Chapter III Chapter III

General provisions regarding the giving of State Aid

Subject to the provisions of this Act and of the rules made thereunder, the Government shall have power to give State aid to an industry in one or more of the following ways:,

1. (a) by granting a loan;
2. (b) by guaranteeing of cash credit, overdraft or a fixed advance with a bank;
3. (c) by taking fully paid up shares or debentures: Provided that the amount paid by the Government for such shares and debentures shall not exceed the amount already paid by other persons for shares and debentures in the same industry;
4. (d) by guaranteeing interest on preference shares or debentures,
5. (e) by guaranteeing a minimum return on the whole or part of the capital of a joint stock company,
6. (f) by the granting on favourable terms of land, raw materials, firewood, water or any other property of the Government subject to such terms and conditions as respects the repayment of the value of the aid granted, as may be prescribed;
7. (g) by paying a subsidy for the conduct of research or the purchase of machinery subject to such terms and conditions as respects the repayment of the value of the aid granted, as may be prescribed;
8. (h) by supplying machinery on hire purchase system.

The condition for any payment under guarantee of a minimum return on the whole or part of the capital of a Joint stock company or for the grant by the Government of land, raw materials, firewood, water or any other property on favourable terms shall ordinarily be that an amount equal to the sum paid or to the value of the grant or concession as fixed at the time when it is paid, shall be repaid to the Government at the close of a fixed term of years if within that term the industry shall be shown to be paying interest or a dividend upon the capital invested in excess of such rates as the Government may fix.

1. (1) No loan shall exceed the prescribed percentage of the value of the assets of the industry to which it is granted and of other property, if any, offered as collateral security without deducting the encumbrances, if any, existing thereon at the time when the application for the loan is made, the value being ascertained by the sanctioning authority in the prescribed manner.
2. (2) No loan shall be granted if the encumbrances on the assets of the industry and on other property offered as collateral security exceed 50 per cent of the value of such assets and collateral securities in the case of an existing industry and thirty-three and one third per cent in the case of a new industry.
3. (3) The authority granting the loan shall, from out of the loan discharge all encumbrances on the assets of the industry and other property, if any, offered as collateral security existing at the time when the application for the loan is made, and shall secure a first charge on the assets and other property aforesaid.
4. (4) Every loan shall be repayable in instalments within a period not exceeding twenty years after the date of advance of the loan, or where the loan is advanced in instalments, after the date of the advance of the last instalment.
5. (5) In special cases the Government, for reasons to be recorded in writing, may, on the application of the owner of an industry to which such loan has been granted, vary the terms fixed by the order granting the loan.
6. (6) All the insurable assets of the applicant offered as security shall be insured against loss or damage with the State Insurance Department and the policy assigned in favour of the Director of Industries and Commerce.

Every loan granted under this Act shall be secured by a mortgage upon the whole or such portion of the assets of the business or enterprise as the sanctioning authority may consider sufficient and where the whole of the assets of the business or enterprise is in the opinion of the sanctioning authority insufficient, by such collateral security as may be required by the sanctioning authority and shall bear interest payable on such dates and at such rates as the Government may determine.

