33. Staff of Small Industries Bank.—(1) The Small Industries Bank may appoint such number of
officers and other employees as it considers necessary or desirable for the efficient performance of its
functions and determine the terms and conditions of their appointment and service.
(2) At any time before the expiry of six months from the appointed day, the Development Bank may,
in public interest, transfer to the Small Industries Bank such members of its staff whom the Development
Bank considers as relevant to, or suitable for, the functions of the Small Industries Bank, as on deputation
with the Small Industries Bank, but such members shall hold office by the same tenure and upon the same
terms and conditions of service as respects remuneration, leave, provident fund, retirement or other
terminal benefits as they would have held such office if the Small Industries Bank had not been
established and shall continue to do so until the Development Bank either on its own motion or at the
request of the Small Industries Bank recalls such member of staff to its service:
Provided that every member of the staff so transferred may elect to go back to the Development Bank
by exercising an option in writing to that effect before the expiry of a period of nine months from the
appointed day and on the exercise of such option, the Development Bank shall, before the expiration of a
period of eighteen months from the appointed day, take back such member of the staff and he shall be
deemed to have been on deputation to the Small Industries Bank during the period he was a member of
the staff of the Small Industries Bank.
(3) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or in any
other law for the time being in force, the absorption of any member of the staff by the Small Industries
Bank in its regular service under this section shall not entitle such employee to any compensation under
that Act or other law and no such claim shall be entertained by any court, tribunal or other authority.
Explanation.—For the purposes of this section, “appointed day” means the date of establishment of
the Small Industries Bank under section 3.
34. Delegation of powers.—The Board may, by general or special order, delegate to any Director or
committee constituted under section 12 or to any officer or other employee of the Small Industries Bank,
subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and
duties under this Act as it may deem necessary.
35. Returns.—The Small Industries Bank shall furnish from time to time to 1
[the Central
Government and the Reserve Bank] such returns as they may require.
36. Obligations as to fidelity and secrecy.—(1) The Small Industries Bank shall not, except as
otherwise required by this Act or any other law, divulge any information relating to, or to the affairs of, its
constituents except in circumstances in which it is, in accordance with the law or practice and usage
customary among bankers necessary or appropriate for the Small Industries Bank to divulge such
information.
(2) The Small Industries Bank may, for the purpose of the efficient discharge of the functions under
this Act, collect from or furnish to the Central Government, Reserve Bank, Development Bank, State
Bank, any subsidiary bank, nationalised bank or other scheduled bank, State Cooperative Bank, State
Financial Corporation, State Industrial Development Corporation, State Small Industries Corporation or
1. Subs. by Act 7 of 2000, s. 20, for “the Central Government, the Reserve Bank and the Development Bank” (w.e.f. 27-3-2000).
22
the National Small Industries Corporation or such other institutions 1
[as may be specified by the Board],
credit information or other information as it may consider useful for the purpose, in such manner and at
such times, as it may think fit.
Explanation.—For the purpose of this sub-section, the expression “credit information” shall have the
same meaning as in clause (c) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934), subject
to the modification that “banking company” referred to therein shall mean a bank, corporation or other
institution referred to in this sub-section.
(3) Every Director, member of a committee, auditor, officer or other employee of the Small Industries
Bank 2
*** whose services are utilised by the Small Industries Bank under the provisions of this Act,
shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the
First Schedule to this Act.
37. Defects in appointment not to invalidate acts, etc.—(1) No act or proceeding of the Board or of
any committee of the Small Industries Bank shall be questioned on the ground merely of the existence of
any vacancy in, or defect in the constitution of, the Board or the committee, as the case may be.
(2) No act done by any person acting in good faith as a Director shall be deemed to be invalid merely
on the ground that he was disqualified to be a Director or that there was any other defect in his
appointment.
3
[37A. Amounts and securities to be held in trust.—(1) Any sums received by a borrowing
institution in repayment or realisation of loans and advances refinanced either wholly or partly by the
Small Industries Bank shall, to the extent of the accommodation granted by the Small Industries Bank and
remaining outstanding, be deemed to have been received by the borrowing institution in trust for the
Small Industries Bank, and shall accordingly be paid by such institution to the Small Industries Bank, as
per the repayment schedule fixed by the Small Industries Bank.
(2) Where an accommodation has been granted to a borrowing institution, all securities held, or which
may be held, by such borrowing institution, on account of any transaction in respect of which such
accommodation has been granted by the Small Industries Bank, shall be held by such institution in trust
for the Small Industries Bank.]
