Khadi and Village Industries Commission Act, 1956

1.    This Act may be called the Khadi and Village Industries Commission Act, 1956.

2.    It extends to the whole of India except the State of Jammu and Kashmir.

In this Act, unless the context otherwise requires,--

a.       "the Board" means the Board constituted under 1*[section 10];

b.       "chairman" means the chairman of the Commission;

c.       "Commission" means the Khadi and Village Industries Commission established under section 4;

cc     2*[ "fixed capital investment" includes investment in plant and machinery and land and building of an industry;]

4. "khadi" means any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns;

5. "member" means a member of the Commission 3*[and includes the chairman 4***];

6. "prescribed" means prescribed by rules made under this Act;

ff.      5*[ "rural area" means the area comprised in any village, and includes the area comprised in any town, the population of which does not exceed ten thousand or such other figure as the Central Government may specify from time to time;] 6* * * * **The Act comes into force in Pondicherry on 1.10.1963 vide Reg. 7 of 1963, s. 3 and Sch.

1. I.*Extended to Goa, Daman and Diu by Reg. 11 of 1963, s. 3 & sch.
2. Subs. by Act 36 of 1957, s. 3 and Sch. II, for "section 9".
3. Ins. by Act 12 of 1987, s. 2 (w.e.f. 24.7.1987).
4. Subs. by Act 32 of 1961, s. 2, for "and includes the chairman".
5. Certain words omitted by Act 12 of 1987, s. 2 (w.e.f. 24.7.1987).
6. Ins. by s. 2, ibid. (w.e.f.24.7.1987).

7. and (gg) omitted by s. 2, ibid. (w.e.f. 24.7.1987).

8. 180 1*"village industry" means,--

1. any industry located in a rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand rupees or such other sum as may, by notification in the Official Gazette, be specified from time to time by the Central Government:

Provided that any industry specified in the Schedule and located in an area other than a rural area and recognised as a village industry at any time before the commencement of the Khadi and Village Industries Commission (Amendment) Act, 1987 shall, notwithstanding anything contained in this sub� lause, continue to be a village industry under this Act;

2. any other non-manufacturing unit established for the sole purpose of promoting, maintaining, assisting, servicing (including mother units) or managing any village industry;] 3. [Power to add to the Schedule.] omitted by Act 12 of 1987, s.3 (w.e.f. 24.7.1987).

1. With effect from such date as the Central Government may, by notification in the Official Gazette, fix in this behalf, there shall be established a Commission to be called the Khadi and village Industries Commission which shall be a body corporate having perpetual succession and a common seal, with power to acquire, hold and dispose of property and to contract, and may by the said name sue and be issued

2. The Commission shall consist of the following members appointed by the Central Government, namely:--

1. six non-official members having specialised knowledge and experience of khadi and village industries and representing such six geographical zones of the country, as may be prescribed;

2. two non-official members having expert knowledge and experience in one or more of the following disciplines, namely:--Economics, Planning, Rural Development, Science and Technology or Technical Education and Training;

3. one Financial Adviser, who shall also be the Chief Accounts Officer of the Commission, ex-officio; and

4. a Chief Executive Officer, ex-officio

Provided that the ex-officio members shall not have the right to vote in any of the matters discussed at a meeting of the Commission.

3. The Central Government may appoint one of the members appointed under clause

1. of sub-section (2) to be the chairman who shall be a full-time member.]

1. The Chief Executive Officer appointed under clause (d) of sub-section

2. of section 4 shall exercise powers of general superintendence over the affairs of the Commission and its day-to-day management under the direction and control of the chairman.

3. The Chief Executive Officer shall be responsible for the furnishing of all returns, reports and statements required to be furnished to the Central Government under section 24.

4. It shall be the duty of the Chief Executive Officer to place before the Commission for its consideration and decision any matter of financial import if the Financial Adviser suggests to him in writing that such matter be placed before the Commission.

The Financial Adviser appointed under clause (c) of sub-section (2) of section 4.shall be in charge of all financial matters of the Commission including its budget, accounts and audit and it shall be the duty of the Financial Adviser to bring to the notice of the Commission through the Chief Executive Officer any matter of financial import, which, in his opinion, requires consideration and decision by the Commission.

