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THE UNIT TRUST OF INDIA ACT, 1963

Title : THE UNIT TRUST OF INDIA ACT, 1963

Year : 1963



(1) Subject to the provisions of the Act and the regulations made under Section 43, the Trust may carry on and transact any of the following kinds of business in India, namely:

(1) Selling and purchasing units;

(2) Investing in, and acquiring, holding or disposing of, securities and exercising and enforcing, all powers and rights incidental thereto including protection or realisation of such investment and the taking over of the administration of any property offered as security for such investment;

(3) Granting of loans and advances upon the security of any moveable or immoveable property or otherwise;

(4) Accepting, collecting, discounting, re-discounting, purchasing, selling or negotiating or otherwise dealing with, any bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway receipts, warehouse receipts, documents of title to goods, warrants, certificates, scrips and other mercantile instruments;

(5) Purchasing, selling or issuing participation certificates in relation to any loan or advance granted by any public financial institution or scheduled bank or such other institution as may be prescribed;
(6) keeping money on deposit with companies or other bodies corporate, scheduled banks or such other institution as may be prescribed;

(7) Investing in any special paper or security floated by the Central Government or the Reserve Bank or by any such foreign government or foreign bank as may be prescribed;

(8) Formulating in relation to any unit scheme,-

(a) Savings and life insurance plan or plans under which a person may acquire an interest in units in association with or as the agent of the Life Insurance Corporation or the Central Government but not including the life insurance business;

(b) Savings and insurance plan or plans under which a person may acquire an interest in units in association with or as the agent of, the General Insurance Corporation but not including the general insurance business; or

(c) Any other plan or plans, under which a person may acquire an interest in units;

(9) Acquiring immoveable property or any interest therein, the development (including construction) and sale of such property and the rendering of financial and other assistance to any person for the acquisition of any immoveable property or any interest therein and for the development (including construction) of such property;

(10) Providing, leasing and hire-purchase finance to persons, companies, and other bodies corporate;

(11) Providing merchant banking and investment advisory services;

(12) Extending investment or fund or portfolio management services to persons resident outside India;

(13) Opening of an account or the making of an agency arrangement with a bank incorporated outside India;

(14) Buying or selling of, or entering into such other dealings in, foreign exchange, as may be necessary for the discharge of its functions;

(15) Doing any other kind of business connected with mobilisation of savings or investments which the Central Government may authorise;

(16) Generally, doing all such acts and things as may be incidental to or consequential upon the discharge of its functions under this Act.

Explanation.-For the purpose of Cls. (12) and (14), the expressions "persons resident outside India" and "foreign Exchange" shall have the meanings, respectively assigned to them inSection 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973).

(2) Subject to the provisions of this Act and the regulations made underSection 43, the Trust may carry on outside India also any of the kinds of business mentioned in Cls. (1), (2), (4), (6), (7), sub-clause (c) of Cl. (8) and Cls. (11), (12), (13) and (15) of sub-section (1).]

19A - 2*Power to impose conditions, etc.

(1) In entering into any arrangement, under Section 19, with any concern, the Trust may impose such conditions as it may think necessary or expedient for protecting the interest of the Trust and for 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 Trust under Section 19 with any concern provides for the appointment by the Trust of one or more directors of such 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 concern, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the Trust in pursuance of the arrangement as aforesaid.

(3) Any director appointed as aforesaid shall-

(a) Hold office during the pleasure of the Trust and may be removed or substituted by any person by order in writing by the Trust;

(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 retire by rotation and shall not be taken into account for computing the number of directors liable to such retirement].

19B -3* Special provision for enforcement of claim by the Trust

(1) Where a company or other body corporate, in breach of any agreement makes any default in re-payment of any loan or advance or any instalment thereof, or in meeting its obligation or otherwise fails to comply, with the terms of its agreement with the Trust, then, without prejudice to the provisions of Section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of the Trust generally or specially authorised by the Trust in this behalf may apply to the Court 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 Trust as security for the loan or advance, or

(b) For transferring the management of the company or other body corporate to the Trust, or

(c) For an ad interim injunction where there is apprehension of the machinery or the equipment being removed from the premises of the company or other body corporate without the permission of the Trust.

