THE KHADI AND VILLAGE INDUSTRIES COMMISSION ACT, 1956 

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ARRANGEMENT OF SECTIONS                                                                                                            

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CHAPTER I 
PRELIMINARY 

SECTIONS 

1. Short title and extent. 

2. Definitions. 

3. Power to add to the Schedule. 

CHAPTER II 

THE KHADI AND VILLAGE INDUSTRIES COMMISSION 

4. Establishment and constitution of the Commission. 

5. Powers and functions of the Chief Executive Officer. 

5A. Powers and functions of the Financial Adviser. 

6. Disqualifications for membership of the Commission. 

6A. Removal of Chairman, Member, etc., from the Commission.  

7. Resignation of office by member. 

8. Vacancies, etc., not to invalidate acts and proceedings of the Commission. 

9. Temporary association of persons with the Commission for particular purposes. 

10. Constitution of the Board. 

11. Commission to consult the Board. 

12. Meetings of the Commission. 

12A. Zonal Committee. 

13. Term of office and conditions of service of the chairman and other members. 

14. Officers and servants of the Commission. 

CHAPTER III 

FUNCTIONS OF THE COMMISSION 

15. Functions of the Commission. 

16. Power of Central Government to give directions. 

CHAPTER IV 

FINANCE, ACCOUNTS, AUDIT AND REPORTS 

17. Payment to the Commission. 

17A. Commission to receive gifts, grants, etc. 

18. Funds of the Commission. 

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SECTIONS 

19. Power of the Commission to spend. 

19A. Standing Finance Committees. 

19B. Recovery of monies due to the Commission as arrears of land-revenue.  

20. Budget. 

21. Borrowing of money. 

22. Transfer of liabilities and obligations to the Commission. 

23. Accounts and audit. 

24. Returns and reports. 

24A. Exemption from liability to pay income-tax. 

CHAPTER V 

MISCELLANEOUS 

25. Dissolution of the Commission. 

26. Power to make rules. 

27. Power to make regulations. 

28. Rules and Regulations to be laid before Parliament. 

THE SCHEDULE. 

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THE KHADI AND VILLAGE INDUSTRIES COMMISSION ACT, 1956* 

ACT NO. 61 OF 1956 

An  Act  to  provide  for  the  establishment  of  a  Commission  for  the  development  of  Khadi  and 

Village Industries and for matters connected therewith. 

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:— 

[25th September, 1956.] 

CHAPTER I 

PRELIMINARY 

1. Short title and extent.—(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*. 

2. Definitions.—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; 

2[(cc)  “fixed  capital  investment”  includes  investment  in  plant  and  machinery  and  land  and 

building of an industry;] 

(d)  “khadi”  means  any  cloth  woven  on  handlooms  in  India  from  cotton,  silk  or  woolen  yarn 

handspun in India or from a mixture of any two or all of such yarns; 

(e) “member” means a member of the Commission 3[and includes the chairman 4***]; 

(f) “prescribed” means prescribed by rules made under this Act; 
5[(ff) “rural area” means the area comprised in any village, and includes the area comprised in any 
town, the population of which does not exceed 6[twenty thousand] or such other figure as the Central 
Government may specify from time to time;] 

7*                                          *                                        *                                         *                                    * 
8*                                          *                                        *                                         *                                    * 
9[(h) “village industry” means,— 

(i) 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  10[one  lakh  rupees]  or  such  other  sum  as  may,  by  notification  in  the 
Official Gazette, be specified from time to time by the Central Government: 

1. Subs. by Act 36 of 1957, s. 3 and the Second Schedule, for “section 9” (w.e.f. 17-9-1957). 
2. Ins. by Act 12 of 1987, s. 2 (w.e.f. 24-7-1987). 
3. Subs. by Act 32 of 1961, s. 2, for “and includes the chairman” (w.e.f. 28-8-1961). 
4. The words “and the vice-chairman” omitted by Act 12 of 1987, s. 2 (w.e.f. 24-7-1987). 
5. Ins. by s. 2, ibid. (w.e.f. 24-7-1987). 
6. Subs. by Act 10 of 2006, s. 2, for “ten thousand” (w.e.f. 15-5-2006). 
7. Omitted by Act 12 of 1987, s. 2 (w.e.f. 24-7-1987). 
8. Omitted by s. 2, ibid. (w.e.f. 24-7-1987). 
9. Subs. by s. 2, ibid., for clause (h) (w.e.f. 24-7-1987). 
10. Subs. by Act 10 of 2006, s. 2, for “fifteen thousand rupees” (w.e.f. 15-5-2006). 
*. Vide notification No. S.O. 3912(E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu and 

Kashmir and the Union territory of Ladakh.   

