In exercise of the
powers conferred by Section 23 of the Karnataka State Aid to Industries Act,
1959 (Karnataka Act 8 of 1960), the Government of Karnataka hereby makes the
following rules relating to the Karnataka State Aid to Industries These rules may be
called the Karnataka State Aid to Industries Rules, 1961. In these rules, unless
the context otherwise requires. (a)
"Act" means
the Karnataka State Aid to Industries Act, 1959; [1][(b)
"Assistant Director" means the Assistant Director of Industries and
Commerce in charge of a district; (b-1)
"Deputy Director" means the Deputy Director of Industries and
Commerce in charge of Loans;] (c) "Director" means the Director of
Industries and Commerce in Karnataka, Bangalore; (d) "Form" means a form appended to
these rules; (e) "Government" means the Government of
Karnataka; [2][(e-1)
"Joint Director" means the Joint Director of Industries and Commerce
in charge of loans;] (f) "Schedule" means a Schedule
appended to these rules; (g) "Section" means a section of the
Act; (h) "Sanctioning authority" means the
authority specified in Rule 3. (1)
The Assistant Director
in his jurisdiction, shall be competent to sanction in each case loans for
amount not exceeding Rs. 2,000 on securities as contemplated under Section 9 of
the Act. [3][(1-a)
The Deputy Director shall be competent to sanction in each case loans of an
amount exceeding Rs. 2,000 but not exceeding Rs. 5,000 on securities as
contemplated under Section 9, subject to prescribed terms and conditions. (1-b)
The Joint Director shall be competent to sanction in each case loans of an
amount exceeding Rs. 5,000 but not exceeding Rs. [4][24,999]
on securities as contemplated under Section 9 subject to prescribed terms and
conditions;.] [5][(2)
xxxxx.] (3) The State Government shall be competent to
sanction in each case loans for an amount of Rs. [6][25,000]
and above to industries which are not entitled to assistance under the State
Financial Corporations Act, 1951 (Central Act 63 of 1951). Note 1. The amount of
the loan, proposed to be sanctioned to any industry together with the amount of
the previous loan or loans, if any, granted to the same industry shall not
exceed the limits specified above. Note 2. The sanction of
the loan is subject to the [7][condition]
that solvency certificates issued by the concerned Assistant Director or a
Revenue Officer not below the rank of Tahsildar, in respect of personal surety
or sureties, are furnished. [8][Any
person aggrieved by an order rejecting an application for loan may, within
ninety days from the date of communication of the order of rejection prefer an
appeal, where the order is made, by. (a)
the Assistant Director,
to the Deputy Director; (b)
the Deputy Director, to
the Joint Director; [9][and] (c)
the Joint Director, to
the Director; [10][xxx] [11][(d)
xxxxx.] Notwithstanding anything
in Rule 3-A, the Government, in respect of any order made by any authority
under Rule 3 and each of the other appellate authorities in respect of any
order made by officers
subordinate to him, may, either suo motu or otherwise, call for the records and
pass such orders as are considered necessary: Provided that no order
shall be passed to the detriment of any person, unless an opportunity is given
to him of being heard.] Subject to the
provisions of Sections 7 and 8, the [12][Assistant
Director, Deputy Director, Joint Director and the Director] will be in charge
of the administration of the Act. The [13][Assistant
Director, Deputy Director, Joint Director and the Director] shall (a)
conduct or cause
detailed enquiries to be conducted in regard to the application for State Aid; (b)
assess or cause to be
assessed the value of the assets of the industrial business or enterprise in
accordance with the Rule 9; (c)
obtain by a written
request, wherever necessary, from the Deputy Commissioner or the Executive
Engineer of the Public Works Department, as the case may be, the valuation
certificates pertaining to the lands and/or buildings offered as security for
the aid; (d)
examine the adequacy or
otherwise of the security for the aid and obtain from the applicant collateral
security in the event of the primary security being found inadequate; (e)
obtain a deed of
mortgage, floating charge or collateral security from the applicant and/or his
surety/sureties in respect of all properties offered as security before the aid
is actually given; (f)
arrange for insuring the
properties secured for the aid, against loss or damage by fire, accident, theft
or pilferage; (g)
maintain a register of
all loans granted and to be recovered under the Act, in Form 'C'; (h)
have the right to
inspect or cause to be inspected the premises, buildings, plant and equipment,