38. Rights of Small Industries Bank in case of default.—(1) Where any industrial concern in the
small-scale sector, which is under a liability to the Small Industries Bank under an agreement, makes any
default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in
relation to any guarantee given by the Small Industries Bank or otherwise fails to comply with the terms
of its agreement, with the Small Industries Bank, the Small Industries Bank shall have the right to take
over the management, or possession, or both of such industrial concern in the small-scale sector, as well
as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated
or assigned to the Small Industries Bank.
(2) Any transfer of property made by the Small Industries Bank, in exercise of its powers under
sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had
been made by the owner of the property.
(3) The Small Industries Bank 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) Where any action has been taken against an industrial concern in the small-scale sector under the
provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Small Industries
Bank have been properly incurred by it as incidental thereto shall be recoverable from the industrial
concern in the small-scale sector and the money which is received by it 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
1. Subs. by Act 7 of 2000, s. 21, for “as may be specified by the Development Bank” (w.e.f. 27-3-2000).
2. The words “or the Development Bank” omitted by s. 21, ibid., (w.e.f. 27-3-2000).
3. Ins. by s. 22, ibid. (w.e.f. 27-3-2000).
23
expenses and, secondly, in discharge of the debt due to the Small Industries Bank, and the residue of the
money so received shall be paid to the person entitled thereto in accordance with his rights and interests.
(5) Where the Small Industries Bank takes over the management or possession of an industrial
concern in the small-scale sector under the provisions of sub-section (1), the Small Industries Bank 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 the concern.
39. Power to seek assistance of Chief Metropolitan Magistrate or District
Magistrate.—(1) Where any property, effects or actionable claims are sold or leased in pursuance of any
power conferred by section 38, the Small Industries Bank or any other person authorised by it may, for
the purpose of taking into custody or under control any such property, effects or actionable claims,
request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction
any such property, effects, actionable claims, books of account or other documents relating thereto may
be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or the District
Magistrate shall, on such request being made to him,—
(a) take possession of such property, effects, actionable claims, or books of account or other
documents relating thereto; and
(b) forward them to the Small Industries Bank or such other person, as the case may be.
(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief
Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or
cause to be used, such force as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this
section shall be called in question in any court or before any authority.
40. Power to call for repayment before agreed period.—Notwithstanding anything in any
agreement to the contrary, the Small Industries Bank may, by notice in writing, require any industrial
concern in the small-scale sector to which it has granted any loan or advance to discharge forthwith in full
its liabilities to the Small Industries Bank,—
(a) if it appears to the Board that false or misleading information in any material particular was
given in the application for the loan or advance; or
(b) if the industrial concern in the small-scale sector has failed to comply with the terms of its
contract with the Small Industries Bank in the matter of the loan or advance; or
(c) if there is a reasonable apprehension that the industrial concern in the small-scale sector is
unable to pay its debt or that proceedings for liquidation may be commenced in respect thereof; or
(d) if the property pledged, mortgaged, hypothecated or assigned to the Small Industries Bank as
security for the loan or advance is not insured and kept insured by the industrial concern in the smallscale sector to the satisfaction of the Small Industries Bank; 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 in
the small-scale sector without being replaced; or
(f) if for any reason it is necessary to protect the interests of the Small Industries Bank.
41. Special provisions for enforcement of claims by Small Industries Bank.—(1) Where an
industrial concern in the small-scale sector, in breach of any agreement, makes any default in repayment
of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee
given by the Small Industries Bank or otherwise fails to comply with the terms of its agreement with that
Bank, or where the Small Industries Bank requires any industrial concern in the small-scale sector to
make repayment of any loan or advance under section 40 and such industrial concern fails to make such
24
repayment, then, without prejudice to the provisions of section 38 of this Act and section 69 of the
Transfer of Property Act, 1882 (4 of 1882), any officer of that Bank, generally or specially authorised by
that Bank 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 assigned, charged, hypothecated, mortgaged or
pledged to that Bank as security for the loan or advance; or
(b) for enforcing the liability of any surety; or
(c) for an ad interim injunction restraining the industrial concern in the small-scale sector from
transferring or removing its machinery, plant or equipment from the premises of such industrial
concern without the permission of the Small Industries Bank, where such transfer or removal is
apprehended.
(2) An application under sub-section (1) shall state the nature and extent of the liability of the
industrial concern in the small-scale sector to the Small Industries Bank, the ground on which it is made
and such other particulars as may be necessary for obtaining the relief prayed for.
(3) Where the application is for the reliefs mentioned in clause (a) and clause (c) of sub-section (1),
the Court shall pass an ad interim order attaching the security, or so much of the property of the industrial
concern in the small-scale sector as would on being sold realise in its estimation an amount equivalent in
value to the outstanding liability of such industrial concern to the Small Industries Bank together with
costs of the proceedings taken under this section with or without an ad interim injunction restraining such
industrial concern from transferring or removing its machinery, plant or equipment.