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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  (12  of  1987),  shall,  notwithstanding 
anything contained in this sub-clause, continue to be a village industry under this Act: 

1[Provided further that in the case of any industry located in a hilly area, the provisions of this 
sub-clause shall have effect as if for the words “one lakh rupees”, the words “one lakh and fifty 
thousand rupees” steal.] 

(ii)  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  Khadi  and  Village  Industries  Commission 

(Amendment) Act 1987 (12 of 1987), s. 3 (w.e.f. 24-7-1987). 

CHAPTER II 

THE KHADI AND VILLAGE INDUSTRIES COMMISSION 

4.  Establishment  and  constitution  of  the  Commission.—(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 sued. 

2[(1A) Save as otherwise provided under this Act and the rules made thereunder, the exercise of all 
powers  and  discharge  of  all  functions  under  this  Act,  including  general  superintendence,  direction  and 
management of day-to-day affairs of the Commission, shall vest in the Commission.] 

3[(2) The Commission shall consist of the following members appointed by the Central Government, 

namely:— 

(a)  six  non-official  members 4[having  specialised  knowledge  and  not  less  than  ten  years  of 
experience of khadi or village industries] and representing such six geographical zones of the country, 
as may be prescribed; 

5[(b) four non-official members of whom each member shall be from the  following disciplines, 

namely:— 

(i) one member having expert knowledge and experience in Science and Technology; 

(ii) one member having expert knowledge and experience in Marketing; 

(iii) one member having expert knowledge and experience in Rural Development; and 

(iv)  one  member  having  expert  knowledge  and  experience  in  Technical  Education  and 

Training.] 
6[(ba) the Chairman of the State Bank of India constituted under sub-section (1) of section 3 of 
the  State  Bank  of  India  Act,  1955  (23  of  1955)  or  an  officer  not  below  the  rank  of  the  Deputy 
Managing Director as may be nominated by the Chairman of the State Bank of India—ex officio;]; 

7[(c) a Chief Executive Officer, ex officio; and 

1. The proviso ins. by Act 10 of 2006, s. 2 (w.e.f. 15-5-2006). 
2. Ins. by s. 3, ibid. (w.e.f. 15-5-2006). 
3. Subs. by Act 12 of 1987, s. 4, for sub-sections (2) and (3) (w.e.f. 24-7-1987). 
4. Subs. by Act 10 of 2006, s. 3, for “having specialised knowledge and experience of khadi and village industries”  

(w.e.f. 15-5-2006). 

5. Subs. by s. 3, ibid., for clause (b) (w.e.f. 15-5-2006). 
6. Ins. by s. 3, ibid. (w.e.f. 15-5-2006). 
7. Subs. by s. 3, ibid., for clauses (c) and (d) (w.e.f. 15-5-2006). 

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(d)  a  Financial  Adviser,  who  shall  also  be  the  Chief  Accounts  Officer  of  the  Commission,              

ex officio.] 

1*                               *                                *                                    *                                   * 

(3)  The  Central  Government  may  appoint  one  of  the  members  appointed  under  clause  (a)  of           

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

2[5.  Powers  and  functions  of  the  Chief  Executive  Officer.—3[(1)  Subject  to  the  provisions 
contained  in  sub-section  (1A)  of  section  4,  the  Chief  Executive  Officer,  appointed  under  clause  (c)  of    
sub-section (2) of section 4, shall exercise such powers and discharge such functions in respect of general 
superintendence  over  the  affairs  of  the  Commission  and  its  day-to-day  management,  as  may  be 
prescribed. 

(1A) Without prejudice to the powers and functions referred to in sub-section (1), the Chief Executive 
Officer  shall  exercise  such  powers  and  discharge  such  functions  under  the  general  superintendence, 
direction and management of the Commission.] 

(2)  The  Chief  Executive  Officer 4[shall,  in  addition  to  exercise  of  the  powers  and  discharge  of  the 
functions  referred  to  in  sub-section  (1),  be  responsible]  for  the  furnishing  of  all  returns,  reports  and 
statements required to be furnished to the Central Government under section 24. 

(3)  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. 