(1) All applications for State aid shall be made in the prescribed form to the District Industries Officer of the concerned district. The District Industries Officer shall make such enquiries as may be prescribed and such other enquiries as he deems fit on every such application. In the case of an application in which the sanctioning authority under sub-section (4) is the Regional Joint Director of Industries and Commerce, the Director or the Government, the District Industries Officer shall forward the application to the sanctioning authority together with the report of the enquiry conducted by him. Where the sanctioning authority is the Director, the application shall be forwarded to him through the Regional Joint Director of Industries and Commerce and where the sanctioning authority is the Government, the application shall be forwarded to the Government through the Regional Joint Director of Industries and Commerce and the Director. (2) If the extent of the State aid applied for exceeds fifty thousand rupees and in any other case in which he so considers the Director shall publish a notice in the prescribed manner, calling upon any person who objects to the grant of the State aid applied for to state his objections at a time and place to be specified by the Director and shall hear such objections and make such enquiry as may be necessary. (3) Every application for State aid exceeding Rs, 15,000 shall be placed before the Board and shall be granted only with its concurrence. (4) Subject to the provisions of sub-section (3) the following authorities shall be competent to grant as State aid the amount or value specified against each :, District Industries Officer Not exceeding five thousand rupees, Regional Joint Director of Industries and Commerce Exceeding five thousand, but not exceeding ten thousand rupees. Director Exceeding ten thousand, but not exceeding twenty-five thousand rupees Government Exceeding twenty-five thousand rupees. (5) Nothing in sub-section (4) shall be deemed to empower the District Industries Officer or Regional Joint Director of Industries and Commerce or the Director to grant State aid on different occasions in respect of the same industry, if the aggregate amount or value of such aid exceeds five thousand rupees or ten thousand rupees or twenty-five thousand rupees, as the case may be.

During the continuance of State aid to any industry which has received aid under the Act, the Government may, by appointing directors or Inspectors, or otherwise, take such steps as they deem advisable so to supervise the conduct of the industry as to safeguard the interests of the Government therein.

In any case in which State aid has been applied for under this Act, the applicant and at any time during the currency of State aid that has been granted under it, the grantee, shall be bound,

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

1. (1) During the continuance of State aid to any industry the profits of such industry shall, if distributed, be distributed only after interest due on debentures and loans has been paid and a reasonable amount has been set aside for depreciation or obsolescence of machinery and buildings and a further reasonable amount has been carried to reserve fund to be utilised in the prescribed manner.
2. (2) No dividend shall be paid to shareholders and no profit shall be taken by the owner in excess of such percentage rate upon the amount of the capital of the industry as the Government may fix from time to time during the continuance of State aid to any industry.

If at any time the amount of any loan outstanding together with such interest as may be due thereon on account of any State aid given is found to exceed the percentage fixed under sub-section

1. (1) of section 13, the Government may either recover so much of such balance as is in excess of such percentage or take such additional or collateral security as they may deem sufficient.

1. (1) If the authority sanctioning the loan is satisfied,
   • (i) that the whole or any portion of the State aid given has been misapplied, or
   • (ii) that there has been a breach by the grantee of the aid of the provisions of this Act, or of any rule made thereunder or of any conditions of the grant, or
   • (iii) that the application on which the State aid has been granted contained or was accompanied by, any material statement by the grantee of the aid which he knew to be false or did not believe to be true or any intentional concealment by him of any material fact, which in the opinion of the authority sanctioning the loan it was his duty to disclose, or that any such false statement or concealment was intentionally made in any inquiry made under this Act by or with the connivance of the owner or in any return under this Act or in reply to any requisition for information under this Act, or
   • (iv) that the industry is being managed in such manner as to endanger the repayment of the value of State aid granted thereto repayable under this Act, the authority may by order in writing terminate the State aid specifying the reason or reasons therefor.
2. (2) No such order as mentioned in sub-section
3. (1) shall be passed without giving the grantee an opportunity to show cause within a specified time why action should not be taken under this section.
4. (3) Where an order terminating the aid is made under sub-section (1), then, notwithstanding anything contained in this Act or in any other law, the authority sanctioning the aid may proceed to recover from the grantee of the aid, as arrears of land revenue,
   • (a) the entire amount of any loan outstanding together with interest as may be due thereon, or
   • (b) in cases where the aid is given otherwise than by loan, the money value of the aid as fixed at the time when it was made, together with interest due thereon, and
   • (c) in the case mentioned in clause
   • (a) or clause (b), the cost of recovery, and, if the Government so direct the cost of any inquiry made in connection therewith.
5. (4) An order made under this section shall be final and shall not be called in question in any court of law.