Provisons of GFR 2005,

DPM 2009, DFPR 1978 and

CGA (R&P) Rules, 1983

RTC MEERUT
 :

DEFENCE ACCOUNTS DEPARTMENT:
A LEARNING ORGANISATION



Mission Statement

We strive to achieve excellence and professionalism in accounting

and financial services and in performing audit functions.

,
,


Quality Policy

The Defence Accounts Department is committed to render efficient,

correct and prompt accounting, payment and financial services
leading to customer satisfaction. It is also committed to render
efficient audit services to ensure public accountability.

RTC MEERUT
 CONTENTS

SECTION TOPIC PAGE No.

I Delegation of Financial Power 1 14
Rules, 1983

II Central Govt. Accounts (Receipt & 15-76

Payment) Rules, 1983

III General Financial Rules, 2005 77-112

IV Compendium of Rules on 113-149

Advances to Government Servants
(Selected Rules)

V Excerpts from House Building 150-159

Advance Rules, 1978

VI Defence Procurement Manual, 2009 160-217

VII E-procurement: policy, guidelines, 218-250

procedure & FAQs

RTC MEERUT
Delegation of
Financial
Powers Rules,
1978

1
 All powers to incur expenditure out of public funds (Consolidated Fund of India) vest
with the Government in the Ministry of Finance. The structure of governance in India and
the area of governance is so vast that it is not possible for the Ministry of Finance to
authorize all the expenditure of Government of India. It was necessary to delegate financial
powers to incur expenditure out of public funds to subordinate authorities of various other
Ministries/Departments of Government of India.

The Delegation of Financial Powers Rules, 1978 is the compendium containing all the
orders delegating powers to authorities other than the Ministry of Finance. The Delegation of
Financial Powers Rules, 1978 came into force with effect from the 1st day of August, 1978
repealing the Delegation of Financial Powers Rules, 1958. The Rules have been amended
from time-to-time since their publication in the Gazette of India, dated the 22nd July, 1978.

The power to relax these rules vest with the President, under Rule 2, who, being
satisfied that it is necessary or expedient so to do, may, by general or special order, relax-

(a) all or any provisions of these rules in relation to any authority;

(b) delegate to any authority powers in addition to the powers delegated under
these rules;

(c) reduce the powers delegated to any authority to such extent as may be
specified in the order;

(d) impose conditions in addition to those specified by these rules; and

(e) for reasons to be specified, withdraw from any authority all or any of the
powers delegated under these rules.

Rule 4 lays down the general limitations on power to sanction expenditure as under:

(1) No expenditure shall be incurred from the public revenues except on legitimate
objects of public expenditure.

(2) A Subordinate Authority may sanction expenditure or advances of public

money in those cases only in which it is authorized to do so by-

(a) the provisions of any law for the time being in force;

(b) these or any other rules issued by, or with the approval of the President;
or

2
 (c) any general or special order of the President or other Competent
Authority.

(3) Nothing contained in sub-rule (2) shall empower any subordinate authority to
sanction, without the previous consent of the Finance Ministry, any expenditure
which involves the increased expenditure in future unless the said expenditure has
been subjected to scrutiny and agreed to by the Finance Ministry before its inclusion
in the budget.

A Subordinate Authority shall exercise the power to sanction expenditure subject to

any general or special order, direction or stipulation which the authority delegating or re-
delegating such power may issue or prescribe from time to time.

Rule 5 stipulates that all financial powers (referred to as Residuary Financial Powers),
not specifically delegated to any authority by these rules, shall vest in the Finance Ministry.

Rule 6 lays down the stipulations regarding the effect of sanction, as enumerated
below:

(1) No expenditure shall be incurred against a sanction unless funds are made
available to meet the expenditure or liability by valid Appropriation or Re-
appropriation.

(2) A sanction to recurring expenditure or liability becomes operative when funds

to meet the expenditure or liability of the first year are made available by valid
Appropriation or Re-appropriation or by an advance from the Contingency
Fund, as the case may be, and remains effective for each subsequent year
subject to appropriation in such years and subject also to the terms of the
sanction.

Rule 7 relates to the provision of funds by Parliament. It states that the Demands for Grants
and Appropriations for charged expenditure are presented to Parliament on behalf of the
appropriate Ministry or authority concerned. Only after the demands have been voted and
the necessary Appropriation Act passed by parliament the amounts so authorized become
available to the Ministry or authority concerned for Appropriation or Re-appropriation to
meet sanctioned expenditure.

The conditions for allotment of funds is specified in Rule 9 and are as under:

(1) The Ministry or authority on whose behalf a Grant or Appropriation for

charged expenditure is authorized by Parliament shall distribute the sanctioned
funds, where necessary, among the controlling and disbursing officers
subordinate to it.

3
 (2) Subject to any special rules or orders issued by the President the whole or part
of the provision under a primary unit may be placed at the disposal of a
controlling or a disbursing officer, or the primary unit may be broken into a
number of secondary units and the provision under any of these, wholly or in
part, may be placed at the disposal of the controlling or disbursing officers.

Important order:

Re-appropriation from the funds provided for new items requires concurrence of Finance
Ministry It is not within the competence of a Department of the Central Government to
order or agree to re-appropriation, without the concurrence of the Ministry of Finance from
the funds provided for new items in the budget.

[G.I., M.F.,O.M. No. F.1(9)-E.II(A)/74, dated the 5th July, 1979.]

The Rule 10 specifies the general restrictions, as enumerated below, regarding

Appropriation and Re-appropriation of the funds allotted to the Departments:

(1) Funds shall not be appropriated or re-appropriated to meet expenditure which

has not been sanctioned by an authority competent to sanction it.

(2) Funds provided for charged expenditure shall not be appropriated or re-
appropriated to meet votable expenditure and funds provided for voted
expenditure shall not be appropriated or re-appropriated to meet charged
expenditure.

(3) No Re-appropriation shall be made from one Grant or Appropriation for

charged expenditure to another Grant or Appropriation for charged
expenditure.

(4) Funds shall not be appropriated or re-appropriated to meet expenditure on a

new service or new instrument of service not contemplated in the budget as
approved by Parliament.

(5) Expenditure on works shall be subject to the following further conditions,

namely:-

(a) Funds shall not be appropriated or re-appropriated to any work which

has not received administrative approval and technical sanction as
prescribed by the Central Government from time to time.

(b) The amount appropriated to any work shall not, save with the previous
consent of the Finance Ministry, exceed the amount approved or

4
 sanctioned for that work bya sum greater than the excess which may be
authorized under the rules referred to in Clause (a):

Provided that such consent may not be necessary if savings are available elsewhere
under appropriate Works Head to re-appropriate funds to cover excess of expenditure over
authorized limits up to 15 per cent.

(c) Save with the previous consent of the Finance Ministry, no Re-
appropriation shall be made from the primary unit Major Works to
any other unit;

Provided that where such a provision is made under Revenue Head in the budget, a
Department of the Central Government shall be competent to re-appropriate funds between
the allied primary units Major Works, Minor Works, Maintenance, Tools and Plants,
included within the same Grant or Appropriation and no such Re-appropriation shall,
however, be made from or to the Suspense Head relating to a public Work.

(d) (i) Save with the specific approval of Parliament or an advance from
the Contingency Fund of India, Appropriation or Re-
appropriation shall not be made to meet an expenditure for a new
public work not provided for in the budget, which may cost
[rupees fifty lakhs] or more.

(ii) Save with the previous consent of the Finance Ministry, no Re-
appropriation shall be made for a new public work costing rupees
ten lakhs or above but less than [rupees fifty lakhs.]

(6) Without the previous consent of the Finance Ministry, no Re-appropriation

shall be made-

(a) from and to the provision for the Secret Service Expenditure;

(b) So as to augment the provision under the primary units salaries,

Wages, Office Expenses and Other Charges, taken together for the
entire Grant or Appropriation;

(c) from the provision made for any specified new item of expenditure in a
grant or Appropriation for another purpose;

(d) from funds provided under the Plan Heads to the Non Plan Heads both
under Revenue and under Capital heads; and

(e) So as to augment the provision under the primary unit Overtime

allowance.

5
 (7) Funds shall not be appropriated or re-appropriated from or to the primary unit
of appropriation Deputation or Travel abroad of Scientists over and above
the funds provided for in the budget as approved by parliament.

The various conditions regarding Creation of posts are laid down in Rule 10:

(1) Notwithstanding anything contained in these rules, no post shall be created-

(a) in the Secretariat Office of a Department of the Central Government

unless the scale or rate of pay on which the post is created has been
approved by the president for a post of similar character under the
Central Government;

(b) in any other office which is under the control of an Administrator or

head of Department unless there exists in the same or any other civil
non-secretariat office under that Administrator or head of Department, a
post of similar character on a rate or scale of pay approved by the
President;

(c) on a permanent basis, save with the previous consent of the Finance
Ministry, unless savings in the succeeding years can be established for
this purpose; and

(d) unless funds to meet the cost of the post, if temporary, can be found by
valid appropriation or Reappropriation from within the provision
placed at the disposal of the authority concerned during a year.
Continuance of such posts in future shall be subject to the provision of
funds being made in the budget.

(2) The power conferred on a subordinate authority to create a permanent post

may be exercised in creating similar supernumerary post for the purpose of
accommodating the lien of a Government servant who, though entitled to hold
a lien against regular permanent post, cannot be so accommodated because of
non-availability of such a post. The supernumerary post shall be created only if
another vacant permanent post is not available to provide lien for the
Government servant concerned and it shall remain operative only until he is
absorbed in a regular permanent post;

(3) The power conferred on a subordinate authority to create permanent or

temporary posts shall not, unless otherwise directed by the president, be
exercised so as to add such posts to any service or cadre unless that service or
cadre is under the control of that authority:

6
 Provided that the provisions of this sub-rule shall not be applicable to posts borne on
the cadres of the Central Secretariat Service, the Central Secretariat Stenographers Service or
the Central Secretariat Clerical Service. The Competent Authorities may create posts but their
inclusion in the Central Secretariat Service, Central Secretariat Stenographers Service or
Central Secretariat Clerical Service, shall be subject to the provisions of the respective Service
or Cadre schemes.

