Credit Policy & Cash Management for a Multi Operational Unit Ofsail

SYNOPSIS

Policy adopted for granting credit.

Credit sale is necessary in any industry, so it is also an important tool in the steel industry under the present competitive market scenario. To match the competition in present market scenarios SAIL offers two type of credit which is :- a) Secured Credit

b) Unsecured Credit

In the case of Secure Credit overall constraint or ceiling with respect to the credit limit then the credit may be allowed within overall branch credit limit by fixing interest priority amongst customers.

In the case Unsecured Creditor it may extend to all customers in terms of guidelines issued from time to time, within the limits approved by director.

Policy adopted for acceptance and dishonour of cheque.

Payments are normally received through cheques from the customers.

Dishonour of cheques is the criminal offence in terms of Sec 138 of the Negotiable Instruments Act., if cheques are returned unpaid by the Bank and full payment covered by the dishonour cheques is not received within 15 days from the date of receipt of Notice. By various judgment of Supreme Court dishonour of cheques on any ground has been treated as punishable offence u/s 138 of Negotiable Instruments Act.

Thus to minimize the risk involved some additional policies must be prepared for acceptance and dishonour of cheque.

Financial arrangements for booking of direct despatch and bulk orders.

All financial arrangements are to be tied up with the customers in the form of interest free deposit / Letter of Credit / Bank Guarantee prior to releasing of orders on the plants for direct despatches.

As the gestation period is very high between booking the order and delivery of goods thus the company has to make some financial arrangements for booking of bulk orders and to cover the additional expenses if there is any.

Interest and cash discount credit sales.

With the overall objective of customer satisfaction, it is necessary to make provision of the various operational parameters in calculation of interest and cash discounts and administration of the same in the branches.

Interest bearing credit may be sanctioned by the branch / Regional Manager / Head of Long / Flat Product, in consultation with Associate Finance, for certain period.

Cash discount may also be given to customers for advance payment.

1. INTRODUCTION

1.1Objective of the project:

The objective of the project is laying down guidelines for deciding the suitability of a customer for extending credit, minimizing the risk involved and methodology for sanction and monitoring credit and cash management of the company.

1.2Methodology:

• Primary Resources
• Secondary Resources
• Descriptive

1.3Limitations of the Study:

• The financials of the company are confidential thus cannot be accessed.
• The data to be collected is to be from an authentic source.
• It should be taken care of that the report is very confidential and should not be disclosed outside the company.

2. ABOUT SAIL

2.1Company Profile

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India's largest producer of iron ore and of having the country's second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide ranges of long and flat steel products are much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards located in major cities and towns throughout India.

With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and Safety Organisation at Ranchi. Our captive mines are under the control of the Raw Materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata. Almost all plants and major units are ISO Certified.

Major Units

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh, Durgapur Steel Plant (DSP) in West Bengal, Rourkela Steel Plant (RSP) in Orissa, Bokaro Steel Plant (BSL) in Jharkhand, IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants

Alloy Steels Plants (ASP) in West Bengal, Salem Steel Plant (SSP) in Tamil Nadu, Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Subsidiary

Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

JointVentures

SAIL has promoted joint ventures in different areas ranging from power plants to e-commerce:

NTPC SAIL Power Company Pvt. Ltd.

This 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and National Thermal Power Corporation Ltd. (NTPC Ltd.) is managing the captive power plants at Rourkela, Durgapur and Bhilai with a combined capacity of 814 megawatts (MW).

Bokaro Power Supply Company Pvt. Ltd.

This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in January 2002 is managing the 302-MW power generation and 660 tonnes per hour steam generation facilities at Bokaro Steel Plant.

M-Junction Services Ltd.

A joint venture between SAIL and Tata Steel on 50:50 bases, this company promotes e-commerce activities in steel and related areas. This company has recently diversified in the e-commerce activities other than steel.

SAIL & MOIL Ferro Alloys Pvt. Ltd.

A joint venture between SAIL and Manganese Ore (India) Ltd on 50:50 bases, this company manages the production of Ferro-Manganese and Silicon-Manganese with furnace operation at Bhilai.

Bhilai Jaypee Cement Ltd.

This is a 26:74 joint venture between SAIL and Jaiprakash Associates Ltd. This company operates a cement plant of 2.2 million tonnes of capacity at Bhilai.

Bokaro Jaypee Cement Ltd.

This is also a joint venture between SAIL and Jaiprakash Associates Ltd. This company operates a cement plant of 2.1 million tonnes of capacity at Bokaro.

S & T Mining Co. Pvt. Ltd.

A joint Venture between SAIL and Tata Steel on 50:50 bases. This joint venture is for acquiring Coal Blocks, carrying out exploration and development of Coal Mines.

SAIL SCI Shipping Pvt. Ltd.

This is a 50:50 joint venture between SAIL and Shipping Corporation of India Ltd. This company provides various shipping and related services by JVC to SAIL for importing coking coal, other bulk materials and other shipping related business.

2.2 Plant wise product mix.

Plants	Location	Saleable Steel (in million tonnes)			Production
		Capacity	Production (2009-10)	Post Expansion capacity
Bhilai Steel Plant	Bhilai, Chhattisgarh	3.153	4.370	6.560	Blooms, Billets, Beams , Light, Structural ,Channels ,Angles ,Bars & Rods, Crane Rails, Plates, Rails ,Long Rails, Pig Iron, Chemicals & Fertilizers.
Durgapur Steel Plant	Durgapur West Bengal	1.586	1.884	2.120	Blooms, Billets & Slads ,Channels, Angles, Bars, Rode & Rebars, Skelp, Wheels, Railway Wheels & Axles, Pig Iron, Chemicals & Fertilisers.
Rourkela Steel Plant	Rourkela Vrissa	1.671	1.997	3.990	HR Coils, Plates, CR Coils & Sheet, GP/GC Sheet, Tin Plates, Spiral Weld Pipes, Electrical Resistance Weld Pipes, Pig Iron, Chemicals & Fertilisers.
Bokaro Steel Plant	Bokaro, Jharkhand	3.780	3.461	4.180	HR Coils/Plate/Sheet, CR Coils & Sheet, GP. Sheet /Coils, GC Sheet. Pig Iron, Chemicals & Fertilisers.
IISCO Steel Plant	Burnpur, West Bengal	0.550	0.414	2.390	Steel Structural, Bulb Bars Sections.
Alloy Steels Plant	Durgapur, West Bengal	0.184	0.180	0.430	Slabs, Booms, Bars, Plates, CRM Rolls, Concast Rollers, Crane Wheels, Springs, Hammers, Grate Bars, Hot Saw Blade, Bright Bars, Stainless Steel Liner Plates.
Salem Steel Plants	Salem, Tamil Nadu	0.175	0.226	0.340	Cold Rolled Stainless Steel ,Hot Rolled Carbon & Stainless Steel Products, Micro-Alloyed Carbon Steel.
Visvesvaraya Iron & Steel Plant	Bhadravati, Karnataka	0.098	0.098	0.220	High Quality Rolled & Forged Alloy & Special Steel Products.
Maharashtra Elektrosmelt Ltd	Chandrapur, Maharashtra	-	0.100	-	High/Medium/ Low Carbon Ferro-Management, Silicon-Management.

2.3 Vision of the Company

“To be a respected world-class corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction.”

2.4 Quality Policy of the Company

“We shall build and sustain a world-class organization, where quality is the hallmark of every process and activity. With the involvement and dedication of our human resources, we are committed to achieve satisfaction of all our stakeholders, through innovation and continual improvement.”

2.5 Memorandum of Understanding (MOU).

The company has entered into a number of strategic MOU which, among other, include the following:

Partner	Profile
POSCO	To establish a strategic alliance for aligning and cooperating in a wide range of strategic business and commercial interest areas. Further another MOU signed with POSCO in connection with: 1. Manufacture & Commercialization of CRNO 2. Exploration of upstream & downstream opportunities in utilizing Finex Technology.
Government of Kerala	To set up, develop & manage a 65,000 TPA TMT- Rolling Mill along with its balancing facilities and auxiliaries at SCL, Calicut on an equal share holding pattern with Government of Kerala.
JV with Rites ltd.	For setting up a wagon manufacturing plant at Kulti. The proposed JV will handle about 1500 wagons per annum.
NMDC Ltd.	To set up a Joint Venture for Development of Arki Limestone Mine at Solan, Himachal Pradesh.