(4) Where the application is for the relief mentioned in clause (b) of sub-section (1), the Court shall
issue a notice calling upon the surety to show cause on a date to be specified in the notice as to why the
liability should not be enforced.
(5) Before passing any order under sub-section (3) or issuing a notice under 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 industrial
concern in the small-scale sector 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 the Court calling upon such industrial
concern or owner, to show cause on a date to be specified in the notice, as to 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-section (4), the Court
shall forthwith order the enforcement of the liability of the surety.
(8) If no cause is shown on or before the date specified in the notice under sub-section (6), the Court
shall forthwith make the ad interim order absolute and direct the sale of the attached property or confirm
the injunction.
(9) If cause is shown, the Court shall proceed to investigate the claim of the Small Industries Bank 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.
(10) After making an investigation under sub-section (9), the Court 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; or
(e) direct the enforcement of the liability of the surety or reject the claim made in this behalf:
Provided that when making an order under clause (c) or making an order rejecting the claim to
enforce the liability of the surety under clause (e), the Court may make such further order as it thinks
25
necessary to protect the interests of the Small Industries Bank and may apportion the cost of the
proceedings in such manner as it thinks fit:
Provided further that unless the Small Industries Bank intimates to the Court that it will not appeal
against any order releasing any property from attachment or rejecting the claim to enforce the liability of
the surety, 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.
(11) 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 Small Industries Bank were the decree holder.
(12) Any party aggrieved by an order under sub-section (7), sub-section (8) or sub-section (10) 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 upon such appeal the appellate Court may, after hearing
the parties, pass such orders as it thinks proper.
(13) Where proceedings for liquidation in respect of an industrial concern in the small-scale sector
have commenced before an application is made under sub-section (1), nothing in this section shall be
construed as giving to the Small Industries Bank any preference over the other creditors of such industrial
concern 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 the other
powers incidental thereto.
42. Small Industries Bank to have access to records.—(1) The Small Industries Bank shall have
free access to all such records of any institution which seeks to avail of any credit facilities from the
Small Industries Bank and to all such records of any such person who seeks to avail of any credit facilities
from such institution, perusal whereof may appear to the Small Industries Bank to be necessary in
connection with the providing of finance or other assistance to such institution or the refinancing of any
loan or advance made to such person by the borrowing institution.
(2) The Small Industries Bank may require any institution or person referred to in sub-section (1) to
furnish to it copies of any of the records referred to in that sub-section and the institution or the person, as
the case may be, shall be bound to comply with such requisition.
43. Validity of loan or advance not to be questioned.—Notwithstanding anything to the contrary
contained in any other law for the time being in force, the validity of any loan or advance granted by the
Small Industries Bank in pursuance of the provisions of this Act shall not be called in question merely on
the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution,
contract, memorandum, articles of association or other instrument:
Provided that nothing in this section shall render valid any loan or advance obtained by any company
or co-operative society where such company or co-operative society is not empowered by its
memorandum to obtain loans or advances.
44. Indemnity of Directors.—(1) Every Director shall be indemnified by the Small Industries Bank
against all losses and expenses incurred by him in, or in relation to, the discharge of his duties, except
such as are caused by his own wilful act or default.
(2) A Director shall not be responsible for any other Director or for any officer or other employee of
the Small Industries Bank or for any loss or expenses resulting to the Small Industries Bank or from the
insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf
of the Small Industries Bank or the insolvency or wrongful act of any debtor or any person under
obligation to the Small Industries Bank or anything done in good faith in the execution of the duties of his
office or in relation thereto.
26
45. Protection of action taken under this Act.—No suit or other legal proceeding shall lie against
the Small Industries Bank, 1
[chairman and managing director, the whole-time director] or any Director or
any officer or other employee of such Bank or any other person authorised by that Bank to discharge any
functions under this Act for any loss or damage caused or likely to be caused by anything which is in
good faith done or intended to be done in pursuance of this Act or any other law or provision having the
force of law.
46. Nomination by depositors or holders of bonds or other securities.—(1) Notwithstanding
anything contained in any other law, where a nomination in respect of any deposits, bonds or other
securities kept with or issued by the Small Industries Bank is made in the prescribed manner, the amount
due on such deposits, bonds or other securities shall, on the death of the depositor or holder thereof, vest
in, and be payable to, the nominee subject to any right, title, interest or claim of any other person, in
relation to such deposits, bonds or other securities.
