to be subscribed and the outstanding 

liabilities on account of underwriting agreements and the deferred payments guarantees] is more than-

¹[sixty lakhs of rupees in the case of a corporation established by or under any other law or] a company as defined in section 3 of the Companies Act, 1956 (1 of 1956) or a Co-operative society registered under the Co-operative Societies Act, 1912 92 of 1912) or any other law relating to Co-operative Societies for the time being in force; and 
²[thirty lakhs] of rupees in any other case:]
³[Provided that the Financial Corporation may, with the prior approval of the Development Bank, exceed the limit under clause (i) or clause (ii) up to four times.] 
⁴[***]

In entering into any arrangement under section 25 with an industrial concern, the Financial Corporation may impose such conditions as it may think necessary or expedient for protecting the interests of the Financial Corporation and securing that the accommodation granted by it is put to the best use by the industrial concern. ⁵[Where any arrangement entered into by the Financial Corporation with an industrial concern provides for the appointment by the Financial Corporation of one or more directors of such industrial concern, such provision and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in the memorandum, articles of association or any other instrument relating to the industrial concern, and any provision regarding share qualification, age limit, number of directorships, removal of office of directors and such like conditions contained in any such law or instrument aforesaid shall not apply to any director appointed by the Financial by the Financial Corporation in pursuance of the arrangement as aforesaid.
Any director appointed in pursuance of sub-section (2) shall-

hold office during the pleasure of the Financial Corporation and may be removed or substituted by any person by order in writing by the Financial Corporation;
not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto;
not be liable to retirement by rotation and shall not be taken into account for computing the number of director liable thereto;

⁶[The Financial Corporation shall not-

⁷[ except as provided in section 8, accept deposits;

except as provided in clause ¹[(da)], (f) and (g) of sub-section (1) of section 25. subscribe to the shares or stock of any company;]
grant any loan or advance on the security of its own shares;
¹[grant any form of assistance to any industrial concern in respect of which the aggregate of the paid-up share capital and free reserves exceeds ²[three crores of rupees or such higher amount not exceeding thirty crores of rupees as the Central Government may, by notification in the Official Gazette, specify].]

¹[The Financial Corporation shall not enter into any kind of business with any industrial concern, of which any of the directors of the Financial Corporation is a proprietor, partner, director, manager, agent, employee or guarantor, or in which one or more directors of the Financial Corporation together hold substantial interest; Provided that this section shall not apply to any industrial concern if any director of the Financial Corporation-

is nominated as a director of the Board of such concern by the Government or a Government company as defined in section 617 of the Companies Act. 1956 (1 of 1956) or by a Corporation established by or under any other law; or
is elected on the Board of such concern by virtue of shares held in the concern by  Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) or by a Corporation established by or under any other law, by reason only of such nomination or election, as the case may be.

Explanation.-"Substantial interest" in relation to an industrial concern means the beneficial interest held by one or more of the directors of the Financial Corporation or by any relative as defined in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956) of such director whether singly or taken together, in the shares of the industrial concern, the aggregate amount paid-up on which either exceeds five lakhs of rupees or five per cent of the paid-up share capital of the industrial concern, whichever is less.
The provisions of sub-section (2)-

shall not apply to any transaction relating to the business entered into prior to the commencement of the State Financial Corporations (Amendment) Act, 1972 (77 of 1972) and all such business and any transaction in relation thereto may be implemented or continued as if that Act had not come into force;
shall apply only so long as the conditions precedent to such disability as set out in the sub-section continue.]

Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment therof 3[or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with terms of its agreement with the Financial Corporation, the Financial Corporation shall have the 4[right to take over the management or possession or both of the 

industrial concerns], as well as the ¹[right to transfer by way of lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
Any transfer of property made by the Financial Corporation, in exercise of its powers ²[***] under sub-section (1), shall vest in the transferee all rights in or to the property transferred ³[as if the transfer] had been made by the owner of the property.
The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held it as it had with respect to the original goods.
⁴[⁵[Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs, ⁶[charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it ⁵[as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it ⁷[***] shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.]
⁵[Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purpose of suits by or against the concern, and shall sue and be sued in the name of 8[the concern].

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