3. CENTRAL MARKETING ORGANIZATION OF SAIL

3.1 Central Marketing Organization(CMO).

ISO 9001:2000 certified Central Marketing Organisation (CMO), one of the largest marketing networks in the country markets mild steel products from four integrated steel plants of SAIL. The CMO headquarters is at Kolkata and the commercial directorate is located at New Delhi. A nation-wide network of regional offices, sales offices and several strategically placed warehouses is further supplemented by consignment agents and authorized dealers to meet the demands of the smallest customers in the remotest corners of the country.

CMO, It caters to the products produced by the 5 integrated steel plants namely ISP, RSP, BSP, DSP and BSL. Also SSP mild steel grade is marketed by CMO. The marketing is done presently through a wide network of 36 BSO s, 22 CCO (Customer Contact Offices), 24 departmental warehouses and 37 CA (Consignment Agencies).

CMO domestic marketing efforts are supplemented by its ever-widening networking of authorized and rural dealers who meet the demands of the smallest customers in the remotest corners of the country. A strong IT support system enables real-time network connectivity within the entire CMO network. Extensive customer contacts, product and segment specialization, close monitoring of order servicing and feedback analysis through a Customer Satisfaction Index are established norms at CMO. The customer friendly approach of CMO is backed by after-sales service ,through the process of key account management, CMO provides single window service to key customer across the country for every business transaction from enquiry to order booking, order taking to deliver, and even consultancy and after sales service.

CMO maintains its aggressive efforts in order to retain market leadership by meeting customer requirement and evolving strategies to increase sales. In order to strengthen the marketing approach and initiate product and segment specialization, CMO has been reorganized on the basis of flat and long production. Likewise, Key Account Management (KAM) process has been implemented in CMO to provide service, quality and tailor made products to key customers through a single window. This is being followed up by the Customer Satisfaction Index (CSI) to increase responsiveness to customer needs.

Yet another significant development had been there-orientation of the sales branches and warehouses. This has enabled to marketing team to concentrate on building customer relationship to provide team better service, along with the best quality. Dealer development, especially in rural areas, is being aggressively pursued by CMO to reach out to the furthest corners of the country. This wide network of authorized dealers also helps meet customers demand for steel in small quantities.

International Trade Division (ITD) of CMO manages export of mid steel products and maintains close liaison with the buyers abroad. ITD has been successful in making SAIL steel, a familiar name across the continents. SAIL's reputation as a producer of quality steel products has been established in as many as 70 countries around the globe, including Japan, UK, Italy, Russia etc. Transport and Shipping Division (T&S) of CMO performs the important functions of ensuring proper dispatch of export materials and timely imports of materials to keep the SAIL plants going.

3.2Marketing Function of CMO

CMO functions primarily through its network of branch, warehouse, SRM Office, T & S and ITD. The job of marketing starts from drawing the Annual Business plan followed my Annual sales plan and finally the monthly sales plan, at branch level.

Branch Sale Office(BSO) Function:

BSO (Branch Sales Office) and CCO (Customer Contact Offices) spread all over the country. The main functions of the branch are given below.

• Demand Forecasting
• Order Booking and material dispatch
• Dispatch of documents to branches and forwarding to warehouses
• Issue of Offer letters and Delivery Orders (for warehouse deliveries) and Intimation letter (for direct dispatch customers)
• After sales service

Ware House Function

Materials are received either at Departmental warehouses or at the Consignment Agency warehouses. Departmental warehouses have Handling Contractors. However,

in case of CA (Consignment Agency) warehouses, all the activities are done by the CA, under the supervision of SAIL personnel.

The major functions of warehouses can be categorized under:-

1. Receipt of Materials
2. Delivery of Materials

Other Activities

Ø Decoiling of TMT Coils to TMT bars is also a facility which is being set up at various locations, within / outside the warehouses as mentioned in Chapter 11d. and the

Ø Periodic wagon card closure-for small balances

Ø Stock verification - matching of physical stocks with computer stocks and adjust wagon cards accordingly.

Ø Idle asset disposal - by formation of suitable committees as per guidelines

Ø Finalizing Contracts and Contract Management in respect of the warehouse like Handling contract, Road transportation contract, door delivery contract , de coiling contract, AMC with agencies like Electrical, weighbridges, surface maintenance, security, siding maintenance etc.

Ø Proper upkeep of warehouse infrastructure with emphasis to the following

• Proper layout and optimum utilization of space, signboards
• Proper surface condition of roads and stacking area
• Display of safety slogans at prominent places
• Provision for labour canteens, public conveniences, drinking water facilities
• Maintenance of railway tracks , road level at level crossings by suitable contractor
• To the extent possible, maintain a dust free environment
• Proper lighting system, so that operations in the late evenings are affected smoothly
• Fencing, Security, manning of gates, fire fighting equipments, handling equipments, health hygiene and first aid facilities, pure drinking water, canteen, well maintained toilets, and maintenance of safety and security measures

Ø Maintenance of leave records, stationeries, and other administrative functions - to be done by one staff earmarked for the same, under the supervision of one executive

Ø Review of gate register by WHM once in 15 days to analyze:

• If vehicles are detained in warehouse regularly
• If so, why - i.e. due to break down of vehicles or inability of HC to load the materials, or whether material not in loading position etc
• Whether there is abnormal delay in loading for particular trucks and if so why
• How much time is being taken between truck in and truck out?

Ø Housekeeping - by collection of bent and twisted materials scattered all over the yard and keeping the same in identified bay and keep the warehouse clean and neat

Ø Documentation, maintenance of records

Ø Reply to audit, vigilance and different correspondences , in time

Ø Maintaining of RG 23 D Register for excise and submitting the same to excise authorities on quarterly basis, by concerned staff. This is a statutory requirement.

Ø Stacking of materials as per broad stacking plan

Ø Maintenance of Quality records for ISO audit

Ø Undertake Customer / Dealer visits, which will help the warehouse group to appreciate their problems better and enable us to improve our services.

Ø Reports and Returns

Sale Resident Manager Functions.

Ø SRM is the interface between plant and CMO and are at plant locations

Ø MP released by SRM office is forwarded to plant for production

Ø Co ordinates with plant and Regions for dispatches (both Direct and Warehouse) to respective destinations / Consignees as per MP

Ø Arranges meetings and plant visits for customers, plant officials and CMO officials

Ø Prioritizes dispatches and also ensures overall equitable and fair distribution of materials to the 4 regions

Ø Coordinates with Plants , T&S and ITD for timely dispatch of export materials

Ø Reports and Returns in respect of production and Dispatch.

3.3Avenues of Sale

The products of SAIL are sold through different avenues. They are as follows:

1. Dealership Scheme
2. Tender Route
3. Memorandum of Understanding (MOU) Scheme.
4. Tie-ups

a) Dealership Scheme:

SAIL has authorized dealer all over the country for marketing of its products. These dealers are appointed after careful analysis of their financial ability and goodwill in the market. Products are delivered to these dealers from the stockyards for selling.

b) Tender Route:

Some of the products of SAIL viz, TMT Bars, Structural, Plates, Pig Iron (dusts and chips) and sold materials downgraded as defectives/scrapes etc are sold through tender. After physical inspection, Warehouse manager/officer-in charge of the stockyard identifies such materials which are to be sold by tender. A statement is prepared with full details of the materials including name of manufacture plants and date of receipt of the same yard. The Tender Notices are set to local tenders/ consumer's association and concerned SSI carnation. A minimum time of four working days is permitted for submission of tenders by interested parties. An amount of equal to 2% of the value of tender quantity subject to a maximum of Rs.50, 000 is to be deposited as earnest money.

c) Memorandum of Understanding (MOU) Scheme:

The minimum order quantity for MOU is 2000 - 6000 mt. The benefits which the customers derive from MOU are:

1. Interest Free Credit (IFC) for a pre-determined period. The IFC may be secured or unsecured.
2. Turnover Discount (TOD) which is calculated per tones of material lifted. The rate of TOD varies with size of lifting. However, TOD is restricted to 120% of the quantity booked against the MOU.
3. Consistency allowance is allowed depending upon the consistency in lifting of material booked against the MOU. This allowance is also calculated at per tones basis.

d) Tie-ups:

Sometime the company receives customers who have bulk demand of products but for a specific period only. The company enters in tie ups with these customers for the supply of the product. Tie-ups generally entered into for a quarter. The TOD and Interest Free Credit facilities are available in tie-ups also.