stock on hand, and the accounts and books of any industrial business or
enterprise for which State aid applied for, has been granted; (i)
watch recoveries and
repayment of loans and grants; (j)
report to Government or
to the Director as the case may be, cases of breach of any of the terms and
conditions subject to which aid is given to an industrial business or
enterprise; and (k)
execute all orders of
the Government or of the Director, as the case may be relating to the grant or
termination of the aid save as otherwise expressly prescribed by rules. [14][Subject
to the provisions of Section 4 aid may be given to any of the industrial
business or enterprises specified in Schedule H.] (a)
Subject to the
provisions of Section 4, aid may be given in one lumpsum or in installments as
the sanctioning authority may lay down in the order sanctioning the loan, for
all or any of the following purposes, namely. (i)
construction of
buildings, go downs, warehouses, wells, tanks and other works necessary for
industrial operation and for purchase of land for the purpose; (ii)
purchase and erection of
machinery, plant and appliances; (iii)
purchase of raw
materials; [15][(iv)
for providing money to be used as working capital; Explanation. In this
item 'Working Capital' means money set apart by an industry for meeting
expenses for purchasing raw materials, payment of wages, transportation,,
repairs to buildings or machinery, payment of rent, fees or taxes,
advertisement and meeting other charges incidental to running the Industry.;] (v) for repayment of other prior loans or loans
incurred by the loanee in connection with the Industry provided that the total
amount to be repaid does not exceed 50 per cent of the loan granted under the
Act. (b)
A joint stock company
shall not be given aid under the Act unless the majority of the members of its
Board of Directors are citizens of India. (1)
Every application for a
loan shall be made. [16][(a)
where the amount does not exceed Rs. 2,000 to the Assistant Director; (b) where the amount exceeds Rs. 2,000 but does
not exceed Rs. 5,000 to the Deputy Director; (c) where the amount exceeds Rs, 5,000 but does
not exceed Rs. [17][24,999]
to the Joint Director; [18][x x x] [19][(d) x
x x x x;] (e) in all other cases to the Government.] (2)
Every application shall
be accompanied by such other documents or information as the sanctioning
authority may by general or special order require in addition to those
mentioned in Form 'A' or 'B'. (1)
Fees payable in respect
of applications for aid under the Act shall be as follows. (i)
1/4 per cent of the
amount of aid applied for or Rs. 250, whichever is less subject to a minimum of
Rs. 250; [20][(1-A)
Fees payable for legal scrutiny of title and documents relating to properties
offered as security shall be Rs. 25.] (2)
The fees paid under this
rule are not refundable on any account. (1)
On receipt of an
application for aid under the Act, the sanctioning authority or an officer
authorised by the sanctioning authority shall conduct a detailed enquiry after
giving previous notice in writing to the applicant. The Deputy Commissioner of
the District in which the applicant resides or has his place of industrial
business or enterprise shall render such facilities as may be required by the
sanctioning authority or the officer authorised by the sanctioning authority to
verify the correctness of the particulars furnished in the application, to
assess the general feasibility of the undertaking the experience, the capacity
and the reliability of the applicant for carrying on the business of the
undertaking successfully and to obtain, such other particulars as may be
necessary to decide on the reasonableness and suitability of the aid applied
for. (2)
The sanctioning
authority or the officer authorised by the sanctioning authority in this behalf
shall have power to call upon the applicant to furnish any information or
produce any document that may be required (concerning his industrial business
or enterprise and the applicant shall furnish the same. (3)
[21][The
Assistant Director of Industries and Commerce in the District], shall, on a
written request from the authority sanctioning the loan or officer authorised
by the sanctioning authority, furnish a valuation certificate in respect of the
lands and/or, buildings offered as security, free of cost. (1)
The value of the assets
of an industrial business or enterprise or the value of any property offered as
collateral security shall be calculated as follows, namely. (i)
in the case of fixed
assets acquired by purchase for cash, such as land, buildings, leaseholds,
railway sidings, plant and machinery, and additions and improvements thereto,