Rule 12 specifies that a subordinate authority may sanction the abolition of post which it is
competent to create. The powers of the subordinate authorities are further amplified in Rule
13 as listed below:

(1) Subject to the provisions of the DFPR, the Departments of the Central
Government, Administrators and Heads of Departments shall, in relation to
creation of permanent posts, creation of temporary posts, Appropriation and
Re-appropriation, incurring of contingent expenditure, incurring of
miscellaneous expenditure, and write-off of losses, have the powers
respectively specified in Schedules II, III, IV, V, VI and VII.

(2) A Department of Central Government may, by general or special order, confer

powers, not exceeding those vested in that Department, upon an Administrator
or Head of Department or any other subordinate authority in respect of any
matter covered by these rules;

Provided that no power under this sub-rule shall be re-delegated in respect of-

(a) creation of posts;

(b) write-off of losses; and

(c) re-appropriation of funds exceeding 10 per cent of the original budget

provision for either of the primary units of appropriation or sub-head, i.e. the
primary unit or sub-head which the funds are being re-appropriated or the
primary unit or sub-head to which the funds are to be re-appropriated,
whichever is less.

(1) The Administrator or Head of a Department referred to in sub-rule (2) may, by

an order in writing, authorize a Gazetted officer serving under him to exercise
to such extent, as may be specified in that order, all or any of the powers
conferred on such Administrator or Head of Department under sub-rule(1) or
Sub-rule (2). The Administrator or Head of a Department shall, however,
continue to be responsible for the correctness, regularity and propriety of the
decisions taken by the Gazetted Officer so authorized.

7
 (2) An authority empowered by or under these rules to incur contingent
expenditure or miscellaneous expenditure shall exercise such powers subject to
the following conditions, namely:-

(a) In regard to the supply of articles required for the public service and for
regulating the purchase of stationery stores for the public service, the
provisions contained in Appendix-8 and Appendix-9 respectively to the
General Financial Rules, 1963, and subsidiary instructions and orders on
the subject shall be followed;

(b) in regard to contingent expenditure on each item specified in Column 2

of the Annexure to Schedule V of the rules, orders, restrictions or scales
specified in Column 4 of that Annexure against that item shall be
observed;

(c) in regard to miscellaneous expenditure any rules, orders, restrictions or

scales as may be made imposed or prescribed by the President shall be
observed.

(5) Unless otherwise provided by any general or special rule or order, it shall be
within the competence of an authority to exercise the financial powers
delegated to an authority subordinate to it.

(6) The power delegated under these rules can also be exercised for a validation of
an action already taken or expenditure or liability already incurred even when
the authority validating the action or expenditure or liability, as the case may
be, had no competence to do so at the time the action was taken or expenditure
or liability was incurred.

Important decisions:

(1) Powers not be delegated to non-Gazetted Officers. Powers should not be delegated
under these rules to non-Gazetted Officers.

[ G.I., M.F., File No. F.12(55)-E.II (A)/59.]

(2) Officer performing current duties can exercise administrative and financial powers
of the post but not the statutory powers. An officer appointed to perform the current
duties of a post in addition to his own can exercise administrative or financial powers vested
in the full-fledged incumbent of the post but he cannot exercise statutory powers, whether
these powers are derived direct from an Act of parliament (e.g., Income Tax Act) or Rules,
regulations and By-laws made under various articles of the Constitution (e.g. Fundamental
Rules, Classification, Control and Appeal rules, Civil Service Regulations, Delegation of
Financial Powers rules, etc.)

8
 [G.I., M.H.A. O.M. No. F.7/14/61-Ests. (A), dated the 24th January, 1963.]

(3) Ministries/Departments may obtain post facto sanction after making payments in
implementation of court orders where the Supreme Court has passed final orders/all
avenues of appeal and review have been exhausted Ministries/ Departments may make
payments in implementation of court orders in cases where the Supreme Court has passed
final orders in the matter, and all avenues of review and appeal have been exhausted. In all
such cases, the Ministry/Department, would obtain post facto sanction from the concerned
nodal Ministries. These powers may be exercised only in case where the court has passed
specific orders and not in cases where it has been indicated that consequential relief or
benefits would flow to the petitioner. These powers should also not be exercised in respect of
areas where power vest with the cabinet such as revision of new pay scales and creation of
non-plan posts of and above Joint Secretary level and plan posts above Additional Secretary
level. In all such cases, the administrative Ministry/Department should necessarily consult
the nodal Department, viz., the Department of personnel & Training and/or Department of
Expenditure.

[G.I., M.F., (Exp.), O.M. No. F.1(8)-E II (A)/96, dated the 17th April, 1996.]

Rule 14 lays down the stipulations regarding declaration of the Head of Office that the
Departments of the Central Government, Administrators and Heads of Departments shall
have power to declare any Gazetted officer subordinate to them as the Head of an Office for
the purpose of these rules:

Provided that not more than one Gazetted officer shall be declared as Head of office in
respect of the same office or establishment, unless such office or establishment is distinctly
separate from one another.

Important decision:

Under Secretary-in-charge of Administration as a Head of office. A Department of the

Central Government may declare the Under Secretary-in-charge of Administration as a Head
of Office.

[G.I. M.F., O.N. No. F.1(55)-E.II (A)/62, dated the 25th October, 1962.]

The various stipulations and conditions regarding insurance of Government Property are
given in Rule 15, as listed below:

Government property, both, movable or immovable, shall not be insured and no

subordinate authority shall undertake any liability or incur any expenditure in connection
with the insurance of such property without the previous consent of the Finance Ministry
except in the cases mentioned below-

9
 (a) Departments of the Central Government shall be competent to incur
expenditure on the insurance of materials and equipments received on loan or
as aid from Foreign Governments or International or other organizations if,
according to the terms of contracts or agreements entered into with the Foreign
Governments or International or other Organizations concerned, insurance of
such materials and equipments is necessary.

(b) Where for booking of goods by rail or road, an enhanced risk rate is provided,
additional charge above those prescribed for booking of goods at owners risk
rate, being in the nature of insurance charges, Departments of the Central
government shall be competent to incur such additional expenditure for
booking goods for carriage at such enhanced rates.

In cases, where it is decided to insure properties or goods under the direct or indirect
control of the Central government, the Departments of the Central Government concerned
shall effect the insurance only with a Nationalized Insurance Organization and follow the
procedure that may be laid down by the Finance Ministry from time to time.

Important decisions:

(1) Relaxation. In relaxation of Rule 15, it has been decided that the Departments of the
Central Government may incur expenditure on insurance not exceeding Rs. 20,000 in each
case, of all costly, extremely delicate, highly sensitive, sophisticated equipments of fragile
nature purchased from abroad which are not easily replaceable and for which insurance is
considered absolutely necessary. The term each case means purchases made by the
Department from one or more than one suppliers abroad on a particular occasion. In this
regard, the provisions of Department of Economic Affairs, O.M. No. F.61 (1)-Ins. I/73, dated
6.2.1973, read with that Departments O.M. No. F.61 (1)-Ins. I/73, dated 21.6.1973, may be
kept in view.

[G.I., M.F., O.M No. F.1 (12)-E.II (A)/94, dated the 6th September, 1994.]

(2) Exemption from compulsory insurance of vehicles. Motor vehicles owned by the
Central government, which are used for purposes not connected with any commercial
enterprise, are exempt from compulsory insurance against third party, risk by virtue of sub-
section (2) of Section 94 of the Motor Vehicles Act, 1939. Such vehicles shall not, therefore, be
insured. The vehicle used for purposes connected with any commercial enterprises
Departments of the Central Government if a fund has been established and is maintained in
accordance with the rules, made in this behalf under the Motor Vehicles Act, 1939, for
meeting any liability arising out of the use of such vehicles, which may be incurred, to third
parties. In cases where such a fund has not been established, the motor vehicles used for
purposes connected with any commercial enterprise shall be insured against third party risk
by the Departments of Central Government.

10
[G.I. K.F., O.M. NO. F.1(62)-E.II (A)/62, dated the 7th February, 1963.]

The Rule 16 regarding Delegation of powers to incur expenditure, stipulates that subject
to the provisions of rule 142 of the Treasury Rules, a Head of Office may have power to
authorize a Gazetted officer serving under him to incur contingent and miscellaneous
expenditure on his behalf subject to such restrictions and limitations as may be laid down by
him. The Head of office shall, however, continue to be responsible for the correctness,
regularity and propriety of the expenditure incurred by the Gazetted officer so authorized.

Rule 18 lays down various conditions governing Expenditure on schemes or projects:

(1) Without prejudice to the provisions of rule 13, a Department of the Central
Government may sanction expenditure of any scheme or project, the total
outlay on which does not exceed rupees [one crore fifty lakhs], if that scheme
has been approved by the Finance Ministry.

Provided that where a project as a whole has been sanctioned after scrutiny and
acceptance by the Finance Ministry further concurrence of the Finance Ministry shall not be
required for sanctioning expenditure on the various constituent scheme included in the
project even if the magnitude of the expenditure involved in any such constituent scheme
exceeds rupees [one crore fifty lakhs]:

Provided further that the approval of the Finance Ministry shall not be required to
sanction excess expenditure over the original estimates of a sanctioned scheme up to ten per
cent or rupees five crores, whichever is less, in the case of plan scheme and ten per cent or
rupees three crores, whichever is less, in the case of non-plan scheme, unless the scheme or
project has been substantially altered:

Provided also that in relation to public works, the power conferred by this rule shall
be subject to the provisions of Central Public Works Department Code, the Central Public
Works Account Code, the relevant Department Code issued after consultation with the
Finance Ministry of any general or special order of the president in this behalf.