A person shall be disqualified for being appointed as, and for being, a member of the Commission�

1. if he is, or is found to be a lunatic or a person of unsound mind; or

2. if he has been adjudged insolvent; or

3. if he has been convicted of an offence involving moral turpitude; or

4. if he has any financial interest in any subsisting contract made with or in any work being done by the Commission, except as a shareholder (other than a Director), in a company as defined in section 3 of the Companies Act, 1956 (1 of 1956):

Provided that where he is a shareholder, he shall disclose to the Central Government, the nature and extent of shares held by him in such a company; or

5. if he has any financial interest in any business undertaking dealing with or any other village industry specified or deemed to be specified in the Schedule to the Act

The Central Government may, by notification in the Official Gazette, remove from office any member of the Commission who�

1. is or becomes subject to any of the disqualifications mentioned in section 6; or

2. in the opinion of the Central Government has failed or is unable to carry out his duties; or

3. absents himself from three consecutive meetings of the Commission without the leave of the Commission:

Provided that before issuing any such notification, the Central Government shall give an opportunity to the member concerned to show cause against such removal.]

1. Subs. by Act 12 of 1987 s. 2, (w.e.f. 24.7.1987).

2. Subs. by s. 4, ibid. (w.e.f. 24.7.1987).

3. Subs. by s.5, ibid. (w.e.f. 24.7.1987).

Any member may resign his office by giving notice in writing to the Central Government and, on such resignation being notified in the Official Gazette by that Government, shall be deemed to have vacated his office.

No act or proceeding of the Commission shall be invalid by reason only of the existence of any vacancy amongst its members or any defect in the constitution there of.

1. The Commission may associate with itself in such manner and for such purposes as may be determined by regulations made under this Act any persons whose assistance or advice it may desire in complying with any of the provisions of this Act.

2. A person associated with it by the Commission under sub- section (1) for any purpose shall have the right to take part in the discussions of the Commission relevant to that purpose, but shall not have the right to vote, and shall not be a member for any other purpose.

3. The Central Government may, by notification in the Official Gazette, depute one or more  officers of the Government to attend any meetings of the Commission and to take part in the discussions of the Commission, but such officer or officers shall not have the right to vote.

For the purpose of assisting the Commission in the discharge of its functions under this Act, the Central Government may, by notification in the Official Gazette, constitute a Board to be called the Khadi and Village Industries �Board consisting of a chairman and such number of other members as the Central Government may think fit, chosen from among persons who, in the opinion of the Central Government, are qualified as having had experience, and shown capacity, in matters relating to the development of khadi and village industries.

The Commission shall ordinarily consult the Board with respect to the discharge of its functions under this Act.

1. The Commission shall meet at such times and places and shall, subject to the provisions of sub-sections (2) and (3), observe such rules of procedure in regard to transaction of business at its meetings (including the quorum at meetings) as may be provided by regulations made by the Commission under this Act;

Provided that the Commission shall meet at least once in every month.

2. 1*[The chairman or, in his absence, any member (other than an ex-officio member) chosen by the members present from among themselves, shall preside at a meeting of the Commission.]

3. All questions at a meeting of the Commission shall be decided by a majority of the votes of the members present and voting and in the case of an equality of votes, the chairman or, in his absence the person presiding, shall have a second or casting vote.

1. Every members of the Commission, other than an ex-officio member, shall hold office for a term of five years: Provided that the chairman shall, notwithstanding the expiration of his term, continue to hold office until his successor enters upon his office.

2. The terms and conditions of service of the chairman, Chief Executive Officer, Financial Adviser and other members shall be such as may be prescribed.]

14. Officers and servants of the Commission. 3***

3*** Subject to such rules as may be made by the Central Government in this behalf, the Commission may appoint such other officers and servants as it considers necessary for the efficient performance of its functions: 3******

1.     Subject to the provisions of this Act, the functions of the Commission shall generally be to plan, promote, organise and assist in the establishment and development of khadi and village industries in the rural area in coordination with other agencies engaged in rural development wherever necessary.

