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REGISTERED No. D. 221

The Gazette of India

EXTRAORDINARY

PART II—Section 2

PUBLISHED BY AUTHORITY

No. 61] NEW DELHI, FRIDAY, DECEMBER 10, 1965/AGRAHAYANA 19, 1887

Separate paging is given to this Part in order that it may be filed

as a separate compilation.

LOK SABHA

The following Bill was introduced in Lok Sabha on the 10th December, 1965: —

BILL NO. 92 OF 1965 A Bill further to amend the Unit Trust of India Act, 1963.

BE it enacted by Parliament in the Sixteenth Year of the

Republic of India as follows: —

1. (1) This Act may be called the Unit Trust of India (Amend-

ment) Act, 1965.

Short title and com- mence- ment, (2) It shall come into force on such date as the Central Govern- ment may, by notification in the Official Gazette, appoint.

2. In section 2 of the Unit Trust of India Act, 1963 (hereinafter 52 of 1963. referred to as the principal Act) ,—

Amend- ment of section 2.

(i) after clause (c), the following clause shall be inserted,

10 namely: —

'(cc) "first unit scheme" means the unit scheme made before the commencement of the Unit Trust of India (Amendment) Act, 1965;

(1251)

(ii) after clause (j), the following clause shall be inserted, namely: —

' (ij) "subsequent unit scheme" means any scheme made after the commencement of the Unit Trust of India (Amend- ment) Act, 1965;';

(iii) in clauses (n), (o), (p) and (q), for the words "the unit scheme", the words "a unit scheme" shall be substituted.

Amend- ment of section 4.

3. In section 4 of the principal Act, in sub-section (5), for the words "the contributing institutions", the following words, brackets, letters and figure shall be substituted, namely:—

io

"any contributing institution, and in making any such re- fund the Board shall not make any discrimination between the institutions referred to in clause (c) of sub-section (2) or between the institutions referred to in clause (d) of that sub- section".

15

4. In section 19 of the principal Act, in sub-section (I),—

(i) after clause (c), the following clause shall be inserted, Amend- ment of section 19.

namely: —

" (cc) formulating in relation to any unit scheme—

(i) savings and life insurance plan or plans in as- ²O sociation with or as the agent of, the Life Insurance Corporation of India, but not including the life insurance business; or

(ii) any other plan or plans,

under which a person may acquire an interest in units;"; 25

(ii) in clause (d), after the words "matters and things", the words "as may promote the sale of units or" shall be inserted.

5. In section 20 of the principal Act, for sub-sections (2), (3) and (4), the following sub-sections shall be substituted, namely: —

" (2) The Trust may borrow money from the Reserve Bank— 30 Amend- ment of section 20.

(i) repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date on which the money is so borrowed, against stocks, funds and securi- ties (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time 35 being in force in India;

(ii) rapayable on demand or within a period of eighteen months from the date on which the money is so borrowed, against the security of the bonds which the Trust may issue with the approval of the Central Government; 40

(Hi) on such terms and conditions and against the secu- rity of such other property of the Trust as may be specified in this behalf by the Reserve Bank for the purposes of any scheme other than the first unit scheme:

, Provided that any amount borrowed under this

clause and outstanding at any one time shall not exceed—

(a) five crores of rupees in respect of each such

scheme; and

(b) ten crores of rupees in respect of all such schemes in the aggregate.

(3) The bonds issued by the Trust under sub-section (2) shall be guaranteed by the Central Government as to the repay- ment of principal and the payment of interest at such rate as may be fixed by the Central Government at the time the bonds are ¹⁵ issued.".

e. After section 20 of the principal Act, the following sections shall

be inserted, namely: —

Insertion of new sections 20A and 20B.

Special contribu- tion by Reserve Bank.

"20A. The Reserve Bank may, from time to time, in its dis- 20 cretion pay to the Trust from out of the amount payable to the Reserve Bank under sub-section (1) of section 25A any sum to be utilised by the Trust solely for meeting the losses arising out of, or any additional amount required in connection with, any variation made by the Trust in the sale or re-purchase price of a unit.

Granti, donations, etc., to Trust.

20B. The Trust may receive gifts, grants, donations or bene- factions from Government or any other source and such gifts, grants, donations or benefactions shall be treated by the Board as capital or income of the first unit scheme or, as the case may ,0 be, of any subsequent unit scheme according to the purposes for which they are made and in the absence of any indication of such purposes, they shall be treated as capital or income of such unit scheme or schemes and to such extent as the Board thinks fit.".

7. In section 21 of the principal Act,—

(a) in sub-section (1), for the words "shall make a unit 35 scheme", the words "may make one or more unit schemes" shall

Amend- ment of section 21.

be substituted;

(b) in sub-section (3), for the words "the scheme", the words;

"any scheme" shall be substituted;

(c) in sub-section (4), for the words "The scheme", the words "Every scheme" shall be substituted.

8. For Chapter V and sections 22 to 25 of the principal Act, the following Chapter and sections shall be substituted, namely: —

Substitu- tion of new Chapter for Chapter V.