(2) An application under sub-section (1) shall state the nature and extent of the liability of the company or other body corporate to the Trust, the grounds on which it is made and such other particulars as may be prescribed.

(3) When the application is for the reliefs mentioned in sub-clauses (a) and (c) of sub-section (1) the Court shall pass an ad interim order attaching the security or so much of the property of the company or other body corporate as would on being sold realise in its estimation an amount equivalent in value to the outstanding liability of the company or other body corporate to the Trust together with the costs of the proceedings taken under the section with or without an ad interim injunction restraining the company or other body corporate from transferring or removing its machinery or equipment.

(4) Where the application is for the relief mentioned in sub-clause (b) of sub-section (1) the Court shall grant an ad interim injunction restraining the company or other body corporate from transferring or removing its machinery or equipment and issue a notice calling upon the company or other body corporate to show cause on a date to be specified in the notice why the management of the company or other body corporate should not be transferred to the Trust.

(5) Before passing any order under sub-section (3) or sub-section (4), the Court may, if it thinks fit, examine the officer making the application.

(6) At the same time as it passes an order under sub-section (3), the Court shall issue to the company or other body corporate a notice accompanied by copies of the order, the application and the evidence, if any, recorded by it calling upon the company or other body corporate 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.

(7) If no cause is shown on or before the date specified in the notice under sub-sections (4) and (6), the Court shall forthwith make the ad interim order absolute and direct the sale of the attached property or transfer the management of the company or other body corporate to the Trust or confirm the injunction.

(8) If cause is shown the Court shall proceed to investigate the claim of the Trust and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), shall, as far as practicable, apply to such proceedings.

(9) On an investigation made under sub-section (8) the Court shall pass an order-

(a) Confirming the order of attachment and directing the sale of the attached property; or

(b) Varying the order of attachment so as to release a portion of the property from attachment and directing the sale of the remainder of the attached property; or

(c) Releasing the property from attachment if it is satisfied that it is not necessary in the interests of the Trust; or

(d) Confirming or vacating the injunction; or

(e) Transferring the management of the company or other body corporate to the Trust or rejecting the claim made in this behalf:

Provided
that when making any order under Cl. (c), the Court may make such further orders as it thinks necessary to protect the interests of the Trust, and may apportion the costs of the proceedings in such manner as it thinks fit:

Provided further that unless the Trust intimates to the Court that it will not appeal against any order releasing any property from attachment, such order shall not be given effect to until the expiry of the period fixed under sub-section (12) within which an appeal may be preferred, or if an appeal is preferred, unless the Court empowered to hear appeals from the decisions of the said Court otherwise directs until the appeal is disposed of.

(10) An order of attachment or sale of property under this section 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 attachment or sale of property in execution of a decree, as if the Trust were the decree-holder.

(11) An order under this section transferring the management of a company or other body corporate to the Trust 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 immoveable property or the delivery of moveable property in execution of a decree, as if the Trust were the decree-holder.

(12) Any party aggrieved by an order under sub-section (7) or subsection (9) may, within thirty days from the date of the order, appeal to the Court empowered to hear appeals from the decisions of the Court which passed the order and the Appellate Court may after hearing the parties pass such orders as it thinks proper.

(13) Nothing in this section shall be construed, where proceedings for liquidation in respect of the company or other body corporate have commenced before an application is made under sub-section (1) as giving to the Trust any preference over the other creditors of the company or other body corporate not conferred on it by any other law.

(14) 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 other powers incidental thereto.