Note.- For the purpose of applying the limit of rupees [one crore fifty lakhs], the entire cost of
the scheme up to the date of completion (both recurring and non-recurring) including the
cost of works (even where the provisions for such work is made in a Demand under the
control of another Department shall be taken into account.

(2) Notwithstanding anything contained in sub-rule (1), but subject to the

provisions of the Central Public Works Department Code, the Central Public
Works Account Code and any general or special order of the president in this
behalf, the Department of Transport may sanction any expenditure on the

11
 maintenance of national Highways and other roads which are under its
administrative charge.

(3) An order of Appropriation or Reappropriation of funds shall operate as

sanction to incur expenditure on minor works and it shall not be incur
expenditure in such cases (vide para. 63 of Central public Works Department
Code).

The power to release funds are given in Rule 19 stipulating that subject to the
existence of specific allotment in the Budget of Appropriation or Re-appropriation of funds
or advance sanctioned for the purpose from the Contingency fund and observance of the
procedure laid down by the Finance Ministry from time to time, the Departments of the
Central Government shall have powers to release funds for investment as equity capital of
statutory corporations or companies wholly owned by the Central government.

The conditions governing Grants and Loans are given in Rule 19 stipulating that the
Departments of the Central Government and Administration shall have full powers to
sanction grants-in-aid including scholarships and loans:

Provided that-

(a) Such grants-in-aid including scholarships or loans are in accordance with the
rules or principles prescribed with the previous consent of the Finance
Ministry; and

(b) the rate of interest on a loan and the period of payment thereof are fixed with
the previous consent of the Finance Ministry unless the rate of interest on such
loan and the period of repayment thereof are prescribed in any general or
special order of that Ministry.

Rule 21 lays provisions regarding powers to sanction expenditure regarding Indents,

contracts and purchases as under:

(a) Subject to the provisions of these rules and the provisions of the Central
Financial rules, 1963, governing the purchase of stores for the public service, a
Department of the Central Government shall have full powers of sanction
expenditure for purchases and for execution of contracts, including agreements
or contracts for technical collaboration or consultancy services.

(b) The powers under this rule shall be exercised up to rupees twenty crore for
open or limited tender contracts, up to rupees five crore for negotiated or single
tender or proprietary contracts and up to rupees two crore for agreements or
contracts for technical collaboration and consultancy services by the Secretary
of the Department concerned and contracts or purchases, amount of which

12
 exceeds these values in the categories stated, shall required the approval of the
Minister-in-charge of the Department.

Notwithstanding anything contained in sub-rules (a) and (b) in cases where the award
of contact or purchase or consultancy is inseparably linked with the project or scheme and
forms a part of the proposals for Standing Finance Committee (SFC) or Committee on Non-
Plan Expenditure (CNE) or Expenditure Finance Committee (EFC) or Cabinet, the same will
be processed as per the financial limits laid down for sanction for such schemes of projects by
the Competent Authority.

EXPLANATION.- In this rule, the word contract include miscellaneous contracts,

such as handling contracts and leases. Leases for hiring accommodation for office, residential
and other purposes shall, however, be regulated under Item 16 of the Annexure to Schedule
V. If a contract extends over a period of time, the total value over the entire period of
currency shall be taken for he purpose of applying the limit. Further, a limited or open
tender which results in only one effective offer shall also be treated as a single tender
contract.

Rule 22 regarding Trading Operations states that, Notwithstanding anything contained

in these rules, all proposals-

(a) for the purchase of commodities not intended for Government consumption,
but for sale or issue to the public, State Governments or any other authority;

(b) for the fixation of prices in respect of direct trading operations of Government;
and

(c) from Government companies and undertaking which may be referred to the
Government for fixation of prices for their products or stocks;

Shall be referred to the Finance Ministry for concurrence before approval:

Provided, however, that a proposal under Clause (a) or Clause (b) may not be referred
to the Ministry of Finance for concurrence, if the value of the transaction is below rupees
[one crore].

In this rule, Government Company the same meaning as in the Companies Act, 1956 (1 of
1956).

Rule 23 lays down conditions authorizing the payment of commutation money by a

Department of the Central government and debiting the same to the Consolidated Fund of
India.

13
Rule 24 stipulates the powers regarding to sanction Sale, etc., of public buildings subject to
the conditions set out below, the Departments of the Central Government and
Administrators shall have full powers to sanction sale or dismantlement of public buildings
(other than a purely temporary structure), provided these powers are exercised with the
concurrence of their Financial Advisers.

Conditions:

(1) No public building shall be sold or dismantled unless it has been previously
ascertained that it is not required by any other Department of the Central
government.

(2) No public building shall be demolished unless it is structurally in a dangerous

condition or is beyond economic repairs and has been certified as such by
appropriate technical authority or it is necessary to vacate the site for
constructing a more important Government building or structure.

(3) A public building, the sale or dismantlement of which is sanctioned in exercise

of the power conferred by this rule, shall be disposed of by public auction
through the Central Public Works Department or the local Public Works
Department in areas where the Central Public Works Department does not
operate.

NOTE 1.- The power conferred by this rule shall be exercised only if the
administrative control of the building vests in the authority sanctioning its sale or
dismantlement.

NOTE 2.- The Departments of the Central Government and Administrators shall
have full powers to sanction sale or dismantlement of purely temporary structures.

EXPLANATION.- A purely temporary structure means a structure, the life of which

is not more than two years.

14
 Central
Government
Acccount
(Receipts &
Payments)
Rules, 1983

15
 PRELIMINARY AND GENERAL PRINCIPLES
(Rule 1 to 16)

Short title, commencement and applicability

(1) These Rules may be called the Central Government Account (Receipts and Payments) Rules, 1983.
(2) They shall come into force on 1- 6 -1983.
(3) They shall apply to all transactions, other than payment of pensionary benefits, pertaining to the
Central Government and the Union territories of Delhi and Andaman and Nicobar Islands.

Location of moneys credited to Government Account. -

Unless otherwise specified, moneys credited to Government Account shall be held either
(i) in the Reserve Bank; or
(ii) in a Central Treasury, the cash, business of which is not conducted by the bank.

The deposit of such moneys in the Reserve Bank shall be governed by the terms of the
agreement specified in Appendix I to these rules made with that Bank under section 21 of the Reserve
Bank of India Act, 1934 (2 of 1934).

Other offices authorised to hold departmental Treasure Chests.-

The Officers in charge of Military Treasure Chests and such offices of the Posts and Telegraphs
Department as are authorised to perform all or any prescribed part of the duties of a Treasury Officer
in respect of custody of the cash balances, and claims against the Government that may be presented
to them for disbursement; and also in respect of moneys that may be tendered to them for credit to
the Government Account, shall have to observe the relevant provisions of the Treasury Rules of the
Central Government.

Custody of money relating to or standing in the Government Account.-

(1) The bank is responsible for the safe custody of Government moneys deposited in the bank.
(2) The procedure for the safe custody of moneys in the hands of Government officers referred to in
rule 4, shall be regulated by the provisions contained in Part IV (Rules 109 to 112 in particular) of the
Treasury Rules of the Central Government.

Payment of revenues, receipts and dues of the Government into Government Account by
Officers authorised to receive them-

16
1. All moneys received by or tendered to Government officers on account of revenues or receipts
or dues of the Government shall, without undue delay, be paid in full into the accredited bank
for inclusion in Government Account. Moneys received as aforesaid shall not be utilised to
meet departmental expenditure except as authorised in sub-rule (2) nor otherwise kept apart
from the accounts of the Government.

2. Notwithstanding anything contained in sub-rule (1), direct utilisation of departmental receipts

for departmental expenditure is authorised in the following cases, namely:-

a. in the case of cash receipts utilised by Postmasters and other heads of offices of Posts
and Telegraphs Department for departmental purposes in accordance with Posts and
Telegraphs departmental regulations;
b. in the case of moneys received on account of the service of summons, diet-money of
witnesses and similar purposes, in civil, revenue and criminal cases and in the case of
diet-money of witnesses deposited by the assesses with the Income Tax Officers;
c. in the case of deposits received at a Civil Court and utilised by the Court to meet
claims for the refund of such deposits;
d. in the case of the Public Works Department (and other departments in which the
provisions of Central Public Works Account Code are authorised to be followed) for
temporary utilisation of cash receipts for current works expenditure, under the
provisions of authorised departmental regulations;
e. in the case of cash received by the Forest Department and utilised in meeting
immediate local expenditure;
f. in the case of cash found on the persons of prisoners at the time of their admission to
jail and used for the repayment by jail Superintendents under departmental
regulations, of similar sums due to other prisoners on their release;
g. in the case of cash receipts of Railways utilised under departmental regulations or
with the previous approval, general or special, of the Government, for departmental
purposes;
h. in the case of the National Library, Calcutta, or any other Government library, to
permit refund of security deposits of members of the Library and the replacement of
books belonging to the library which are not returned by borrowers out of their
deposit money;
i. in the case of the Botanical Survey of India, to permit the refund to indentors of
quinine and purchasers of seeds and plants, out of the amount deposited by them, of
such amount as may be in excess of the cost of quinine or of seeds and plants including
incidental charges on packing, remittance, connected therewith;
j. in the case of the Survey of India Department, to permit the refund to indentors of
maps or other priced publications, out of the amount deposited by them, of such
amount as may be in excess of the cost of maps or publications including incidental
charges on packing, and forwarding, connected therewith; the payment of commission
to selling agents out of sale receipts and to permit refund to indentors or private
publishers of maps or other priced publications of royalty charges and scrutiny
charges for checking of external boundary of India from out of amount deposited in
excess by them;
k. in the case of offices subordinate to the Ministry of External Affairs and stationed
outside India where a branch of the accredited bank does not exist, to permit the direct

