24. General duty of the Board.—The Board in discharging its functions under this Act shall act on
business principles due regard being had by it to the interests of industry, commerce and the general
public.
3
[25. Business which Financial Corporation may transact.—4
[(1) The Financial Corporation may,
subject to the provisions of this Act, carry on and transact any of the following kinds of business,
namely:—
(a) guaranteeing, on such terms and conditions as may be agreed upon,—
(i) loans raised by industrial concerns which are repayable within a period not exceeding
twenty years, and are floated in the public market;
(ii) loans raised by industrial concerns from scheduled banks or State cooperative banks 5
[or
other financial institutions];
(b) 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;
(c) underwriting of the issue of stock, shares, bonds or debentures by industrial concerns;
(d) transferring for consideration any instruments relating to loans and advances granted by it to
industrial concerns;
(e) acting as agent of the Central Government or the State Government or the Development Bank
or the Small Industries Bank or the IFCI Limited formed and registered under the Companies Act,
1956 (1 of 1956), or any other financial institution notified in this behalf by the Central Government
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 or relating to the business of
the Development Bank, Small Industries Bank, IFCI Limited or financial institution;
(f) subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern
or any other concern;
(g) 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;
(h) granting loans or advances to, or subscribing to debentures of, an industrial concern,
repayable within a period not exceeding twenty years from the date on which they are granted or
subscribed to, as the case may be:
Provided that the Financial Corporation may, with the prior approval of the Small Industries 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, and industrial concern to
1. Subs. by Act 77 of 1972, s. 13, for section 22 (w.e.f. 30-12-1972).
2. The proviso omitted by Act 39 of 2000, s. 16 (w.e.f. 5-9-2000).
3. Subs. by Act 6 of 1962, s. 10, for section 25 (w.e.f. 16-4-1962).
4. Subs. by Act 39 of 2000, s. 17, for sub-section (1) (w.e.f. 5-9-2000).
5. Ins. by Act 43 of 1985, s. 15 (w.e.f. 21-8-1985).
17
which may be attached an option to convert such debentures or loans into stock or shares of the industrial
concern:
Provided also that the Financial Corporation may, in the exercise of such option, convert the amounts
outstanding on such debentures or loans into 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).
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;
(i) 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;
(j) undertaking research and surveys for evaluating or dealing with marketing or investments or
undertaking and carrying on techno-economic studies or other activities in connection with the
development of any industry;
(k) providing technical and administrative assistance to any industrial concern or any person for
the promotion, management or expansion of any industry;
(l) planning and assisting in the promotion and development of industries;
(m) providing consultancy and merchant banking services;
(n) acting as the trustee for the holders of debentures or other securities;
(o) leasing, sub-leasing or giving on hire or hire-purchase of industrial plant, equipment,
machinery or any other asset;
(p) factoring;
(q) providing export related credit and services;
(r) undertaking money market related activities;
(s) setting up of mutual funds and undertaking asset management activity;
(t) promoting, forming or conducting or assisting in the promotion, formation, or conduct of
companies, subsidiaries, societies, trusts or such other associations of persons as it may deem fit;
(u) opening or confirming or endorsing letters of credit and negotiating or collecting bills and
other documents drawn thereunder;
(v) doing such other business as the Small Industries Bank may authorise, and or 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.
(2) The Financial Corporation may receive, in consideration of any of the services mentioned in
sub-section (1), such commission, brokerage, interest, remuneration or fee as may be agreed upon.]
1
* * * * *
(3) Subject to the 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
[Small Industries Bank] but in no case shall exceed
thrice the paid-up share capital and reserve fund of the Corporation.]
1. Omitted by Act 43 of 1985, s. 15 (w.e.f. 21-8-1985).
2. Subs. by Act 77 of 1972, s. 15, for “and (c)” (w.e.f. 30-12-1972).
3. Subs. by Act 39 of 2000, s. 17, for “Development Bank” (w.e.f. 5-9-2000).
18
1
[(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 and free
reserves, whichever is less.
(5) 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.]