2.     In particular, and without prejudice to the generality of the foregoing power, the Commission may take such other steps as it may think fit,--

a.     to plan and organise training of persons employed or desirous of seeking employment in khadi and village industries;

b.    to build up reserves of raw materials and implements and supply them to persons engaged or likely to be engaged in production of handspun yarn or khadi or village industries at such rates as the Commission may decide;

c.     to encourage and assist in the creation of common service facilities for the processing of raw materials or semi- finished goods and for otherwise facilitating production and marketing of khadi or products of village industries;

d.    to promote the sale and marketing of khadi or products of village industries or handicrafts and for this purpose forge links with established marketing agencies wherever necessary and feasible;

e.     to encourage and promote research in the technology used in khadi and village industries, including the use of non- conventional energy and electric power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their competitive capacity and to arrange for dissemination of salient results obtained from such research;

f.     to undertake directly or through other agencies studies of the problems of khadi or village industries;

g.    to provide financial assistance to institutions or persons engaged in the development and operation of khadi or village industries and guide them through supply of designs, prototypes and other technical information for the purpose of producing goods and services for which there is effective demand in the opinion of the Commission;

h.     to undertake experiments or pilot projects which in the opinion of the Commission are necessary for the development of khadi and village industries;

i.      to establish and maintain separate organisations for the purpose of carrying out any or all of the above matters;

j.      to promote and encourage cooperative efforts among the manufacturers of khadi or persons engaged in village industries;

k.     to ensure genuineness and to set up standards of quality and ensure that products of khadi and village industries do conform to the said standards, including issue of certificates or letters of recognition to the concerned persons; and (l) to carry out any other matters incidental to the above.] ---------------------------------------------------------------------

1.     Subs. by Act 12 of 1987, s. 6 (w.e.f. 24.7.1987).

2.     Subs. by s. 7, ibid. (w.e.f. 24.7.1987).

3.     Omitted by s. 8, ibid. (w.e.f. 24.7.1987).

4.     Subs. by s. 9, ibid. (w.e.f. 24.7.1987). 183

In the discharge of its functions under this Act, the Commission shall be bound by such directions as the Central Government may give to it.

The Central Government may, after due appropriation made by Parliament by law in this behalf, pay to the Commission in each financial year such sums as may be considered necessary for the performance of the functions of the Commission under this Act.

The Commission may, for the purpose of development of khadi 2*[the development of village industries or the development of khadi and village industries], receive gifts, grants donations or benefactions from the Government or any other person.

1. 3*[The Commission shall have three separate funds to be called the khadi fund, the village industries fund and the general and miscellaneous fund.

1A. There shall be credited,--

1. to the khadi fund, all sums received by the Commission for the purpose relating to khadi;

2. to the village industries fund, all sums received by the Commission for the purposes relating to village industries and products of handicrafts;

3. to the general and miscellaneous fund, all other sums received by the Commission:

Provided that if the amount available in any of the said funds is in excess of the requirements of that fund and the amount available in any other of the said funds is insufficient to meet the requirements of that fund, the Commission may, with the previous approval of the Central Government, transfer from the first mentioned fund the excess amount or such part �Thereof as may be necessary to the other fund.

Explanation.--For the purpose of computing the amount in any of the said funds, the amount received under section 17A shall not be taken into account.

1B. The sums credited under sub-section (1),--

1. to the khadi fund, shall be applied for the purposes relating to khadi;

2. to the village industries fund, shall be applied for the purposes relating to village industries and products of handicrafts;

3. to the general and miscellaneous fund, shall be applied for the purposes relating to khadi and village industries and for meeting the salary, allowances and other remuneration of the members, officers and other employees of the Commission and other administrative expenses of the Commission.]

2. Except as otherwise directed by the Central Government, all moneys belonging to such funds shall be deposited in the Reserve Bank of India or with the agents of the Reserve Bank of India or, where there is neither an office of the Reserve Bank of India nor an agent of the Reserve Bank of India, in a Government Treasury, or be invested in such securities as may be approved by the Central Government.

Subject to the provisions of section 20 the Commission shall have power to spend such sums as it thinks fit on purposes authorized by this Act:

1. Ins. by Act 32 of 1961, s. 9.

2. Subs. by Act 12 of 1987, s. 10 (w.e.f. 24.7.1987).

3. Subs. by s. 11, ibid. (w.e.f. 1.4.1988).

185.Provided that nothing in this section shall be deemed to prevent the Commission from spending, with the previous approval of the Central Government, such moneys, as it thinks fit on any such purpose outside the territories to which this Act extends.

