Public Debt Act,1944
Preamble
(18 of 1944)1
22nd November,1944
An Act to consolidate and amend the law relating to Government securities 2[* * *] and to the management by the Reserve Bank of India. Of the public debt of 3[the Government].
WHEREAS it is expedient to consolidate and amend the law relating to Government securities 2[* * *] and to the management by the Reserve Bank of India of the public debt of 3[the Government]; It is hereby enacted as follows :-
STATEMENT OF OBJECTS AND REASONS
“The great bulk of Government obligations in India have till very recently been expressed in the form of promissory notes which pass from hand to hand by endorsement and delivery. Stock certificates, i.e., certificates which are not negotiable themselves but merely record title, the actual transfers requiring registration in the books of the Public Debt Office, are of comparatively recent introduction. Not unnaturally, therefore, the law of Government securities in India, started as an appendage to the law of Negotiable Instruments, modifying it where necessary to meet the peculiar circum- stances of Government promissory notes such as (1) their validity for a period much longer than that of the ordinary negotiable instrument of commerce and the concomitant necessity of issuing separate instruments to replace the originals for the record of interest payments, and (2) their being held more widely than ordinary negotiable commercial instruments ‘ by various classes of investors in addition to the financial and business community. The fact that Government loans were almost entirely in the form of promissory notes meant that the special modifications of the law, effected from time to time to meet practical difficulties only related to Government obligations held in this form, with the result that when the previous legislation was revised in the Act of 1920, a clear distinction was not always drawn between those parts of the law which ought to relate to Government securities as a whole and those which merely related to promissory notes. A striking instance of this is provided by section 13(Act X of 1920) providing for the summary provisional settlement of disputes, which is confined only to promissory notes. Although logically imperfect, this position did not in the past lead to any practical difficulties as the holders of Government loans in the form of stock certificates were comparatively few. As a result of war conditions however, and the efforts of the Reserve Bank as agent of Government in the management of public debt to popularise stock certificate in the interest of safety and administrative convenience the proportion of Government loans held in the form of stock certificates or in special subsidiary ledger accounts, which the Bank has undertaken to maintain for large institutional holders, has substantially increased, and the time appears to be opportune for recasting the provisions of the Indian Securities Act,1920so as to provide more satisfactorily for the management of Central public debt.
Apart from the fact that Section 13of the 1920 Act fails to provide for the summary provisional settlement of disputes regarding Government loans held otherwise than as promissory notes the machinery which it provides is in itself incomplete and there have been numerous cases where on account of disputant contenting himself with the mere issue of a notice of dispute to the Public Debt Office and abstaining from prosecuting his claim in a Court of law, or on account of vague stop orders emanating from Courts, the periodical payment of interest has been held up for unconscionably long periods, much to the annoyance and prejudice of the actual holder. There have also been numerous instances in which where the matter has been taken to Court, Government and the Reserve bank have been made parties to what was essentially a dispute b etween two private parti es in the decision of which Government or the Bank had no interest. It is. there- fore, considered desirable to recase this part of the law so as to provide for a summary adjudication by the Reserve Bank of dispules as to the title to be the holder of a security, with a necessary safeguard by way of a guarantee of indemnity to ensure that the interests of the party who may ultimately succeed in establishing in a Court of law his right to hold the security are not prejudiced.
The legislative competence of the Central Legislature extends, however, only to legislation affecting public debt of the Central Government, while the public debt of a Province is subject to legislation in the Provincial Legislature only. The Act of 1920, which regulates public debt of both kinds, is amenable to amendment by the Central Legislature only in so far as it deals with public debt of the Central Government. The present legislation, therefore, takes the form of a Bill to be enacted as a separate Act, applicable only to securities of the Central Government, which will reproduce the provisions of the 1920 Act with amendments designed to remedy the defects already referred to, and with certain other amendments the necessity or desirability of which is suggested by experience in the administration of the Act during last two decades. In this reproduction of the provisions of the 1920 Act, those provisions have been rearranged so as to group together sections dealing with the incidents common to the different forms in which loans of the Central Government are held and to relegate to separate sections the incidents peculiar to negotiable instruments.”-Gaz. find,1943, Part V, page 162.
Amendment Act 6 of 1949.-
“Until 1946the Indian Securities Act,1920, governed the securities issued by both the Central and the Provincial Governments. The working of this Act disclosed certain defects and it was considered necessary to amend it, particularly in the context of the very large increase of the public debt during the war years. Under the Government of India Act,1935, the Central Legislature was competent to change only the law in respect of central securities and the provisions of the Indian Securities Act,1920, were accordingly replaced, so far as the Central public debt was concerned, by a comprehensive new Act, the Public debt (Central Government) Act,1944, which was brought into effect from the 1st May,1946 leaving the Provincial securities to be regulated by the Indian Securities Act,1920. As the money market is common to the whole country and the public debt of the Central and Provincial Governments is administered by a single agency namely, the Reserve Bank, it is obviously desirable to have uniform legislation for regulating the public debt of both. The Provincial Governments concur in this view and the Chambers of the Legislatures of all the Provinces in India have passed resolutions recommending that the securities issued by their respective Governments and their public debt should be regulated by an Act of the Dominion Legislature. It is accordingly proposed to amend the public Debt (Central Government) Act so as to extend it to cover the public debt of all the Provincial Governments”.-S.O.R. Gaz. of India.. 1949. Pt. V. p. 37.
