3. Establishment and incorporation of Small Industries Development Bank of India.—(1) With
effect from such date as the Central Government may, by notification, appoint, there shall be established,
for the purposes of this Act, a corporation to be known as the Small Industries Development Bank of
India.
(2) The Small Industries Bank shall be a body corporate with the name aforesaid having perpetual
succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and
dispose of property and to contract, and may, by that name, sue or be sued.
(3) The head office of the Small Industries Bank shall be at Lucknow or at such other place as the
Central Government may, by notification, specify.
(4) The Small Industries Bank shall establish offices, branches or agencies at any place in or outside
India.
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[4. Authorised capital.—The authorised capital of the Small Industries Bank shall be one thousand
crores of rupees divided into seventy-five crores fully paid-up equity shares of rupees ten each and
twenty-five crores of fully paid-up redeemable preference shares of rupees ten each:
Provided that the Central Government may, on the recommendation of the Board, by notification,
increase the authorised capital to an amount not exceeding two thousand crores of rupees consisting of
such number of equity shares and redeemable preference shares as it may deem fit.
1. Ins. by Act 7 of 2000, s. 2 (w.e.f. 27-3-2000).
2. Ins. by Act 53 of 2003, s. 12 and The Schedule (w.e.f. 2-7-2004).
3. Clause (q) omitted by s. 12 and The Schedule, ibid. (2-7-2004).
4. Subs. by Act 7 of 2000, s. 3, for sections 4 to 6 (w.e.f. 27-3-2000).
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4A. Conversion of equity shares into redeemable preference shares.—(1) The Central
Government may, at any time after the commencement of the Small Industries Development Bank of
India (Amendment) Act, 2000, by notification, convert such number of equity shares held by the
Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance
Corporation and other institutions owned or controlled by the Central Government, not exceeding twentyfive crores, as it may decide, into redeemable preference shares:
Provided that such conversion shall in no case reduce the equity shares held in aggregate by the
Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance
Corporation and other institutions owned or controlled by the Central Government to less than fifty-one
per cent.
(2) The redeemable preference shares referred to in sub-section (1) shall—
(a) carry such fixed rate of dividend as the Central Government may specify at the time of such
conversion, and
(b) neither be transferable nor carry any voting rights.
(3) The redeemable preference shares referred to in sub-section (1) shall be redeemed by the Small
Industries Bank within three years from the date of such conversion in such instalments and in such
manner as the Board may determine.
4B. Transfer of capital.—On such date as the Central Government may, in consultation with the
Development Bank, by notification, specify (hereinafter referred to as “the specified date”), not less than
fifty-one per cent. of the issued capital of the Small Industries Bank which has been subscribed by the
Development Bank as on the date immediately preceding the specified date shall, stand transferred to, and
vested in, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and
other institutions owned or controlled by the Central Government in such proportion, manner and on such
terms and conditions as may be determined by that Government.
4C. Issued capital.—(1) The issued capital, of the Small Industries Bank, of four hundred and fifty
crores of rupees, immediately before the commencement of the Small Industries Development Bank of
India (Amendment) Act, 2000, shall, on such commencement, stand divided into forty-five crores equity
shares of rupees ten each.
(2) The Board may, from time to time, increase the issued equity share capital or redeemable
preference share capital of the Small Industries Bank by allotment of shares to such persons and on such
terms and conditions as the Board may determine:
Provided that no increase in the issued equity capital shall be made in such a manner that the
Development Bank, the public sector banks, the General Insurance Corporation, the Life Insurance
Corporation and other institutions owned or controlled by the Central Government, hold in aggregate at
any time, less than fifty-one per cent. of the issued equity share capital of the Small Industries Bank.
4D. Reduction of share capital.—(1) The Small Industries Bank may, with the prior approval of the
Central Government, by a resolution passed in a general meeting of the shareholders, reduce its share
capital in any way.
(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced by—
(a) extinguishing or reducing the liability on any of its equity shares in respect of the share capital
not paid-up;
(b) either with or without extinguishing or reducing liability on any of its equity shares,
cancelling any paid-up share capital which is lost, or is unrepresented by available assets; or
(c) either with or without extinguishing or reducing liability on any of its equity shares, paying
off any paid-up share capital which is in excess of the wants of the Small Industries Bank.
(3) In any general meeting referred to in sub-section (1), the resolution for reduction of share capital
shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy,
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and the votes cast in favour of the resolution are not less than three times the number of the votes, if any,
cast against the resolution by shareholders so entitled and voting.
