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The Bombay Local Authorities Loans Rules, 1923

Published vide Notification No. G.N., F.D., No. 1393-E, dated 23rd December, 1922 (B.G., Part 1, page 2918)

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(1) "the Act" means the Local Authorities Loans Act, 1914 (IX of 1914);

(2) "Government Loan" means a loan taken from funds of the State Government;

(3) "Loan" means a loan made, taken or raised, under the Act and includes a loan for the payment of the cost of the carrying out of a work under sub-section (1)(i) of section 3 of the Act, [or a loan for the recoupment] of any expenditure incurred by a local authority with the sanction of the State Government for the carrying out of any such work;

(4) "Non-Government loan" means a loan raised, with the sanction of the State Government, otherwise than from funds of the State Government; and

(5) "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.

(a) within the local limits of the area subject to the control of the Local Authority, or

(b) for the benefit of the inhabitants within those limits.

(1) The purpose for which the loan is required, and where the loan is required for any of the purposes specified in clause (i), (ii) or (iv) of subsection (1) of section 3, an estimate of the cost of the entire work or such part of it as it is proposed to carry out from loan funds;

(2) The amount which it is proposed to borrow;

(3) The fund on the security of which it is proposed to borrow;

(4) The law under which the said fund is levied, received, or held;

(5) The dates within which the money is to be borrowed, and when it is proposed to raise a loan in instalments, the amount of each instalments, the dates within which the first instalment is to be taken or raised, and the years in which it is intended to take or raise the other instalments;

(6) The rate of interest at which it is proposed to borrow;

(7) The term of years for which the money is to be borrowed, and the method by which it is to be repaid. If it is proposed to repay the loan by means of a Sinking Fund, the rate of interest, at which the improvement of such Sinking Fund is to be calculated, shall also be stated;

(8) An account of the financial position of the local authority, including a statement of all existing prior charges on its funds

(a) The receipt side of the account should show only ordinary revenue. Receipts from loans or deposits, or the investments of Sinking Funds should be excluded as well as items of abnormal character which should be indicated separately when required;

(b) On the expenditure side interest on debt and payments to a Sinking Fund should be included, and all expenditure from loan funds and repayment of advances or deposits should be excluded;

(c) Explanations should be given of important variations in the accounts of revenue and expenditure.

(9) The extraordinary items of receipts and expenditure with full description of the nature of receipt or expenditure for the past three years in a separate statement;

(10) The balance of each loan taken either from the State Government or open market together with the amount of instalment, if any to be set aside annually for the Sinking Fund should be distinctly shown in a separate statement.

(1) reject the application, or

(2) if so empowered grant the loan, or sanction the raising of the loan, as the case may be, [with or without modification].

(a) the term of the loan does not ordinarily exceed the maximum period of 30 years. Every loan should usually run for as short a period as possible. This rule may, however, be relaxed in very special cases;

(b) funds are available from the grant voted by the Legislative Assembly for the purpose; and

(c) the rate of interest payable on the loan to be such as the State Government shall determine.

(i) In the case of every loan, the State Government shall determine and the local authority shall pay the cost -

(a) of any inquiry made under rule 5,

(b) of advertisements published under rule 7,

(c) of inspection made, and other measures of control taken, under rule 12, and

(d) of any other proceedings taken by order of the State Government under these rules.

(ii) In the case of every loan, that the local authority shall furnish to the Accountant General, Bombay, and to the State Government, any information which they may require regarding its funds and regarding the expenditure of the loan.

(iii) In the case of a Government loan, the State Government, if it 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, may at any time in 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.

(iv) In the case of a non Government loan, that the local authority shall not, without the previous approval of the State Government, vary the dates within the raising of the loan or of the first instalment of it, has been sanctioned; and that, if the loan is raised by instalments, the local authority shall report, for the previous approval of the State Government, the dates within which each further instalment is to be raised.

I. The execution, supervision and audit of works entrusted to the Public Works Department will, as heretofore, continue to be subject to the rules of that Department as published in the Public Works Code.

II. The rules hereinafter following apply only to works to be constructed independently of the Public Works Department by local authorities authorised under the Local Authorities Loans Act, 1914, to raise money in the open market or by taking a loan from the State Government for the purpose.

III. It shall be the duty of the Executive Engineer in whose district such works are being constructed out of loans raised by local authorities in the open market or be taking a loan from the State Government under the Local Authorities Loans Act, 1914, or of any person specially authorised by the State Government in this behalf, to inspect such works and the accounts connected therewith at such intervals as the State Government or the Chief or the Superintending Engineer may direct.