'CHAPTER V 5

ALLOCATION AND DISTRIBUTION OF INCOME AND RESERVE FUNDS

22. (1) The capital of the Trust in relation to the first unit scheme shall consist of—

Capital of the Trust.

(i) the initial capital,

(ii) the unit capital of the said scheme, *°

(iii) any reserves created for that scheme,

(iv) any amount borrowed for the purposes of that scheme,

(v) any amount received for the purposes of that scheme by way of gifts, grants, donations or benefactions from the *5 Government or any other source and treated as the capital of that scheme under section 20B,

(vi) any other capital allocated to that scheme by the Board having regard to the nature of such capital and other relevant factors.

20

(2) The capital of the Trust in relation to any subsequent unit scheme shall consist of—

(i) the unit capital of that scheme,

(ii) any reserves created for that scheme,

(iii) any amount borrowed for the purposes of that 23 scheme,

(iv) any amount received for the purposes of that scheme by way of gifts, grants, donations or benefactions from the Government or any other source and treated as the capital of that scheme under section 20B, 39

(") any other capital allocated to that scheme by the Board having regard to the nature of such capital and othei? relevant factors. (3) The capital in respect of a unit scheme shall be held separately from the capital in respect of any other unit scheme and such capital shall, subject to the provisions of this Chapter, 33 be applied solely for the purposes, pf that unit scheme.

23. The income of the Trust shall consist of—

Income of the Trust.

(i) in relation to the first unit scheme,—

(a) the income arising out of the capital referred to in subjection (1) of section 22,

5 (b) any gifts, grants, donations or benefactions treated as the income of that scheme under section 20B, and

(c) any other income allocated to that scheme by the Board having regard to the nature of the income and io other relevant factors;

(ii) in relation to any subsequent unit scheme,—

(a) the income arising out of the capital referred to In sub-section (2) of section 22,

(b) any gifts, grants, donations or benefactions 13 treated as the income of that scheme under section 20B, and

(c) any other income allocated to that scheme by the Board having regard to the nature of the income and other relevant factors.

Allocation of income in respect of first unit scheme.

20 24, The income of the Trust in any year arising out of the capital of the Trust relating to the first unit scheme shall be allocated to the initial capital and the unit capital thereof in the same proportion as the former bears to the latter at the end of that year.

Allocation of interest and other expenses.

25. (1) The interest payable for any year for any borrowings by the Trust and the total amount of other expenses incurred by the Trust for that year for the purposes of the first unit scheme shall be allocated and charged to the initial capital and the unit capital thereof in the same proportion as is referred to in (sec- tion 24.

(2) Notwithstanding anything contained in sub-section (1), if in any year the amount of expenses, other than interest allo- cated to the unit capital relating to the first unit scheme, is more than five per cent, of the income allocated in that year to that scheme, only an amount equal to such five per cent, shall be 35 charged to that unit capital and the rest of the total amount of expenses other than interest shall be charged to the initial capital.

(3) The interest payable for any year for any borrowings by the Trust and the total amount of other expenses incurred by the 4Q Trus| totnat y?ar tor t ne purpo³es of any subsequent unit gchemt

shall be charged to the unit capital of such scheme in such manner and to such extent as the Board may, with the previous approval of the Reserve Bank, determine.

(4) For purposes of this section, where expenses are incurred In common by the Trust in relation to more than one unit scheme 5 such expenses may be allocated to the different schemes to such extent and in such manner as the Board may, with the previous approval of the Reserve Bank, determine having regard to the nature and purposes of the expenses and other relevant factors.

25A. (1) The income allocated to the initial capital in any I⁰ Distribu- tion of income.

year reduced by the interest and the amount of other expenses charged for that year to the initial capital may be distributed in the prescribed manner among the contributing institutions in each case in proportion to their respective contributions.

(2) The income allocated in any year to the unit capital l5

2O relating to the first unit scheme reduced by the interest and the amount of other expenses charged for that year to such unit capital may, but not less than ninety per cent, of such income so reduced, shall, be distributed in respect of that year to the unit holders under that unit scheme.

(3) The Income allocated in any year to the unit capital relating to each of the subsequent unit schemes reduced by the interest and the amount of other expenses charged for that year to such unit capital may, having regard to the purposes of that ~. scheme and other relevant factors,—

(i) be distributed in respect of that year to the unit holders under that scheme in such manner and at such percentage of the income so reduced as the Board may I determine; or

Reserve funds.

Definition.

25C In this Chapter, "year" means the period in respect of which the books and accounts of the Trust are balanced and closed under sub-section (2) of section 26.'.

9. In section 27 of the principal Act, for sub-section (1), the follow- 5 ing sub-section shall be substituted, namely: —

Amend- ment of section 27.

lof 1"B8.

"(i) The affairs of the Trust shall be audited by one or more auditors duly qualified to act as auditor under sub-section (1) of section 226 of the Companies Act, 1956 (hereinafter referred to at the auditor) who shall be appointed by the Trust with the pre- ¹⁰ vious approval of the Reserve Bank and shall receive such remu- neration as the Trust may fix.".

10. In section 32 of the principal Act, in aub-section (1),— Amend- ment of •ectlon 32.

7 of IM*.