trade mark and designs, etc., the price at which these assets were acquired
subject to deduction on account of wear and tear; such deduction shall be calculated
in the case of buildings, machinery and plant, at the
rates fixed as allowable depreciation under Section 10(2) of the Income-tax
Act, 1922; appreciable increase or decrease in the market value of the site,
machinery and buildings may also be taken into consideration in calculating
such value; [22][(ii)
in the case of fixed assets acquired otherwise than by purchase for cash, the
present value of the assets taking into account their nature, present
condition, location, utility and other like matters;] (iii) in the case of stores, spare parts, and tools
not taken into use, the cost price or the price of replacement, "whichever
is less; (iv) in the case of stores, spare parts, and tools
which have been used, but are still in stock, the cost price less a proper
deduction due to wear and tear; (v) in the case of stock-in-trade or manufactured
stock, the cost of manufacture or the market price, whichever is less; and in
the case of purchased stock, the cost price or the price of replacement,
whichever is less; (vi) in the case of book debts, the nominal amount
of those debts: provided that the debts shall be classed as good and no account
shall be taken of doubtful debts. All debts which are due for over two years
and recoverable shall be classed as doubtful; (vii) in the case of investments, the market value of
such investments on the date of the valuation; (viii)
(a) in the case of any other assets not acquired by purchase, the value of the
assets at the time when they became assets of the business subject to proper
deductions for wear and tear: provided that no value shall be placed on the
goodwill, patents or secret processes of any business; (b)
the value of the assets so far as they consist of money shall be all cash with
bankers or on hand, the value of cash in other countries being taken at the
rate of exchange ruling on the day on which the valuation is made; (c)
the value of the additional assets that will be created by the application of
the loan granted by the State Government, shall be money spent on the
acquisition of immoveable property and machinery of a permanent nature and on
the liquidation of encumbrances on existing fixed assets which contribute to
the enhancement of the capital value of the concern. (2)
The assets having been
valued as above, all debts and liabilities of the business shall be deducted
other than accumulated profits and reserves and the balance shall represent the
net value of the surplus of assets and shall be the value of the business for
the purpose of the Act. The bona fides and the
solvency of the applicant or the surety, as the case may be and the sufficiency
of the security offered shall be carefully ascertained before sanctioning a
loan/aid or subsidy to him. (1)
Every loan, guarantee of
a cash credit, overdraft or fixed advance with a Bank, may be sanctioned to the
extent of seventy-five per cent of the security offered in any one or more of
the following kinds, namely. (i)
mortgage of lands and/or
buildings, etc, of the recipient of State aid; (ii)
mortgage of machinery,
plant, etc, of the recipient of State aid; (iii)
mortgage of land or
buildings or both, to be purchased with the loan amount sanctioned; (iv)
mortgage of machinery,
plant, etc., to be purchased with the loan amount sanctioned; (v)
a floating charge on all
the assets of the recipient of State aid; [23][(vi)
hypothecation of the property, movable or immovable of a surety for the loan
sanctioned.] In
addition to the above, a recipient of State aid may be required to offer such
personal security as may be considered necessary by the authority sanctioning
the loan. Further
in case of a cash credit, overdraft or fixed advance with a Bank the grant of
loan shall be subject to such additional conditions as may be required by the
Bank. (2)
No loan shall be
disbursed unless the applicant or his surety executes the necessary bond to the
satisfaction of the sanctioning authority. (1)
The rate of interest on
loans, grants, advances, cash credits, overdrafts on banks shall be [24][10] per
cent per annum subject to a rebate of [25][4] per
cent per annum for prompt payment of the installments on or before the due
date. The rebate due will be adjusted to the credit of the loanee and will be
taken into account at the time of payment of the last instalment. No rebate
shall be admissible for payment of stipulated installments in parts on or before
the due date. [26][Provided
that in the case of an unemployed engineer, the rate of interest shall be five