2
[25A. Power to acquire rights.—The Financial Corporation shall have the right to acquire, by
transfer or assignment, the rights and interests of any such financial institution as may be notified by the
Central Government (including any other rights incidental thereto) in relation to any loan or advance
granted or any amount recoverable by such institution, either in whole or in part, by the execution or issue
of any instrument or by the transfer of any instrument by endorsement or in any other manner:
Provided that such loan or advance or amount relates to any business which the Financial Corporation
may transact under this Act.]
3
[25B. Gifts, grants, etc.—The Financial Corporation may receive gifts, grants, donations or
benefactions from Government or any other source.]
4
[26. Limit of accommodation.—On and from the commencement of the State Financial
Corporations (Amendment) Act, 2000 (39 of 2000), the Financial Corporation shall not enter into any
arrangements under clause (a), (d) or (h) 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 together with
the amount of the face value of the shares and stocks 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—
(i) five hundred 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 (2 of 1912) or any other law relating to
co-operative societies for the time being in force; and
(ii) two hundred lakhs of rupees in any other case:
Provided that the Financial Corporation may, with the prior approval of the Small Industries Bank,
exceed the limit under clause (i) or clause (ii) up to four times.]
27. Power to impose conditions for accommodation.—(1) 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
[(2) 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 Corporation in
pursuance of the arrangement as aforesaid.
1. Ins. by Act 77 of 1972, s. 15 (w.e.f. 30-12-1972).
2. Ins. by Act 43 of 1985, s. 16 (w.e.f. 21-8-1985).
3. Ins. by Act 39 of 2000, s. 18 (w.e.f. 5-9-2000).
4. Subs. by s. 19, ibid., for section 16 (w.e.f 5-9-2000).
5. Subs. by Act 77 of 1972, s. 17, for sub-section (2) (w.e.f. 30-12-1972).
19
(3) Any director appointed in pursuance of sub-section (2) shall—
(a) 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;
(b) 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;
(c) not be liable to retirement by rotation and shall not be taken into account for computing the
number of directors liable to such retirement.]
28. Prohibited business.—1
[(1)] The Financial Corporation shall not—
2
[(a) except as provided in section 8, accept deposits;
(b) except as provided in clauses 3
[(da)] (f) and (g) of sub-section (1) of section 25, subscribe to
the shares or stock of any company;]
(c) grant any loan or advance on the security of its own shares;
4
[(d) 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 ten crores of rupees or such higher amount not
exceeding thirty crores of rupees as the State Government, on the recommendation of the Small
Industries Bank, may, by notification in the Official Gazette, specify.]
5
[(2) 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—
(i) 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
(ii) 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.
(3) The provisions of sub-section (2)—
(i) 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;
1. Section 28 renumbered as sub-section (1) thereof by Act 77 of 1972, s. 18 (w.e.f. 30-12-1972).
2. Subs. by Act 6 of 1962, s. 13, for clauses (a) and (b) (w.e.f. 16-4-1962).
3. Ins. by Act 77 of 1972, s. 18 (w.e.f. 30-12-1972).
4. Subs. by Act 39 of 2000, s. 20, for clause (d) (w.e.f. 5-9-2000).
5. Ins. by Act 77 of 1972, s. 18 (w.e.f. 30-12-1972).
20
(ii) shall apply only so long as the conditions precedent to such disability as set out in
sub-section continue.]
29. Rights of Financial Corporation in case of default.—(1) 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 thereof 1
[or in meeting its obligations in relation to any guarantee given
by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial
Corporation, the Financial Corporation shall have the 2
[right to take over the management or possession
or both of the industrial concerns], as well as the 3
[right to transfer by way of lease or sale] and realise the
property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers 4*** under
sub-section (1), shall vest in the transferee all rights in or to the property transferred 5
[as if the transfer]
had been made by the owner of the property.
(3) 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 by it as it had
with respect to the original goods.