(15) For the purpose of this section 'Court' means the High Court within the local limits of whose jurisdiction,-

(i) The defendant or respondent, or where there is more than one defendants or respondents any one of them-

(1) Has his registered office; or

(2) Carries on the whole or part of his business,at the time of the commencement of any legal proceedings, against him under this Act; or

(ii) The cause of action for such legal proceedings, wholly or in part, arises.

(16) The provisions of this section shall not apply to or in relation to any proceedings (whether by way of suits or appeals or other proceedings) under this Act pending before a District Judge or an Additional District Judge or a High Court at the commencement of the Unit Trust of India (Amendment) Act, 1985.]

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1. Substituted by Act 63 of 1985, Section 5 (w.e.f. 23rd April, 1985).

2. Inserted by Act 52 of 1975, Section 53 (w.e.f. 16th February, 1976).

3. Inserted by Act 63 of 1985, Section 6 (w.e.f. 23rd April, 1985).

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(1)1*[The Trust may borrow, whether in India or outside India] from any authority or person, not being Government or the Reserve Bank, against such security and on such terms and conditions as-may be agreed upon.

2*[(2) The Trust may borrow money from the Reserve Bank-

(i) Repayable on demand or on the expiry of fixed period not exceeding ninety days from the date on which the money so borrowed against stocks, funds and securities (other than immoveable property) in which a trustee is authorized to invest trust money by any law for the time being in force in India;

(ii) Repayable on demand or within a period of eighteen months from the date on which the money is so borrowed, against the security of the bonds which the trust may issue with the approval of the Central Government;

(iii) On such terms and conditions and against the security of such other property of the Trust as may be specified in this behalf by the Reserve Bank for the purposes of any scheme other than the first unit scheme:

Provided
that any amount borrowed under this clause and
outstanding at any one time shall not exceed-

(a) Five crores of rupees in respect of each such scheme;

(b) Ten crores of rupees in respect of all such schemes in the aggregate.

(3) The bonds issued by the Trust under sub-section (2) shall be guaranteed by the Central Government as to the re-payment of principal and the payment of interest at such rate as may be fixed by the Central Government at the time the bonds are issued.]

20A -3* Special contribution by Reserve Bank

4*[The Reserve Bank or the Development Bank may], from time to time, in its discretion pay to the Trust from out of the amount 4*[payable to the Reserve Bank or, as the case may be, the Development Bank] under sub-section (1) of Section 25-A any sum to be utilized by the Trust solely for meeting the losses arising out of or any additional amount required in connection with any variation made by the Trust in the sale or re-purchase price of a unit.

20B - Grants, donations, etc. to Trust

The Trust may receive gifts, donations or benefactions from Government or any other source and such gifts, grants, donations or benefaction shall be treated by the Board as capital or income of the first unit scheme or, as the case may be, of any subsequent unit scheme according to the purposes for which they are made and in the absence of any indication of such purposes, they shall be treated as capital or income of such units scheme or schemes and to such extent as the Board thinks fit.

20C - 5* Power to transfer rights

The rights and interests of the Trust (including any other rights incidental thereto) in relation to any loan or advance granted, or any amount recoverable, by it may be transferred by the Trust, 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 in which the rights and interests in relation to such loan or advance may be lawfully transferred, and the Trust may notwithstanding such transfer, act as the trustee within the meaning of Section 3 of the Indian Trusts Act, 1882 (2 of 1882), for the transferee.]

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1. Substituted by Act 63 of 1985, Section 7.

2. Substituted by Act 17 of 1966, Section 5 (w.e.f. 10th June, 1966).

3. Inserted by Act 17 of l966, Section 6 (w.e.f. 10th June, 1966).

4. Substituted by Act 52 of 1975, Section 54 (w.e.f. 16th February, 1976).

5. Inserted by Act 63 of 1985, Section 8 (w.e.f. 23rd April, 1985).

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(1) For the purpose of providing facilities for participation in the income, profits and gains arising out of the acquisition, holding management or disposal of securities by the Trust, the Board1[may make one or more2[unit schemes], including one or more unit schemes for issuing units to persons residing outside India in such foreign currencies, as the Trust may deem fit.]