4. FINANCE AND ACCOUNTS DEPARTMENT OF SAIL

4.1 Structure of Finance and Account Department, CMO.

Home Sales Branches all over India along with 4 Branch Transport and Shipping (BTSO).Home sale branches are being monitored by CMO (HQ) at kolkata whereas BTSOs are separately monitored by T&S/HQ. Ultimately, all home sale branches and BTSOs including T&S/HQ and Commercial Directorate (including ITD) are accountable to CMO (HQ) at kolkata as far as the finance function are concerned.

4.2Function of Finance and Account Department, CMO

The function of the Finance Department encompasses wide areas which are summaries as below:

1. Pricing Concurrence.
2. Implementation of Marketing Guidelines.
3. Accounting.
4. Budgeting.
5. Monitoring Costs.
6. Credit Rating of the Customer.
7. Compliance of statutory obligation.

The above mentioned functions are discussed as below:

1) Pricing Concurrence:

SAIL has listed price for each product which are applicable throughout India. The listed prices are determined based on certain criteria. They are:

1. Landed price of import goods i.e, International price.
2. Domestic Supply pattern.
3. Market demand of the products.

The listed prices are generally reviewed on a quarterly basis. Although the listed prices are applicable through India, price is adjusted from region to region by allowing rebates. These rebates are decided upon by the regional officer considering the applicable local price. In additional to this various other incentives viz, IFC, TOD, etc. as mentioned earlier are also allowed.

2) Implementation of Marketing Guidelines:

The corporate office at SAIL issues marketing guidelines to which all the local offices should adhere. The marketing guideline contains guideline regarding:-

1. Execution of MOU for different types of production.
2. Registration of demand under MOU.
3. Tender.
4. Acceptance of Cheque.
5. Credit policy and its limitation.
6. Financial arrangement and negotiation.

It is the responsibility of the Accounting Department to oversee the proper implementation of this guideline, applicable for each transaction.

3) Accounting:

Accounting in CMO is done under three broad categories of

1. Direct sale.
2. Stockyard sale.
3. Finally Consolation of Accounts.

4) Budgeting:

At the beginning of the year, the Head Office asks all regional office about there budget. The broad categories for which budgeting are done are:

1. Employee Remuneration and Benefit
2. Stores
3. Power and fuel
4. Handling Expenses
5. Postal and Telephone Expenses
6. Rent
7. Rates and Taxes
8. Security
9. Legal charges
10. Miscellaneous

In addition to these, budgeting is done for few more categories at HQ level for CMO as a whole are enumerated as below:

• Gratuity
• Leave
• Retirement Benefit
• Interest Income
• Depreciation

For the regions each component of the budgeted into office and stockyard. By adding up the component wise budgets across all the levels the total amounts is arrived at. To this is added the special components of HQ budget to arrive at the financial figure.

After obtaining the total figure it is sent to the Head of the Finance & Accounts Division and ultimately reaches the corporate office thought the Head of Unit. The budget is approved by the chairman of SAIL.

5) Monitoring Costs:

The Finance and Account division seeks monthly reports from the regions about these actual expenses as against their budgeted expenses. The HQ then performs variance analysis to find out any deviations from the budgeted figures. In case, there is any division the HQ asks for clarification of same from the concerned branch or unit and reports the same to end users.

6) Credit Rating of the Customer.

One of the most important functions of the Finance and Accounts division is the credit rating of customer. Before credibility is assessed based on two parameters namely-

Ø Commercial and

Ø Financial

Under commercial parameters the considerations are:

• SAIL share in total purchases
• Notional/branch key account customers
• MOU/tie up
• Payment schedule: on due date, beyond due date
• Consistency in lifting
• Interest payment including penal interest
• Furnishing of document

Under financial parameters the considerations are:

• Total liability: Total net worth
• Current Assets: Current Liability
• PBT/Net Sales
• (Inventory/Receivable)/Net Sales
• n the strength of the above two parameters, the credibility of customers are ascertained.

Credit rating is generally done for a year. But there is a regular monitoring of the customer performance is done.

7) Compliance of statutory obligation-

The finance and account division also has to make arrangements for compliance to statutory obligations in dealing with Central Excise, Sales Tax and the Income Tax Departments.

4.3Role of Finance in SAIL's Marketing:-

Finance play vital role in SAIL's marketing. From all aspect there exist an inseparable relationship between finance on the one hand and marketing on the other hand, they are also dependent each other. In fact financial policies will be devised to fit marketing decisions of a firm in practice. Here Central Marketing Organization's (CMO) role is mostly concentrated in casting an influence over the sales figure. It drives all its effort into the analysis of demand, then forwarding implementation to the plants regarding customer needs, marinating consistent supply and above all, rendering an optimized customer satisfaction. CMO considers volume to be the center of focus as one of the most prioritized objectives to carry out its line of operation.

Brand development, development of consumer based customers, dealer's development and maintaining market share are all the marketing aspects in context of CMO.

While financial objective in marketing involves striving for -

Ø Selling at optimum price

Ø Selling at optimum marketing cost

Ø To realize maximum sale proceeds

CMO is also involved in the collection and management of cash and has the prerogative to decide on the feasibility of deals with customer, all directed towards the overall betterment of the company's position. Credit rating and Monitoring Cell (CRMC) here plays a crucial role in assessing the credit worthiness of the customers.

From a narrower perspective, CMO get target from corporate office in New Delhi concerning the cash collection (Sale proceeds can be realized through barter system, cash, demand draft / bank cheque, e-receipts, channel financing) arena and therefore has to transfer and draw whatever funds received or required respectively from day to day operations. The corporate office serves as the apex body for managing the final cash account.

5. CREDIT POLICY

5.1Credit Policy and its Limitation

As a commercial organisation dealing with production and marketing of steel, regular cash flow and maximising return under the prevailing marketing conditions are of critical importance for the Steel Authority of India Limited (SAIL)

The main objective of Credit Policy are laying down guidelines for deciding the suitability of a customer for extending credit, minimising the risk involved and methodology for sanction and monitoring credit.

SAIL follows some principle for Credit Policy such as:

1. Materials should be sold mainly on "cash and carry" basis or delivery against payment through negotiation of documents. For the purpose, bank drafts, pay orders, bankers' cheques and current dated cheques shall also be considered as Cash. Acceptance of current dated cheques will be guided as per the operational guidelines.
2. Material may be sold on Secured Credit based on Letter of Credit (LC) or Bank Guarantee (BG) of adequate amount from a scheduled bank.
3. Material may be sold on unsecured credit, if deemed necessary, keeping in view the trade practices and specific customers' requirements.
4. All proposals for provision of credit shall be processed in Consultation with Associate Finance (ICWF). Secured credit facility may be extended to customers by the concerned executives as per the rules provided. Unsecured credit may be provided to customers with approval of the Director (Commercial).
• . In case of proposals for unsecured credit received from any of the units/organization of Indian Railways or any defence related Organisations/Departments/Units including para-military forces directly under Home Ministry or other Central Ministry/Government of India, but excluding Public Sector Units (PSUs), the individual party-wise location-wise unsecured credit limit for such Organisations / Departments / Units may be approved by ED (M)-LP/FP, CMO in consultation with Finance.
• I. Credit limit sanctioned for a customer may be operated at one or more branches as per operational guidelines.

Categorization of Customer

For the purpose of provision of material on credit, customers may be broadly divided into two categories, namely:

Category - 'I'

• Central/State Govt. Departments
• Public Sector Undertaking (whose net worth is positive)
• Projects of National/State level importance, including those funded by International Financial agencies
• Private Companies (whose shares are traded regularly).
• Customers, with whom Memorandum of Understanding (MOU)/Tie-up has been executed.

Category - 'II'

• Public Sector Undertaking (whose net worth is negative)
• Private Companies (whose shares are not traded regularly)
• Other Companies, Partnership/Proprietorship firms

While processing proposal for provision of credit, adequate attention should be paid to the second category of customers because of the relatively higher risks involved.