4E. Restriction on exercising of voting right.—Every shareholder of the Small Industries Bank
holding equity shares shall have a right to vote in respect of such shares on every resolution and his
voting right on a poll shall be in proportion to his share of the paid-up equity share capital of the Small
Industries Bank:
Provided, however, that no shareholder, other than the Development Bank, the public sector banks,
the General Insurance Corporation, the Life Insurance Corporation and other institutions owned or
controlled by the Central Government, shall be entitled to exercise voting rights in respect of any equity
shares held by him in excess of ten per cent. of the issued equity share capital.
5. Management.—(1) The general superintendence, direction and management of affairs and
business of the Small Industries Bank shall vest in a Board of Directors which may exercise all powers
and do all such acts and things as may be exercised or done by the Small Industries Bank and are not by
this Act expressly directed or required to be done by the Small Industries Bank in general meeting.
(2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in
such cases and subject to such conditions, if any, as may be specified by it, by the chairman and managing
director or the whole-time directors.
(3) Subject to the provisions of this Act, the Board in discharging its functions shall act on
business principles with due regard to public interest.
6. Constitution of Board.—(1) The Board shall consist of the following, namely:—
(a) a chairman and managing director appointed by the Central Government;
(b) two whole-time directors appointed by the Central Government;
(c) two directors who shall be officials of the Central Government nominated by the Central
Government;
(d) three directors to be nominated in the prescribed manner by the Development Bank, the public
sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions
owned or controlled by the Central Government;
(e) three directors, including one Director from the officials of the State Financial Corporations,
nominated by the Central Government from amongst the persons having special knowledge of, or
professional experience in, science, technology, economics, industry, banking, industrial cooperatives, law, industrial finance, investment, accountancy, marketing or any other matter, the
special knowledge of, or professional experience in, which would, in the opinion of the Central
Government, be useful to the Small Industries Bank;
(f) such number of directors not exceeding four elected in the prescribed manner, by shareholders,
other than the Development Bank, the public sector banks, the General Insurance Corporation, the
Life Insurance Corporation and other institutions owned or controlled by the Central Government,
whose names are entered in the register of shareholders of the Small Industries Bank ninety days
before the date of the meeting in which such election takes place on the following basis, namely:—
(i) where the total amount of equity share capital issued to such shareholders is ten per cent.
or less of the total issued equity share capital, two directors;
(ii) where the total amount of equity share capital issued to such shareholders is more than ten
per cent. but less than twenty-five per cent. of the total issued equity share capital, three directors;
and
(iii) where the total amount of equity share capital issued to such shareholders is twenty-five
per cent. or more of the total issued equity share capital, four directors:
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Provided that if the percentage of holding of issued equity share capital with the shareholders, other
than the Development Bank, the public sector banks, the General Insurance Corporation, the Life
Insurance Corporation and other institutions owned or controlled by the Central Government, does not
permit election of four directors or until the assumption of charge by the elected directors, the Board may
at any time co-opt such number of directors, not exceeding four, from amongst the persons having special
knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial
co-operatives, law, industrial finance, investment, accountancy, marketing or any other matter, the special
knowledge of, or professional experience in, which would, in the opinion of the Board, be useful to the
Small Industries Bank for carrying out its functions, who shall hold office until the assumption of charge
by the elected directors and an equal number of such co-opted directors shall retire in the order of
co-option.
(2) The chairman and managing director and the whole-time directors shall hold office for such term
not exceeding five years as the Central Government may specify in this behalf and any person so
appointed shall be eligible for re-appointment.
(3) Notwithstanding anything contained in sub-section (1), the Central Government shall have the
right to terminate the term of office of the chairman and managing director or the whole-time director, as
the case may be, at any time before the expiry of the term specified under sub-section (2) by giving him
notice of not less than three months in writing or three months’ salary and allowances in lieu of such
notice and the chairman and managing director or the whole-time director, as the case may be, shall also
have the right to relinquish his office at any time before the expiry of the term specified under
sub-section (2) by giving, the Central Government, notice of not less than three months in writing.
(4) The chairman and managing director and the whole-time directors shall receive such salary and
allowances, as may be determined by the Central Government.
(5) The Central Government may, at any time, remove the chairman and managing director or the
whole-time director, as the case may be, from office:
Provided that no person shall be removed from his office, under this sub-section, unless he has been
given an opportunity of showing cause against his removal.
(6) Every Director nominated under clauses (c), (d) and (e) of sub-section (1), shall hold office during
the pleasure of the authority nominating him.
(7) Subject to the provisions of sub-section (6),—
(a) every Director nominated under clauses (d) and (e) of sub-section (1) shall hold office for
such term not exceeding three years as the Central Government, or the authority nominating him, as
the case may be, may specify in this behalf and thereafter until his successor assumes office, and shall
be eligible for re-nomination:
Provided that no such Director shall hold office continuously for a period exceeding six years; and
(b) every Director elected under clause (f) of sub-section (1) shall hold office for three years and
thereafter until his successor assumes office and shall be eligible for re-election:
Provided that no such director shall hold office continuously for a period exceeding six years.