17
 utilisation of fees and other receipts realised by them towards their departmental
expenditure;
l. in the case of All India Radio, to permit payment of commission to (i) sale agents of All
India Radio Programme journals, and (ii) to advertising agencies, out of the sale
proceeds of the journals and of advertising time in Commercial Service of All India
Radio, respectively;
m. in the case of Regional Poultry Farms, Hassarghatta, Bangalore, Bombay and
Bhubaneswar, to permit refunds to private poultry farmers of amounts paid in
advance by them in excess of the cost of chicks, etc., supplied to them including
incidental charges connected therewith;
n. in the case of Department of Publications, to permit
i. the remittance by the sole concessionaire of the amounts due towards
advertisements in Government publications after deducting the commission
payable to him; and
ii. the refund of moneys deposited in advance by indentors for supply of
publications out of the sale proceeds of the publications;
o. in the case of Films Division to permit payment of commission to commission agents
out of sale proceeds of films for non-commercial exhibitions in India;
p. in the case of the Social Welfare and Rehabilitation Departments to utilise the cash
received on private order work for the payment of wages to labour employed on that
work;
q. in the case of Central Research Institute, Kasauli, to utilise the cost received on account
of sale of sera and vaccines produced at the Institute, for refund to the indentors of the
excess amount received from them;
r. in the case of Central Institute of Psychiatry, Ranchi, to utilise the amount of advance
deposited by the patients as maintenance charges at the time of their admission to the
Institute, to refund the unutilised amount of maintenance charges to the patients
discharged from the Institute.

Provided that the authority hereby given to utilise departmental receipts for departmental
expenditure shall not be construed as authority to keep the departmental receipts and expenses
defrayed therefrom, outside the account of the payments into and withdrawals from the
Consolidated Fund or Public Account, as the case may be.

3. In special cases authorised by the Government, moneys received or tendered on account of

the revenues of the Government may be deposited with a bank other than the Reserve Bank or
its agent for the purpose of Government transactions. The conditions under which such
deposits may be made and the manner in which the balances of such deposits shall be
included in the Government Account shall be decided by the Government in each case after
consultation with the Comptroller and Auditor General.

Facility for public to credit Government dues direct into the accredited bank of a
Ministry /Department and certain tax receipts in other Nationalised bank also.-
Money due to the Government may also be credited directly into the specified branch of the
accredited bank in which a particular departmental officer holds his account, in accordance with the
procedure notified by the Ministry, Department and, or Union Territory concerned for the purpose.
Tax receipts pertaining to the Central Board of Direct Taxes and Central Borad of Excise and Customs

18
(and of any other particular Ministry or Department as may be decided by the Government from time
to time) and also sales tax revenue of Delhi Administration are authorised under special procedures
notified therefor, to be credited by the tax payers directly into any branch of the authorised bank
within the municipal limits at the selected centre notified for the purpose. Form of challan to be used,
and related matters are contained in rule 26.

Deposit of Government revenue etc. by the receiving branch of the bank into the Reserve
Bank.-

Immediately on receipt of Government revenues, receipts or dues, the receiving branch of the
bank shall cause them to be included in the Deposits of the Government held by the Reserve Bank of
India in accordance with the provisions of rule 3.

Bar against money withdrawn from Government Account being deposited in a bank other
than the accredited bank, etc.-

A Government officer may not, except with the special permission of the Government, deposit
moneys withdrawn from the Government Account under the provisions of rule 11, in a bank account
other than that with the accredited bank.

Withdrawal of money from Government Account.-

1. Save as expressly provided by, or under these rules, or unless the Government in Ministry of
Finance (Department of Expenditure) otherwise direct in any case, moneys may not be
withdrawn from the Government Account other than against cheques issued by an Accounts
Officer on an account opened in his favour, or by a cheque drawing D.D.O. on an assignment
Account opened in his favour, at a specified branch of the accredited bank. In so far as civil
Ministries or Departments are concerned, such accounts shall be opened under orders issued
by the Financial Adviser of the Ministry or Department concerned in consultation with the
Controller General of Accounts.

2. A cheque drawing D.D.O. functioning under the scheme of departmentalisation of accounts

may withdraw money for such purposes as may be prescribed by the Controller General of
Accounts by general order.

Provided that the Controller General of Accounts may permit withdrawal by any particular
cheque drawing D.D.O. for any other special purpose.

3. An Accounts Officer and or cheque-drawing D.D.O. shall not draw a cheque for withdrawal
of money for any purpose unless the claim for withdrawal complies with the provisions
contained in these rules as to the person by whom and the form in which the claim shall be
preferred.

4. No withdrawal shall be permitted on a claim for the first of any series of payments of pay and
allowances to a Government servant (other than a person newly appointed to Government
service) prepared by a drawing and disbursing officer unless the claim is supported by a copy

19
 of the last pay certificate (in Form G.A.R. 2) issued by the drawing and disbursing officer of
the previous office in which the Government servant had served.

5. An Accounts Officer or Cheque-drawing D.D.O. shall obtain sufficient information as to the

nature of every payment he is making and shall not accept a claim which does not formally
present that information, unless there are specific orders of Government against disclosure of
the nature, on any individual claim or type of claims in the public interest.

Responsibility for moneys withdrawn.-

1. If a cheque drawing D.D.O. receives information from the Accounts Officer that moneys have
been incorrectly withdrawn and that a certain slim should be recovered in respect of any bill
passed by him, he shall effect the recovery without delay and without regard to any
correspondence undertaken or contemplated with reference to the retrenchment order; and he
shall, without delay, repay the sum in such manner as the Accounts Officer may direct.

2. Subject as hereinafter provided in this rule, the procedure to be observed by a Government

officer in regard to moneys withdrawn from the Government Account for expenditure shall
be regulated by the provisions made in this behalf in Part III of these rules.

3. A Government officer supplied with funds for expenditure shall be responsible for such funds
until an account of them has been rendered to the satisfaction of the Accounts Officer
concerned. He shall also be responsible for seeing that payments are made to persons entitled
to receive them.

4. If any doubt arises as to the identity of the Government officer by whom an account of such
funds shall be rendered, it shall be decided by the Government.

General instructions for handling cash.-

Save as otherwise expressly provided in these rules or in any authorised departmental regulations,
the following instructions shall be observed by all Government officers who are required to (a)
receive Government dues and handle cash or (b) perform the functions of drawing and disbursing
officers (with or without cheque drawing powers), or both:

i. Every such officer (referred to in this rule as the Head of the Office) should maintain a cash
book.

ii. All monetary transactions should be entered in the cash book as soon as they occur and
attested by the Head of the Office in token of check.

Exception (a).An 'Account Payee' crossed cheque or bank draft drawn in the personal name of a
recipient (Government servant or third party) by a Pay and Accounts Officer (or by a cheque
drawing D.D.O.) and routed through a departmental office merely for the purpose of
delivery to the recipient thereof, need not be entered by the latter office in its cash book; the

20
 delivery of such a cheque or draft to the concerned party may be recorded in, and watched
through a separate "crossed cheques and bank drafts transit register."

Exception (b).Cheques issued by cheque-drawing D.D.O.s are required to be entered in a

'Register of Cheques issued'. Therefore, only those cheques drawn by him which are
encashable in his capacity as Disbursing Officer for arranging payments in cash, need be
entered in the cash book.

Exception (c).Receipts in the form of local cheques, or demand drafts (to be crossed) in favour
of Pay and Accounts Officers (or endorsed in their favour as per Note 2 under rule 18)
accepted by non-cheque drawing D.D.Os need not be entered in the Cash Book but should
be entered in the Register of Valuables and remitted into the accredited bank duly
supported by challans for credit to Govt. Account.

iii. The cash book should be closed regularly and completely checked. The Head of the Office
should verify the totalling of the cash book or have this done by some responsible
subordinate other than the writer of the cash book and initial it as correct.

iv. At the end of each month, Head of the Office should verify the cash balance in the cash book
and record a signed and dated certificate to that effect. In regard to any discrepancy noticed
therein, the instructions contained in Section V of Chapter 2 of the General Financial Rules
should be followed. In case the verification of cash balance is not possible on the last
working day of a month on account of disbursement of, monthly salary and allowances, it
may be done on the first working day of the next month before making any transactions on
that day.

v. Entries made in the cash book regarding remittance of receipts to the accredited bank for
credit into Government Account should be attested by the Head of Office after verifying
them with reference to the bank's receipt recorded on the pay-in-slips or challans. When the
credit appears in the receipt scroll from the bank, the actual date of realisation of the cheque
or draft should be indicated by cheque drawing D.D.O.s against the original entry in the
cash book so as to keep track of outstanding items.

vi. An erasure or over-writing of an entry once made in the cash book is strictly prohibited. If a
mistake is discovered, it should be corrected by drawing the pen through the incorrect entry
and inserting the correct one in red ink between the lines. The Head of Office should initial
every such correction and invariably date his initials.

vii. A Government officer who handles Government money should not, except with the special
sanction of the Head of Office be allowed to handle also in his official capacity money which
does not belong to the Government. Where under any special sanction, a Government
officer deals with both Government and non-Government money in his official capacity, the
Government money should be kept in a cash box separate from the non-Government money
and the transactions relating to the latter should be accounted for in a separate set of books
and kept entirely out of the Government Account.

viii. The employment of peons to fetch or carry money should be discouraged. When it is
absolutely necessary to employ one for this purpose, a man of some length of service and

21
 proved trust worthiness should only be selected and in case where the amount to be
handled is large, one or more guards should accompany the messenger.