Credit Limits allowed to the customer:-

1. Based on prevailing market conditions and business needs, an overall limit for provision of secured and unsecured credit separately shall be fixed at the beginning of each financial year by the Director (Commercial) in consultation with the Director (Finance). These limits may be revised in case of necessity, as per market condition. Credit, secured and unsecured, provided at any point of time, should not exceed the limit.
2. In case of provision of material against secured credit, the Branch Manager, in consultation with Associate Finance, shall issue material against valid banking document(s). Overall position of provision of secured credit shall be monitored at the regional level by the concerned Head of Finance.
3. Limit fixed for unsecured credit, shall be sub-allocated among various Regions by Headof Finance, CMO in consultation with Head of Long Product (LP)/Flat Product (FP). The Regional Managers shall sub-allocate the limit among the Branches under intimation to the Supervisory Officers.
4. Proposal for unsecured credit limit for individual customer shall be initiated by the Branch Manager in consultation with Associate Finance along with supporting documents and routed through the Regional office, Credit Rating and Monitoring Cell (CRMC), Head of Long/Flat product and Head of CMO Finance and decided as per guidelines with the approval of Director(Commercial).
• In case of proposals for unsecured credit received from any of the units/organization of Indian Railways or any defence related Organisations/ Departments/Units including para-military forces directly under Home Ministry or other Central Ministry/Government of India, but excluding Public Sector Units (PSUs), the individual party-wise location-wise unsecured credit limit for such Organisations / Departments / Units may be approved by ED(M)-LP/FP, CMO in consultation with Finance.
• I. Credit limit sanctioned for a customer may be operated at one or more branches as per operational guidelines.

Time Limit for Credit

Interest Bearing Credit (IBC) may be sanctioned by the Branch/Regional Manager /Head of Long/Flat Product, in consultation with Associate Finance (ICWF), for period not exceeding the limit indicated below, as per delegation provided here under:

Secured Credit Unsecured Credit

BM/ICWF 60 days 30 days

RM/ICWF 90 days 60 days

Head of Long/

Flat Products/ICWF 120 days 90 days

The date of commencement of credit will be reckoned as per provisions laid down in the Operational Guidelines from time to time.

Extension of credit after the normal period:

In exceptional cases, existing credit may be extended beyond the credit period as per above on the request of the customers for period not exceeding the limit indicated below, on charging interest as applicable.

Secured Unsecured

BM/ICWF 15 days 10 days

RM/ICWF 30 days 20 days

Head of LP/FP/ICWF 45 days 30 days

In case the period of credit of provision is decided by a higher authority, same can be reviewed only by the said or a higher authority.

In case any proposal for extension of period (secured/unsecured) is approved, interest thereon shall be charged as per normal interest rates (secured - 14.75% and unsecured is 19.75%)

Interest Free Credit Sale

Branch Manager in consultation with Associate Finance may grant Interest Free Credit (IFC) upto the entitlement period allowed as per the prevailing policy on Order Booking Schemes/Specific approvals

Interest on Credit sale

Interest, normal or penal as applicable, shall be charged on credit facility extended, at the rates declared from time to time. However, recovery of interest may be waived for recorded reasons as per the delegation of powers (DOP).

5.2Granting Credit to Customer.

Credit sale is necessary in any industry, so it also important aspect tools in the steel industry under the present competitive market scenario. To match the competition in present market scenarios SAIL offered by two type of credit which is:-

• Secured Credit
• Unsecured Credit

In the case of Secure Credit overall constraint or ceiling with respect to the credit limit then the credit may be allowed within overall branch credit limit by judiciously fixing interest priority amongst customers.

In the case Unsecured Creditor it may extend to all customers in terms of guidelines issued from time to time, within the limits approved by director.

Customer may be private sector, public sector, Government Department, Project and Trader.

There are particular empowerment as to sanction credit period for interest free credit, interest borne credit or the combination of both which may range from sixty to ninety days and it may be extend up to one hundred twenty days in case of secured credit. In exceptional cases, credit once granted can be extended on sufficient grounds beyond the due data on the request of the customer. Credit period will commence from the date of delivery order in case of stockyard sales and from the eighth day of RR in case of Direct Sales.

In the case of unsecured creditor, the request for unsecured credit would only be recommended after considering factors like……

• Status of the customer
• Record of payment
• Past performance
• Potential of performance in the current year and in future
• Importance of the business being sought
• Market image of the customer
• Financial results

If deemed fit branch would recommend the request to the regional office. Along with the credit proposals, the branch shall enclose the financial statements in respect of the customer desirably for the last three years.

According to Sick Industrial Companies Act 1985, an industrial company was defined sick if it was registered for at least seven years, it incurred cash losses for the current and the proceeding year, and its net worth was eroded. In terms of SICA, the Government of India set up the board for industrial and financial reconstruction (BIFR) in January 1987. Industrial companies whose net worth had been eroded completely and those which had net worth eroded by 50% or more were required to take a reference to the BIFR under section 15 and 23 of the Act respectively.

After receipt of the proposal at the regional level, regional manager and the associate finance manager would examine it with reference top various parameters and wherever deemed fit, proposal would be forwarded to the head of the product category being sought for.

5.3 Securities to be furnished for Secured Creditor.

• Bank Guarantee (BG)/ Letter of Credit (LC) should preferably be received directly from the bank through post/courier.
• Non-judicial stamp paper used in BG must be of requisite value and should be purchase on behalf of the issuing bank.
• Written confirmation must be obtained from the issuing bank regarding the genuineness of LC/BG.
• Normally outstation BG should not be accepted.
• Amount of LC/BG should cover the amount of interest, if any.
• All LC's must be advised through the SAIL's bank (SBI).However, LC's of the scheduled bank can be negotiated directly with the opening/negotiating bank.
• Description of goods as per LC should exactly match with the description as per invoices.
• All the LC's should be negotiated within the validity date. Payment should be received only from the bank.
• Expiry date for the LC's are last date of delivery or last date of negotiation of documents.
• LC can also act as a standby document that if the same may not be negotiated for each and every transaction and be kept as standby.

5.4Securities to be furnished for Unsecured Creditor.

• At the time of availing unsecured credit for the first time corporate guarantee by the B.O.D and two personal guarantee bonds from two of its directors is to be furnished.
• In addition to the above requirements, current dated cheques for full value of the material and interest if any with covering letter of undertaking to be taken.

Following customers may be exempted from furnishing BG's

• Government Department
• Quasi government bodies
• PSU's
• NGO's
• Public Limited Companies whose shares are quoted in the stock exchange and traded regularly.

6. CASH(CHEQUE) MANAGEMENT

6.1Acceptance of Cheque and its Limitation.

Ø At the beginning of each financial year, BM-LP/FP should prepare the list of customers in their respective areas from whom Cheque can be accepted. The limit up to which Cheque may be accepted from an individual customer at any point of time may be decided judiciously based on business needs.

For common customers, BMs/LP & FP shall, jointly decide the individual names and limits. For PET customers, the Regional In-Charge/PET shall fix the individual Cheque limits on written recommendation of senior most PET Executive in Branch. Wherever PET Executive at Branch is not available, Regional PET in charge shall fix Cheque limits on his own.

Cheque of ASP/SSP customers are to be accepted based on approved list forwarded by Regional I/C of ASP/SSP or as per specific approval of RM I/c (ASP/SSP).

Ø The list so prepared should be reviewed by BM (FP/LP) at least once in every 6 (six) months for any additions/deletions. If any customer not featuring in the list approaches for grant of Cheque facility, the same may be granted by the BM concerned as deemed fit and information may be kept as per enclosed format. Details in the same format may be built up at the Branch in respect of other customers enjoying Cheque facility, in case such information is not available. If at any time, any change in the constitution of the customer comes to the notice of the branch, review of Cheque facility for such customers may be done/undertaken by BM.

Ø Cheque may be accepted from Govt. Departments without limit. It may be noted that this provision is applicable only for Government Departments and not PSUs.

Ø Cheque deposited by a customer should be accepted on behalf of other Branches, (MRCA) on clearance by concerned BM/Associate Finance/Dealing Executive within the approved Cheque limit of the customer.

Ø Outstation Cheque should not be accepted from any private customer. In the case of Govt. Depts. and Central Public Sector undertakings, outstation Cheque may be accepted with recovery of bank charges. Bank charges that cannot be recovered from such customers may be absorbed by the Branch with the approval of RM/ICWF. Branch Finance in charge should check up with the local SBI and find out the area, which should be considered as outstation in banking circle.

