Section 27. Power to impose conditions for accommodation

CHAPTER III POWERS AND DUTIES OF THE BOARD — 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). 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). 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). (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.]