5[5A.  Powers  and  functions  of  the  Financial  Adviser.—The  Financial  Adviser  6[appointed  under 
clause (d) of sub-section (2) of section 4 shall be in charge of such financial matters of the Commission 
including its budget, accounts and audit, as may be prescribed] 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. 

6. Disqualifications for membership of the Commission.—A person shall be disqualified for being 

appointed as, and for being, a member of the Commission— 

(a) if he is, or is found to be a lunatic or a person of unsound mind; or 

(b) if he has been adjudged insolvent; or 

(c) if he has been convicted of an offence involving moral turpitude; or 

(d) 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 

(e) 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. 
7[6A.  Removal  of  Chairman,  Member,  etc.,  from  the  Commission.—The  Central  Government 

may, by notification in the Official Gazette, remove from office any member of the Commission who— 

(a) is or becomes subject to any of the disqualifications mentioned in section 6; or 

(b) in the opinion of the Central Government has failed or is unable to carry out his duties; or 

(c) absents himself from three consecutive meetings of the Commission without the leave of the 

Commission: 

1.  The proviso omitted by Act 10 of 2006, s. 3 (w.e.f. 15-5-2006). 
2. Subs. by Act 12 of 1987, s. 5, for sections 5 and 6 (w.e.f. 24-7-1987). 
3. Subs. by Act 10 of 2006, s. 4, for sub-section (1) (w.e.f. 15-5-2006). 
4. Subs. by s. 4, ibid., for “shall be responsible” (w.e.f. 15-5-2006). 
5. Ins. by s. 5, ibid. (w.e.f. 15-5-2006). 
6. Subs. by s. 5, ibid., for certain words (w.e.f. 15-5-2006). 
7. Ins. by Act 12 of 1987, s. 6 (w.e.f. 24-7-1987). 

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Provided that before issuing any such notification, the Central Government shall give an opportunity 

to the member concerned to show cause against such removal.] 

7. Resignation of office by member.—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. 

8.  Vacancies,  etc.,  not  to  invalidate  acts  and  proceedings  of  the  Commission.—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 thereof. 

9.  Temporary  association  of  persons  with  the  Commission  for  particular  purposes.—(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. 

10. Constitution of the Board.—1[(1)] 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 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 2[National Khadi and Village Industries Board.] 

3[(2) The Board shall, subject to the provisions of sub-section (3), meet at such times and places and 
observe  such  rules  of  procedure  in  regard  to  the  transaction  of  business  at  its  meetings  including  the 
quorum at meetings as may be prescribed; 

(3) The Board shall meet at least twice in a year.]. 

11.  Commission  to  consult  the  Board.—The  Commission  shall  ordinarily  consult  the  Board  with 

respect to the discharge of its functions under this Act. 

12.  Meetings  of  the  Commission.—(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. 
4[(2) 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 5[votes of the 
members (including ex officio 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. 

6[12A.  Zonal  Committee.—(1)  The  Commission  shall  constitute  for  each  of  the  six  geographical 
zones, referred to in clause (a) of sub-section (2) of section 4, a Zonal Committee, which shall consist of 
the following, namely:— 

1. Section 10 renumbered as sub-section (1) thereof, by Act 10 of 2006, s. 6 (w.e.f. 1-10-1984). 
2. Subs. by s. 6, ibid., for “Khadi and Village Industries Board” (w.e.f. 15-5-2006). 
3. Ins. by s. 6, ibid. (w.e.f. 15-5-2006). 
4. Subs. by Act 12 of 1987, s. 6, for sub-section 2 (w.e.f. 24-7-1987). 
5. Subs. by Act 10 of 2006, s. 7, for “votes of the members present” (w.e.f. 15-5-2006). 
6. Ins. by s. 8, ibid. (w.e.f. 15-5-2006). 

6 

 
                                                           
(a) the non-official member representing the zone, referred to in clause (a) of sub-section (2) of 

section 4, who shall be the Chairman of the Zonal Committee constituted for respective zones; 

(b) one representative of each of the State Khadi and Village Industries Boards of the States or, as 
the case may be, the Government of each State in the zone, to be notified by the Central Government 
in consultation with the State Government concerned—member; 

(c) the Zonal Deputy Chief Executive Officer of the Commission, who shall be the convener of 

the Zonal Committee—member; 

(d)  the  State  Directors  in  charge  of  the  Commission’s  Directorates  for  the  States  in  the             

zone—member; 

(e) a Zonal or Regional manager of one of the lead banks operating in the zone-member; and 

(f)  one  representative  of  an  institution  of  repute,  working  for  at  least  ten  years  in  the  khadi  or 
village industries sector and having a good record of performance, from each State in the zone, to be 
notified by the Central Government—member. 