Ø Cheque may be accepted from any customer without any limit against outstanding credit/Sundry Debtors. In case of payment received by Cheque against unsecured credit/secured credit, credit limit should be reinstated only after realization of the Cheque. However, on deposit of Cheque within Cheque limit enjoyed by the customer against unsecured credit/secured credit; credit limit may be restored immediately. In case part of the Cheque limit has already been utilized, then to the extent of balance Cheque limit available, credit limit may be restored.

Ø In case of dishonor of Cheque, Cheque facility for such customers should be stopped with immediate effect.

Ø Due to operational reason if any excess delivery is to be given at the stockyard, Warehouse Manager/Stockyard Executive may accept Cheque from the customer to the extent of shortfall in effecting delivery of one piece/coil/packet/bundle of materials and restricted to the amount due from the customer in this regard.

Ø Cheque subject to realization may be accepted without any limit from any customer who either has not been granted any Cheque facility or the same has been withdrawn.

Ø Lifting of materials against Cheque/Demand Draft/Pay Orders submitted by new customer may be allowed subject to realization of such Cheque/Demand Draft/Pay Orders. However, if the BMs are satisfied with the credential of the customer, they may allow lifting of material immediately on receipt of Demand Draft/Pay Orders.

Ø The date of acceptance of Cheque is to be considered as date of payment except Cheque bouncing cases.

Ø List of the customers along with the limit up to which Cheque may be accepted should be made available to the cashier and the same should also be entered in the computer system. Cheque from customers whose names appear in the list may be accepted by any executive without any reference to BM up to the limit prescribed for each customer.

Ø If a customer who tenders a Cheque in excess of the limit specified or tenders a Cheque for an amount which along with the uncleared Cheque deposited on the previous days exceed the limit specified, the same should be brought to the notice of Branch Manager by Cashier/Finance Officer in writing and specifying -

• Amount of Cheque tendered by the customer.
• Amount of uncleared Cheque deposited on the previous days.
• Cheque limit established in favour of the customer.

Ø Branch Manager may normally accept Cheque up to twice the individual limits on circumstances described above. However, in cases where the total amount of uncleared and freshly tendered Cheque deposited by a customer exceeds twice his individual Cheque limit, freshly tendered Cheque may be accepted only with prior clearance of RM.

Ø Branch Finance Officer should write to the bank requesting them to ensure that the intimation of dishonored Cheque is available with the Branch on the day of dishonor itself. Any case of dishonored Cheque should immediately be brought to the notice of the Branch Manager. Cheque facility granted to such customer whose Cheque have been returned unpaid should be revoked with immediate effect. Information of dishonored Cheque should also be furnished by Branch Finance Officer to Stockyard In charge, Regional Finance in charge and Head of Finance.

Ø BM/ Finance In charge/ Dealing Officer should immediately contact the party for realization of payment of dishonored Cheque along with interest. If the payment is not forthcoming, actions should be initiated as per the guidelines issued separately on action to be taken on dishonor of Cheque.

Ø Cheque facility granted to such customer whose Cheque has been dishonored due to “insufficient funds”, “effects not cleared”, “please present again”, “refer to drawer”, etc., may be reinstated after a minimum period of 1 month after realization of payment along with interest with approval of RM.

Ø In case of dishonor due to stop payment, request for reinstatement, should normally not be considered. In case customer gives prior notice and the same is authorized by BM/ICWF approval of RM/ICWF may be obtained for reinstatement of Cheque facility.

Ø In case of dishonor of Cheque due to technical reasons, Cheque facility granted to such customers may be reinstated by RM/ICWF after satisfying that the balance was available on the day the Cheque was presented to their bank.

Ø Dishonored Cheque should not be represented to the bank at all if notice U/S 138 has been served. However, the same may be represented - - in cases where, the dishonor memo from the bank mentions to present again. - In case of Govt. Department, as advised by concerned Dept. /Treasury.

Ø On the request of the customer, dishonored Cheque may be returned after realization of payment along with interest.

Ø Branch Finance Officer should check the bank statement thoroughly and ensure that no Cheque has been represented by the bank at their level. In case they notice such cases, the matter should be taken up with the bank and reasons for representation should be obtained for taking appropriate action.

Ø In case of dishonored Cheque, penal rate of interest applicable for unsecured credit shall be recovered along with the value of the Cheque.

Ø If Cheque is received from customers, the same should not be entered as demand drafts or pay orders in the system.

Ø All current dated Cheque/demand drafts etc. should be deposited in the bank on the same day of receipt, failing which on the next bank working day, immediately following the date of receipt. Any delay in deposit of Cheque/demand drafts must be reported by Branch Finance Officer to BM and Regional Finance In charge and also to Head of Finance.

Ø No immediate refund against MRCA/MR should be done without getting necessary confirmation regarding encashment of Cheque.

Ø One specific employee in the Branch is to be assigned the job of dealing with the bank for depositing the Cheque and collecting information relating to crediting to our account and honoring of Cheque by the drawee bank.

Ø Information relating to crediting of Cheque amount to our account and also honoring of the Cheque by the drawee bank shall be collected on daily basis from our banker.

Ø The information obtained as above, shall be entered into the system by the designated employee, so that the marketing executive who is in charge of issuing delivery orders can know that the Cheque received earlier from the same party have been duly honored.

FORMAT FOR INFORMATION FOR GRANT OF CHEQUE FACILITY

SAIL : BSO :

REF.No.:_______________________ DATE:______________

SUB: CHEQUE FACILITY

1. NAME OF CUSTOMER:

2. OFFICE FACTORY

(a) Address:

(b) Telephone:

(c) FAX:

(d) E-mail:

(e) NAME OF DIRECTORS/PARTNERS/PROP.: 1._________________________

2._________________________

3._________________________

4._________________________

3. CHEQUE ACCEPTANCE LIMIT

IN THE PAST (IF ANY) : Rs.

4. UNSECURED CREDIT (IF ANY): REGULAR/ONE TIME: RS.

5	CHEQUES DISHONOURED IN THE PAST, IF ANY	DATE OF DISHONOUR	AMOUNT	REASONS IF ANY	RESTORATION	APPROVED BY

6. NAME OF LEAD BANKER AS FURNISHED BY THE CUSTOMER:

7. Certificate from Bank through which normal transaction takes place with SAIL, stating nature of account and period of operation is required to be submitted by the customer, at the time of grant of Cheque facility.

8. RECOMMENDATIONS: CHEQUE FACILITY UPTO Rs.________________

TO

M/S._____________________________________

GRANTED.

BRANCH MANAGER ___________________

6.2 Way-out for Dishonors of Cheque.

PART -A

Noticeunder Sec. 138/142 ofthe Negotiable Instrument ACT

1. Dishonor of Cheque is a criminal offence in terms of Sec. 138 of the Negotiable Instruments Act, 1881 (as amended), if Cheque are returned unpaid by the Bank and full payment covered by the dishonored Cheque(s) is not received within 15 days from the date of receipt of Notice u/s 138 of N I Act. By various judgments of Supreme Court dishonor of Cheque on any ground has been treated as punishable offence u/s 138 of N I Act.
2. As part of our commercial activities, payments are normally received through Cheque(s) from the customer(s). In case of unsecured credit customer(s) will be required to submit a Letter of Undertaking for availing unsecured credit as per Annexure-D of MS 30 of 2004 which is reproduced as Annexure -I in this guideline, along with filled in current dated Cheque(s) for full value of the material along with the interest, if any. No blank or undated Cheque should be obtained.
3. In case of dishonor of Cheque(s) Notice u/s 138 of N. I. Act is to be issued by registered post as well as by courier within 30 days from the date of receipt of intimation from our Banker returning the Cheque(s) unpaid. Such notice can be sent by fax as well as by hand. But wherever notice is sent by hand a clear acknowledgement as a proof of delivery should be obtained. In the notice u/s 138 the Cheque amount and interest amount should be claimed separately. If any payment is received between the date of dishonor of Cheque(s) the acceptance and acknowledgement of such payment should be given only after the notice u/s 138 is issued. Notice u/s 138 should be issued to the Company/Firm as well as to the Director(s)/Partner(s) as well as other persons in charge and responsible for the conducting of business of the said company/firm so as to make them liable for prosecution in terms of sec 141 of N I Act. However, such Notice should not be issued to the Director(s) who are nominee by virtue of his/their holding any office or employment in the Central/State Government or in a financial Corporation owned or controlled by Central/State Govt. Wherever Notice is sent by fax/registered post/courier/by hand, the earliest date of transmission/service of Notice should be treated as the starting point of limitation of 30 days as per sec 142 of N I Act for filing complaint. A draft Notice is enclosed at Annexure II as a model. The content of Notice shall vary from case to case and hence same should be issued in consultation with Legal Cell, HQ/Regional Law. In any event Notice has to be issued within a period of 30 days from the date of receipt of our Banker's advice returning the Cheque(s) unpaid.
4. Once Notice u/s 138 is issued, the Cheque(s) should not be represented. However, in cases where the advice of the Bank returning Cheque unpaid is to the effect, say for example, "Fund Expected". "Present again", in such cases we may represent the Cheque provided the notice u/s. 138 has not been issued. In other words, Cheque(s) should not be represented if notice u/s. 138 has been issued.
5. In case of failure of the Director(s)/Partner(s) and other persons in charge and responsible for the conduct of the business of the concerned Company/Firm to pay the entire Cheque amount within the aforesaid period of 15 days from the date of receipt of the Notice, Criminal complaint in terms of Sec 138/142 of the N I Act has to be filed in consultation with Legal Cell/Regional Law, in the Court of the Metropolitan Magistrate/Judicial Magistrate, 1st class, within a period of one month from the expiry of the notice period of 15 days. The above time schedule should be strictly followed to avoid the criminal complaint being time barred in terms of section 142 of the N.I. Act. The model complaint as per Annexure III is enclosed as the guideline. However, Branch should consult Legal Cell HQ/Regional Law before filing the same in the Court.