6
[(4)
7
[Where any action has been taken against an industrial concern] under the provisions of
sub-section (1), all costs, 8
[charges and expenses which in the opinion of the Financial Corporation have
been properly incurred] by it 9
[as incidental thereto] shall be recoverable from the industrial concern and
the money which is received by it
10*** 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)
7
[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 purposes of suits by or against the concern, and shall sue and be sued in the name of 11[the
concern].
30. Power to call for repayment before agreed period.—Notwithstanding anything in any
agreement to the contrary, the Financial Corporation may, by notice in writing, require any industrial
concern to which it has granted any loan or advance to discharge forthwith in full its liabilities to the
Financial Corporation,—
(a) if it appears to the Board that false or misleading information in any material particular was
given by the industrial concern in its application for the loan or advance; or
(b) if the industrial concern has failed to comply with the terms of its contract with the Financial
Corporation in the matter of the loan or advance; or
(c) if there is a reasonable apprehension that the industrial concern is unable to pay its debts or
that proceedings for liquidation may be commenced in respect thereof; or
(d) if the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as
security for the loan or advance is not insured and kept insured by the industrial concern to the
satisfaction of the Financial Corporation or depreciates in value to such an extent that, in the opinion
1. Ins. by Act 77 of 1972, s. 19 (w.e.f. 30-12-1972).
2. Subs. by s. 19, ibid., for “right to take over the management of the industrial concern” (w.e.f. 30-12-1972).
3. Subs. by Act 56 of 1956, s. 14, for “right to sell” (w.e.f. 1-10-1956).
4. The words “of sale and relaisation” omitted by s. 14, ibid. (w.e.f. 1-10-1956).
5. Subs. by s.14, ibid., for “as if the sale”(w.e.f. 1-10-1956).
6. Subs. by s. 14, ibid., for sub-section (4) (w.e.f. 1-10-1956).
7. Subs. by Act 77 of 1972, s. 19, for certain words (w.e.f. 30-12-1956).
8. Subs. by Act 6 of 1962, s. 14, for “charges and expenses properly incurred” (w.e.f. 16-4-1962).
9. Subs. by Act 77 of 1972, s. 19, for “as incidental to such management, or transfer and realization.” (w.e.f. 30-12-1956).
10. The words “from such management, or transfer and realization” omitted by s.19, ibid. (w.e.f. 30-12-1972).
11. Subs. by Act 6 of 1962, s. 14, for “the owner for the concern” (w.e.f. 16-4-1962).
21
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
forming part of the security or otherwise, is removed from the premises of the industrial concern
without being replaced; or
(f) if for any reason it is necessary to protect the interests of the Financial Corporation.
31. Special provisions for enforcement of claims by Financial Corporation.—(1) Where an
industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or
any instalment thereof 1
[or in meeting its obligations in relation to any guarantee given by the
Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation
or where the Financial Corporation requires an industrial concern to make immediate repayment of any
loan or advance under section 30 and the industrial concern fails to make such repayment, 2
[then, without
prejudice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property
Act, 1882 (4 of 1882)] any officer of the Financial Corporation, generally or specially authorised by the
Board in this behalf, may apply to the district judge within the limits of whose jurisdiction the industrial
concern carries on the whole or a substantial part of its business 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
3
[Financial Corporation] as security for the loan or advance; or
4
[(aa) for enforcing the liability of any surety; or]
(b) for transferring the management of the industrial concern to the Financial Corporation; or
(c) for an ad interim injunction restraining the industrial concern from transferring or removing
its machinery or plant or equipment from the premises of the industrial concern without the
permission of the Board, where such removal is apprehended.
(2) An application under sub-section (1) shall state the nature and extent of the liability of the
industrial concern to the Financial Corporation, the ground on which it is made and such other particulars
as may be prescribed.
32. Procedure of district judge in respect of applications under section 31.—(1) When the
application is for the reliefs mentioned in clauses (a) and (c) of sub-section (1) of section 31, the district
judge shall pass an ad interim order attaching the security, or so much of the property of the industrial
concern as would on being sold realise in his estimate an amount equivalent in value of the outstanding
liability of the industrial concern to the Financial Corporation, together with the costs of the proceedings
taken under section 31, with or without an ad interim injunction restraining the industrial concern from
transferring or removing its machinery, plant or equipment.