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

Provided that the Committee shall meet at least once in every three months. 

(3) The Chairman of the Zonal Committee or, in his absence, any member chosen by the members 

present from among themselves, shall preside at a meeting of the Committee. 

(4)  The  Zonal  Committee  shall  generally  function  as  a  forum  for  consultation  and,  accordingly,     

inter alia,— 

(a) act as a conduit for the dissemination of information relating to the programmes and schemes 

of the Commission for the development of khadi and village industries in the zone; 

(b) monitor, from time to time, the implementation of the programmes and schemes referred to in 

clause (a); 

(c)  provide  feedback  to  the  Commission  on  the  problems  and  difficulties  envisaged  and 
suggestions  made  by  banks,  voluntary  agencies,  artisans  and  others  engaged  in  the  operation  of 
programmes and schemes referred to in clause (a).] 
1[13. Term of office and conditions of service of the chairman and other members.—(1) Every 
member  of  the  Commission,  other  than  an  ex  officio  member,  shall  hold  office  2[at  the  pleasure  of  the 
Central Government which shall not exceed continuous period 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*                *                *                 *                * 
4*** 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: 

    4*                              *                                 *                               *                                   * 

1. Subs. by Act 12 of 1987, s. 7, for section 13 (w.e.f. 24-7-1987). 
2. Subs. by Act 10 of 2006, s. 9, for “for a term of five years” (w.e.f. 15-5-2006). 
3. Sub-section (1), omitted by Act 12 of 1987, s. 8 (w.e.f. 24-7-1987). 
4. The proviso and brackets and figure “(2)” omitted by s. 8, ibid. (w.e.f. 24-7-1987). 

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8 

 
 
 
CHAPTER III 

FUNCTIONS OF THE COMMISSION 

1[15. Functions of the Commission.—(1) Subject to the provisions of this Act, the functions of the 
Commission shall generally be to 2[plan, promote, facilitate, 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 steps as it may think fit,— 

(a) to 3[plan and organise, directly or through specified agencies] training of persons employed or 

desirous of seeking employment in khadi and village industries; 

(b) to 4[build up, directly or through specified agencies] reserves of raw materials and implements 
and 5[supply  them  or  arrange  supply  of  the  raw  materials  and  implements]  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 6[provide  financial  assistance,  directly  or  through  specified  agencies,]  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 7[undertake, directly or through specified agencies, 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 co-operative 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. 9, for section 15 (w.e.f. 24-7-1987). 
2. Subs. by Act 10 of 2006, s. 10, for “plan, promote, organise” (w.e.f. 15-5-2006).  
3. Subs. by s. 10, ibid., for “plan and organise” (w.e.f. 15-5-2006). 
4. Subs. by s. 10, ibid., for “build up” (w.e.f. 15-5-2006). 
5. Subs. by s. 10, ibid., for “supply them” (w.e.f. 15-5-2006). 
6. Subs. by s. 10, ibid., for “provide financial assistance” (w.e.f. 15-5-2006). 
7. Subs. by s. 10, ibid., for “undertake experiments” (w.e.f. 15-5-2006). 

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1[Explanation.—For the purposes of clauses (a), (b), (g) and (h) of sub-section (2), the expression 
“specified agencies” means the agencies which the Central Government may, by notification in the 
Official Gazette, specify in this behalf.] 

16. Power of Central Government to give directions.—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. 

CHAPTER IV 

FINANCE, ACCOUNTS, AUDIT AND REPORTS 

17. Payment to the Commission.—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. 

2[17A.  Commission  to  receive  gifts,  grants,  etc.—The  Commission  may,  for  the  purpose  of 
development of Khadi,  3[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.] 

18. Funds of the Commission.—4[(1) The Commission shall have stet separate funds to be called the 

khadi fund, the village industries fund and the general and miscellaneous fund. 

(1A) There shall be credited,— 

(a) to the khadi fund, all sums received by the Commission for the purposes relating to khadi. 