For any clarification the matter may be referred to Legal Cell HQ/Regional Law on case to case basis.

PART - B

FILING OF CIVIL SUITS

1. In addition to the above, law also permits us to file civil suit in the concerned High Court/Civil Court for recovery of our dues with interest. During the civil proceedings in the Civil Court we are also entitled to seek an order from the Court under Order 38 Rule 5 of the Civil Procedure Code (CPC) for attachment of the properties of the delinquent/defaulting customers even before judgment. For that, along with the Plaint a separate Petition under Order 38 Rule 5 of the CPC is also to be filed in consultation with the Legal Cell, HQ/Regional Law.
2. Further to the above, we should also file simultaneously another Petition the concerned High Court/Civil Court for appointment of an Advocate-Commissioner under Order 26 Rule 14 of the CPC for inspection of the Factory/Office premises of the delinquent/defaulting customer(s) for ascertaining full particulars of movable and immovable properties. The Advocate-Commissioner would prepare an Inventory for submitting it to the concerned Court. In addition, we should also try to ascertain, as fast as possible, the details of the assets, both movable and immovable, of the customer(s) including the Bank Account(s) of the delinquent/defaulting customers and furnish the same to the Court. On the basis of such information the Court may be requested, to pass an order of attachment before judgment under Order 38 Rule 5.
3. Another Petition, in addition to the other two Petitions referred to above, should also be filed along with the Plaint under Order 39 Rules 1 & 2 of the CPC for an order of injunction by the Court to restrain the delinquent/defaulting customer(s) their Director(s)/Partner(s) etc. from transferring/alienating and/or encumbering in any manner whatsoever, the properties, both movable and immovable, to any person(s) during the pendency of the Civil Suit.
4. Whether civil suit under Order 37 should be filed or ordinary civil suit for recovery of outstanding with interest is be filed, may be decided case to case basis in consultation with Legal Cell HQ.
5. Since the Civil Proceedings as referred to in Part-B involves payment of huge Court Fees and since period of limitation to file Civil Suit is three years from the date when the Bank returns the Cheque(s) unpaid, prior approval from Legal Cell/CMO/Kolkata and the Competent Authority must be obtained before initiating civil action.
6. Alternatively, winding up proceedings as per provisions of Section 439 of the Companies Act, 1956 can be initiated when defaulting customer is a Company in a situation where (a) payment of huge Court fees is involved (b) properties of the Company is under prior charge with Bank and other financial institutions. However, the winding up proceedings can be initiated only after serving Notice under Section 433 and 434 of the Companies Act. The winding up proceedings can be initiated with the approval of RM in consultation with Legal Cell.

PART-C

FILING OF COMPLAINT FOR THE OFFENCE UNDER SEC.138 OF N. I. ACT AND SEC. 420 OF IPC

In view of the recent judgment of Supreme Court of India separate FIR for the offence u/s 420 IPC and filing of Cr. Complaint for the offence u/s 138 N I Act separately is not permissible. Filing of composite complaint for the offence u/s 138 of N I Act and sec 420 IPC can be decided in consultation with Legal Cell HQ.

PART-D

ENGAGEMENT OF LAWYERS AND MONITORING OF CASES

1. The Branches must engage best lawyers available at the concerned locations in consultation with the Legal Cell HQ/Regional Law.
2. The Branches must monitor the cases carefully and with due diligence in consultation with the Legal Cell HQ/ Regional Law and the concerned lawyer and submit a fortnightly report to the Legal Cell/CMO/Kolkata with copies to RM, GM(F&A). Branch should depute an executive to attend the case on day to day basis.

Annexure-I

M/s Steel Authority of India Limited,

Dear Sirs,

Re: Unsecured Credit Facility.

Ref: Your Offer Letter No /Intimation Letter No. ___dated______

In response to your letter no._______dated______ enclosing therewith the above offer letter, I/we am/are submitting Cheque(s) bearing No.(s)_______________ dated ___________ for Rs.__________________ for payment and to discharge our liability towards the price of the materials sold and delivered to us as per your offer letter(s) on credit basis as well as interest accrued thereon @ _______% per annum for the aforesaid credit period. We also undertake to pay further interest at the aforesaid rate by separate Cheque for the extended credit period as may be made at our request.

I/We further agree and undertake to pay interest at the rate ______ % per annum on the principal amount due w.e.f. the date of DO/RR/invoice/receipt of material in case of door delivery (strike off whichever is not necessary) till the date of payment for our failure to pay the entire dues within the initial credit period or within the extended period, as the case may be.

I/We assure and undertake that as and when such Cheque(s) is/are presented to our Banker(s), the same will be honored by them and we will keep sufficient amount in our account for payment of the Cheque amount.

I/We further agree and undertake that we shall not instruct our Banker(s) to stop payment(s) of the Cheque(s) issued to you against our liability as aforesaid.

I/We also undertake that we shall never issue any notice requesting you not to present the Cheque(s) issued by us on the respective due date(s).

I/We am/are aware that on the basis of this undertaking and the Cheque(s) submitted by me/us, you have agreed to provide us unsecured credit and I/we submit that in the event of any default in honoring the Cheque(s) you are at liberty to take action against me/us for the dishonor of the Cheque(s) under the provisions of Section 138 of NI Act or any other legal action for recovery of the Cheque amount plus interest.

Thanking you

Yours faithfully

Annexure-II

LEGAL NOTICE FOR DISHONOUR OF CHEQUE

(Without Prejudice)

(To be sent to the local/registered address of the party by Registered Post)

From:

The Branch Manager,

……………. Branch

Steel Authority of India Limited,

………………………. ……………………

To:

………….

……………

Dear Sir,

I ………………………………………………… (Designation) give you the following notice:

1. I am the Branch Manager of “Steel Authority of India Limited” …… Branch, and duly authorized to give you this notice. Steel Authority of India Limited is carrying on the business of manufacturing and selling coke, pig iron, steel and other allied products.
2. You had purchased…………..MT of coke/pig iron/ steel worth Rs……… from the aforesaid Steel Authority of India Limited, on ………. (date), vide D.O. No………… dated………… and had delivered an account payee Cheque no …… …. Dated ….. On …. (date) for Rs………(Rupees ………………………….) only, drawn on ………..Bank being the purchase price as per usual terms of purchase of Steel Authority of India Limited, products. You had forwarded the Cheque vide a forwarding letter no …………….. Dated ………..
3. We had deposited the Cheque in our account in ……………… Bank, during the period of validity of the Cheque, on ………… (Date), which has been returned by the bank on ………. (Date) with the following comment……………..
4. It therefore, appears that you had obtained the D.O. / endorsed R.R / endorsed Lorry Receipt through false representations, mischievously defrauded and cheated the company.