5
[(1A) When the application is for the relief mentioned in clause (aa) of sub-section (1) of section 31,
the district judge shall issue a notice calling upon the surety to show cause on a date to be specified in the
notice why his liability should not be enforced.]
(2) When the application is for the relief mentioned in clause (b) of sub-section (1) of section 31, the
district judge shall grant an ad interim injunction restraining the industrial concern from transferring or
removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show
cause, on a date to be specified in the notice, why the management of the industrial concern should not be
transferred to the Financial Corporation.
1. Ins. by Act 77 of 1972, s. 20 (w.e.f. 30-12-1972).
2. Ins. by Act 56 of 1956, s. 15 (w.e.f. 1-10-1956).
3. Subs. by s. 15, ibid., for “Corporation” (w.e.f. 1-10-1956)
4. Ins. by Act 43 of 1985, s. 19 (w.e.f. 21-8-1985).
5. Ins. by s. 20, ibid. (w.e.f. 21-8-1985).
22
(3) Before passing any order under sub-section (1) or sub-section (2)
1
[or issuing a notice under
sub-section (1A)] the district judge may, if he thinks fit, examine the officer making the application.
2
[(4) At the same time as he passes an order under sub-section (1), the district judge shall issue to the
industrial concern or to the owner of the security attached a notice accompanied by copies of the order,
the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to
be specified in the notice why the ad interim order of attachment should not be made absolute or the
injunction confirmed.
(4A) If no cause is shown on or before the date specified in the notice under sub-section (1A) the
district judge shall forthwith order the enforcement of the liability of the surety.]
(5) If no cause is shown on or before the date specified in the notice under sub-sections (2) and (4),
the district Judge shall forthwith make the ad interim order absolute and direct the sale of the attached
property or transfer the management of the industrial concern to the Financial Corporation or confirm the
injunction.
(6) If cause is shown, the district judge shall proceed to investigate the claim of the Financial
Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908,
(5 of 1908) in so far as such provisions may be applied thereto.
(7) After making an investigation under sub-section (6), the district judge may—
(a) confirm the order of attachment and direct the sale of the attached property;
(b) vary the order of attachment so as to release a portion of the property from attachment and
direct the sale of the remainder of the attached property;
(c) release the property from attachment;
(d) confirm or dissolve the injunction; 3***;
1
[(da) direct the enforcement of the liability of the surety or reject the claim made in this
behalf; or]
(e) transfer the management of the industrial concern to the Financial Corporation or reject the
claim made in this behalf:
Provided that when making an order under clause (c)
1
[or making an order rejecting the claim to
enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the
management of the industrial concern to the Financial Corporation under clause (e)], the district judge
may make such further orders as he thinks necessary to protect the interests of the Financial Corporation
and may apportion the costs of the proceedings in such manner as he thinks fit:
Provided further that unless the Financial Corporation intimates to the district judge that it will not
appeal against any order releasing any property from attachment 1
[or rejecting the claim to enforce the
liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation],
such order shall not be given effect to, until the expiry of the period fixed under sub-section (9) within
which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs
until the appeal is disposed of.
(8) An order of attachment or sale of property under this section shall be carried into effect as far as
practicable in the manner provided in the Code of Civil Procedure 1908 (5 of 1908) for the attachment or
sale of property in execution of a decree as if the Financial Corporation were the decree-holder.
4
[(8A) An order under this section transferring the management of an industrial concern to the
Financial Corporation shall be carried into effect, as far as may be practicable, in the manner provided in
1. Ins. by Act 43 of 1985, s. 20 (w.e.f. 21-8-1985).
2. Subs. by s. 20, ibid., for sub-section (4) (w.e.f. 21-8-1985).
3. The word “or” omitted by s. 20, ibid. (w.e.f. 21-8-1985).
4. Ins. by Act 56 of 1956, s. 16 (w.e.f. 1-10-1956).
23
the Code of Civil Procedure, 1908 (5 of 1908) for the possession of immovable property or the delivery of
movable property in execution of a degree, as if the Financial Corporation were the decree-holder.]