Adjustment of transactions of the Government with a State Government.-

No transactions of the Government with a State shall be adjusted against the balance of the
Government except in accordance with such directions as may be given by the Controller General of
Accounts on the advice of the Comptroller and Auditor General of India to regulate, the procedure
for the accounting of such transactions.

Extent of responsibility of the Reserve Bank in connection with the business of

Government.-

Nothing contained in, or in the application of these rules shall have effect so as to impose
upon the Reserve Bank in connection with the business of the Government any responsibility not
imposed upon it by the terms of the agreement referred to in rule 3.

22
RECEIPT OF GOVERNMENT REVENUES, DUES, ETC. AND CREDITING
THEM INTO THE GOVERNMENT ACCOUNT
(Rule 18 to 27)

Acceptance of Government revenues, etc. by departmental officers.-

Government revenues, dues or other moneys receivable on Government account may be

realised in cash (namely, in legal tender coins or notes), or by cheques or drafts drawn on any local
branch of a scheduled bank or by money orders or postal orders or in such other form as may be
prescribed by Government. Revenues and dues of the Government are generally received by
departmental Officers or by specified branches of the accredited bank in the form of crossed local
drafts or local cheques or in cash unless otherwise specifically ordered. Unless specially authorised to
receive higher amounts in cash, departmental officers may normally receive cash upto an amount not
exceeding Rs. 100 in each case.

Cheque, bank drafts tendered in payment of Government revenues, dues, etc.

(1) (a) Cheques, bank drafts drawn on local branch of a scheduled bank may be accepted by
departmental officers or by the specified branch of the accredited bank or by a bank specially
notified for the purpose, in payment of Government dues or in settlement of other
transactions with the Government, subject to the provisions of special instructions, if any,
issued by a Ministry, Department and, or union territory, in consultation with the Controller
General of Accounts, relating to any specific type of dues being followed. The cheques, bank
drafts, should be crossed by the drawer before tendering. However, until they are cleared, the
Government cannot admit that payment has been received; consequently, the receipt of the
cheque alone may be acknowledged when it is tendered. A formal payment receipt shall be
given to the tenderer (or sent to his address wherever such an arrangement is envisaged by
the department, or bank) after the cheque or draft has been cleared. The preliminary
acknowledgement of the receipt of the cheque or draft, will be given in the form indicated
below by the departmental Officers:

"Received cheque/ draft number ------- for Rs -------- drawn on --------- on account of --------".

(b) In the event of the cheque or draft being dishonoured, the fact shall be reported at once to the
tenderer with a demand for payment in cash and the dishonoured cheque or draft should be
returned to the tenderer on surrendering the preliminary acknowledgement of the receipt of
the cheque or draft or any token previously granted. The Government cannot, however,
accept any liability for loss or damage which may possibly occur as a result of delay in
intimating that the cheque or draft has been dishonoured.

(c) In the case of Government dues which are payable by a certain fixed date, the person desiring
to make payments by means of cheque or bank draft must take suitable precaution to ensure
that his cheque or draft reaches the bank or the departmental office concerned in good time,
keeping in view the provisions of rule 20 (i) and (ii). The bank, and, or departmental office
may, at its discretion, refuse to accept

23
 (i) cheques or drafts tendered on the last day to the former, and on the last two working
days to the latter respectively; and, or
(ii) cheques or drafts which require clearance at the inter-bank clearing house before credit
can be afforded to Government Account, if and when work of such clearing house is
disrupted or apprehended to get disrupted so as to impede realisation of credit thereof
by the due date.

(2) The Government may, in relation to any particular class of transactions involving payment of
Government dues, issue orders varying or relaxing any of the conditions prescribed in this
rule.

Date of receipt of Government revenues, dues etc.

Government dues tendered in the form of a cheque or draft and is honoured on presentation,
shall be deemed to have been paid-

i. where the cheque or draft is tendered to the bank, on the date on which it was cleared and
entered in the receipt scroll;
ii. where a cheque or draft is tendered to a departmental officer (in cases where such tendering is
permissible or required under relevant departmental provisions) on the third working day
after its presentation;
iii. if it is sent by post in pursuance of instructions to make payment by post, on the date on
which the cover containing it is put into the post:

Provided that, where a cheque or draft is marked as not payable before a certain date, the
payment shall not be deemed to have been made until the date on which it becomes payable.

Grant of receipt to the payer by departmental Officers.

1) The Head of an office where money is received on behalf of the Government must give the
payer a receipt duly signed by him after he has satisfied himself, before signing the receipt
and initialling its counterfoil, that the amount has been properly entered in the cash book. If
the circumstances so justify, he may at his discretion authorise any other officer subordinate
to him, whether gazetted or non-gazetted, to sign such receipts for him.

2) Where money is realised not in cash but by recovery from a payment made on a bill setting
forth full particulars of the deduction, receipt may be granted only if specially desired by the
payer, the fact of the recovery having been made by deduction from the bill being clearly
recorded on the receipt.

3) All receipts must be written in figures and in words in the original and signed in full over the
'Cash Received/| Received Payment' stamps. Other copies thereof, may however, be
initialled against the amount already indicated therein over the "Cash Received/ Received
Payment' stamp.

24
Form and custody of receipt books.

1) Receipt books in machine numbered Form G.A.R. 6 may be obtained from the Central Forms
Store, Calcutta. This standard form shall be used by all Government officers receiving money
on behalf of the Government unless any special form of receipt is prescribed by Departmental
regulations to suit the convenience of any particular department or office.

2) The receipt books must be kept under lock and key in the personal custody of the Officer
authorised to sign the receipt on behalf of the Government.

3) Before a receipt book is brought into use, the number of forms contained therein shall be
counted and the result recorded in a conspicuous place in the book over the signature of the
Government officer in charge of the book. Counterfoils of used receipt books shall be kept in
his personal custody.

Issue of duplicates and copies of receipts.

No Government officer may issue duplicates or copies of receipts granted for money received
on the allegation that the originals have been lost. If any necessity arises for such a document, a
certificate may be given that on a specified day a certain sum on a certain account was received from
a certain person. This prohibition extends only to the issue of duplicates on the allegation that the
originals have been lost and does not apply to cases authorised by these rules or by special orders of
the Government in which duplicates have to be prepared and tendered with originals.

Procedure for affording transfer credit when departmental receipts are utilised for
Payment:

1) Whenever moneys received on account of revenues, receipts if the Government instead of

being paid into the bank are Utilised to meet departmental payments, the gross receipts and
the payments made, therefrom shall be entered as receipts and expenditure in any record that
may be, kept of the payments into and withdrawal from the Consolidated Fund or Public
Account as the case may be, and accounted for as such to the Accounts Officer. If the receipts
are in excess of the payments made, the excess shall be remitted to the bank or Accounts
Officer, as the case may be; and save where it is otherwise provided in these rules, the officer
making such remittance shall note on the challan the full amount of cash actually received by
him and per contra the expenses met therefrom and not merely the net receipts.

2) When the departmental officer submits a formal claim, or bill to the Accounts Officer in
adjustment of departmental receipts temporarily utilised for departmental payments, the
words "received payment by transfer credit to. ....................." (inserting the head of account to
which the amount is creditable in the portion) should be endorsed on the "Nil" claim or bill.
Necessary superscription should be made on such a bill to indicate that no cash payment is
sought against it.

25
 WITHDRAWAL FROM THE GOVERNMENT ACCOUNT

GENERAL RULES RELATING TO CLAIMS FOR WITHDRAWALS AND

MANNER OF PAYMENT (Rule 28 to 62)

Mode of withdrawals.

Save as otherwise specially provided in these rules or unless Government in the Ministry of
Finance (Department of Expenditure) otherwise direct in any case, no withdrawal of money may be
made from the Government Account except by presentation of bill in support of relevant claim for
the purpose.

Presentation of claims.

Save as hereinafter provided bills drawn and presented by a departmental officer to an

Accounts Officer or to a cheque drawing DDO shall themselves be duly receipted for payments.
Separate receipts, duly affixed with revenue stamp wherever necessary, shall be obtained and
furnished to the bill passing and paying authority at the time of receiving payment from him in
respect of all other payments claimed through bills.

Claims of, and payments to Suppliers, etc.

When a person not in the Government employment claims payment for work done, service
rendered or articles supplied, such claims shall, unless there are express orders of the Government to
the contrary, be submitted through the Head of the Department or other responsible Government
officer under whose immediate order the service was done or the equivalent was given for which
payment is demanded. The officer to whom such a claim is submitted, shall be responsible for
Completing the necessary formalities and for making the payment with due expedition. The payment
may be made by the officer by any recognized mode of payment, that is by cheque as far as possible
or by bank draft, or by Cash or by postal money order at the request and expense of the payee
concerned. The other relevant rules of this Section may also be observed for the purpose. A certificate
to the effect that the payment has been made to the proper person and that a proper
acknowledgement has been obtained and filed in his office may be sent to the Accounts Officer when
the payment is made to a private party.

Permanent Advances:

Government officers may make such payments as are authorised to be paid out of permanent
advances or imprests which they are permitted to hold under orders of competent authority issued in
terms of Rule 90 of the General Financial Rules subject to recoupment on presentation of bills.

Arrear Claims:

Claims against the Government which are not preferred within two year of their becoming
due would attract the provision of rules 82 to 88 of the General Financial Rules. After relevant

26
requirements thereof are satisfied, they may be presented to the Accounts Officer for pre-check
payment; provided, further, that this rule shall not apply to claims on account of arrears of pensions.