(2) Any payment by the Small Industries Bank in accordance with the provisions of sub-section (1)
shall be a full discharge of its liability in respect of such deposits, bonds or securities.
47. Arrangement with Small Industries Bank on appointment of directors to prevail.—(1) Where
any arrangement entered into by the Small Industries Bank with an industrial concern in the small-scale
sector provides for the appointment by the Small Industries Bank 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 that industrial 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 Small Industries Bank in
pursuance of the arrangement as aforesaid.
(2) Any director appointed as aforesaid shall—
(a) hold office during the pleasure of the Small Industries Bank and may be removed or
substituted by any person by order in writing of the Small Industries Bank;
(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.
48. Act 18 of 1891 to apply in relation to Small Industries Bank.—The Bankers’ Books Evidence
Act, 1891 shall apply in relation to Small Industries Bank as if it were a bank as defined in section 2 of
that Act.
49. Act 10 of 1949 not to apply to Small Industries Bank.—Nothing contained in the Banking
Regulation Act, 1949, except section 34A and section 36AD thereof, shall apply to the Small Industries
Bank.
50. [Act 43 of 1961 not to apply to Small Industries Bank.]—Omitted by the Finance Act, 2001
(14 of 2001), s. 142 (w.e.f 1-4-2002).
51. Liquidation of Small Industries Bank.—No provision of law relating to the winding up of
companies or corporations shall apply to the Small Industries Bank and that Bank shall not be placed in
liquidation save by order of the Central Government and in such manner as it may direct.
2
[51 A. Power to make rules by Central Government.—(1) The Central Government may, by
notification, make rules to carry out the provisions of this Act.
1. Subs. by Act 7 of 2000, s. 23, for “chairman” (w.e.f. 27-3-2000).
2. Ins. by Act 7 of 2000, s. 24 (w.e.f. 27-3-2000).
27
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may
provide for all or any of the following matters, namely:—
(i) the procedure for filing and hearing of appeal against the refusal to register the transfer of
shares by the Board under sub-section (3) of section 20D; and
(ii) any other matter which has to be, or may be, prescribed by rules under this Act.]
52. Power to make regulations.—(1) The Board may
1
*** by notification, make regulations not
inconsistent with the provisions of this Act to provide for all matters for which provision is necessary or
expedient for the purpose of giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may
provide for—
2
[(a) the removal of Director under sub-section (8) of section 6;
(aa) the places of meetings of the Board under this Act and the procedure to be followed at such
meetings including the quorum necessary for transaction of business and the manner of adoption of
resolution under section 6;
(ab) the functions to be discharged by the Executive Committee under sub-section (2) of
section 12;
(ac) the places of meetings of the Executive Committee and the procedure to be followed at such
meetings under sub-section (4) of section 12;
(ad) such fees and allowances which may be paid to the directors and members of the Executive
Committee under section 12A;
(ae) the particulars to be prescribed in the register of shareholders under clause (iv) of
sub-section (1) of section 20B;
(af) the procedure relating to maintenance of register of shareholders in electronic form under
sub-section (2) of section 20B;
(ag) the matters relating to the annual general meeting under sub-section (3) of section 20G;]
(b) the form and manner in which the balance-sheets and the accounts of the Small Industries
Development Assistance Fund under sub-section (1) of section 25 and the Small Industries Bank
under sub-section (1) of section 28 shall be prepared;
(c) the manner in which nominations may be made in terms of sub-section (1) of section 46;
(d) generally the efficient conduct of the affairs of the Small Industries Bank;
(e) any other matter which is to be, or may be, prescribed.
3
[(3) Every rule made by the Central Government, and every regulation made by the Board under this
Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in
session for a total period of thirty days which may be comprised in one session or in two or more
successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or
both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter
have effect only in such modified form or be of no effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the validity of anything previously done under
that rule or regulation.]
1. The words “with the previous approval of the Development Bank” omitted by Act 7 of 2000, s. 25 (w.e.f. 27-3-2000).
2. Subs. by s. 25, ibid., for clause (a) (w.e.f. 27-3-2000).
3. Subs. by s. 25, ibid., for sub-section (3) (w.e.f. 27-3-2000).
28
[53. Amendment of certain enactments.]—Rep. by the Repealing and Amending Act, 2001
(30 of 2001), s. 2 and The First Schedule (w.e.f. 3-9-2001).
54. Power to remove difficulties.—If any difficulty arises in giving effect to the provisions of this
Act, the Central Government may, in consultation with the Development Bank, by order, do anything, not
inconsistent with such provisions, for the purpose of removing the difficulty:
Provided that no such order shall be made after the expiration of three years from the date on which
this Act receives the assent of the President.