Amendment Act 57 of 1956. ”
“The public debt and securities of the Union and Part A States are at present administered by the Reserve Bank of India in accordance with the Public Debt Act,1944, and the rules made there under. The Act at present does not extend to securities created and issued by the Governments of Part B States. Some of these States have their own Public Debt laws while others have acquired public debt only recently and have no regular law on the subject. Securities issued by the Governments of Pan B States are circulating in all parts of the country and the public- debt of Part B States is also being administered by the Reserve Bank of India. It is, therefore, desirable that
t here should be u niformity of procedure in respect of the public debt of the Union and all Part A and Part B States and that the Public Debt Act,1944 should apply to securities issued by the Government of Part B States as it applies to securities issued by the Central Government or a Part A State. The Legislatures of Part B States other than that of the State of Jammu and Kashmir have passed resolutions in pursuance of Article 252 of the Constitution empowering Parliament to pass the necessary legislation on the subject. The Bill, accordingly amends the Public Debt Act,1944, so as to make it applicable to securities issued by the Governments of Part B States other than the Government of Jammu and Kashmir and makes certain other minor and incidental amendments in that Act”.-S.O.R. Gaz. ofind.,27-8-1956, Pt. II, S. 2, Ext., p. 772.
Amendment Act 44 of 1959.-“
Ten-Year Treasury Savings Deposit Certificates and 15-Year Annuity Certificates which are sold and discharged through the Reserve Bank of India are governed by the provisions of the Public Debt Act,1944Section 7of that Act provides that if the face value of the Government securities belonging to a deceased holder exceeds Rs. 5,000, the executors or administrators of the deceased holder and the holder of a succession certificate shall be the only persons who may be recognised by the Reserve Bank as having any title of these securities.
2. Suggestions have been made from time to time that as the production of legal proof of succession involves considerable delay and expense, the holders of Ten-year Treasury Savings Deposit Certificates and 15-Year Annuity Certificates may be allowed the right to nominate a person or persons to whom the amount due on the certificate could be paid in the event of the death of the holders without the production of succession certificate or other proof of title. This Bill accordingly seeks to allow the facility of nomination to holders of the aforementioned certificates.”-S.O.R. Gaz. ofind. 27-8-1959, Pt. 11,S. 2, Extra, page 878.
Amending Act 44 of 1972.-
The public debt and the securities of the Central and State Governments, other than the Government of the State of Jammu and Kashmir, are at present administered by the Reserve Bank of India in accordance with the provisions of the Public Debt Act,1944. and the rules made there under. In 1956, the Legislatures of the erstwhile Part B States, other Legislatures of the erstwhile Part B States, other than that of the State of Jammu and Kashmir, passed resolutions in pursuance of Article 252(1) of the Constitution empowering Parliament to amend the Public Debt Act,1944, so as to make it applicable to securities issued by the Governments to those States and to their public debt. The Government of Jammu and Kashmir proposes to raise public loans from this year for augmenting resources for financing its developmental outlays and has requested that the Public Debt Act,1944 may be made applicable to securities to be issued by it and to its public debt. The Legislative Assembly and the Legislative Council of the State of Jammu and Kashmir have passed resolutions in pursuance of Article 252( I ) of the Constitution empowering Parliament to amend the Public Debt Act,1944, with a view to make the provisions thereof applicable to securities issued by the Government of the State of Jammu and Kashmir and to its public debt. The Bill seeks to amend the Public Debt Act,1944 for the aforesaid purpose.-S.O.R.-Gaz. ofind., 8-8-1972, Pt. II, S. 2, Ext. p. 672.
ACT HOW AFFECTED BY SUBSEQUENT LEGISLATION
Amended by Acts 6 of 1949; 57 of 1956; 44 of 1959; 44 of 1972.
Adapted by A.C.A.O.,1948;A.L.O.,1950: 3 A.L.O.,1956.
Extended by Acts 59 of 1949; 30 of 1950; Regns. 12 of 1962; 6 of 1963; 7 of 1963; 8 of 1965.
Extended in Madras by Mad. Act 35 of 1949.
Extended in Travancore-Cochin by T. C. Ord. 5 of 1953.
Extended in Rajasthan by Raj. Ord. 5 of 1956.
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1 For Statement of Objects and Reasons, see Gaz. of Ind.,1943, Pt. V, p. 162.
This Act has been extened to the new Provinces and merged States by the Merged States (Laws) Act,1949 (59 of 1949), S. 3 (1-1-1950) and to the States of Manipur, Tripura and Vindhya Pradesh by the Union Territories (Laws) Act,1950 (30 of 1950), S. 3 (16-4-1950). Manipur and Tripura are full-fledged States. Vindhya Pradesh is a part of the State of Madhya Pradesh See Acts.81 of 1971 and 37 of 1956, S. 9 respectively.
It has also been extended to the States merged in the State of Madras : See Mad. Act 35 of 1949, S. 3 (1-1-1950).
This Act and the Rules made thereunder have been made applicable to the Government securities of the State of Rajasthan issued before or after 11th September 1956; see Raj. Ord. 5 of 1956, S. 2 (11-9-1956);
This Act and the rules made thereunder are made applicable to the Government securities of the State of Travancore-Cochin issued on or after the 13th July,1953 as they apply to Government securities of a Part A State See Trav. Co. Ordi. 5 of 1953, 8.2(31-10-1953).
The Act has been extended to Union Territory of
(1) Goa, Daman and Diu by Regn. 12 of 1962 (1-2-1965);
(2) Dadra and Nagar Haveli by Regn. 6 of 1963 (1 -7-1965);
(3) Pondicherry by Regn. 7 of 1963 (1-10-1963);
(4) Laccadive, Minicoy and Amindivi Islands by Regn. 6 of 1965 (1-10-1967).
2 The words “issued by the Central Government” were omitted by the Public Debt (Central Government) Amendment Act,1949 (6 of 1949), S. 2 (1 -4-1949).
3. Substituted for the words “the Union and the Part A States” by the Public Debt (Amendment) Act,1956 (57 of 1956), 8.2(15-10-1956).