per cent per annum and the rebate shall be two per cent per annum. Explanation. In this
sub-rule "unemployed Engineer" means a person who is holder of a
degree or a diploma in any branch of engineering and who is
unemployed and who is desirous of establishing a small-scale industry.] (2)
Interest shall accrue
from the date of the disbursement of the loan amount: provided that when the
loan is disbursed in installments, interest on each installment shall accrue
from the date of disbursement of each such installment. [27][[28][(1) A
person to whom aid under clause (b) of Section 5 is given, shall pay commission
at one per cent per annum on the amount guaranteed.] (2) The commission referred to in sub-rule (1)
shall be paid in the following manner, namely. (i)
it shall be paid so long
as the guarantee is in force; (ii)
it shall be calculated
with reference to the actual balances of the principal and interest outstanding
at the end of each month; (iii)
it shall be paid once in
six months commencing from the date six months after the date of guarantee; (iv)
it shall be credited to
a Government Treasury on or before the due date provided that if the due date
happens to fall on a Treasury holiday, the day previous to such day shall be
deemed to be the due date; (v)
if the commission is not
credited on the due date, interest at the rate of 7 1/2% per annum accruing
from that date on the amount of guarantee commission due on that date shall
also be paid to Government; (vi)
an agreement
incorporating these terms shall be executed.] Every loan granted shall
be payable in such number of instalments as may be fixed in the order granting
the loan. Every loan shall be
repayable within such period as may be fixed in the order granting the loan: Provided that the period
so fixed shall in no case exceed ten years from the date of the disbursement of
the loan or when the loan is paid in instalments, from the date of disbursement
of the last instalment unless the State Government by general or special order
extends the period: Provided further that
the repayment shall not commence at a date earlier than two full years from the
date of disbursement of the loan or last instalment of the loan; but a borrower
may repay a loan on earlier date or in instalments larger than those
stipulated. All repayments of loans
and interest under these rules shall be made in [29][cash]
at any Government Treasury in the State to the credit
of State Government. It is not obligatory on the part of the authority
sanctioning the loan to issue a demand notice for the repayment of instalments.
Non-receipt of such notice is not a valid excuse for default to pay any
instalment on the due date. Subject to the
provisions of Section 18 (1)
In the event of the
borrower contravening any of the provisions of the Act, and in particular
Sections 10 and 17, the whole of the amount of aid and all moneys due from such
person including interest, costs and other charges, shall forthwith be repaid
by such person, and if not so repaid, the same may be recovered from the person
aided or his surety as arrears of land revenue. (2)
If any instalment or
part thereof and/or interest accrued remains unpaid after the due date, such
moneys together with costs; if any, or if so directed by the State Government,
the entire balance of loan with interest accrued thereon, together with costs,
if any shall be recovered as arrears of land revenue. (1)
The recipient of State
aid shall maintain at his own expense in good and efficient repairs the
premises, buildings, machinery, plant and all other properties mortgaged to the
State Government, as security for the aid. He shall unless exempted by the
State Government, insure such mortgaged properties against loss or damage by
fire, riots, civil commotion, theft, accident or pilferage either for the full
insurable value or for such amount as may be determined by the Director with an
insurance company [30][x x x x
x] and shall duly and punctually pay the premium payable in respect thereof as
and when they become due and payable. In the event of failure to carry out any
repairs or to effect the insurance or to pay the premium due the Director or
the authority sanctioning the loan may do so or cause them to be done and incur
necessary expenditure on account of the same. The expenditure so incurred shall
be recovered in accordance with the provision of Section 18. (2)
All properties to be
mortgaged to Government as security shall be insured as required by sub-rule
(1) before the aid is actually given in cases of aid exceeding Rs. 5,000 unless
specifically exempted by the State Government Insurance policies so obtained
shall be assigned in favour of the Governor of Karnataka. The recipient of State