IV. Such inspection shall ordinarily be conducted quarterly by the Executive Engineer and monthly by the Public Works Department Sub-Divisional Officer in whose charge the work may be and shall be chiefly directed to ascertaining that the quantity and quality of the work executed and the progress made in construction are fairly commensurate with the outlay charged in the accounts.

V. (i) For the purpose of sub-rule IV under rule 12 the local authority shall cause a continuous record of expenditure to be maintained and posted monthly in the Public Works Department "Register of Works" - Form 'A' appended to these rules. The measurements for the month and for the year and upto date must be shown for each item, but corresponding expenditure on items need only be given for those works estimated to cost over Rs. 5,000. The expenditure for the work for the month, the expenditure for the year and the total expenditure should be shown. Columns should be provided for "Materials at site" and for liabilities. With the above information the quantities and cost (calculated on the normal cost system*) may, at any time, be compared with the estimate. With the sanction of the State Government the account forms may be modified and actual expenditure by items omitted in any special cases in which this is deemed desirable.

* Note. - The normal cost is the cost at estimated rates of all works actually executed.

(ii) If a loan is raised for the construction of roads, a return of road material should be prepared for the inspection by the Public Works Department officers.

VI. Every deviation from any project as sanctioned, which in the opinion of the inspecting officer is likely to entail, any increase in the outlay exceeding five per cent, on the estimates approved, or to impair or diminish the utility of the works under construction, shall be reported to the State Government and also to the local authority concerned, and no such deviation shall in any case be proceeded with or without the sanction of the State Government and of such local authority, or otherwise than in accordance with such requirements as the State Government or such local authority with the approval of the State Government may impose as to additions, alterations and amendments in the estimates.

VII. Every inspecting officer shall furnish the Chief or Superintending Engineer with a brief report of the inspections performed by him with such remarks on the construction and progress of the works as he may deem necessary. The Chief or Superintending Engineer shall bring to the notice of the State Government any points on which the orders of the State Government are considered to be necessary.

VIII. In regard to the loan accounts of local authorities whose accounts are subject to an official audit by the Accountant General a test audit shall be conducted by the Local Fund Audit Department of the Accountant General's office. In all other cases the test audit shall be carried out once a year as the Accountant General may direct, and shall be confined exclusively to the accounts of expenditure from the loan.

(a) The State Government shall issue a notice to the local authority prohibiting the collection or management of such funds by the local authority, and vesting and administration thereof in such officer as the State Government may appoint. The State Government shall cause such notice to be published in the Bombay 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 State Government under section 5 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 moneys so collected and of the cost of collection, in such form as the State 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 Bombay Government Gazette.

(a) In the case of a Government loan. - The State Government shall direct that the unexpended balance shall be forthwith repaid to the State Government, and the principal of the debt reduced by an equivalent amount, the State 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 State Government may direct that the unexpended balance shall be utilised in the reduction in any way of the debt of the local authority, or in carrying out any works which the local authority is legally authorised to carry out.

(1) Interest shall be charged at the rate agreed upon, yearly or half-yearly, as the State 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 State Government may, if it thinks fit, direct that a penal rate of compound interest not exceeding 10 per cent, per annum shall be paid upon all overdue instalments of interest, or of principal and interest.

(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 State 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 State Government otherwise direct.

(3) It shall submit the accounts of its sinking fund annually to the Accountant General, Bombay, and shall at once make good from its income any amount by which he may certify that the fund is deficient, unless the State Government sanctions a gradual re-adjustment, and

(4) It shall invest its Sinking Fund Government securities as defined by the Indian Securities Act, 1920, or securities specified in clause (c) or (d) of section 20 of the Indian Trusts Act, 1882 ;

[(5) Notwithstanding anything in sub-rule (4) it shall be lawful for a local authority to invest any amount standing to the credit of the sinking fund established in respect of any specified loan in purchasing its own debentures or other securities issued for raising such loan:

Form 'A'

.................... Fund

Register of works

Executive Engineer

.................... District.

Note. - This form will be used for all works costing over Rs. 2,500 whether accounted for according to actual or normal cost. When used for the latter class of works, the blank column immediately preceding "Total value of work done" should be headed "Total normal cost".

Name of Work

Name of Work

Explanation of difference or deviations from the sanctioned estimate

Executive Engineer,

.................District.

Notification