The State Financial Corporations Act, 1951

(1) This Act may be called the State FinancialCorporations Act, 1951. (2) It extends to the whole of India 1***. (3) It shall come into force in any State on such date2as the Central Government may, by notificationin the Official Gazette, appoint.

In this Act unless the context otherwise requires,-- (a) "Board" means the Board of directors of the Financial Corporation; 1[(aa) "Development Bank" means the Industrial Development Bank of India established underthe Industrial Development Bank of India Act, 1964 (18 of 1964);] 2[(b) "Financial Corporation" means a Financial Corporation established under section 3 andincludes a Joint Financial Corporation established under section 3A;] 3[(c) "industrial concern" means any concern engaged or to be engaged in-- (i) the manufacture, preservation or processing of goods; 4[(ii) mining or development of mines;] (iii) the hotel industry; (iv) the transport of passengers or goods by road or by water or by air 5[or by ropeway or bylift]; (v) the generation or distribution of electricity or any other form of power; (vi) the maintenance, repair, resting or servicing of machinery of any description or vehiclesor vessels or motor boats or trailers or tractors; (vii) assembling, repairing or packing any article with the aid of machinery or power; 6[(viii) the setting up or development of an industrial area or industrial estate;] (ix) fishing or providing shore facilities for fishing or maintenance thereof; 7*** 8[(x) providing weigh bridge facilities; (xi) providing engineering, technical, financial, management, marketing or other services orfacilities for industry; (xii) providing medical, health or other allied, services; (xiii) providing software or hardware services relating to information technology,telecommunications or electronics including satellite linkage and audio or visual cablecommunication; (xiv) setting up or development of tourism related facilities including amusement parks,convention centres, restaurants, travel and transport (including those at airports), tourist serviceagencies and guidance and counselling services to the tourists; (xv) construction; (xvi) development, maintenance and construction of roads; (xvii) providing commercial complex facilities and community centres including conferencehalls; (xviii) floriculture; (xix) tissue culture, fish culture, poultry farming, breeding and hatcheries; (xx) 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; (xxi) research and development of any concept, technology, design, process of product,whether in relation to any of the matters aforesaid, including any activities approved by the SmallIndustries Bank; or (xxii) such other activity as may be approved by the Small Industries Bank;] 9[Explanation 1.--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 orany other like operation.] 10[Explanation 2. --If any doubt arises as to whether a concern is an industrial concern or not, thesame shall be referred to the 11[Small Industries Bank] for its decision and the decision of the 11[SmallIndustries Bank] thereon shall be final.] (d) "prescribed" means prescribed by rules or regulations made under this Act; 12[(da) the expression "public sector bank" means the State Bank of India constituted under theState 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 ofthe Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or undersection 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980(40 of 1980);] (e) "Reserve Bank" means the Reserve Bank of India constituted under the Reserve Bank of IndiaAct, 1934 (2 of 1934); (f) "scheduled bank" means a bank for the time being included in the Second Schedule to theReserve Bank of India Act, 1934 (2 of 1934); 13[(fa) "Small Industries Bank" means the Small Industries Development Bank of India establishedunder sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989(39 of 1989);] 14[15[(fb)] "State Co-operative Bank" shall have the meaning assigned to it in Clause (f) of section2 of the Reserve Bank of India Act, 1934 (2 of 1934);] 16[(fc)] "State Government", in relation to a Union territory, means the Administrator thereof; (g) "underwriting" means contract, with or without conditions, to subscribe for stocks, shares,bonds or debentures of an industrial concern with a view to the resale of the whole or any partthereof.

(1) The State Government may, by notificationin the Official Gazette, establish a Financial Corporation for the State under such name as may bespecified in the notification. (2) The Financial Corporation shall be a body corporate by the name notified under sub-section (1),having perpetual succession and a common seal, with power, subject to the provisions of this Act, to1[acquire, hold and dispose of] property and shall by the said name sue and be sued.

