KERALA LOCAL AUTHORITIES LOANS RULES, 1965

*THE LOCAL AUTHORITIES LOANS RULES, 1965
S.R.O. No. 268/65- In exercise of the powers conferred by Section 8 of the Kerala Local Authorities Loans Act, 1963 (30 of 1963), the Government of Kerala hereby make the following rules namely:-

RULES

1. Short title and commencement.- (1) These rules may be called the Kerala Local Authorities Loans Rules, 1965.
(2) They shall come into force with effect from 1st August, 1965.
2. Definitions.- In these rules, unless the context otherwise requires
(i) the Act means the Kerala Local Authorities Loans Act, 1963 (Act 30 of 1963);
(ii) “Government loan" means a loan taken by a local authority from the Government funds;
(iii) "Ioan” means a loan made, taken or raised under the Act;
(iv) “non-Government loan” means a loan raised otherwise than from Government funds;
(v)"term of a loan" means the period elapsing between the date on which the loan is completely made, taken or raised and the date on which it is completely repaid.

3. Limitation of borrowing power.- A local authority shall not borrow money for any of the purposes specified in Clauses (i) to (iv) of sub-section (1) of Section 3 of the Act unless the Work to be carried out is either
(a) within the local limits of the area subject to the control of the local authority,
(b) for the benefit of the inhabitants within those limits.

4. Nature of the funds on the security of which a local authority may borrow.- For the purpose of borrowing money under Section 3 of the Act or guaranteeing interest under Section 5 of the Act, a local authority shall not offer as security any of its funds which is charged under any provision of law for any specific purpose other than the one for which the loan is proposed to be raised or for which the interest is proposed to be guaranteed, except with the approval of the Government.

5. Works for which money may be borrowed etc.— A local authority shall not borrow money nor shall it guarantee the payment of interest for any work which it is not legally authorisedto execute under the provisions of law governing it.

6. Manner of application for permission to borrow money- When a local authority desires to borrow money, it shall submit an application to the Government or to such authority as may be specified by them in this behalf, in the form given in Appendix I.

7. Manner of making application for sanction to give guarantee.- When a local authority desires either severally or in Conjunction with any other local authority to charge its funds or any part thereof by way of guarantee for the payment of interest on money expended or to be expended on any work, under Section 5 of the Act, it shall submit an application to the Government in the form given in Appendix II

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8. Inquiries to be made on applications.- The Government or the authority authorised under Rule 6, shall cause such inquiry as they think fit to be made into the statements contained in the application made, under Rule 6 or 7 as the case may be. Such enquiry may be conducted through such persons as the Government or the authority may authorise or with reference to such records as they may deem fit.

9. Rejection of application etc.- If it appears to the Government or the authority authorised under Rule 6, as the case may be, that the money ought not to be borrowed or that the payment of interest on the money expended or to be expended on any work or for any of the purposes, to which such funds might be by law applied, shall not be guaranteed, it shall reject the application.

10. Removed

11. Disposal of application.- The Government or the authority authorised under Rule 6, as the case may be, after conducting the enduiry referred to in Rule 8 either
(i) reject the application, or
(ii) grant the loan or sanction the raising of the loan as the case may be, or
(iii) permit the local authority to guarantee the payment of interest under Section 5 of the Act.
Provided that no application shall be rejected under this rule without giving the Local authority an opportunity to show cause against the action proposed to be taken.)

11A deleted

12. Power of Government to grant urgent loans.- Where a local authority in its application desires the immediate grant, or sanction to the raising of a loan on the ground that funds are urgently needed for any of the purposes mentioned in sub-section (1) of Section 3 of the Act, the Government or the authority authorised under rule 6 as the case may be, if it is satisfied that the loan is urgently needed for any purpose, may, notwithstanding anything contained in Rules 8 and 11 after such inquiry, if any, as it thinks fit to make, grant, or sanction the raising of, such loan at any time after the receipt of the application.

13. Conditions relating to non-Government loans.- The Government or the authority authorised under Rule 6 shall not permit the raising of a non-Government loan unless it is satisfied that the local authority will be able to repay the loan together with interest in time from the proceeds from the work to be executed with the proposed loan.

14. Inspection of works etc.- it shall be lawful for the Government or for such officers as they may authorise, to inspect or to cause the inspection or any work carried out under contract in respect of which the payment of interest is guaranteed by a local authority either severally or in conjunction with any other local authority under Section 5 of the Act and every person in charge of the execution of the Work shall be bound to afford such facilities as the inspecting officers may require for the purpose of inspection of the work.

(2) The person or the corporate body with whom any such contract for the work is made, shall keep Such accounts in respect of the Work as the Government or such inspecting officers may require and all Such accounts shall be made available to the Government or the inspecting officers for inspection if so called for.