TAKE NOTICE THEREFORE that you are called upon to pay the following amounts within fifteen days of receipt of this Notice, failing which we shall initiate legal proceedings for the recovery of the said amount, criminal proceedings for cheating and fraud, and shall also prosecute you under Section 138 of the Negotiable Instruments Act, 1881 :

1. Amount for which the Cheque was Issued Rs …………….
2. Bank charges Rs …………….
3. Interest Rs……………..

And in these cases you shall be liable to pay the cost of the proceedings, and interest also.

This is WITHOUT PREJUDICE to any other legal remedy that Steel Authority of India Limited, may like to avail of, including other legal proceedings / execution / distress etc.

Yours faithfully,

Date : Steel Authority of India Limited, Place (BRANCH MANAGER)

Annexure-III

COMPLAINT UNDER SECTION 142 OF THE NEGOTIABLE

INSTRUMENTS ACT, 1881

In the Court of the Metropolitan Magistrate

(District …………………)

Complaint Case No…………………. of 200………………

(Under Section 142 of the Negotiable Instruments Act)

The Steel Authority of India Limited

………………...Payee/Complaint

Vs.

……………….. (Name of Opp. Party)

……………….. Drawer/Opp. Party

To the Hon'ble Judge of the aforesaid Court, the humble complainant begs to say as under:

1. That the Drawer/Opp. Party had requested to be allowed to pay by Cheque for purchase of materials, more fully described in the Schedule, valued at Rs…….. The complaint had agreed to the request, and had issued Delivery Order for the said materials purchased/enclosed Railway Receipt/Lorry Receipt in favour of the Opp. Party.
2. The opposite party drew up a Cheque on ……. (date) for the sale value as per the usual terms of sale, being Cheque no …….. for Rs……….(Rupees …………………….only) drawn on …… Bank,……………Branch, in favour of the complainant. As agreed between the parties, the Cheque was dated …………., and the Cheque was valid for a period of three months from the said date of the Cheque. The Opp. Party also made certain representations regarding the Cheque, as contained in the letter of the Opp. Party no………. dated…………
3. The opp. Party has thereupon received delivery of the materials from ……… Stockyard of the complainant on ………… (Note : This is only required in case of D.O. as in case of Railway Receipt / Lorry Receipt, the little passes on endorsement of the receipt.)
4. The aforesaid Cheque was presented before the …………… Bank On ………………, well within the validity period of the Cheque, and on it was being matured for payment. But the said bank returned the Cheque unpaid On ……with the remark ‘refer to drawer', that is on account of there being insufficiency of funds in the account of the Drawer/Opp. Party and the drawee bank.
5. That thereafter the complainant, vide his Notice no………. dated…………, demand payment of the amount of the Cheque. The aforesaid Notice was served on the Opp. Party on…………………….
6. Despite service of the Notice, the Opp. Party did not pay the said amount and interest thereon up to date to the complainant within 15 days of the service of the said Notice.
7. The Opp. Party, in order to cheat and defraud the complainant and without any intention to pay for the goods purchased by the Opp. Party from the complainant, had issued the above noted Cheque, knowing fully well that it was bound to be dishonored, and induced the complainant to part with the materials.

IT IS THEREFORE PRAYED, that the Hon'ble Court may be pleased to prosecute the Opp. Party u/s 138 of the Negotiable Act, 1881 and penalize him thereunder.

Verification Sd/-

………………

………………

Complainant

……………...

7. SUMMARY, CONCLUSIONS & SUGGESTIONS

7.1Summary

1. INTRODUCTION

This topic converts to objective, methodology, and limitation of the study.

The objective of the project is laying down guidelines for deciding the suitability of a customer for extending credit, minimizing the risk involved and methodology for sanction and monitoring credit and cash management of the company.

2. ABOUT SAIL

This topic involve about SAIL, i.e. background of SAIL, Vision of the company “To be a respected world Class Corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction.” , plant wise product mix i.e. which plant produce what type of product, quality policy of the company, MOU i.e. with whom they sing future relationship regarding sale or purchase.

3. CENTRAL MARKETING ORGANISATION OF SAIL

This topic cover marketing setup of SAIL, i.e.-

Ø Central Marketing Organization (CMO)

CMO, It caters to the products produced by the 5 integrated steel plants namely ISP, RSP, BSP, DSP and BSL. Also SSP mild steel grade is marketed by CMO. The marketing is done presently through a wide network of 36 BSO s, 22 CCO (Customer Contact Offices), 24 departmental warehouses and 37 CA (Consignment Agencies).

CMO domestic marketing efforts are supplemented by its ever-widening networking of authorized and rural dealers who meet the demands of the smallest customers in the remotest corners of the country. A strong IT support system enables real-time network connectivity within the entire CMO network. Extensive customer contacts, product and segment specialization, close monitoring of order servicing and feedback analysis through a Customer Satisfaction Index are established norms at CMO. The customer friendly approach of CMO is backed by after-sales service ,through the process of key account management, CMO provides single window service to key customer across the country for every business transaction from enquiry to order booking, order taking to deliver, and even consultancy and after sales service.

Ø Marketing Function of CMO

CMO functions primarily through its network of branch, warehouse, SRM Office, T & S and ITD. The job of marketing starts from drawing the Annual Business plan followed my Annual sales plan and finally the monthly sales plan, at branch level.

Branch Sale Office (BSO) Function:

Warehouse Function

Sales Resident Manager Function

Ø Avenues of Sale

The products of SAIL are sold through different avenues. They are as follows:

1. Dealership Scheme
2. Tender Route
3. Memorandum of Understanding (MOU) Scheme.
4. Tie-ups

4. FINANCE AND ACCOUNTS DEPARTMENT OF SAIL

This topic cover Finance and Accounts Department of SAIL.

Ø Structure of Finance and Account Department, CMO.

Home Sales Branches all over India along with 4 Branch Transport and Shipping (BTSO).Home sale branches are being monitored by CMO (HQ) at kolkata whereas BTSOs are separately monitored by T&S/HQ. Ultimately, all home sale branches and BTSOs including T&S/HQ and Commercial Directorate (including ITD) are accountable to CMO (HQ) at kolkata as far as the finance function are concerned.

Ø Function of Finance and Account Department, CMO.

The function of the Finance Department encompasses wide areas which are summaries as bellow:

1. Pricing Concurrence.
2. Implementation of Marketing Guidelines.
3. Accounting.
4. Budgeting.
5. Monitoring Costs.
6. Credit Rating of the Customer.
7. Compliance of statutory obligation.

Ø Role of Finance in SAIL's Marketing:-

Finance play vital role in SAIL's marketing. From all aspect there exist an inseparable relationship between finance on the one hand and marketing on the other hand, they are also dependent each other. In fact financial policies will be devised to fit marketing decisions of a firm in practice. Here Central Marketing Organization's (CMO) role is mostly concentrated in casting an influence over the sales figure. It drives all its effort into the analysis of demand, then forwarding implementation to the plants regarding customer needs, marinating consistent supply and above all, rendering an optimized customer satisfaction. CMO considers volume to be the center of focus as one of the most prioritized objectives to carry out its line of operation.

5. CREDIT POLICY

This topic is based on credit policy of CMO:

Ø Credit Policy and its Limitation

The main objective of Credit Policy are laying down guidelines for deciding the suitability of a customer for extending credit, minimizing the risk involved and methodology for sanction and monitoring credit.

SAIL follows some principle for Credit Policy such as:

Materials should be sold mainly on "cash and carry" basis delivery against payment through negotiation of documents. Material may be sold on Secured Credit based on Letter of Credit (LC) or Bank Guarantee (BG) of adequate amount from a scheduled bank.

Material may be sold on unsecured credit, if deemed necessary, keeping in view the trade practices and specific customers' requirements.

All proposals for provision of credit shall be processed in Consultation with Associate Finance (ICWF). Secured credit facility may be extended to customers by the concerned executives as per the delegation provided hereunder. Unsecured credit may be provided to customers with approval of the Director (Commercial).

Categorization of Customer

Category - 'I'

1. Central/State Govt. Departments
2. Public Sector Undertaking (whose net worth is positive)
3. Projects of National/State level importance, including those funded by International Financial agencies
4. Private Companies (whose shares are traded regularly).
5. Customers, with whom Memorandum of Understanding (MOU)/Tie-up has been executed.