1[3A. Establishment of Joint Financial Corporations.--(1) Notwithstanding anything contained insection 3, two or more States may, after consultation with the 2[Small Industries Bank], enter into anagreement that there shall be one Financial Corporation for the group of States participating in theagreement and if the agreement is published in the Official Gazette of each of those States, the CentralGovernment may, by notification in the Official Gazette, establish a Joint Financial Corporation to servethe needs of those States under such name as may be specified in the notification. (2) An inter-State agreement under sub-section (1) among the participating States may-- (a) provide for the fixation of the authorised capital of the Joint Financial Corporation, thenumber of fully paid-up shares into which it shall be divided and the allocation among theparticipating States of the shares to be distributed under clause (a) of sub-section (3) of section 4; (b) provide for the sharing of the liability for me guarantee under section 6 or section 7 3[orsection 8]; (c) provide for the number of directors to be nominated to the Board by each participating StateGovernment; (d) provide for the apportionment among the participating States of expenditure in connectionwith the Joint Financial Corporation; 4***** (f) determine which of the participating State Governments shall exercise the several functions ofthe State Government under this Act, and references in this Act to the State Government, in relationto the Joint Financial Corporation, shall, save as otherwise expressly provided, be construedaccordingly; (g) provide for consultation among the participating States either generally or with reference toparticular matters arising under this Act; (h) make such incidental and consequential provisions, not inconsistent with this Act, as may bedeemed necessary or expedient for giving effect to the agreement. (3) The Joint Financial Corporation shall be a body corporate by the name notified undersub-section (1), having perpetual succession and a common seal, with power, subject to the provisions ofthis Act, to acquire, hold and dispose of property and shall by the said name sue and be sued. (4) Any reference in this Act to State in relation to a Joint Financial Corporation established for twoor more States, shall be construed as a reference to each such State.]

1[(1) The authorised capital of the Financial Corporation shallbe such sum as may be fixed by the State Government in this behalf, but it shall not be less than fiftylakhs of rupees or exceed five hundred crores of rupees: Provided that the State Government may, on the recommendation of the Small Industries Bank, bynotification in the Official Gazette, increase the authorised capital up to one thousand crores of rupees. (2) Subject to the provisions of section 4D, the authorised capital shall be divided into such number offully paid-up shares of the same face value and such number of fully paid-up redeemable preferenceshares of the same face value and shall be issued to the parties mentioned in clauses (a), (b) and (c) ofsub-section (3) and in the case of parties referred to in clause (d) of that sub-section, such shares shall beissued at such times and in such manner as the State Government may, by notification in the OfficialGazette, determine. (3) Subject to the approval of the State Government and the Small Industries Bank, the Board shalldetermine the number of shares which may, respectively, be distributed among-- (a) the State Government; (b) the Small Industries Bank; (c) public sector banks, the Life Insurance Corporation of India established under section 3 of theLife Insurance Corporation Act, 1956 (31 of 1956), other insurance companies owned or controlledby the Central Government, other institutions owned or controlled by the Central Government or theState Government, as the case may be; and (d) parties other than those referred to in clause (a), or clause (b) or clause (c): Provided that the number of shares which may be allocated to parties referred to in clause (d) shall inno case exceed forty-nine per cent. of the total number of issued equity shares: Provided further that no increase in the issued equity capital shall be made in such a manner that theparties referred to in clause (a) or clause (b) or clause (c) hold in aggregate, at any time less thanfifty-one per cent. of the issued equity capital of the Financial Corporation.] (4) Subject to the other provisions contained in this section, the allocation of shares among the partiesreferred to in clauses (c) and (d) of sub-section (3) and the allotment of such shares shall be made by theFinancial Corporation in such manner as may be prescribed. 2[(5) If any shares allocated to any of the parties referred to in clauses (c) and (d) of sub-section (3)remain unsubscribed, they shall be subscribed for equally by the State Government and the 3[SmallIndustries Bank].]