(b) to the village industries fund, all sums received by the Commission for the purposes relating 

to village industries and products of handicrafts; 

(c) 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 6f 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),— 

(a) to the khadi fund, shall be applied for the purposes relating to khadi; 

(b) to the village industries fund, shall be stet for the purposes relating to village industries and 

products of handicrafts; 

(c)  to  the  general  and  miscellaneous  fund,  shall  be  stet  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. 

19. Power of the Commission to spend.—Subject to the provisions of section 20 the Commission 

shall have power to spend such sums as it thinks fit on purposes authorised by this Act: 

1. The Explanation ins. by Act 10 of 2006, s. 10 (w.e.f. 15-5-2006). 
2. Ins. by Act 32 of 1961, s. 9 (w.e.f. 28-8-1961). 
3. Subs. by Act 12 of 1987, s. 10, for “or the development of village industries” (w.e.f. 24-7-1987). 
4. Subs. by s. 11, ibid., for sub-sections (1), (1A) and (1B) (w.e.f. 1-4-1988). 

10 

 
                                                           
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[19A.  Standing  Finance  Committees.—(1)  There  shall  be  constituted  from  among  the  members      

of  the  Commission  in  the  prescribed  manner,  a  Standing  Finance  Committee  in  respect  of  each  of  the 
2[three funds] referred to in section 18. 

3[Provided that the Chief Executive Officer and Financial Adviser shall be ex officio members of the 
Standing Finance Committee in respect of each of the three separate funds referred to in sub-section (1) of 
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. 

19B.  Recovery  of  monies  due  to  the  Commission  as  arrears  of  land-revenue.—(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.] 

20. Budget.—(1) The Commission shall, by such date in each year as may be prescribed, prepare and 
submit  to  the  Central  Government  for approval  4[three  separate  budgets] in the prescribed  form  for the 
next  financial  year,  to  be  called  the  khadi  budget  5[,  the  village  industries  budget  and  the  general  and 
miscellaneous  budget],  showing  the  estimated  receipts  and  expenditure  in  respect  to  khadi  6[,  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 expenditure is covered by a specific provision in the budget approved by the 
Central Government. 

7[(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 8[the budget] approved by the Central Government is not exceeded. 

1. Ins. by Act 32 of 1961, s. 11 (w.e.f. 28-8-1961). 
2. Subs. by Act 12 of 1987, s. 12, for “two funds” (w.e.f. 1-4-1988). 
3. The proviso ins. by Act 10 of 2006, s. 11 (w.e.f. 15-5-2006). 
4. Subs. by Act 12 of 1987, s. 13, for “two separate budgets” (w.e.f. 1-4-1988). 
5. Subs. by s. 13, ibid., for “and the village industries budget” (w.e.f. 1-4-1988). 
6. Subs. by s. 13, ibid., for “and village industries respectively” (w.e.f. 1-4-1988). 
7. Subs. by s. 13, ibid., for sub-section (3) (w.e.f. 1-4-1988). 
8. Subs. by s. 13, ibid., for “either budget” (w.e.f. 1-4-1988). 

11 

 
                                                           
21.  Borrowing  of  money.—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. 

22.  Transfer  of  liabilities  and  obligations  to  the  Commission.—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. 

23.  Accounts  and  audit.—(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. 

(2) 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. 

24.  Returns  and  reports.—(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  programme  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  programme 
during the previous financial year. 

(3) A copy of the report received under sub-section (2) shall be laid before each House of Parliament. 
1[24A.  Exemption  from  liability  to  pay  income-tax.—Notwithstanding  anything  contained  in  the 
Income-tax  Act,  1961  (43  of  1961),  the  Commission  shall  not  be  liable  to  pay  any  income-tax  on  its 
income, profits or gains.] 

CHAPTER V 

MISCELLANEOUS 

25.  Dissolution  of  the  Commission.—(1)  The  Central  Government  may,  by  notification  in  the 
Official Gazette, direct that the Commission shall be dissolved from such date as may be specified in the 
notification and thereupon the Commission shall be deemed to be dissolved accordingly. 

(2) On and from the said date— 

(a) all properties and funds which, immediately before the said date, were in the possession of the 

Commission for the purposes of this Act shall vest in the Central Government; and 

(b) all members shall vacate their office as members of the Commission. 

1. Ins. by Act 29 of 1977, s. 34 (w.e.f. 1-4-1962). 

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1[(3) Any time after the issue of the notification under sub-section (1), the Central Government may 
re-establish the Commission in accordance with the provisions of section 4 and on and from the date of 
the  re-establishment  of  the  Commission,  the  properties  and  funds  which  had  previously  vested  in  the 
Central  Government  under  clause  (a)  of  sub-section  (2)  shall  stand  vested  in  the  Commission  so              
re-established.]. 

