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SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA ACT

Ministry of Law and Justice

Act nº 39 of 1989


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter IVA. Shares
  • Chapter IVB
  • Chapter V
  • Chapter VI
  • Chapter VII
  • Chapter VIII
  • Schedules
  • Act nº 39 of 1989

Preamble

THE SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA ACT, 1989

[Act, No. 39 of 1989]

[25th October, 1989]

PREAMBLE

An Act to establish the Small Industries Development Bank of India as the principal financial institution for the promotion, financing and development of industry in the small-scale sector and to co-ordinate the functions of the institutions engaged in the promotion, financing or developing industry in the small-scale sector and for matters connected therewith or incidental thereto.

be it enacted by Parliament in the Fortieth Year of the Republic of India as follows:--

Chapter I

Section 1. Short title, extent and commencement

(1) This Act may be called the Small Industries Development Bank of India Act, 1989.

(2) It extends to the whole of India.

(3) It shall come into force on such date1as the Central Government may, by notification, appoint and different dates may be appointed for different provisions of this Act.

1. Vide S.O. 137 (E), dated 7th March, 1990, published in the Gazette of India. Extra., Pt. II. Sec. 3 (ii). dated 7th March, 1990.


Section 2. Definitions

In this Act, unless the context otherwise requires,--

(a) "Board" means the Board of Directors of the Small Industries Development Bank of India referred to in section 5;

1 [(b) "Chairman and Managing Director" means the Chairman and Managing Director referred to in clause (a) of sub-section (1) of section 6;]

(c) "Court" means the High Court with in the local limits of whose jurisdiction,--

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

(1) has his registered office, or

(2) carries on the whole or part of his business,

at the time of 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;

(d) "Development Bank" means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act,1964 (18 of 1964);

(e) "Director" means a Director nominated under sub-section (1) of section 6 and includes the 2 [Chairman and Managing Director and whole-time Director];

(f) "export" means export from India of products or services of any industrial concern in small-scale sector;

3[ (fa) "General Insurance Corporation" means the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972);]

(g) "import" means import into India of services or goods including all materials, commodities and articles in a solid, liquid or gaseous state and all forms of energy for the use of any industrial concern in the small-scale sector;

5[(h) "industrial concern in the small scale sector" means any concern engaged or to be engaged in,--

The manufacture, preservation or processing of goods;

Shipping;

Mining including development of mines;

The hotel industry;

The transport of passengers or goods by road or by water or by air or by ropeway or by lift;

The generation, storage or distribution of electricity or any other form of energy;

The maintenance, repair, testing or servicing of machinery or equipment of any description or vehicles or vessels or motor boats or trailers or tractors;

Assembling, repairing or packing any article with the aid of machinery or power;

The setting up of, or development of, an industrial area or an industrial estate;

Fishing or providing shore facilities for fishing or maintenance thereof;

Providing special or technical knowledge or other services for the promotion of industrial growth;

Providing engineering, technical, financial, management, marketing or other services or facilities for industry;

Service industry such as altering, ornamenting, polishing, finishing, oiling, washing, cleaning or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal;

Providing medical, health or other allied services;

Providing services relating to information technology, telecommunication or electronics;

Leasing, sub-leasing or giving on hire-purchase of industrial plants, equipments, machinery or other assets including vehicles, ships and aircraft;

Such other activity as the Central Government may, having regard to the objects of this Act, by notification, specify in this behalf; or

The research and development of any concept, technology, design, process or product whether in relation to any of the matters aforesaid, including any activities specified under sub-clause (xvii), or any other matter and which is regarded as a small-scale undertaking under section 11B of the Industries (Development and Regulation) Act, 1951(65 of 1951);

Explanation.-- The expression "processing of goods" includes any art or process for producing, preparing or making an article by subjecting any material to a manual mechanical, chemical, electrical or any other like operation.]