(2) Subject to the provisions of this Act and the regulation made under Section 43, a scheme made under sub-section (1) may provide for-

3*[(a) The issue of units and the face value of each unit:

Provided that the face value of each unit shall, where such value is in Indian currency, be not less than ten rupees or more than one hundred rupees and where such value is in any foreign currency, be in multiples of ten;]

(b) The form and manner in which an application may be made for the purchase of a unit from the Trust;

(c) The manner in which payment may be made for purchasing a unit from the Trust;

(d) The issue of unit certificates and the form and manner in which such certificates may be issued;

(e) The issue of duplicate of any unit certificate in the event of loss or destruction of the original and the fee on the payment of which such duplicate may be issued;

(f) The procedure for determining the value at which the units may be sold or purchased, from time, by the Trust;

(g) The recognition of persons as unit holders;

4*[ga) The application for, and the holding of, or dealing with, units by any parent of a minor; ]

(h) The persons to whom, the time at which and the manner in which payments in respect of a unit shall be made by the Trust;

(i) The preparation and maintenance of a register, if any, of unit holders;

(j) The conditions, if any, subject to which a unit holder may transfer the unit;

(k) Any other matter which the Trust may consider to be necessary or proper for the effective implementation of the scheme.

4*[(2-A) Where any parent of a minor holds, deals with or makes any application for the purchase of a unit on behalf of the minor, the provisions of the scheme, in pursuance of which the unit had been issued, shall be binding on the minor.

(2-B) Where the payment of any sum becomes due on or in respect of, any unit held on behalf of a minor, such payment shall, subject to the provisions of the scheme, be made to the parent by whom the purchase of such unit was applied for or by whom such unit was acquired, as the case may be, and such parent shall be entitled to receive such payment for and on behalf of the minor; and in the event of the death of the said parent, such payment shall be made to the lawful guardian of the minor.

Explanation.-References in this section to "parent" shall be construed as including references to step-parent.]

(3) The Board may, from time to time, add to or otherwise amend 3[any scheme] made under sub-section (1).

(4)5*[Every scheme] made under sub-section (1) and every amendment thereof under sub-section (3) shall be notified in the official Gazette.

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1. Substituted by Act 17 of 1966, Section 7, (w.e.f. 10th June, 1966).

2. Substituted by Act 63 of 1985, Section 9 (w.e.f. 23rd April, 1985).

3. Substituted by Act 63 of 1985, Section 9.

4. Inserted by Act 16 of 1975, Section 5 (came into force at once).

5. Substituted by Act 17 of 1966, Section 7.

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(1) The capital of the Trust in relation to the first unit scheme shall consist of-

(i) The initial capital,

(ii) The unit capital of the said scheme,

(iii) Any reserves created for that scheme,

(iv) Any amount borrowed for the purposes of that scheme,

(v) Any amount received for the purposes of that scheme by way of gifts, grants, donations or benefactions from the Government or any other source and treated as the capital of that scheme under Sec. 20-B.

(vi) Any other capital allocated to that scheme by the Board having regard to the nature of such capital and other relevant factors.

(2) The capital of the Trust in relation to any subsequent unit scheme shall consist of-

(i) The unit capital of that scheme,

(ii) Any reserves created for that scheme,

(iii) Any amount borrowed for the purposes of that scheme,

(iv) Any amount received for the purposes of that scheme by way of gifts, grants, donations or benefactions from the Government or any other source and treated as the capital of that scheme under Sec. 20-B,

(v) Any other capital allocated to that scheme by the Board having regard to the nature of such capital and other relevant factors.

(3) The capital in respect of a unit scheme shall be held separately from the capital in respect of any other unit scheme and such capital shall, subject to the provisions of this Chapter, be applied solely for the purposes of that unit scheme.