Preparation of bills:

The following instructions with regard to preparation of bills shall be observed:

i. Printed forms of bills as prescribed under these rules or other departmental regulations
should, as far as possible, be used. Bill for all debt-head items should be drawn in separate
forms printed in red ink on white paper.

ii. If, in any case, the use of a bill purely in any regional language becomes unavoidable, a brief
abstract should be endorsed in English under the signature of the preferring officer stating the
amount, the name of payee and the nature of the payment.

iii. All bills must be filled in and signed in ink; entries and signature with ball point pens are also
permissible provided the same are clear and legible. The amount of each bill should, as far as
whole rupees are concerned be written in words as well as in figures. The fraction of a rupee
may, however, be written in figures after the words stating the number of rupees, but in the
event of there being no fraction of a rupee, the word 'only' must be inserted after the number
of whole rupees and care should be taken to leave no space for interpolation as in the
following examples 'Rupees twenty-six only' 'Rupees twenty-five and 25 paise'.

iv. All corrections and alterations in the total of a bill whether made in words or figures should
be attested by the full signature, with date, of the person signing the receipt as many times as
such corrections and alterations are made.

v. The full accounts classification must be recorded on each bill by the drawing officer, the
classification in the Budget being taken as a guide. The classification should also show
whether the expenditure is voted or charged; and as far as practicable, its allocation between
departments or between Central Government and State Governments where necessary.

vi. Charges against two or more major heads should not be included in one bill.

vii. When bills are presented on account of charges incurred under any special orders, the order
sanctioning the charge should be quoted and the sanction attached to the bill.

viii. Dates of payment should, when possible, be noted by the payees in their acknowledgements
in sub-vouchers and acquittance rolls. If, for any reason (such as illiteracy or the presentation
of receipts in anticipation of payment), it is not possible for the dates of payment to be noted
by the payees, the dates of actual payment should be noted by disbursing officers on the
documents under their initials either separately for each payment or by groups as may be
found convenient.

ix. When payment is desired wholly or partly by a bank draft (wherever payment by bank draft
is permissible) or by cheques in favour of another payee, formal application for the draft or
cheque should accompany the bill and the manner in which the payment is desired should
also be indicated in the drawer's receipt on the bill.

27
 x. the spaces left blank either in the money column or in the columns for particulars of the bill
should invariably be covered by oblique lines.

xi. A note to the effect that the amount of the bill is below a specified amount expressed in whole
rupees, which is slightly in excess of the total amount of the bill, should invariably be
recorded in the body of the bill in red ink.

Form of bills

The forms prescribed for the preparation of bills relating to various classes of claims such as
pay and allowances of Government servants, contingencies, and the procedure to be observed in the
presentation of such claims are specified in the rules in the subsequent Sections and Parts.

Signature and counter-signature on bills

1) Unless Government have expressly authorised it in the case of any specified office, no
payment may be made on a bill or order signed by a clerk instead of by the Head of an Office,
although in the absence of the latter the clerk may be signing letters for him. Nor may any
money be paid on a bill or order signed with a stamp. When the signature on the bill is given
by a mark or seal or thumb or great toe impression, it shall be attested by some known person.
Signatures in Indian languages other than Hindi must always be transliterated.

2) The Head of an Office may authorise any Gazetted Officer serving under him to sign a bill or
order for him, communicating the name and specimen signature of the officer to the
disbursing officer concerned. This will not, however, relieve the Head of the Office in any way
of his responsibility for the accuracy of the bill or for the disposal of the money received in
payment. When the above arrangements are made due to his temporary absence from
headquarters on account of leave or tour, he should immediately, on return, check that the
bills passed and cheques issued by the nominated officer during the period of his absence are
correct, the payments have been properly accounted for and record a certificate to this effect
in the cash book. Similar action may also be taken in case the arrangements are made due to
his transfer but in that case, the prescribed verification may be made by the successor officer,
soon after he takes over the new charge.

3) Bill requiring previous counter-signature shall not be presented for payments before such
counter signature has been obtained.

Duplicates and copies of bills, etc:

1) No Government officer may issue duplicates or copies of bills or other documents for the
payment of money which has already been paid, on the allegation that the originals have been
lost. If any necessity arises for such a document, a certificate may be given that on a specified
day a certain sum was paid to a certain person. This prohibition extends only to the issue of
duplicates on the allegation that the originals have been lost and does not apply to cases, if
any, in which by any rule or order, duplicates have to be prepared and tendered with the
originals.

28
 2) In the case of a bill passed by the Drawing Officer or Controlling Officer for presentation to an
Accounts Officer or cheque-drawing D.D.O. as the case may be, but lost either before payment
or before such presentation, the Government Officer , who drew the original bill shall
ascertain from the Accounts Officer or Cheque drawing DDO that payment has not been
made on it, before he issues a duplicate thereof. The duplicate copy if issued must bear
distinctly on its face the word 'duplicate' written in red ink. The fact that duplicate bill has
been issued shall be immediately communicated to the Accounts Officer or cheque-drawing
D.D.O. as the case may be, with instructions to refuse payments on the original bill if
presented.

3) When any kind of bill is required to be prepared in duplicate or triplicate, only one copy shall
be signed or counter-signed in full and the other copy or copies may be only initialled. Only
the original copy shall be sent Accounts Officer or cheque-drawing D.D.O. for payment.

Stamps for receipts

Receipts from all sums exceeding Rs. 5000 must be stamped under section 3 read with item 53
of Schedule-I of the Indian Stamp Act, 1899 (2 of 1899) unless they are exempt from stamp duty.

Source from which cheque books are to be obtained

1) Subject as hereinafter provided in this rule, cheques on the accredited bank shall be drawn on
forms contained in cheque books supplied by the Accounts Officer or cheque-drawing D.D.O.
concerned. Cheque books are not to be obtained from the bank for the purpose.

2) Drawing Officers of the Defence, Railways and Posts and Telegraphs shall obtain their
supplies of cheque books under departmental arrangements.

3) Accounts Officers specially authorised by the Government to write cheques by means of

cheque perforating machines may obtain their supply of, cheque forms by requisition from
the Deputy Controller of Stamps, Central Stamp Stores, Nasik Road. Such cheque forms shall
be in continuous lengths and shall not be bound in books.

Intimating branch bank regarding cheque book to be used

The Accounts Officer or cheque-drawing D.D.O. shall notify to the branch bank upon with he
draws, the number of each cheque book which, from time to time; he brings into use and the number
of cheques it contains. The bank will keep a record of these particulars for verifying the genuineness
of the cheques presented for encashment.

Scrutiny, safe custody and surrender of cheque books:

1) Cheque books shall, on receipt, be carefully examined by the drawing officer who should
count the number of forms contained in each and record a certificate of count on the flyleaf.

29
 2) Each cheque book must be kept under lock and key in the personal custody of the Accounts
Officer and cheque-drawing D.D.O. who, when relieved, shall take a receipt for the exact
number of cheques made over to the relieving officer.

3) In cases where withdrawal of funds by cheques is no longer necessary, all the cheque forms of
cheque books which remain partly or wholly unused shall be surrendered to the Accounts
Officer who will put to proper use the books which are wholly unused after either taking
them on stock under intimation to the Principal Accounts Office and destroy by incineration
the partly used ones under personal supervision after keeping note of the fact in the relevant
records under proper attestation.

Intimating branch bank about loss of cheque book, bank cheque form:

The loss of a cheque book or a blank cheque form shall be notified promptly to the branch
bank with which the Accounts Officer or cheque drawing D.D.O. concerned has his account.

Instructions for indicating amounts of cheques

All cheques shall have written across them in words at right angles to the type, a sum a little
in excess of that for which they are drawn; thus 'under rupees thirty only' will mean that the cheque
is for a sum not less than Rs. 20 but less than Rs. 30 and similarly 'under rupees eight hundred only'
will mean that it is for less than Rs 800 but not less than Rs. 700. The amount shall be written in the
manner prescribed for bills in clause (iii) of rule 33 and no abbreviation such as eleven hundred for
'one thousand one hundred' is permissible.

Attestation of corrections, alterations in a cheque:

All corrections and alterations in a cheque shall be attested by the drawing officer over his full
signature.

Types of cheque forms:

1) Cheque drawn in favour of Government offices or Departments or payment on account of

interdepartmental or inter-Governmental dues shall be crossed and the words "for credit to
Government account and not payable in cash" written between the lines.

2) Cheques payable to Government officers to enable them to make disbursement in cash, such
as of pay and allowances of establishments, of contingent expenditure on behalf of the
Government, shall be issued in favour of the disbursing Government officer concerned by
designation, the word "only" being added after the designation of the payee officer on the
cheque. Such cheques shall bear the superscription "not transferable" on the top and are not
negotiable.

30
 3) (a) Subject to the provisions of clause (b), all cheques towards payment or personal claims of
Government servants, pensioners, contractors, suppliers and public sector companies and
corporation shall be drawn as payable to or order of the payee.

(b) Cheques coming within the purview of clause (a), if drawn on the bank shall be crossed
with the superscription "Account Payee only" wherever the amount exceeds Rs. 1000 in
regard to salary cheque, or wherever the amount exceed Rs.500 in respect of non-salary
cheques. Such non-salary cheque for an amount not exceeding Rs. 1000 may, however, be
issued as open cheque if so desired by the payee but only as order cheque. It should be
ensured that no payee makes it a practice to get uncrossed cheques in his favour as a matter of
course.

Period of validity of a cheque:

Cheque shall be payable at any time within three months from the date of issue.

Procedure for revalidation of a time-barred cheque, etc:

1) A time-barred cheque may be received back by the drawer and in a case where its amount
was not cancelled and written back in the accounts and it is not older than one year from its
original date, may be revalidated under the signature of the drawer by changing the date;
otherwise, a new cheque may be issued in lieu thereof, after he satisfies himself about the
reasons for its non-encashment and also justification for revalidation or issue of a new cheque
in lieu. The fact of receipt of the time-barred cheque and action taken should be noted on its
counterfoil and in the register of cheques delivered; and in the latter case, necessary cross
reference should be given in the new counterfoil. Where the drawer of the cheque is a cheque
drawing D.D.O., he should deface it suitably and forward it to the Pay and Accounts Office
alongwith the list of payments, in support of the item representing the drawal of the new
cheque.