3 [(ha) "Life Insurance Corporation" means the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);]

4 [***]

(j) "National Small Industries Corporation" means the National Small Industries Corporation Limited registered under the Companies Act, 1956 (1 of 1956);

(k) "notification" means a notification published in the Official Gazette;

(1) "prescribed" means prescribed by regulations made under this Act;

3 [(la) "public sector bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]

6[(lb) "Reserve Bank" means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934(2 of 1934);

(lc) "scheduled bank" means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934(2 of 1934);]

(m) "Small Industries Bank" means the Small Industries Development Bank of India established under sub-section (I) of section 3;

(n) "State Small Industries Corporation" means a State Corporation, registered under the Companies Act, 1956 (I of 1956), for small industries in a State;

(o) "State Financial Corporation " means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);

(p) "State Industrial Development Corporation" means a State Corporation registered under the Companies Act, 1956 (1 of 1956) for the development of industries in a State;

7[* * *]

1. Substituted by Act 7 of 2000. sec. 2, for clause (b) (w.e.f. 27-3-2000).

2. Substituted by Act 7 of 2000, sec. 2, for "Managing Director" (w.e.f. 27-3-2000).

3. Inserted by Act 7 of 2000, sec. 2 (w.e.f. 27-3-2000).

4. Clause (i) omitted by Act 7 of 2000, sec. 2 (w.e.f. 27-3-2000).

5. Substituted for the following by the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003.

"(h) "industrial concern in the small-scale sector" means an industrial concern as defined in clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964), and which is regarded as a small-scale undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951);"

6. Inserted by the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003

7. Clause (q) omitted by the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003. Prior to omission it read as:

"(q) words and expressions used herein and not defined but defined in the Industrial Development Bank of India Act, 1964 (18 of 1964), shall have the meanings respectively assigned to them in that Act."


Chapter II

Section 3. Establishment and incorporation of Small Industries Development Bank of India

(1) With effect from such date1as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a corporation to be known as the Small Industries Development Bank of India.

(2) The Small Industries Bank shall be a body corporate with the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract, and may, by that name, sue or be sued.

(3) The head office of the Small Industries Bank shall be at Lucknow or at such other place as the Central Government may, by notification, specify.

(4) The Small Industries Bank shall establish offices, branches or agencies at any place in or outside India.

1. Vide S.O. 198 (E), dated 7th March, 1990, published in the Gazette of India, Extra., pt.II, Sec. 3 (ii) dated 7th March, 1990.


Section 4. Authorised capital

1[4. Authorised capital

The authorised capital of the Small Industries Bank shall be one thousand crores of rupees divided into seventy-five crores fully paid-up equity shares of rupees ten each and twenty-five crores of fully paid-up redeemable preference shares of rupees ten each :

Provided that the Central Government may, on the recommendation of the Board, by notification, increase the authorised capital to an amount not exceeding two thousand crores of rupees consisting of such number of equity shares and redeemable preference shares as it may deem fit.]

1. Substituted by Act 7 of 2000, sec. 3, for section 4 (w.e.f. 27-3-2000).


Section 4A. Conversion of equity shares into redeemable preference shares

1 [4A.Conversion of equity shares into redeemable preference shares

(1)The Central Government may, at any time after the commencement of theSmall Industries Development Bank of India (Amendment) Act, 2000, bynotification, convert such number of equity shares held by the Development Bank,the public sector banks, the General Insurance Corporation, the Life InsuranceCorporation and other institutions owned or controlled by the CentralGovernment, not exceeding twenty-five crores, as it may decide, into redeemablepreference shares:

Providedthat such conversion shall in no case reduce the equity shares held in aggregateby the Development Bank, the public sector banks, the General InsuranceCorporation, the Life Insurance Corporation and other institutions owned orcontrolled by the Central Government to less than fifty-one per cent.

(2)The redeemable preference shares referred to in sub-section (1) shall--

(a)carry such fixed rate of dividend as the Central Government may specifyat the time of such conversion, and

(b)neither be transferable nor carry any voting rights.

(3)The redeemable preference shares referred to in sub-section (1) shall beredeemed by the Small Industries Bank within three years from the date of suchconversion in such instalments and in such manner as the Board may determine.]

1.Inserted by Act 7 of 2000, sec. 3 (w.e.f. 27-3-2000).