15. Grant of Government Loans.- (1) If the Government grant a loan to a local authority under Rule 11, the local authority shall be required to execute an agreement in the form given in Appendix Illin favour of the Government and the loan shall be granted subject to such conditions as the Government may specify.
(2) Every grant of a Government loan shall be subject to the conditions that

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(i) the local authority shall furnish to the Examiner of Local Fund Accounts, the Accountant General, the Government and the authority authorised under Rule 6, all information which they may require regarding its funds and regarding the expenditure of the loan;
(ii) the accounts of the local authority in respect of the loan amount shall be open to audit by the Accountant General;
(iii) If the Government or the authority authorised under Rule 6 considers that the local authority has failed to comply with any of the conditions prescribed in respect of the loan or with any of the requirements of these rules it shall be lawful for them to order that no further payments shall be made on account of such loan and that any amount advanced with interest thereon shall be repaid immediately.

16. Control and inspection of works and accounts.- The Government shall make such provisions as they may deem necessary
(a) for ascertaining and Securing that the money borrowed is duly applied to the purpose for which it has been borrowed, and that the unexpended balance of the loan is not employed otherwise than in accordance with these rules.
(b) Where the loan is taken for any of the purposes specified in Clauses (i), (ii), (iii), or (iv) of sub-section (1) of Section 3 of the Act for the proper inspection of the work to be carried out:
Provided that every such work and the accounts connected therewith shall be open at all times to the inspection of-
(1) the officers of the Engineering Departments of the Government not below the rank of an Executive Engineer exercising jurisdiction over the area in which the work is executed;
(2) any person who may be authorised to inspect the accounts of the local authority, and
(3) any other person specially authorised by the Government in this behalf.

17. Procedure on attachment- When the Government decide to attach any funds under Section 4 or under Section 6 of the Act, the following procedure shall be observed, namely:-
(a) the Government shall issue a notice to the local authority prohibiting the collection or management of Such funds by the local authority, and vesting the administration thereof in such officer as the Government may appoint. The Government shall cause such notice to be published in the Government Gazette, and in such other manner as it may deem fit within the local limits of the area subject to the control of the local authority;
(b) the officer appointed by the Government under Section 4 or under Section 6 of the Act shall pay the moneys collected or received under such attachment to the lender, or in the case of a Government loan, into the Government Treasury;
(c) the said officer shall, prepare the accounts of money So Collected and of the cost of collection in such form as the Government may, from time to time, direct. He shall deliver a copy of the accounts to the local authority and shall cause a copy to be published in the Gazette.

18. Procedure in respect of unexpended balances of loans.- If, on the completion of the work or the closing of the account of the transaction for which a local authority has borrowed money, the Government is satisfied that the whole of the money has not been spent on the purpose of Which it was borrowed it shall proceed as follows, namely:-
(a) in the case of a Government loan - The Government shall direct that the unexpended balance shall be forthwith repaid to the Government, and the principal of the debt reduced by an equivalent amount. The Government may direct such variation as it may consider necessary on this account in the instalments fixed for the liquidation of the loan.
(b) In the case of a non-Government loan - the Government may direct that the unexpended balance shall be utilised in the reduction in any way of the debt of the local authority.

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19. Interest on Government loans.-(1) In the case of Government loans interest shall be charged, at the rate agreed upon yearly or half-yearly, as the Government may determine and shall be reckoned and paid on each instalment from the date on which such instalment is received by the local authority.

(2) The Government may, if they think fit, direct that compound interest at a rate not less than 7% per cent per annum shall be paid upon all overdue instalments of interest or principal and interest.

20. Repayment of Government loans.- The local authority may, at any time, repay the whole or any part of a Government loan in advance of the period fixed by the conditions of the loan.

21 Accounts of Government loans.-The accounts of every Government loan shall be kept by the ACCountant General.

22. Sinking fund for non-Government loans.- If a loan is not repayable by annuities or annual drawings, the local authority shall establish a sinking fund in the following manner, namely:-
(1) it shall pay out of its income, yearly or half yearly into such fund, a sum which, accumulating at such rate of compound interest as the Government may fix, will be sufficient to secure the liquidation of the loan within the term fixed for its repayment;
(2) it shall make the first of such payments within one year from the date of taking or raising the loan unless the sanctioning authority otherwise directs, and
(3) it shall submit the accounts of its sinking fund annually to the Examiner of Local Fund Accounts and shall at once make good from its income any amount by which he may certify that the fund is deficient, unless the Government sanctions gradual readjustment.