26. Power to make rules.—(1) The Central Government may, by notification in the Official Gazette, 

make rules to give effect to the provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

2[(a) the manner of filling casual vacancies among the members of the Commission and the terms 
and  conditions  of  service  of  the  Chairman,  the  Chief  Executive  Officer,  the  Financial  Adviser  and 
other  members  of  the  Commission  including  the  salary  and  allowances  to  be  paid  to  them  and  the 
travelling and daily allowances to be drawn by them when they are on tour;] 

3[(aa) the powers to be exercised and functions to be discharged by the Chief Executive Officer 

under sub-section (1) of section 5; 

(ab)  the  financial  matters  in  respect  of  which  the  Financial  Adviser  shall  be  in  charge  under 

section 5A; 

(ac) the transaction of business at the meetings of the Board under sub-section (2) of section 10;]; 
(b)  4***the  procedure  to  be  followed  in  removing  a  member  who  is  or  becomes  subject to any 

disqualification; 

(c)  the  term  of  office  and  other  conditions  of  service  of,  the  procedure  to  be  followed  in  the 

discharge of functions by, and the manner of filling casual vacancies among members of the Board; 
5*                                       *                                        *                                        *                                       * 
6[(dd) the constitution of the Standing Finance Committees under sub-section (1) of section 19 A; 

(ddd)  the  procedure  to  be  followed  by  the  Tribunal  in  deciding  questions  referred  to  it  under      

sub-section (2) of section 19B;] 

(e) the date by which, and the form in which, the budget shall be prepared and submitted in each 

year under sub-section (1) of section 20; 

(f) the procedure to be followed for placing the Commission in possession of funds; 

(g) the  procedure to  be followed  and the conditions to  be  observed  in  borrowing  moneys  or  in 

granting loans; 

(h) the conditions subject to which, and the mode in which, contracts may be entered into by or 

on behalf of the Commission; 

(i)  the  form  and  manner  in  which  the  accounts  of  the  Commission  shall  be  maintained  under     

sub-section (1) of section 23; 

(j)  the  form  and  manner  in  which  the  returns,  reports  or  statements  shall  be  submitted  under 

section 23; and 

(k) any other matter which has to be, or may be, prescribed. 

7*                                   *                                    *                                   *                                * 

1. Ins. by Act 10 of 2006, s. 12 (w.e.f. 15-5-2006). 
2. Subs. by Act 12 of 1987, s. 14, for clause (a) (w.e.f. 24-7-1987). 
3. Ins. by Act 10 of 2006, s. 13 (w.e.f. 15-5-2006). 
4. The words “the disqualifications for membership of the Commission and” omitted by Act 12 of 1987, s. 14 (w.e.f. 24-7-1987). 
5. Omitted by s. 14, ibid. (w.e.f. 24-7-1987). 
6. Ins. by Act 32 of 1961, s. 13 (w.e.f. 28-8-1961). 
7. Omitted by Act 12 of 1987, s. 14 (w.e.f. 24-7-1987). 

13 

 
                                                           
27.  Power  to  make  regulations.—(1)  The  Commission  may,  with  the  previous  sanction  of  the 
Central Government, by notification in the Official Gazette, make regulations not inconsistent with this 
Act and the rules made thereunder, for enabling it to discharge its functions under this Act. 

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may 

provide for all or any of the following matters, namely:— 

(a)  the  terms  and  conditions  of  appointment  and  service  and  the  scales  of  pay  of  officers  and 
servants of the Commission, other than  1[the Chief Executive Officer] and the Financial Adviser to 
the  Commission,  including  payment  of  travelling  and  daily  allowances  in  respect  of  journeys 
undertaken by such officers and servants for the purpose of this Act; 

(b) the time and place of meetings of the Commission, the procedure to be followed in regard to 
transaction  of  business  at  such  meetings  and  the  quorum  necessary  for  the  transaction  of  such 
business at a meeting; 

2[(ba) the transaction of business at the meetings of the Zonal Committee under sub-section (2) of 

section 12A;]; 

3[(bb) the summoning and holding of meetings, and the conduct of business of a Standing Finance 

Committee]; 

(c) the delegation of powers and duties to 4*** or any employee of the Commission; 