Section 4B. Transfer of capital

1[4B. Transfer of capital

On such date as the Central Government may, in consultation with the Development Bank, by notification, specify (hereinafter referred to as "the specified date"), not less than fifty-one per cent. of the issued capital of the Small Industries Bank which has been subscribed by the Development Bank as on the date immediately preceding the specified date shall, stand transferred to, and vested in, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government in such proportion, manner and on such terms and conditions as may be determined by that Government.]

1. Inserted by Act 7 of 2000, sec. 3 (w.e.f. 27-3-2000).


Section 4C. Issued capital

1[4C. Issued capital

(1) The issued capital, of the Small Industries Bank, of four hundred and fifty crores of rupees, immediately before the commencement of the Small Industries Development Bank of India (Amendment) Act, 2000, shall, on such commencement, stand divided into forty-five crores equity shares of rupees ten each.

(2) The Board may, from time to time, increase the issued equity share capital or redeemable preference share capital of the Small Industries Bank by allotment of shares to such persons and on such terms and conditions as the Board may determine:

Provided that no increase in the issued equity capital shall be made in such a manner that the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, hold in aggregate at any time, less than fifty-one per cent. of the issued equity share capital of the Small Industries Bank.]

1. Inserted by Act 7 of 2000, sec. 3 (w.e.f. 27-3-2000).


Section 4D. Reduction of share capital

1[4D. Reduction of share capital

(1) The Small Industries Bank may, with the prior approval of the Central Government, by a resolution passed in a general meeting of the shareholders, reduce its share capital in any way.

(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced by--

(a) extinguishing or reducing the liability on any of its equity shares in respect of the share capital not paid-up;

(b) either with or without extinguishing or reducing liability on any of its equity shares, cancelling any paid-up share capital which is lost, or is unrepresented by available assets; or

(c) either with or without extinguishing or reducing liability on any of its equity shares, paying off any paid-up share capital which is in excess of the wants of the Small Industries Bank.

(3) In any general meeting referred to in sub-section (1), the resolution for reduction of share capital shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, and the votes cast in favour of the resolution are not less than three times the number of the votes, if any, cast against the resolution by shareholders so entitled and voting.]

1. Inserted by Act 7 of 2000, sec. 3 (w.e.f. 27-3-2000).


Section 4E. Restriction on exercising of voting right

1[4E. Restriction on exercising of voting right

Every shareholder of the Small Industries Bank holding equity shares shall have a right to vote in respect of such shares on every resolution and his voting right on a poll shall be in proportion to his share of the paid-up equity share capital of the Small Industries Bank:

Provided, however, that no shareholder, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, shall be entitled to exercise voting rights in respect of any equity shares held by him in excess of ten per cent. of the issued equity share capital.]

1. Inserted by Act 7 of 2000, sec. 3 (w.e.f. 27-3-2000).


Chapter III

Section 5. Management

1 [5.Management

(1)The general superintendence, direction and management of affairs and business ofthe Small Industries Bank shall vest in a Board of Directors which may exerciseall powers and do all such acts and things as may be exercised or done by theSmall Industries Bank and are not by this Act expressly directed or required tobe done by the Small Industries Bank in general meeting.

(2)The Board may direct that any power exercisable by it under this Act shall alsobe exercisable in such cases and subject to such conditions, if any, as may bespecified by it, by the chairman and managing director or the whole-timedirectors.

(3)Subject to the provisions of this Act, the Board in discharging its functionsshall act on business principles with due regard to public interest.]

1. Substituted by Act 7 of 2000. sec, 3, For section 5 (w.e.f. 27-3-2000).


Section 6. Constitution of Board

1[6. Constitution of Board

(1) The Board shall consist of the following, namely:--

(a) a Chairman and Managing Director appointed by the Central Government;

(b) two whole-time Directors appointed by the Central Government;

(c) two Directors who shall be officials of the Central Government nominated by the Central Government;

(d) three Directors to be nominated in the prescribed manner by the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government;

(e) three Directors, including one Director from the officials of the State Financial Corporations, nominated by the Central Government from amongst the persons having special knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial co-operatives, law, industrial finance, investment accountancy, marketing or any other matter, the special knowledge of, or professional experience in, which would, in the opinion of the Central Government, be useful to the Small Industries Bank;