The income of the Trust shall consist of-

(i) In relation to the first unit scheme,-

(a) The income arising out of the capital referred to in sub-section (1) of Sec. 22,

(b) Any gifts, grants, donations or benefactions treated as the income of that scheme under Sec. 20-B, and

(c) Any other income allocated to that scheme by the Board having regard to the income and other relevant factors;

(ii) In relation to any subsequent unit scheme,-

(a) The income arising out of the capital referred to in sub-section (2) of Sec. 22,

(b) Any gifts, grants, donations or benefactions treated as the income of that scheme under Sec. 20-B, and

(c) Any other income allocated to that scheme by the Board having regard to the nature of the income and other relevant factors.



The income of the Trust in any year arising out of the capital of the Trust relating to the first unit scheme shall be allocated to the initial capital and the unit capital thereof in the same proportion as the former bears to the latter at the end of that year.



(1) The interest payable for any year for any borrowings by the Trust and the total amount of other expenses incurred by the Trust for that year for the purposes of the first unit scheme shall be allocated and charged to the initial capital and the unit capital thereof in the same proportion as is referred to in Sec. 24.

(2) Notwithstanding anything contained in sub-section (1), if in any year the amount of expenses, other than interest allocated to the unit capital relating to the first unit scheme, is more than five per cent, of the income allocated in that year to that scheme, only an amount equal to such five per cent, shall be charged to that unit capital and the rest of the total amount of expenses other than interest shall be charged to the initial capital.

(3) The interest payable for any year for any borrowings by the Trust and the total amount of other expenses incurred by the Trust in that year for the purposes of any subsequent unit scheme shall be charged to the unit capital of such scheme in such manner and to such extent as the Board may, with the previous approval of the1*[Development Bank] determine.

(4) For the purposes of this section, where expenses are incurred in common by the Trust in relation to more than one unit scheme such expenses may be allocated to the different schemes to such extent and in such manner as the Board may, with the previous approval of the1*[Development Bank] determine having regard to the nature and purposes of the expenses and other relevant factors.

25A - Distribution of income

(1) The income allocated to the initial capital in any year reduced by the interest and the amount of other expenses charged for that year to the initial capital may be distributed in the prescribed manner among the contributing institutions in each case in proportion to their respective contributions.

(2) The income allocated in any year to the unit capital relating to the unit scheme reduced by the interest and the amount of other expenses charged for that year to such unit capital may, but not less than ninety per cent, of such income so reduced, shall be distributed in respect of that year to the unit holders under that unit scheme :

2*[Provided that in relation to any year in which the Trust has declared a dividend of not less than ten per cent, on the unit capital the requirement as to distribution of not less than ninety per cent, of such income in such year as so reduced shall not apply.]

(3) The income allocated in any year to the unit capital relating to each of the subsequent unit schemes reduced by the interest and the amount of other expenses charged for that year to such unit capital may, having regard to the purposes of that scheme and other relevant factors,-

(i) Be distributed in respect of the year to the unit-holders under that scheme in such manner and at such percentage of the income so reduced as the Board may determine; or

(ii) Be carried forward and re-invested or otherwise utilized for the benefit of the unit-holders in accordance with the provisions of that scheme.

25B - Reserve Funds

(1) The Trust may establish one or more reserve funds by transferring such sums as it may deem fit out of the income of the Trust not distributed to institution or unit holders under the provisions of this Chapter.

(2) Subject to the provisions of this Act, the amount in any reserve fund created specifically for the purposes of any unit scheme shall be applied or utilized only for the benefit of the unit holders under that unit scheme and for such purposes and in such manner as the Board may determine.

25C - Definition

In this Chapter, "year" means the period in respect of which the books and accounts of the Trust are balanced and closed under sub-section (2) of Sec. 26.]

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1. Substituted by Act 52 of 1975, Section 52 (w.e.f. 16th February, 1976).

2. Added by Act 63 of 1985, Section 10 (w.e.f. 23rd April, 1985).

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Last updated on July, 2016

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