Category - 'II'

1. Public Sector Undertaking (whose net worth is negative)
2. Private Companies (whose shares are not traded regularly)
3. Other Companies, Partnership/Proprietorship firms

While processing proposal for provision of credit, adequate attention should be paid to the second category of customers because of the relatively higher risks involved.

Credit Limits allowed to the customer:-

Based on prevailing market conditions and business needs, an overall limit for provision of secured and unsecured credit separately shall be fixed at the beginning of each financial year by the Director (Commercial) in consultation with the Director (Finance).

In case of provision of material against secured credit, the Branch Manager, in consultation with Associate Finance, shall issue material against valid banking document(s).Overall position of provision of secured credit shall be monitored at the regional level by the concerned Head of Finance.

Limit fixed for unsecured credit, shall be sub-allocated among various Regions by Headof Finance, CMO in consultation with Head of Long Product (LP)/Flat Product (FP).

Proposal for unsecured credit limit for individual customer shall be initiated by theBranch Manager in consultation with Associate Finance along with supporting documents and routed through the Regional office, Credit Rating and Monitoring Cell (CRMC), Head of Long/Flat product and Head of CMO Finance and decided as per guidelines with the approval of Director(Commercial).

Time Limit for Credit

Secured Credit Unsecured Credit

BM/ICWF 60 days 30 days

RM/ICWF 90 days 60 days

Head of Long/

Flat Products/ICWF 120 days 90 days

Extension of credit after the normal period:

Secured Unsecured

BM/ICWF Credit policy & cash management for a multi operational unit ofsail 15 days 10 days

RM/ICWF 30 days 20 days

Head of LP/FP/ICWF 45 days 30 days

Ø Granting Credit to Customer.

Credit sale is necessary in any industry, so it also important aspect tools in the steel industry under the present competitive market scenario. To much the competition in present market scenarios SAIL offered by two type of credit which is:-

1. Secured Credit
2. Unsecured Credit

In the case of Secure Credit overall constraint or ceiling with respect to the credit limit then the credit may be allowed within overall branch credit limit by judiciously fixing interest priority amongst customers.

In the case Unsecured Creditor it may extend to all customers in terms of guidelines issued from time to time, within the limits approved by director.

Ø Securities to be furnished for Secured Creditor.

• Bank Guarantee (BG)/ Letter of Credit (LC) should preferably be received directly from the bank through post/courier.
• Written confirmation must be obtained from the issuing bank regarding the genuineness of LC/BG.
• Expiry date for the LC's are last date of delivery or last date of negotiation of documents.
• LC can also cat as a standby document that if the same may not be negotiated for each and every transaction and be kept as standby.

Ø Securities to be furnished for Unsecured Creditor.

• At the time of availing unsecured credit for the first time corporate guarantee under the SAIL of the company duly authorized by the B.O.D and 2 personal guarantee bonds from two of its directs is to be furnished.
• In addition to the above requirements, current dated cheques for full value of the material and interest if any with covering letter of undertaking to be taken.
• Following customers may be exempted from furnishing PG's
• Government Department
• Quasi government bodies
• PSU's
• NGO's
• Public Limited Companies whose shares are quoted in the stock exchange and traded regularly.

6. CASH(CHEQUE) MANAGEMENT

This topic is based on cash (Cheque) management of CMO:

Ø Acceptance of Cheque and its Limitation.

At the beginning of each financial year, BM-LP/FP should prepare the list of customers in their respective areas from whom Cheque can be accepted

For common customers, BMs/LP & FP shall, jointly decide the individual names and limits. For PET customers, the Regional In-Charge/PET shall fix the individual Cheque limits on written recommendation of senior most PET Executive in Branch.

Cheque of ASP/SSP customers are to be accepted based on approved list forwarded by Regional I/C of ASP/SSP or as per specific approval of RM I/c (ASP/SSP).

The list so prepared should be reviewed by BM (FP/LP) at least once in every 6 (six) months for any additions/ deletions.

Cheque may be accepted from Govt. Departments without limit. It may be noted that this provision is applicable only for Govt. Depts. and not PSUs.

Cheque deposited by a customer should be accepted on behalf of other Branches, (MRCA) on clearance by concerned BM/Associate Finance/Dealing Executive within the approved Cheque limit of the customer.

Outstation Cheque should not be accepted from any private customer.

Cheque may be accepted from any customer without any limit against outstanding credit/Sundry Debtors.

In case of dishonor of Cheque, Cheque facility for such customers should be stopped with immediate effect.

Lifting of materials against Cheque/Demand Draft/Pay Orders submitted by new customer may be allowed subject to realization of such Cheque/Demand Draft/Pay Orders.

Ø Way-out for Dishonors of Cheque.

PART -A

NOTICE UNDER SEC. 138/142 OF THE N. I. ACT

Dishonor of Cheque is a criminal offence in terms of Sec. 138 of the Negotiable Instruments Act, 1881 (as amended), if Cheque are returned unpaid by the Bank and full payment covered by the dishonored Cheque(s) is not received within 15 days from the date of receipt of Notice u/s 138 of N I Act. By various judgments of Supreme Court dishonor of Cheque on any ground has been treated as punishable offence u/s 138 of N I Act.

PART - B

FILING OF CIVIL SUITS

In addition to the above, law also permits us to file civil suit in the concerned High Court/Civil Court for recovery of our dues with interest. During the civil proceedings in the Civil Court we are also entitled to seek an order from the Court under Order 38 Rule 5 of the Civil Procedure Code (CPC) for attachment of the properties of the delinquent/defaulting customers even before judgment. For that, along with the Plaint a separate Petition under Order 38 Rule 5 of the CPC is also to be filed in consultation with the Legal Cell, HQ/Regional Law.

PART-C

FILING OF COMPLAINT FOR THE OFFENCE UNDER SEC.138 OF N. I. ACT AND SEC. 420 OF IPC

In view of the recent judgment of Supreme Court of India separate FIR for the offence u/s 420 IPC and filing of Cr. Complaint for the offence u/s 138 N I Act separately is not permissible. Filing of composite complaint for the offence u/s 138 of N I Act and sec 420 IPC can be decided in consultation with Legal Cell HQ.

PART-D

ENGAGEMENT OF LAWYERS AND MONITORING OF CASES

The Branches must engage best lawyers available at the concerned locations in consultation with the Legal Cell HQ/Regional Law. The Branches must monitor the cases carefully and with due diligence in consultation with the Legal Cell HQ/ Regional Law and the concerned lawyer and submit a fortnightly report to the Legal Cell/CMO/Kolkata with copies to RM, GM(F&A). Branch should depute an executive to attend the case on day to day basis.

7.2Conclusions

From the above study, it has been found that finance function an effective role in various decision regarding SAIL's activity. In conclusion, it may be stated that in spite of an efficient system of finance in SAIL, the company may try to innovate any other system that may improve the company's performance in the coming years.

The company may add two more policies in its credit policies which are:

1. Factoring Services.
2. Channel Financing.

Factoring Services

Factoring services means when SAIL provides materials to its customers on credit it should allow the customers to discount the bill from bank which will help SAIL in getting the payment immediately from bank. Thus bank will pay SAIL the amount discounted by the customer. This system is not followed by SAIL. Thus this could be an alternate channel to provide credit to both secured and unsecured creditors and will also help SAIL in reducing risk involved.

Channel Financing

Channel financing is basically for retail customers. In this system customers don't have to pay the full amount at the time of buying the materials. They can pay the amount in installments. This will help SAIL to attract more customers and will help in increasing their volume of sales. This could also be an alternate channel to provide credit to customers.

There is no such change required in the cash management part of SAIL.

7.3 Suggestions

Ø SAIL should also select celebrity as a brand ambassador to endorse its products. Like SRMB has taken Kapil Dev as a brand ambassador to endorse their products.

Ø SAIL should provide tour packagers to the dealers and their families at the time when dealer achieve a set target.

Ø The quality of the product has to be maintained and improve if possible.

Ø SAIL should focus more on advertisement section. It needs more promotional activity as compare to other steel company.

• There are only two hoarding in Kolkata, one is in Rajarhat and another is in Park Circus. So, more hoarding should be put in cities and towns.
• It should also give ads in radio, as it is very effective medium which reaches to home to home.
• It should also give an advertisement on buses, auto, rickshaw, local train and other vehicles as it is more eye caching and will create a good impact on the viewer's mind.

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