(f) such number of Directors not exceeding four elected in the prescribed manner, by shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, whose names are entered in the register of shareholders of the Small Industries Bank ninety days before the date of the meeting in which such election takes place on the following basis, namely:--

(i) where the total amount of equity share capital issued to such shareholders is ten per cent. or less of the total issued equity share capital, two Directors;

(ii) where the total amount of equity share capital issued to such shareholders is more than ten per cent. but less than twenty-five per cent. of the total issued equity share capital, three Directors; and (iii) where the total amount of equity share capital issued to such shareholders is twenty-five per cent. or more of the total issued equity share capital, four Directors:

Provided that if the percentage of holding of issued equity share capital with the shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government, does not permit election of four Directors or until the assumption of charge by the elected Directors, the Board may at any time co-opt such number of Directors, not exceeding four, from amongst the persons having special knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial co-operatives, law, industrial finance, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in, which would, in the opinion of the Board, be useful to the Small Industries Bank for carrying out its functions, who shall hold office until the assumption of charge by the elected Directors and an equal number of such co-opted Directors shall retire in the order of co-option.

(2) The Chairman and Managing Director and the whole-time Directors shall hold office for such term not exceeding five years as the Central Government may specify in this behalf and any person so appointed shall be eligible for re-appointment.

(3) Notwithstanding anything contained in sub-section (1), the Central Government shall have the right to terminate the term of office of the Chairman and Managing Director or the whole-time Director, as the case may be, at any time before the expiry of the term specified under sub-section (2) by giving him notice of not less than three months in writing or three months' salary and allowances in lieu of such notice and the Chairman and Managing Director or the whole-time Director, as the case may be, shall also have the right to relinquish his office at any time before the expiry of the term specified under sub-section (2) by giving, the Central Government, notice of not less than three months in writing.

(4) The Chairman and Managing Director and the whole-time Directors shall receive such salary and allowances, as may be determined by the Central Government.

(5) The Central Government may, at any time, remove the Chairman and Managing Director or the whole-time Director, as the case may be, from office:

Provided that no person shall be removed from his office, under this sub-section, unless he has been given an opportunity of showing cause against his removal.

(6) Every Director nominated under clauses (c), (d) and (e) of sub-section (1), shall hold office during the pleasure of the authority nominating him.

(7) Subject to the provisions of sub-section (6),--

(a) every Director nominated under clauses (d) and (e) of sub-section (1) shall hold office for such term not exceeding three years as the Central Government, or the authority nominating him, as the case may be, may specify in this behalf and thereafter until his successor assumes office, and shall be eligible for re-nomination:

Provided that no such Director shall hold office continuously for a period exceeding six years; and

(b) every Director elected under clause (!) of sub-section (I) shall hold office for three years and thereafter until his successor assumes office and shall be eligible for re-election:

Provided that no such Director shall hold office continuously for a period exceeding six years.

(8) The shareholders, other than the Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the Central Government may, after giving the Director a reasonable opportunity of being heard in the manner as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the aggregate not less than one-half of the equity share capital held by such shareholders, remove any Director elected under clause (f) of sub-section (1) and elect another Director in his place to fill the vacancy so caused;

(9) (i) A meeting of the Board shall be held at least once in every three months and at least four meetings shall be held every year and the meetings may be held at such places as may be prescribed.

(ii) Notice of every meeting of the Board shall be given in writing to every Director for the time being in India, and at his usual address in India to every other Director.

(10) Subject to the provisions contained in this Chapter, the Board may meet at such times and places and shall observe such rules of procedure in regard to transaction of its business including the manner of adoption of resolutions as may be prescribed.

(11) The Chairman and Managing Director, if for any reason, is unable to attend a meeting of the Board, any other Director nominated by the Chairman and Managing Director in this behalf and in the absence of such nomination, any Director elected by the Directors present from among themselves, shall preside at the meeting.

(12) All questions which come up before any meeting of the Board shall be decided by a majority of votes of the Directors present and voting, and in the event of an equality of votes, the Chairman and Managing Director, or in his absence, the person presiding, shall have a second or casting vote.

(13) Save as provided in sub-section (12), every Director of the Board shall have one vote.]

1. Substituted by Act 7 of 2000, sec. 3, for section 6 (w.e.f. 27-3-2000).