(9) Any party aggrieved by an order 1
[under sub-section (4A), sub-section (5)] or sub-section (7) may,
within thirty days from the date of the order, appeal to the High Court, and upon such appeal the High
Court may, after hearing the parties, pass such orders thereon as it thinks proper.
(10) Where proceedings for liquidation in respect of an industrial concern have commenced before an
application is made under sub-section (1) of section 31, nothing in this section shall be construed as
giving to the Financial Corporation any preference over the other creditors of the industrial concern not
conferred on it by any other law.
2
[(11) The functions of a district judge under this section shall be exercisable—
(a) in a presidency town, where there is a city civil court having jurisdiction, by a judge of that
court and in the absence of such court, by the High Court; and
(b) elsewhere, also by an additional district judge 3
[or by any judge of the principal court of civil
jurisdiction].]
3
[(12) 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 the other
powers incidental thereto.]
4
[32A. Power of Financial Corporation to appoint directors or administrators of an industrial
concern when management is taken over.—(1) When the management of an industrial concern is taken
over by the Financial Corporation, the Financial Corporation may, by order notified in the Official
Gazette, appoint as many persons as it thinks fit,—
(a) in any case in which the industrial concern is a company as defined in the Companies
Act, 1956 (1 of 1956) to be directors of that industrial concern; or
(b) in any other case, to be administrators of that industrial concern.
(2) The power to appoint directors or administrators under this section includes the power to appoint
any individual, firm or company to be the managing agent or manager of the industrial concern on such
terms and conditions as the Financial Corporation may think fit.]
5
[(3) Nothing in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force
or in any instrument relating to the industrial concern shall, in so far as it makes in relation to a director,
any provision for the holding of any share qualification, age limit, restriction on the number of
directorships, retirement by rotation or removal from office, apply to any director appointed by the
Financial Corporation under this section.]
32B. Effect of notified order under section 32A.—On the issue of a notified order under
section 32A,—
(a) in any case in which the industrial concern is a company as defined in the Companies
Act, 1956 (1 of 1956) all persons holding office as directors of the industrial concern and in any other
case, all persons holding any office having the powers of superintendence, direction and control of the
industrial concern, immediately before the issue of the notified order, shall be deemed to have vacated
their offices as such;
(b) any contract of management between the industrial concern and any managing agent or any
director or manager there of holding office as such immediately before the issue of the notified order
shall be deemed to have terminated;
1. Subs. by Act 43 of 1985, s. 20, for “under sub-section (5)” (w.e.f. 21-8-1985).
2. Subs. by Act 6 of 1962, s. 15 for sub-section (11) (w.e.f. 16-4-1962).
3. Ins. by Act 77 of 1972, s. 21 (w.e.f. 30-12-1972).
4. Ins. by Act 56 of 1956, s. 17 (w.e.f. 1-10-1956).
5. Ins. by Act 6 of 1962, s. 16 (w.e.f. 16-4-1962).
24
(c) in the case of an industrial concern which is a company as defined in the Companies Act,
1956 (1 of 1956) the managing agent, if any, appointed under section 32A shall be deemed to have
been duly appointed in pursuance of the said Act and the memorandum and articles of association of
the industrial concern and the provisions of the said Act and the memorandum and articles shall,
subject to the other provisions contained in this Act, apply accordingly, but no such managing agent
shall be removed from office except with the previous consent of the Financial Corporation;
(d) the directors or the administrators appointed under section 32A shall take such steps as may
be necessary to take into their custody or under their control all the property, effects and actionable
claims to which the industrial concern is, or appears to be, entitled, and all the property and effects of
the industrial concern shall be deemed to be in the custody of the directors or administrators, as the
case may be, as from the date of the notified order;
(e) the directors appointed under section 32A shall, for all purposes, be the directors of the
industrial concern duly constituted under the Companies Act, 1956 (1 of 1956) and such directors, or
as the case may be, the administrators appointed under section 32A, shall alone be entitled to exercise
all the powers of the directors or as the case may be, of the persons exercising powers of
superintendence, direction and control, of the industrial concern, whether such powers are derived
from the said Act or from the memorandum or articles of association of the industrial concern or from
any other source whatsoever.
