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The Small Industries Development Bank of India Act, 1989

41. Special provisions for enforcement of claims by Small Industries Bank

1.      Where an industrial concern in the small-scale sector, in breach of any agreement, makes any default in repayment of any loan or advance or any installment thereof or in meeting it obligations in relation to any guarantee given by the Small Industries Bank or otherwise fails to comply with the terms of its agreement with that Bank, or where the Small-scale Industries Bank requires any industrial concern in the small-scale sector to make repayment of any loan or advance under section 40 and such industrial concern fails to make such repayment, then, without prejudice to the provisions of section 38 of this Act and section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of that Bank, generally or specially authorised by that Bank in this behalf, may apply to the Court for one or more of the following reliefs, namely:-

a.      For an order for the sale of the property assigned, charged, hypothecated, mortgaged or pledged to that Bank a security for the loan or advance; or

b.     For enforcing the liability of any surety; or

c.      For an ad interim injunction restraining the industrial concern in the small-scale sector from transferring or removing its machinery, plant or equipment from the premises of such industrial concern without the permission of the Small Industries Bank, where such transfer or removal is apprehended.

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2.      An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern in the small-scale sector to the Small Industries Bank, the ground on which it is made and such other particulars as may be necessary for obtaining the relief prayed for.

3.      Where the application is for the reliefs mentioned in clause (a) and clause (c) of sub-section (1), the Court shall pass an ad interim order attaching the security, or so much of the property of the industrial concern in the small-scale sector as would on being sold realise in its estimation an amount equivalent in value to the outstanding liability of such industrial concern to the Small Industries Bank together with costs of the proceedings taken under this section with or without an ad interim injunction restraining such industrial concern from transferring or removing it s machinery, plant or equipment.

4.      Where the application is for the relief mentioned in clause (b) of sub-section (1), the Court shall issue a notice calling upon the surety to show cause on a date to be specified in the notice as to why the liability should not be enforced.

5.      Before passing any order under sub-section (3), or issuing a notice under sub-section (4), the Court may ,if it thinks fit, examine the officer making the application.

6.      At the same time as it passes an order under sub-section (3), the Court shall issue to the industrial concerning the small-scale sector or to the owner of the security attached, a notice accompanied by copies of the order, the application and the evidence, if any, recorded by the Court calling upon such industrial concern or owner, to show cause on a date to be specified in the notice, as to why the ad interim order of attachment should be made absolute or the injunction confirmed.

7.      If no cause is shown, on or before the date specified in the notice under sub-section (4), the Court shall forthwith order the enforcement of the liability of the surety.

8.      If no cause is shown on or before the date specified in the notice under sub-section (6), the Court shall forthwith make the ad interim order absolute and direct the sale of the attached property or confirm the injunction.

9.      If cause is shown, the Court shall proceed to investigate the claim of the Small Industries Bank in accordance with the provisions contained in the Code of Civil Procedure, 1908 (5 of 1908), in so far as such provisions may be applied thereto.

10.   After making an investigation under sub-section (9), the Court may-

a.      Confirm the order of attachment and direct the sale of the attached property;

b.     Vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property;

c.      Release the property from attachment;

d.     Confirm or dissolve the injunction; or

e.      Direct the enforcement of the liability of the surety or reject the claim made in this behalf:

Provided that when making an order under clause (c)making an order rejecting the claim to enforce the liability of the surety under clause (e), the Court may make such further order as it think necessary to protect the interests of the Small Industries Bank and may apportion the cost of the proceedings in such manner as it think fit:

Provided further that unless the Small Industries Bank intimates to the Court that it will not appeal against any order releasing any property from attachment or rejecting the claim to enforce the liability of the surety, such order shall not be given effect to, until the expiry of the period fixed under sub-section (12) within which an appeal may be preferred or, if an appeal is preferred, unless the Court empowered to hear appeals from the decisions of the said Court otherwise directs, until the appeal is disposed of.

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11.   An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or sale of property in execution of a decree as if the Small Industries Bank were the decree holder.

12.   Any party aggrieved by an order under sub-section (7), sub-section (8) or sub-section (10) may, within thirty days from the date of the order, appeal to the Court empowered to hear appeals from the decisions of the Court which passed the order and upon such appeal the appellate Court may, after hearing the parties, pass such orders as it thinks proper.

13.   Where proceedings for liquidation in respect of an industrial concern in the small-scale section have commenced before an application is made under sub-section (1), nothing in this section shall be construed as giving to the Small Industries Bank any preference over the other creditors of such industrial concern not conferred on it by any other law.

14.   For the removal of doubts, it is hereby declared that any Court competent to grant an ad interim injection under this section shall also have the power to appoint a receiver and to exercise all the other powers incidental thereto.



The Small Industries Development Bank of India Act, 1989 Back




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