(i) after the words and figures "the Super Profits Tax Act, 1963,", where they occur for the first time, the words, brackets and 15 figures "the Companies (Profits) Surtax Act, 1964," shall be in- serted;

(ii) for the words "or super profits tax", the words "super profits tax, surtax" shall be substituted;

(Hi) in clause (a), after the words "super profits tax", the ²⁰ word ".surtax" shall be inserted;

(iv) in clause (c),—

(a) after the words and figures "the Super Profits Tax Act, 1963,", the words, brackets and figures "or to surtax under the Companies (Profits) Surtax Act, 1964," shall be 7 of 1964.

25 inserted;

(b) after the words "for the purposes of super profits tax", the words "or surtax" shall be inserted.

11. In section 17 of the Reserve Bank of India Act, 1934, in clause (4BBB),-

Amend- ment of Act 2 at 1934 (i) the word "or" occurring at the end of sub-clause (i) shall 3° be omitted;

(ii) after sub-clause (ii), the following sub-clause shall be inserted, namely: —

62 of 1983.

"(in) for the purpose of any scheme other than the first unit scheme under the Unit Trust of India Act, 1963 on such terms and conditions and against the security of such other property of the Unit Trust as may be specified In this behalf by the Bank;".

STATEMENT OF OBJECTS AND REASONS

The Un;t Trust of India Act, 1963 provides at present for the sale of units by the Trust under a scheme, which was brought into force on July 1, 1964. Although the response from the public has been encouraging, it is considered desirable that the Trust should be enabled at this stage to offer, in addition, facilities for the acquisi- tion of units by various classes of investors, under other schemes catering to their special preferences or requirements. It is also proposed that the Unit Trust should be in a position to formulate plans for the accumulation of savings by intending Investors, for subsequent investment in units.

2. The Bill seeks to amend the Unit Trust of India Act, 1963 for these and for certain other purposes. The notes on clauses explain in detail the various provisions of the Bill.

NEW DELHI; T. T. KRI9HNAMACHARL

The 4th December, 1965.

PRESIDENT'S RECOMMENDATION UNDER ARTICLE 117 OF THE CONSTITUTION OF INDIA

[Copy of letter No. F. 15/15/65-SB, dated the 6th December, 1965 from Shri T. T. Krishnamachari, Minister of Finance to the Secretary, Ijok Sabha.]

The President having been informed of the subject matter of the proposed Unit Trust of India (Amendment) Bill, 1965, recommends the introduction of the Bill in the Lok Sabha under clause (1) of article 117 of the Constitution.

Notes on clauses

Clause 2 provides for definitions. The present unit scheme is pro- posed to be defined as the first unit scheme and the other schemes which may be prepared by the Trust will be referred to as the subse- quent unit schemes.

Clause 3.—Provision has been made in section 4 of the Act for the initial capital to be refunded, in case this is considered necessary or possible, to all the institutions. The section as it is now drafted does not, however, enable the Trust to return the initial capital only to the financial corporations or other notified financial institutions, as distin- guished from (a) the Reserve Bank, (b) the Life Insurance Corpora- tion and (c) the State Bank and its subsidiaries. It is proposed to empower the Unit Trust to return the initial capital separately, or only, to these financial corporations or notified financial institutions, or to the institutions mentioned in each of the other categories refer- red to above.

Clause 4 enables the Trust to formulate savings-cum-insurance or other savings plans. The amounts accumulated under these plans will be invested in units under the various schemes, which may be for- mulated and announced by the Trust.

Clause 5 provides for the grant of loans to the Trust by the Reserve Bank of India against debentures and ordinary shares held by the Trust, notwithstanding the fact that these may not be trustee securities. It is considered desirable that the Trust should be enabled to borrow on the security of these investments, for the purposes of the subsequent unit schemes.

Clause 6 provides for the waiving by the Reserve Bank, in case this is considered necessary, of the amount due to it on account of the interest or dividend on its contribution to the initial capital. The amount, which is thus waived, will be utilised for subsidising any concession to the investors in determining the sale or repurchase price of units. Clause 6 also provides for the receipt of other dona- tions fir gifts by the Trust.

Clause 8 provides for the changes which will be necessary in the Chapter relating to the assets and income of the Trust and the distri- bution of the income. It 3s proposed that the income relating to each unit scheme should be segreated and accounted for separately. While 765 G. of I.—3.

the distribution of not less than 90 per cent, of the income wiH con- tinue to be necessary in the case of the first unit scheme, according to the provisions of the law, the amount to be distributed, in respect of the subsequent unit schemes will be left to the discretion of the Trust, which is expected to take into consideration investors' prefe- rences and expectations regarding the distribution or reinvestment of the income.

Clause 9 is self-explanatory.

Clause 10 provides for a minor change in consequence of the enact- ment of the Companies (Profits) Surtax Act, 1964.

S. L. SHAKDHER,

Secretary.

PRINTED IN INDIA BY THE GENERAL MANAGER, GOVERNMENT OF INDIA PRESS, TVTINTO ROAD, NEW DELHI AND PUBLISHED BY THE MANA0ER OF PUBLICATIONS,

DELHI. 1965.