32C. Powers and duties of directors and administrators.—(1) Subject to the control of the
Financial Corporation, the directors, or as the case may be, the administrators appointed under
section 32A, shall take such steps as may be necessary for the purpose of efficiently managing the
business of the industrial concern and shall exercise such powers and have such duties as may be
prescribed.
(2) Without prejudice to the generality of the powers vested in them under sub-section (1), the
directors or as the case may be, the administrators appointed under section 32A, may, with the previous
approval of the Financial Corporation, make an application to a court for the purpose of cancelling or
varying any contract or agreement entered into any time before the issue of the notified order under
section 32A, between the industrial concern and any other person and the court may, if satisfied after due
inquiry that such contract or agreement had been entered into in bad faith and is detrimental to the
interests of the industrial concern, make an order cancelling or varying (either unconditionally or subject
to such conditions as it may think fit to impose) that contract or agreement and the contract or agreement
shall have effect accordingly.
32D. No right to compensation for termination of contract of managing agent, managing
director, etc.—(1) Notwithstanding anything to the contrary contained in any contract or in any law for
the time being in force, no managing agent, managing director or any other director or a manager or any
person in charge of management of an industrial concern shall be entitled to any compensation for the
loss of office or for the premature termination under this Act of any contract of management entered into
by him with such concern.
(2) Nothing contained in sub-section (1) shall affect the right of any such managing agent or
managing director, or any other director or manager or any such person in charge of management to
recover from the industrial concern, moneys recoverable otherwise than by way of such compensation.
32E. Application of Act 1 of 1956.—(1) Where the management of an industrial concern, being a
company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the Financial Corporation,
then, notwithstanding anything contained in the said Act or in the memorandum or articles of association
of such concern,—
(a) it shall not be lawful for the shareholders of such concern or any other person to nominate or
appoint any person to be a director of the concern;
(b) no resolution passed at any meeting of the shareholders of such concern shall be given effect
to unless approved by the Financial Corporation;
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(c) no proceeding for the winding up of such concern or for the appointment of receiver in respect
thereof shall lie in any court, except with the consent of the Financial Corporation.
(2) Subject to the provisions contained in sub-section (1) and to the other provisions contained in this
Act and subject to such other exceptions, restrictions and limitations, if any, as the Central Government in
consultation with the State Government may, by notification in the Official Gazette, specify in this behalf,
the Companies Act, 1956 (1 of 1956) shall continue to apply to such concern in the same manner as it
applied thereto before the issue of the notified order under section 32A.
32F. Restriction on filing of suite for dissolution, etc., of an industrial concern not being a
company when its management is taken over.—(1) Where the management of an industrial concern
not being a company as defined in the Companies Act, 1956 (1 of 1956) is taken over by the Financial
Corporation, no suit or proceedings for dissolution or for partition shall, in so far as it relates to that
industrial concern, lie in any court or before any tribunal or other authority except with the consent of the
Financial Corporation.
(2) No proceeding for the appointment of any official assignee or receiver in relation to any industrial
concern the management of which has been taken over by the Financial Corporation shall lie in any court
except with consent of the Financial Corporation.]
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[32G. Recovery of amounts due to the Financial Corporation as an arrear of land
revenue.—Where any amount is due to the Financial Corporation in respect of any accommodation
granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing
in this behalf, may, without prejudice to any other mode of recovery, make an application to the State
Government for the recovery of the amount due to it, and if the State Government or such authority, as
that Government may specify in this behalf, is satisfied, after following such procedure as may be
prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the
Collector shall proceed to recover that amount in the same manner as an arrear of land revenue.]