2) In the event of the non-return of the time-barred cheque to the drawer, the drawer should, on
the expiry of the prescribed period of 3 months after the date of issue of the cheque, request
the payee either to return the cheque or explain the causes for its non-return and take further
action, as may be necessary, as the case may be.

Procedure for cancellation of a cheque:

1) When it is necessary to cancel a cheque:

i. in cases where the cheque is not issued, its cancellation should be recorded with dated
signature on the counterfoil and the cheque should be destroyed;

ii. where it is issued and withdrawn, after similar note on its counterfoil, it should be
defaced; and forwarded to the Pay and Accounts Office where the drawer is a cheque-
drawing D.D.O.; entries in the accounts should be suitably reversed;

31
 iii. if the cheque is not in the drawer's possession after satisfying himself with reference to
his records (namely payment and error scrolls and register of cheques delivered) that it
is not paid, he should promptly send an intimation by registered post
(acknowledgement due) to the branch bank on which it is drawn to stop payment of the
cheque. In case the drawer is a cheque drawing D.D.O., he should inform the Pay and
Accounts Office. If the currency of the cheque has not expired at the time of sending the
intimation, the bank shall acknowledge in writing in the form indicated in clause (i) of
sub-rule (2) of rule 48 that it has kept a note of the 'stop payment' order.

2) A cheque remaining unpaid for any cause, six months after the month of its issue and not
surrendered for renewal should be cancelled in the manner indicated in clause (iii) of sub-rule
(1) with the difference that no acknowledgement of the stop order may be insisted from the
bank. Its amount should also be written back in the accounts.

Lost cheques:

1) A request for the issue of a cheque in lieu of a cheque alleged to be lost, may be entertained if
the request is received by the Pay and Accounts Officer or Accounts Officer or cheque-
drawing D.D.O. who had issued the original cheque, within a period of one year from the
date of issue of the original cheque, irrespective of the date on which the relevant claim had
accrued. However, the concerned Principal Accounts Officer may, nevertheless, order
entertainment of such a request received by the Pay and Accounts Officer or Accounts. Officer
of cheque-drawing D.D.O. within a period of 3-1/2 years from the date on which the relevant
claim had become due, wherever this is beneficial.

2) The Pay and Accounts Officer shall proceed with a request relating to a cheque issued by him
and which satisfies the above conditions in the manner stated below:

a. The Pay and Accounts Office should send an intimation by registered post,
acknowledgement due, to the bank drawn on regarding the alleged loss of the cheque
and advise it to stop payment if the cheque alleged to have been lost is presented for
payment thereafter. If the currency of such a cheque has not expired at the time of
sending such an intimation, the bank shall acknowledge in writing in the following
form, that it has kept a note of the Stop Payment Order. In case, however, the currency
of the cheque alleged to have been lost has expired when the intimation regarding loss
of cheque is sent to the bank, no acknowledgement of the Stop Payment Order may be
insisted from the bank. The postal acknowledgement may be treated as sufficient for
the record of the Pay and Accounts Office.

b. The Pay and Accounts Officer should satisfy himself with reference to the records
maintained in his office such as the payment or error scrolls received from the paying
bank and register of cheques delivered, that the payment of the cheque in question has
not been made. He should also keep a suitable note on the counter-foil of the lost
cheque and against the relevant entries in the register of cheques delivered and paid
voucher, regarding the Issue of a fresh cheque in lieu of the lost one.

c. The Party requesting for the issuance of a fresh cheque in lieu of the lost one should
execute an indemnity bond. However, in the case of a Government Department, Public

32
 Undertakings wholly owned by Government or the bank, the execution of such an
indemnity bond is not necessary but a fresh cheque should, in these cases, be issued
only on receipt of a certificate that the cheque alleged to have been lost was not
received by them or having received the same, it was lost and further that it will be
returned to the Pay and Accounts Office if found afterwards.

d. on completion of the requirements in clauses (a) to (c), the Pay and Accounts Officer
may issue a fresh cheque in lieu of the lost one under intimation to the drawee office.

3) When cheque drawing D.D.O. reports to the paying branch of the bank about a cheque issued
by him having been lost, the bank shall record a 'Stop' against the cheque and issue an
acknowledgement in the form given in clause (i) of sub-rule 2. On receiving a copy of this
acknowledgement from the said cheque-drawing D.D.O., the Pay and Accounts Officer
concerned will after verification of his relevant records such as register of cheques delivered
and after keeping a suitable note against the relevant entry in that register, issue a
nonpayment certificate to the cheque drawing

4) The cheque-drawing D.D.O. will note particulars of the non-payment certificate received by
him against the relevant entry in the office copy of the list of payments, to indicate that the
original cheque has not been paid and it has been 'stopped' from payment. A similar note will
also be made by him on the counterfoil of that cheque and office copy of the relevant paid
voucher before issuing a fresh cheque in lieu thereof. Provisions of clause (iii) of sub-rule 2
will be followed for the purpose of issue of a fresh cheque and the number and date of the
fresh cheque will also be noted on the list of payments, paid voucher and counterfoil of the
old and cancelled cheque. While the paying bank need not thus issue 'non-payment
certificate', there will be no change in their responsibilities in regard to lost cheques. All usual
precautions will continue to be exercised by them with a view to ensuring that a cheque in
respect of which 'stop' advice has been received, is not subsequently paid.

5) If it is found afterwards, that the original cheque had been paid, the Pay and Accounts Officer
will take up the matter with the paying branch telegraphically and stop payment of the
renewed cheque if not already paid. He will also reverse the entries made in the relevant
record (including counterfoils) on this account on receipt of confirmation of this fact from the
paying branch. In case the renewed cheque is reported to have been paid by then, he will
place the paid amount under the head of account "858-Suspense Accounts-Suspense Account
(Civil)-cheques cancelled but paid" till the matter is investigated and the amount is recovered
or written off. The paid cheque will also be removed from the payment scroll and kept in the
personal custody of the Pay and Accounts Office till then. In case the fact of such payment is
noticed by the drawing and disbursing officer, he will report the matter immediately to the
paying branch and inform the Pay and Accounts Officer accordingly by a telegram for further
action.

Date of payment:

1) For the purpose of this rule, payment realised by the payee by encashing a cheque revalidated
or a fresh cheque obtained shall be treated as payment realised by encashing the original
cheque. the cheque is handed over to the payee or to his authorised messenger,

33
 2) Wherever payment is arranged by means of a bank draft to a payee located at a station
different from that of the authority competent to draw relevant cheque (against which the
draft is purchased), the date of payment will be reckoned as date on which it is handed over
to the payee or his authorised agent (presuming that no undue delay is caused by the payee in
this regard) or the specific date superscribed.

3) Cases of payment of Rs. 1 crore and above to a public sector undertaking/ Government aided
institution, have to be authorised by the concerned PAO at New Delhi through the Reserve
Bank of India, New Delhi, which will afford credit to the bank (current) account of the
beneficiary by affording contra-debit to the Ministry's/ Department's account with the
Reserve Bank. The date of payment in such cases will be the date indicated against the
relevant entry in the payment scroll rendered by the Reserve Bank.

Letters of Credit against assignment accounts, etc

1. The Accounts Officer concerned shall communicate to the relevant branch of the accredited
bank, the amount of quarterly assignment authorised in favour of cheque drawing D.D.O.s
rendering account to him. A fresh letter of credit, issued after expiry of the period prescribed
in the earlier letter of credit will be treated as an addition to the unspent balance of the earlier
letter of credit. The Pay and Accounts Officers, while communicating the assignment for the
second and subsequent quarters should indicate not only the amount assigned for that
quarter, but also the progressive total of alignment upto the end of the quarter so that the
bank is able to ensure that the total cumulative drawals from the beginning of the year do not
exceed the total progressive assignments. However, the assignment remaining unspent as at
the end of a financial year is not to be carried forward to the first quarter of the next financial
year. The paying branch is responsible to ensure that at no time the amount assigned in the
letter of credit is exceeded by the payment of any cheque. The cheques actually issued during
the last quarter but presented for payment during the next quarter (within the period of
validity) will be taken by the bank against the assignment of the year in which they were
drawn and not against the assignment of the year in which they are paid.

2. A drawing officer in whose favour an assignment account has been opened in the accredited
bank, is not permitted to draw the whole amount and place it in a separate account in the
bank or in a private account.

Specimen signatures and other safeguards

1. Every Government officer who is authorised to (i) sign or countersign bills shall send a
specimen of his signatures to his Accounts Officer through some superior officer or
predecessor whose specimen signature is already with the Accounts Officer and (ii) draw
cheques, shall send specimen of his signatures similarly to the branch bank concerned (and
also to the Accounts Officer in cases where the officer is cheque-drawing D.D.O.). When such
an officer makes over charge of his office to another, he shall likewise send a specimen of the
signature of the relieving officer to the Accounts Officer and bank concerned.

34
 2. Specimen signatures when forwarded on a sheet of paper, other than the forwarding letter
itself, must be duly attested by the officer signing the forwarding letter.

Comparison of signature with the specimen, etc:

1. With regard to claims presented, the signature of the drawing officer shall be compared
carefully with his specimen signature received before payment is ordered.

2. Special precautions must be taken as regards all bills and documents showing signs of
alteration and if such documents be frequently received from any office, the attention of the
Head of the Office shall be formally drawn to the irregularity.

3. No document bearing an erasure can be accepted and payment on such documents shall be
refused and a fresh document called for.

Special seal to be affixed on payment authorities:

All orders and authorities for payment wherever required to be issued from one Accounts
Office on another (e.g. Pension Payment authority) will be stamped with a special seal, which will
remain in the personal custody of the officer signing them, and specimen impression of the seal duly
attested will be supplied to all Accounts Officers concerned.