aid shall permit the Director or any person deputed by him by general or
special order in writing or any other person authorised in this behalf by the
State Government, to inspect the premises, buildings, plant and equipment,
stock on hand, accounts and books of the industrial business or enterprise in
respect of which the aid has been granted and shall provide necessary
facilities for such inspection. (A)
Except as otherwise
specifically exempted by the sanctioning officer or authority, the accounts of
an industrial business or enterprise in respect of which State aid has been
granted shall be examined and audited once in every year by an auditor approved
by the Government. The recipient of State Aid shall furnish to the sanctioning
officers or authority once in a year, an annual statement of accounts of the
industrial business or enterprise, certified by the auditor containing the
following particulars: (a)
A full and complete
statement of the assets and liabilities; (b)
a valuation of all the
assets; (c)
a manufacturing account
showing the outturn by the industrial business or enterprise with the cost per
unit of such outturn; (d)
a trading account; (e)
a profit and loss
account. In
case the accounts are not maintained and audited as aforesaid, Government may,
at the cost of such industrial business or enterprise and for such period as
they consider necessary, appoint an auditor, accountant or other officer for
the preparation of such account books. (B)
The accounts of the
industrial business or enterprise to which the State aid has been granted shall
be open to test check by the Comptroller and Auditor General at his discretion. In case where the
conditions under which loans or grants given have not been fulfilled by the
recipients, the gross profits of the concern shall not be appropriated in any
manner without the prior sanction of the authority sanctioning the loan. Subject to the
provisions of Sections 8 and 11, the State Government shall give guarantee of a
cash credit, overdrafts, or fixed advance with a bank, and the following banks
and corporations are recognised for this purpose, namely. (i)
The State Bank of
Mysore; (ii)
The State Bank of India; (iii)
The Central Bank of
India Limited; (iv)
The Indian Bank Limited; (v)
The Industrial Finance
Corporation constituted under the Industrial Finance Corporation Act, 1948; (vi)
The Canara Bank Limited; (vii)
The Karnataka State
Financial Corporation. [31][(viii)
The State Bank of Hyderabad; (ix)
The Punjab National Bank Limited.] [32][(x)
Allahabad Bank; (xi)
Andhra Bank Limited; (xii)
Bank of Baroda; (xiii)
Bank of India; (xiv)
Belgaum Bank; (xv)
Canara Banking Corporation; (xvi)
Devakarn Nanjee Banking Company; (xvii)
Indian Overseas Bank; (xviii)
Jayalaxmi Bank; (xix)
Karnataka Bank; (xx) National
and Grindlays Bank; (xxi)
Pangal Nayak Bank; (xxii)
Syndicate Bank; (xxiii)
Union Bank of India; (xxiv)
United Commercial Bank; (xxv)
Vijaya Bank; (xxvi)
Vysya Bank , (xxvii)
Life Insurance Corporation of India.] [33][(xviii)
Film Finance Corporation Limited (A Government of India Undertaking).] [34][(xxix)
U.S. AID, Washington, U.S.A.; (xxx)
Messrs. Chemtex Inc. of New York, U.S.A.; (xxxi)
Industrial Development Bank of India Limited (IDBI); (xxxii)
The Industrial Credit and Investment Corporation of India Limited (ICICI),
Bombay.] The recipient of State
aid shall provide facilities for training such number of apprentices in the
industrial business or enterprise for which aid has been given, as may be laid
down by the sanctioning authority in the order sanctioning the aid. (1)
Where the recipient of
State aid has failed to fulfill the terms and conditions of such aid, the
authority sanctioning the aid shall have the accounts and books and/or auditing
of the accounts of the business or enterprise, inspected for which fees payable
by the recipients of the loan or aid shall be as under. Fee (i) in the case of an
industrial business having a capital outlay of one lakh of rupees and below (i) Rs. 100; (ii) in the case of an
industrial business having a capital outlay exceeding one lakh of rupees. (ii) Rs. 100 for the
first one lakh of rupees; and Rs. 25 for every additional outlay one lakh of
rupees or part thereof. (2)
Whenever State aid is granted
to a person in respect of any industrial business or enterprise and is secured
by a mortgage or a floating charge upon the assets or such business or
enterprise, the recipient of the State aid shall put up at his place or places
of business or enterprise, a prominent sign post containing the name of such
business or enterprise with the addition of 'State aided' within brackets. [1] Substituted
Clauses (b) and (b-1) for clause (b) by GSR 528, dated 23-11-1967, w.e.f.