Explanatory Note

(This note is not part of these Rules but is intended to indicate their general purport).
Section 8 of the Kerala local Authorities Loans Act, 1963 requires that the Government may, by notification in the Gazette make rules to carry out the purposes of the Act. The above rules are intended to regulate the raising of loans by Local Authorities.

APPENDIX I
Application for loan
(See Rule 6)


1.Purpose of the loan.
2. The amount proposed to be borrowed.
3. If the amount is for any remunerative work the probable return from the same per annum after its execution.
4. The fund or the portion of the fund on the security of which it is proposed to borrow.
5. The law under which the said fund is levied, received or held.
6. The date within which the money is to be borrowed.
7. The rate of interest at which the money is to be borrowed.
8. The term of years for which the money is to be borrowed and the method by which it is to be repaid.
9. Account of the financial position of the Municipality.

10. A statement of the prior loans outstanding, repayment and the method of their repayment

APPENDIX II
Application For Permission to Guarantee interest
(See Rule 7)

1. Purpose for which the payment of interest is to be guaranteed.
2. Cost of the work or the expenditure to be incurred for the purpose and probable amount as interest to be guaranteed.
3. Whether the interest is to be guaranteed severally or in conjunction with any other local authority.
4. If in conjunction with any other local authority, the name of the local authority concerned.

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5. The probable return that may be received by the local authority on the completion of the work, if it is a remunerative One.
6. The fund or the portion of the fund on the security of which the interest is to be guaranteed.
7. The law under which the said fund is levied, received or held.
8. The date within which the interest is to be guaranteed.
9. The rate of interest to be guaranteed.
10. The term of the years for which the guarantee has to be given.
11. Account of the financial position of the Municipality.
12. A statement of the prior loans outstanding repayment and the method of their repayment

                                   APPENDIX III 

THIS AGREEMENT is executed on this................. day of Two Thousand................ Between (H.E. the name of the local authority) (hereinafter called "the Borrower”) of the one part and the Government of Kerala (hereinafter called "the Government") of the other part
Whereas on the application of the borrower, the Government have sanctioned a loan of Rs.................. in G.O.................... dated.......................... under the Kerala Local Authorities Loans Act, 1963 (hereinafter referred to as the said Act) for the purpose of.............. (H.E. the purpose) subject to the terms and conditions contained in the said Act and in the Kerala Local Authorities Loans Rules, 1965 (hereinafter referred to as the "said Rules") and those hereinafter contained to which the borrower has agreed; Whereas the said borrowing has been duly authorised by Resolution No............. dated................. passed at a duly authorised meeting of the Borrower held on..........

Now These presents witness and it is hereby agreed as follows:- 

1. The loan amount of Rs..................... under this agreement shall be secured on the funds of the Borrower.
2. The loan shall bear interest at the rate of............... per cent per annum from the date of disbursement of the loan. In case the borrower commit default in payment of any instalment compound interest at the rate of ........ percent per annum shall be paid on the instalment thus defaulted. Notwithstanding the above condition the local authority shall be liable to pay interest and penal interest at the rates that may be fixed by the Government from time to time.
3. The loan amount with interest thereon shall be paid in............. equated instalments the first instalment being payable on completion of one year from the date of disbursement of the loan and the subsequent instalments shall be paid on the corresponding dates of the succeeding years.
4. The loan amount shall be utilised by the Borrower only for the purpose of.......... and for no other purpose
5. The Borrower shall forthwith pay to the Government the unexpended portion if any, of the loan amount and the loan shall be reduced by an equivalent amount.
6. The Borrower shall not before the repayment of the loan amount in full, create any charge on the fund of the Borrower without the previous sanction in writing of the Government.
7. The Borrower shall furnish to the Examiner of Local Fund Accounts, the Accountant General, and any other person authorised by Government the information which they may require regarding its fund and the utilisation of the loan amount.
8. On breach of all or any of the terms and conditions herein contained, the whole amount then outstanding together with interest thereon shall immediately be repaid to the Government in a lump.
9. In case the Borrower commits default in repayment of any of the instalments of the loan amount or interest on due dates the Government shall be competent to attach the funds of the Borrower on which the loan has been secured, under Section 5 of the said Act.
10. The Borrower agrees that all sums found due to the Government under or by virtue of this agreement shall be recovered from the properties movable and immovable of the Borrower, as if they are arrears of Land Revenue under the provisions of the Revenue Recovery Act for the time being inforce and in such other manner as the Government may deem fit.
In witness whereof Shri................................................................... for and on behalf of the Borrower and Shri........................................................... for and on behalf of the Government have hereunto set their hands the day and year first above written.

Signed by Shri............... ................................................................................. In the presence of witnesses.


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Signed by Shri.................................................................... In the presence of witnesses.

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