1. There shall be constituted from among the members of the Commission in the prescribed anner, a Standing Finance Committee in respect of each of the [three funds] 2* referred to in section 18.(2) The Standing Finance Committee shall exercise such of the powers of the Commission under section 19 as are delegated to it by the Commission.

1. Any sum payable to the Commission under any agreement express or implied, or otherwise howsoever, may be recovered in the same manner as an arrear of land-revenue.

2. If any question arises whether a sum is payable to the Commission within the meaning of sub-section (1), it shall be referred to a Tribunal constituted by the Central Government for the purpose which shall, after making such inquiry as it may deem fit and after giving to the person by whom the sum is alleged to be payable an opportunity of being heard, decide the question; and the decision of the Tribunal shall be final and shall not be called in question by any court or other authority.

3. The Tribunal shall consist of one person who is not connected with the Commission or with the person by whom the sum is alleged to be payable.

4. The expenses of the Tribunal shall be borne by the Commission.]

1. The Commission shall, by such date in each year as may be prescribed, prepare and submit to the Central Government for approval 3*[three separate budgets] in the prescribed form for the next financial year, to be called the khadi budget 3*[, the village industries budget and the general and miscellaneous budget], showing the estimated receipts and expenditure in respect of khadi 3*[,village industries and products of handicrafts and khadi and village industries respectively] during that financial year.

2. Subject to the provisions of sub-sections (3) and (4), no sum shall be expended by or on behalf of the Commission unless the

1. Ins. by Act 32 of 1961, s. 11.

2. Subs. by Act 12 of 1987, s. 12 (w.e.f. 1.4.1988).

3. Subs. by s. 13, ibid. (w.e.f. 1.4.1988).

3. 186.expenditure is covered by a specific provision in the budget approved by the Central Government. 1*[(3) The Commission may within the respective limits of the khadi budget, the village industries budget and the general and miscellaneous budget, sanction any reappropriation from one head of expenditure to another or from a provision made for one scheme to that in respect of another, but subject to the proviso to sub-section (1) of section 18, in no case shall a reappropriation of fund be made from one budget to any of the other two budgets:

Provided that no reappropriation from the head "Loan" to any other head of expenditure and vice versa in any of the budgets shall be sanctioned by the Commission, except with the previous approval of the Central Government.]

4. The Commission may, within such limits and subject to such conditions as may be prescribed, incur expenditure in excess of the limit provided in the budget approved by the Central Government under any head of expenditure or in connection with any particular scheme, so long as the aggregate amount in [the budget]1* approved by the Central Government is not exceeded.

Subject to such rules as may be made in this behalf, the Commission shall have power to borrow on the security of the khadi fund or the village industries fund or any other asset for any purposes for which such funds may be applied.

All liabilities incurred by, all contracts entered into with, and all matters and things engaged to be done by, or for, the Central Government in connection with the development of khadi or village industries at any time after the 14th day of January, 1953, and before the commencement of this Act, shall, after such commencement, be deemed to have been incurred by, entered into with, or engaged to be done by, or for, the Commission.

1. The Commission shall maintain proper accounts and other relevant records and prepare an annual statement of accounts, including the profit and loss account and the balance-sheet in such form as may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India.1. Subs. by Act 12 of 1987, s. 13 (w.e.f. 1.4.1988).

2. 187.The accounts of the Commission shall be audited by the Comptroller and Auditor-General of India at such intervals as may be prescribed by him.

3. The Comptroller and Auditor-General of India and any person appointed by him in connection with the audit of the accounts of the Commission shall have the same rights and privileges and authority in connection with such audit as the Comptroller and Auditor-General has in connection with the audit of Government accounts and, in particular, shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect any of the offices of the Commission.

4. The accounts of the Commission as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central Government and that Government shall cause the same to be laid before each House of Parliament.

1. The Commission shall furnish to the Central Government, at such time and in such form and manner as may be prescribed or as the Central Government may direct, such returns and statements and such particulars in regard to any proposed or existing programmed for the promotion and development of khadi and village industries, as the Central Government may, from time to time, require.

2. Without prejudice to the provisions of sub-section (1), the Commission shall, as soon as possible after the end of each financial year, submit to the Central Government a report, in such form and before such date as may be prescribed, giving a true and full account of its activities, policy and programmed during the previous financial year.

3. A copy of the report received under sub-section (2) shall be laid before each House of Parliament.