7-2-1967. [2] Inserted
Clause (e-1) by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967. [3] Inserted
Sub-rules (1-a) and (1-b) by GSR 528, dated 2341-1967, W.e.f. 7-12-1967. [4] Substituted
by GSR 60, dated 194-1971, w.e.f. 4-3-1971, for the followings:- "10,000". [5] Omitted
Sub-rule (2) by GSR 60, dated 194-1971, w.e.f. 4-3-1971. [6] Substituted
by GSR 528, dated 23-114967, w.e.f. 7-2-1967, for the followings:- "10,000". [7] Substituted
by GSR 528, dated 23-114967, w.e.f. 7-2-1967, for the followings:- "conditions that adequate balance of
amount from the provision in the Budget on that account for the year is
available; and" . [8] Inserted
Rules 3-A and 3-B by GSR 528, dated 23414967, w.e.f. 7-12-1967. [9] Inserted
by GSR 60, dated 19-1-1971, w.e.f. 4-3-1971. [10] Omitted
by GSR 60, dated 1944971, w.e.f. 4-3-1971, for the followings:- "and". [11] Omitted
Clause (d) by GSR 60, dated 1944971, w.e.f. 4-3-1971. [12] Substituted
by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967, for the followings:- "Assistant Director and the
Director". [13] Substituted
by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967, for the followings:- "Assistant Director and the
Director". [14] Inserted
Rule 4-A by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967. [15] Substituted
Item (iv) by S.O. 4475, dated 3-5-1966. [16] Substituted
Sub-rule (1) by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967. [17] Substituted
by GSR 60, dated 19-1-1971, w.e.f. 4-3-1971, for the followings:- "10,000". [18] Omitted
by GSR 60, dated 19-1-1971, w.e.f. 4-3-1971, for the followings:- "and". [19] Omitted
Clause (d) by GSR 60, dated 19-1-1971, w.e.f. 4-3-1971. [20] Inserted
Sub-rule (1-A) by GSR 342, dated 24.9-1969, w.e.f. 27-9-1969. [21] Substituted
by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967, for the followings:- "Deputy Commissioner of the District or
the concerned Executive Engineer of the Public Works Department". [22] Substituted
Clause (ii) by GSR 528, dated 23-114967, w.e.f. 7-12-1967. [23] Inserted
Item (vi) by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967. [24] Substituted
by GSR 155, dated 21-4-1969, w.e.f. 1-5-1969, for the followings:- "71/2". [25] Substituted
by GSR 155, dated 21-4-1969, w.e.f. 1-5-1969, for the followings:- "21 /2". [26] Inserted
Proviso and Explanation by GSR 37, dated 11-1-1972, w.e.f. 27-1-1972. [27] Inserted
Rule 12-A by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967. [28] Substituted
Sub-rule (1) by GSR 155, dated 214-1969, w.e.f. 1-5-1969. [29] Substituted
by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967, for the followings:- "the cash". [30] Omitted
by GSR GSR 528, dated 2341-1967, w.e.f. 7-12-1967, for the followings:- "to be approved by the Director in
consultation with the State Government" [31] Inserted
by Notification No. CI 2 ISA 63, dated 25-4-1963. [32] Inserted
by GSR 886, dated 23-2-1966. [33] Inserted
by GSR 914, dated 15-4-1966. [34] Inserted
by GSR 528, dated 23-11-1967, w.e.f. 7-12-1967.KARNATAKA STATE
AID TO INDUSTRIES RULES, 1961
PREAMBLE