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THE STATE FINANCIAL CORPORATIONS ACT, 1951

Title : THE STATE FINANCIAL CORPORATIONS ACT, 1951

Year : 1951


 
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.



(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 co-operative banks; 2*[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;

3*[(ca) Transferring for consideration any instruments relating to loans and advances granted by it to industrial concerns;]

(d) Acting as agent of the Central Government or the State Government 3*[or the Development Bank] or the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15.or 1948), or any other financial institution notified in this behalf by the Central Government 4*[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 2*["or relating to the business of the Development Bank, Industrial Finance Corporation of India or financial institution"]

4*[(da) 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;"]

(e) Receiving in consideration of the services mentioned in the preceding clauses such commission as may be agreed upon;

1*["(f) Retaining as part of its assets any stock, shares, bonds or debentures which it may acquire by subscription or in fulfillment of its underwriting liabilities and disposing of the stock, shares, bonds or debentures so acquired;"]

(g) 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 :

1*["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: 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 :

Provided further that"]

6*[Provided also that] the Financial Corporation may, in the exercise of such option, 7*["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)

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.

8*["(ga) 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;

(gb) 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;

(gc) Providing technical and administrative assistance to any industrial concern or any person for the promotion, management or expansion of any industry;

(gd) Planning and assisting in the promotion and development of industries;

(ge) Doing such other business as the Development Bank may authorise;"]

(h) 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.

9* * * * *

(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) 10*[, (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 11*[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 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 holdings as to conform to the provisions of that sub-section.]


25A. 12* 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."]

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1. Subs. by Act 6 of 1962, s. 10, for s. 25 (w.e.f. 16-4-1962).

2. Ins. by Act 43 of 1985, s. 15.

3. Ins. by Act 77 of 1972, s. 15.

4. Subs. by s. 15, ibid., for certain words.

5. Subs. by Act 43 of 1985, s. 15.

6. Subs. by Act 43 of 1985, s. 15.

7. Ins. by s. 15, ibid.

8. Ins. by Act 43 of 1985, s. 15.

9. Omitted by s. 16, ibid.

10. Subs. by Act 77 of 1972, s. 15, for "and (c)".

11. Subs. by Act 52 of 1975, s. 35, for "Reserve Bank" (w.e.f. 16-2-
1976).

12. Ins. by Act 43 of 1985, s. 16.

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2*[(1)] 3*[On and from the commencement of the 4*["State Financial Corporations (Amendment) Act, 1985 (43 of 1985)"] the Financial Corporation shall not enter into any arrangements under clauses (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 arrangements5*[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 under-writing agreements and the deferred payments guarantees] is more than-

(i) 3*[4*["sixty lakhs of rupees in the case of a corporation established by or under any other law or a company] as defined in secton 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) 6*4*[thirty lakhs] of rupees in any other case:]

7*["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*[8* * * * *9*

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1. Subs. by Act 6 of 1962, s. 11, for s. 26 (w.e.f. 16-4-1962).

2. Re-numbered by Act 77 of 1972, s. 16.

3. Subs. by s. 16, ibid., for certain words.

4. Subs. by Act 43 of 1985, s. 17.

5. Ins. by Act 77 of 1972, s. 16.

6. Subs. by s.16, ibid., for "ten lakhs".

7. Ins. by Act 43 of 1985, s. 17.

8. Omitted by s. 17, ibid.

9. Subs. by Act 77 of 1972, s. 17 for sub-section (2).

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(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.

(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.

(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.]



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;

3*[(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 4*["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"]

3*[(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;

(ii) Shall apply only so long as the conditions precedent to such disability as set out in the sub-section continue.]



(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 installment 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 concern], as well as the 3*[right to transfer by way of lease or sale] and realize 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.

(4) 1*[Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs,

7*[charges and expenses which in the opinion of the Financial
Corporation have been properly incurred] by it 1*[as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it 8* * * * 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) 1*[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 sued in the name of 8*[the concern].

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1. Ins. by Act 77 of 1972, s. 19.

2. Subs. by Act 77 of 1972, s. 19, for certain words.

3. Subs. by Act 56 of 1956, s. 14, for "right to sell".

4. The words "of sale and realisation" omitted by s. 14, ibid.

5. Subs. by s. 14, ibid., for "as if the sale".

6. Subs. by s. 14, ibid., for sub-section (4).

7. Subs. by Act 6 of 1962, s. 14, for "charges and expenses properly incurred" (w.e.f. 16-4-1962).

8. Omitted by Act 77 of 1972, s. 19.

9. Subs. by Act 6 of 1962, s. 14, for "the owner of the concern"
(w.e.f. 16-4-1962).

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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 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.


 
(1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any installment 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 1*[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 authorized 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 2*[Financial Corporation] as security for the loan or advance; or

3*["(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.

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1. Ins. by Act 56 of 1956, s. 15.

2. Subs. by s. 15, ibid., for "Corporation".

3. Ins. by Act 43 of 1985, s. 19.

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(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.

(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.

(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.

(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-section (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; 6* * * *

2*["(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.

(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 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 decree, as if the Financial Corporation were the decree-holder.]

(9) Any party aggrieved by an order 3*["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.

(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 1*[or by any judge of the principal court of civil jurisdiction].]

(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.]

32A. 4* 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.

(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.5* 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 thereof holding office as such immediately before the issue of the notified order shall be deemed to have terminated;

(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. 7*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 at 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. 8* Application of Act 1 of 1956
 
(1) Where the management of an industrial concern, being a company as defined in the Companies Act, 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;

(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 suits 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.]

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.

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1. Subs. by Act 43 of 1985, s. 13.

2. Subs. by s. 14, ibid.

3. Subs. by Act 77 of 1972, s. 13, for s. 22.

4. Added by s. 14, ibid.

5. Subs. by Act 52 of 1975, s. 34, for "Reserve Bank" (w.e.f. 16-2-
1976).

6. Ins. by Act 77 of 1972, s. 21.

7. Ss. 32A to 32F ins. by Act 56 of 1956, s. 17.

8. Ins. by Act 6 of 1962, s. 16 (w.e.f. 16-4-1962).

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Last updated on August, 2016

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