(d)  the  maintenance  of  minutes  of  meetings  of  the  Commission  and  of  the  Board  and  the 

transmission of copies thereof to the Central Government; 

(e) the persons by whom, and the manner in which, payments deposits and investments may be 

made on behalf of the Commission; 

(f) the custody of moneys required for the current expenditure of the Commission and investment 

of moneys not so required; 

(g) the maintenance of accounts; and 

(h) the form in which certificates of genuineness of khadi and products of village industries may 

be granted by the Commission 5[and the fees chargeable in respect thereof.] 
6[(2A) The power to make regulations under this section with respect to the terms and conditions of 
service and the scales of pay and pension to be paid to the employees of the Commission shall include the 
power  to  give  retrospective  effect  from  a  date  not  earlier  than  the  commencement  of  this  Act,  to  such 
regulations  or  any  of  them  but  no  retrospective  effect  shall  be  given  to  any  such  regulation  so  as  to 
prejudicially affect the interest of any person to whom such regulation may be applicable.] 

(3)  The  Central  Government  may,  by  notification  in  the  Official  Gazette,  rescind  any  regulation 

which it has sanctioned and thereupon the regulation shall cease to have effect. 

7[28. Rules and Regulations to be laid before Parliament.—Every rule and every regulation made 
under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it 
is in session, for a total period of thirty days which may be comprised in one session or in two or more 
successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately  following  the  session  or  the 
successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or 
both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter 
have effect only in such modified form or be of no effect, as the case may be; so, however, that any such 
modification or annulment shall be without prejudice to the validity of anything previously done under 
that rule or regulation.] 

1. Subs. by Act 12 of 1987, s. 15, for clause (a) for “the secretary” (w.e.f. 24-7-1987). 
2. Ins. by Act 10 of 2006, s. 14 (w.e.f. 15-5-2006). 
3. Ins. by Act 32 of 1961, s. 14 (w.e.f. 28-8-1961). 
4. The words “the Chief Executive Officer or” omitted by Act 10 of 2006, s. 14 (w.e.f. 15-5-2006). 
5. Added by Act 32 of 1961, s. 14 (w.e.f. 28-8-1961). 
6. Ins. by Act 12 of 1987, s. 15 (w.e.f. 24-7-1987). 
7. Ins. by s. 16, ibid. (w.e.f. 24-7-1987). 

14 

 
                                                           
THE SCHEDULE 
1[See section 2 (h)] 

1. Bee-keeping. 

2. Cottage match industry, manufacture of Fireworks and Aggravates. 

3. Cottage pottery industry. 

4. Cottage soap industry. 

5. Flaying, curing and tanning of hides and skins and ancillary industries connected with the same and 

cottage leather industry. 

6. Ghani oil industry. 

7. Hand-made paper. 

8. Manufacture of cane-gur and khandsari. 

9. Palm-gur making and other palm-products industry. 
2[10. Processing, packaging and marketing of cereals, pulses, spices, condiments, masalas etc.] 

3[(i) Manufacture of shellac; 

(ii) Collection of forest plants and fruits for medicinal purposes; 

(iii) Fruit-processing and fruit preservation; 

(iv) Bamboo and cane-work; 

(v) Blacksmithy; 

(vi) Carpentry; and 

(vii) Fibre other than coir.] 

4[Manufacture and use of manure and methane gas from cowdung arid other waste products (such as 

flesh and dead animals, night soil, etc.)] 

5[Cottage industry of limestone and its products.] 
6[Manufacture of household utensils in aluminium.] 
7[Manufacture of gum resins; manufacture of katha.] 
8[Lime Stone, Lime Shell and other Lime Products industry.] 
9[Manufacture of Lokvastra cloth.] 
10[Processing of maize and Ragi.] 
11[Manufacture of Rubber Goods (Dipped Latex Products).] 

1. Subs. by Act 12 of 1987, s. 17, for “[See sections 2 (h) and 3 (1)]” (w.e.f. 24-7-1987). 
2. Substituted by G.S.R. 1101, dated 16-8-1979. 
3. Added by S. O. 3232. 
4. Added by S.O.1031. 
5. Added by S.O.1342. 
6. Added by S.O. 3647. 
7. Added by S.O.92. 
8. Added by G. S. R. 685(E) of 1977. 
9. Added by G. S. R. 6 (E). 
10. Added by G. S. R. 366. 
11. Added by G.S.R. 591 (E)/84. 

15 

 
                                                           
