Section 4 in The Rajasthan State Aid to Industries (Guaranteeing of Cash Credit and other Credit Facilities) Rules, 1965
4. Guaranteeing of Cash-Credits.
- The State Government may guarantee cash credit, overdraft or fixed advance by any Creditor bank or any industrial unit, industry or industrial co-operative society to which these rules apply, under the following conditions(i)Subject to the provisions of clauses (iii) and (vi) of these rules the extent of the guarantee to be given by the State Government under these rules, shall be limited to 25% of the amount of loan advanced or to be advanced by a creditor bank or to 50% of the amount by which the security offered by the loanee falls short of the percentage of the amount of security demanded by the bank, whichever is less if the proprietors, partners, Directors or promoters of the industrial unit, industry or industrial co-operative society concerned give a personal guarantee to indemnify the State Government in the event of any losses occurring to the State Government on account of the guarantee under there rules;(ii)the assets/immovable properties offered as security by the loanee shall be got insured and mortgaged with the creditor bank or the Life Insurance Corporation, which will take necessary action regarding their valuation, mortgage deeds etc.;(iii)the liability of the State Government to honour the margin guaranteed shall arise only when the creditor bank has exhausted all legal remedies at its disposal for recovery of the principal amount or interest on the due date and shall cease and be discharged on account of(a)any act or omission by the creditor bank concerned, the legal consequence of which is the discharge of the loanee;(b)creditor bank's forbearance to sue or to enforce any other remedies against the loanee; and(c)any default on the part of the creditor bank concerned to recover the amount of advance or interest thereon after the due date;(iv)in case recovery of the amount due to the creditor bank by the loanee is effected by the sale of the assets/immovable properties mortgaged, the liability of the State Government shall be limited as indicated under clause (i) above, to 25% of the amount of loan advanced the difference between the amount of loan advanced and the amount recovered from the sales of assets or immovable properties mortgaged, whichever is less;(v)the creditor bank shall intimate to the State Government within a week as far as possible of the default, if any, committed by the loanee towards the repayment of the principal and/or interest on the due date;(vi)No guarantee under these rules shall be given for loans exceeding Rs. 1,00,000/- in any individual case, though any such guarantee can be give for loans up to Rs. 10,00,000/- in exceptional cases by the Finance Department;(vii)the duration of the guarantee shall be one year subject to further renewal on the same terms and conditions as mentioned in these rules;(viii)a guarantee commission @ Rs. 1/2% per annum on the amount of guarantee shall be charged by the State Government and shall be paid by the loanee in advance every year to the Accounts officer, Directorate of Industries and Supplies, Government of Rajasthan, Jaipur; and(ix)the loanee concerned, the creditor bank and the State Government shall sign an agreement in the form mentioned in schedule II.