(8) The shareholders, other than the Development Bank, the public sector banks, the General
Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the
Central Government may, after giving the director a reasonable opportunity of being heard in the manner
as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the
aggregate not less than one-half of the equity share capital held by such shareholders, remove any director
elected under clause (f) of sub-section (1) and elect another director in his place to fill the vacancy so
caused.
(9) (i) A meeting of the Board shall be held at least once in every three months and at least four
meetings shall be held every year and the meetings may be held at such places as may be prescribed.
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(ii) Notice of every meeting of the Board shall be given in writing to every Director for the time being
in India, and at his usual address in India to every other Director.
(10) Subject to the provisions contained in this Chapter, the Board may meet at such times and places
and shall observe such rules of procedure in regard to transaction of its business including the manner of
adoption of resolutions as may be prescribed.
(11) The chairman and managing director, if for any reason, is unable to attend a meeting of the
Board, any other Director nominated by the chairman and managing director in this behalf and in the
absence of such nomination, any director elected by the directors present from among themselves, shall
preside at the meeting.
(12) All questions which come up before any meeting of the Board shall be decided by a majority of
votes of the directors present and voting, and in the event of an equality of votes, the chairman and
managing director, or in his absence, the person presiding, shall have a second or casting vote.
(13) Save as provided in sub-section (12), every Director of the Board shall have one vote.]
7. [Managing Director.]—Omitted by the Small Industries Development Bank of India (Amendment)
Act, 2000 (7 of 2000) s. 4 (w.e.f. 27-3-2000).
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[8. Disqualifications of directors.—A person shall not be eligible for being elected as a director
under clause (f) of sub-section (1) of section 6, if he—
(a) has been found to be of unsound mind by a court of competent jurisdiction and the finding is
in force;
(b) is an undischarged insolvent;
(c) has applied to be adjudicated as an insolvent and his application is pending;
(d) has been convicted by a court of competent jurisdiction, of any offence involving moral
turpitude and sentenced in respect thereof to imprisonment for not less than six months and a period
of five years has not elapsed from the date of expiry of the sentence; or
(e) has not paid any call in respect of shares of the Small Industries Bank held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for the payment of
the call.
9. Vacation and resignation of office by directors.—(1) The office of a director shall become
vacant if he—
(a) becomes subject to any of the disqualifications mentioned in section 8; or
(b) resigns his office by giving notice in writing under his hand and the resignation is accepted; or
(c) absents himself from three consecutive meetings of the Board without obtaining leave of
absence from the Board.
(2) Notwithstanding anything contained in clause (a) of sub-section (1), the disqualifications referred
to in that clause shall not take effect—
(a) for thirty days from the date of the adjudication, sentence or order;
(b) where any appeal or petition is preferred within thirty days aforesaid against the adjudication,
sentence or conviction resulting in the sentence or order until the expiry of seven days from the date
on which such appeal or petition is disposed of; or
(c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of
the adjudication, sentence, conviction or order and the appeal or petition, if allowed, would result in
the removal of the disqualification, until such further appeal or petition is disposed of.]
10. [Causal Vacancies in office of Managing Director.]—Omitted by the Small Industries
Development Bank of India (Amendment) Act, 2000 (7of 2000) s. 6 (w.e.f. 27-3-2000).
11. [Meetings of the Board.]—Omitted by s. 6, ibid. (w.e.f. 27-3-2000).
1. Subs. by Act 7 of 2000, s. 5, for sections 8 and 9 (w.e.f. 27-3-2000).
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[12. Executive Committee and other committees.—(1) The Board shall constitute an Executive
Committee consisting of the chairman and managing director, the whole-time directors and such other
directors as it may deem fit.
(2) The Executive Committee shall discharge such functions as may be prescribed or as may, without
prejudice to the provisions contained in section 34, be delegated to it by the Board.
(3) The Board may constitute such other committees whether consisting wholly of directors or wholly
of other persons or partly of directors and partly of other persons for such purpose or purposes as it may
think fit.
(4) The Executive Committee or any other committee constituted under this section shall meet at such
times and places and shall observe such rules of procedure in regard to the transaction of business at its
meetings as may be prescribed.
12A. Fees and allowances of directors and members of committees.—The directors and the
members of a committee shall be paid such fees and allowances as may be prescribed for attending the
meetings of the Board or of any committee constituted in pursuance of this Act and for attending to any
other work of the Small Industries Bank:
Provided that no fees shall be payable to the chairman and managing director or to the whole-time
directors or to any other director who is an official of the Government.]