Chapter IV Chapter IV

PROVISIONS REGARDING THE GIVING OF STATE AID OTHERWISE THAN BY THE SUPPLY OF MACHINERY ON THE HIRE PURCHASE SYSTEM

Power to grant loans.-Loans granted under this chapter shall be subject to the sanction of the Government given after consultation with the Finance Department ; provided that in regard to loans not exceeding a prescribed amount, the Government may make rules delegating their powers to such authority or officer as they deem fit.

Security for repayment.-(1)

1. (a) On the acceptance of an application for a loan, the applicant shall execute a deed in the prescribed form undertaking to apply the loan to the purpose for which and to fulfil the conditions on which the loan is granted rendering himself and such property as may have been specified in the deed as security including machinery purchased or any building constructed with the aid of loan and in the event of such property being found insufficient rendering the whole of his property, liable for repayment of the loan with interest and costs, if any, incurred by the Government in making recovery of the loan.
2. (b) No transfer, assignment or charge made or created after the execution of the deed in relation to the property specified therein or machinery purchased or building constructed with the aid of the loan shall be valid against the Government unless it has been made or created with the previous consent in writing of the authority sanctioning the loan.

1. (2) When the application has been made by a firm or company, the deed shall be executed by a duly authorised representative thereof, and the deed shall thereupon be deemed binding on the said firm or company and the property of the said firm or company shall be liable for the repayment of the loan in the same manner as if the loan had been granted to an individual.

Loan how repayable.-The loan, together with all interest due thereon, if any, shall be repayable either in a lump sum or by instalments as may be provided for in the deed executed by the borrower under section 21.

Notices to pay.-(1) When any loan or instalment or interest thereon falls due and is not paid on or before the due date or when a loan has been declared immediately repayable under section 27, the officer empowered by the Government in this behalf may cause to be served on the borrower a notice in the prescribed manner calling upon him to pay the sums due within such time as may be fixed therein.

1. (2) Such notice shall contain an intimation that in case of default the said officer will issue a declaration in the prescribed form showing the amount of the debt due and the property mentioned in the deed as liable to satisfy the same.

Effect of declaration.-(1) If within the time so fixed the sums due are not paid, the officer empowered under section 23 may issue the declaration as prescribed in sub-section

1. (2) of the same section, and such declaration shall be published in the Government Gazette.
2. (2) Such declaration shall be conclusive evidence of its contents, and shall not be called into question in any Court by the borrower, his heirs, legal representatives or assigns, or by any member of his family if he belongs to a joint Hindu family nor shall any right, principle or rule arising from or under the personal or customary law applicable to the said persons or any of them, nor anything contained in the Jammu and Kashmir Alienation of Land Act, Samvat 1995, affect the validity or effectiveness of a mortgage executed or of a declaration published under this Act, or the procedure therein provided for enforcement thereof.
3. (3) Such declaration may be produced by the said officer, or by such other person as he may either generally or specially appoint in this behalf before the principal Civil Court of original jurisdiction, within the local limits of whose jurisdiction any of the property liable for the debt due is situate in the same manner as a decree of which execution is sought.

Execution of declaration.-When declaration has been received by a Civil Court under section 24, the Court shall immediately attach the property mentioned in the declaration and shall pass an order directing that, unless the amount mentioned in the declaration is paid within such time, not exceeding two months, as the Court may consider reasonable, it may be recovered by sale of the property mentioned in the declaration as if it were a decree for the payment of money passed by the said Court in the exercise of its ordinary civil jurisdiction.

Inspection and returns.-In any case in which an application for a loan has been made under this chapter, the applicant, and at any time during the currency of a loan that has been granted the borrower shall be bound-

1. (a) to comply with any general or special order of the Director relating to the inspection of the premises, building, machinery and stock-in-hand of the industry;
2. (b) to permit the inspection of all accounts relative to the industry;
3. (c) to furnish full returns of all product manufactured or sold, both as regards description and quantity;
4. (d) to maintain such special accounts and to furnish such statements as the Director may from time to time require; and
5. (e) to submit the accounts of the industry to such audit as the Director may prescribe.

Penalty for default in applying the loan.-If the Director, after any inspection provided for in section 26, is not satisfied that the money lent is being applied to the purpose or purposes for which the loan was granted or that the conditions on which the loan was granted are being duly fulfilled, he may declare, notwithstanding anything contained in the deed executed under section 21, that the loan is immediately repayable and shall give notice of such declaration to the borrower.

Power to adjust security during currency of loan.-If at any time during the currency of the loan, the value of the security falls below the outstanding balance of the loan, the Director may either proceed to recover in the manner laid down in sections 23, 24 and 25 so much of such balance as is not adequately covered by the then existing value of the security or accept such additional or collateral security as he may deem sufficient.

Power to recover loans.-If the borrower fails to comply with any order under clause

1. (a) of section 26 or does not permit or obstructs the inspection of the accounts relative to the industry or makes default in respect of any of the particulars specified in clauses (c),
2. (d) and
3. (e) of the said section, or if the borrower disposes of any profits in contravention of the provisions of section 33, the Director may, after considering any representation the borrower may make within such time as the Government may allow in this behalf, proceed to recover the loan in the manner laid down in sections 23, 24 and 25.

Appeal.-Within fifteen days of the receipt of a notice under sections 27, 28 or 29, the borrower may appeal against such order to the Government and the decision of the Government thereon shall be final.

Government guarantee of a minimum return.-The conditions of a guarantee by the Government of a minimum return on the whole or part of the capital of a Joint Stock Company shall be-

1. (a) that the industry shall be subject to the conditions of section 26 in respect of inspection, returns and accounts;
2. (b) that a minimum portion of the authorized capital of the industry to be fixed according to the circumstances of each case has been subscribed and paid in cash;
3. (c) that no such guarantee shall in any case extend beyond a period of five years;
4. (d) that during the period to which the guarantee extends, the Government may impose on such persons as it considers to be directly concerned in the promotion of the company, a condition that if they transfer any of their shares without the consent of the Government, they shall be liable jointly and severally to refund to the Government any sums paid to the company in fulfilment of the guarantee: Provided that the sum recoverable by the Government in any one year shall not exceed a sum equal to half the net profits made by the company in the preceding year in excess of the sum required for the payment of interest or dividend at the rate fixed in the agreement.

Subsidies.-A subsidy to a cottage industry or a village industry for any purpose and a subsidy to any other industry for the conduct of research or for purchase of machinery may be granted by the Government on such conditions as may be prescribed in this behalf.

Disposal of profits when conditions on which State Aid is given are not fulfilled.-No borrower shall pay any dividend or distribute or take any profits in excess of such percentage rate upon the amount of the capital of the industry as the Government may from time to time fix, until the conditions on which the State Aid has been granted are fulfilled.

Government control of aided industry.-Notwithstanding anything contained elsewhere in this chapter, the Government may, by the appointment of its own directors or otherwise exercise such control over the conduct of the industry to which the State Aid has been given as shall suffice in its opinion to safeguard its interest; provided that such right has been expressly reserved by agreement at the time the aid was granted.

Method of recovery of money due.-Notwithstanding anything contained in sections 23, 24 and 25, any amount payable to the Government under this Act or by virtue of a contract entered into under this Act including interest and costs, if any, may, with the previous sanction of the Government, be recoverable as arrears of land revenue.