Payment by postal money order:

1. In case in which money due by the Government is paid by Postal Money Order, the cost of
remittance shall, in the absence of any special rule or order to the contrary, be borne by the
payee.

2. Wherever money is withdrawn by departmental officers under these rules, from Government
Account for payment, such as to a refund in cash, and the claimant does not receive it (or
arrange to receive it) within a month from the date of drawal in spite of intimation thereof,
and where individual payments are of value upto Rs. 100, the money may be remitted to the
payee by postal money order irrespective of whether a request to this effect has been received
from the payee or not.

Rules applicable to officers in charge of Military Treasure chest etc. in dealing with
claims:

Unless there be anything repugnant in the subject or context, and subject to such variation or
modification as may be authorised by departmental regulations, shall be followed generally by
officers-in-charge of Military Treasures chests, and offices of the Posts and Telegraphs department, in
dealing with claims against the Government that may be presented to them for disbursement.

Vouchers for payment:

Subject as hereinafter provided in this rule, a Government officer entrusted with the payment
of money shall obtain for every payment he makes, including repayment of sums previously lodged

35
with the Government, a voucher setting forth full and clear particulars of the claim and all
information necessary for its proper classification and identification in the accounts. Every voucher
must bear, or have attached to it, an acknowledgement of the payment signed by the person by
whom or on whose behalf the claim is put forward. The acknowledgement shall be taken at the time
of payment.

Certificate of payment in certain circumstances:

In all cases in which it is not possible or expedient to support a payment by worker or by the
payee's receipt, a certificate of payment duly signed by the disbursing officer and counter-signed by
his superior officer, together with a memorandum explaining the circumstances, should invariably be
placed on record and submitted to the Accounts Officer where necessary. Full particulars of the
claims should invariably be set forth; and where this necessitates the use of a regular bill form, the
certificate itself may be recorded thereon.

Instructions relating to affixing pay orders, defacing of stamps affixed on vouchers and
manner of cancellation of vouchers:

1. Every voucher must bear a pay order signed or initialled by the responsible disbursing officer,
specifying the amount payable both in words and figures. All pay orders must be signed by
hand and in ink.

2. All paid vouchers must be stamped 'paid' or so cancelled that they cannot be used a second
time. Stamps affixed to vouchers must also be cancelled so that they may not be used again.

3. All sub-vouchers to bills must be cancelled in such a manner that they cannot be subsequently
used for presenting fraudulent claims or other fraudulent purposes.

Safe custody etc., of vouchers and acquittances which are not required to be submitted to
Accounts Offices:

1. Vouchers and acquittances which are not required to be submitted to the Accounts Officer
shall be filed and retained carefully in the office concerned as important documents till they
are destroyed under the orders of competent authority.

2. With regard to cancellation and destruction of sub-vouchers relating to contingent

expenditure shall apply generally to sub-vouchers in respect of other classes of payments,
unless they are governed by special departmental regulations or orders of the Government to
the contrary.

Overcharges:
Subject to such special orders as the Government may issue in any individual case, the
responsibility for an overcharge shall rest primarily with the drawer of a bill, and it is only in the
event of culpable negligence on the part of the controlling officer or of the Accounts Officer that the
question of recovery from either of them may be considered.

Audit objections and recoveries

36
1. Every Government servant must attend promptly to all objections and orders communicated to
him by the Accounts Officer, Internal Check Inspecting Officer and Statutory Audit Officer.

2. When an Accounts Officer disallows a payment as unauthorised, the disbursing officer is bound
not only to recover the amount disallowed without listening to any objection or protest but to
refuse to pay it in future till the Accounts Officer authorises the payment to be resumed.

3. Recoveries may not ordinarily be made at a rate exceeding one-third of pay unless the
Government servant affected has, in receiving the excess, acted contrary to orders or without due
justification or taken an advance for a specific purpose, not utilised it for the purpose (for which
the advance was sanctioned) within the prescribed period, and failed to refund the outstanding
amount within the stipulated date.

37
 PERSONAL CLAIMS OF GOVERNMENT SERVANTS
(Rule 63 to 95)

Due date for payment of salaries

1. Subject to such special orders as may be issued by the Government from time to time in relation
to specified Departments or places or both, bills for monthly pay and fixed allowances of
Government servants may be signed at any time not earlier than 5 days before the last working
day of the month by the labour of which such pay and allowances are earned and shall be due
for payment on the last working day of the month to which they relate. However, the pay and
allowances for the month of March shall be paid on the first working day of April.

2. The Government may, in special cases, relax any of the conditions specified in this rule.

Cases in which drawal and disbursements for part of a month permitted

In the following cases separate bills may be presented for pay and allowances (including for
joining time, if any) or leave salary due for part of a month and such bills may be paid before the end
of the month:

1. When a Government servant proceeds on transfer, deputation, leave or vacation

a. to or from a place outside India from or to a place in India, or
b. from any place outside India to another place outside India.

2. When a Government servant is transferred to another account circle; or within the same account
circle when involving change of drawing and disbursing officer on account of transfer between or
within Civil Ministries and Departments.

3. When a Government servant finally quits the service of the Government, or is transferred to
foreign service or on deputation to a State Government.

4. When a Government servant proceeding on leave from a post in a country outside India, draws in
that country leave salary up to date prior to that on which he leaves that country.

5. When, on occasions of local importance and following local practice. Heads of Indian Embassies,
High Commissions or other Missions abroad, authorise payment of salary and allowances of the
locally recruited employees for the period not beyond the date preceding the day of payment.

Absentee statement

The monthly bill shall be supported by an absentee statement, if a Government servant, was
absent during the month either on special duty or suspension, or with or without leave other than
casual leave, or when a post is left vacant substantively. This statement is required to be submitted
only in respect of long leave chains/ spells and other long-term vacancies caused due to death,
suspension, transfer, deputation etc. against which either postings or officiating arrangements are
made.

38
Increment Certificate

1. To the first bill in which a periodical increment is drawn for a Government servant, a
certificate shall be appended. In the case of Government servants whose names are omitted
from pay bill, such certificates need not be so attached to the pay bills but should be made
available for test check during local audit.

2. Of the two alternative certificates, the former may be, used in any case in which the increment
becomes due to the Government servant concerned for having been incumbent of the post
specified for the prescribed term counting from the date of the last increment or of
appointment to the post, excluding periods such as of absence from duty not counting for
increment and absence on extraordinary leave, and if he has held a post in an officiating
capacity, or if the post held by him substantively was a temporary post, kinds of leave which
are shown in the tabular portion of the certificate. In all other cases, the second alternative
form of certificate shall be used and it shall be supported by an explanatory memorandum
showing briefly but clearly the grounds on which the increment is claimed.

3. When an increment claimed operates to carry a Government servant over an efficiency bar, it
must be supported by a declaration from the authority empowered to allow the increment
that it has satisfied itself that the Government servant concerned is fit to cross the efficiency
bar.

Affixing prescribed certificates

Claim for house rent or any other fixed allowance shall be supported by such certificates as
may be prescribed by Government from time to time.

Fund deductions

The duty of noting the proper deduction to be made from pay bills on account of Provident
and other funds shall devolve on the drawer of the bill but no discretion is allowed in carrying out
any order received from the Accounts Officer to make any particular Deduction.

Income-tax deductions

Deduction from pay bills on account of Income Tax shall be made strictly in accordance with
the relevant provisions of the Income Tax Act, 1961 (43 of 1961) as amended from time to time and
the rules and orders issued thereunder.

House rent or licence fee deductions

1. When demand statements, (in duplicate) for licence fee of public buildings recoverable from
Government servants are received from the Public Works Divisional office or any other
authority in charge of such buildings, the Heads of Offices or drawing and disbursing officers
shall make the necessary deductions as specified therein from the relevant bill in which pay is

39
 drawn. After the recovery is made, one copy of the demand statement shall be returned to the
authority from which it was received after noting the amount (s) recovered and recording a
certificate to the effect that the recovery is in order and has been made and that the
emoluments are correct.

2. If the licence fee recoverable from a Govt. servant is limited to a certain percentage of his
emoluments, the particulars of such emoluments shall be noted in the remarks column of the
demand statement before its return. If, after the return of the demand statement, the
emoluments of the Government servant are changed retrospectively, such changes shall either
be shown in the next demand statement or intimated to the authority concerned by a special
letter.

3. Notwithstanding anything contained in this rule:

a. the recovery of licence fee from Government servants of the Central Government in
respect of buildings belonging to a State may be made in accordance with such
procedure as may be prescribed by the Government of that State, and

b. Departments of the Central Government may, after consultation with the Accounts
Officer, prescribe such detailed rules or procedure as may be necessary for recovery of
licence fee in respect of such buildings under their administrative control.

4. The provisions of this rule apply mutatis mutandis to recovery of other charges such as
additional licence fee for furniture, electric, water heating and sanitary installations and
charges for consumption of water and electricity, which may, under the orders of competent
authority, be recovered in the same way as, and together with, licence fee for building proper.

5. The procedure under sub-rules (1) to (4) shall not apply to the General Pool accommodation
under the Control of Director of Estates. The Directorate of Estates, including its Regional
offices, issue standing demand statements on receipt of which the Heads of Offices or
drawing and disbursing officers, as the case may be, should make the deductions of the
licence fee specified therein from the next relevant bill in which pay is drawn. They should
prepare a schedule in support of the deductions made in the relevant bill and attach thereto.
After booking the amount of deductions to the receipt head, the Accounts Officer will pass on
the schedule to the Assistant Director (Accounts), New Delhi or the concerned Estate Manager
indicating the total amount recovered and other relevant details if any.

6. In cases where any general pool accommodation is allotted to Officers whose pay and
allowances are drawn from other than Central Government's Civil Estimates i.e. Posts and
Telegraphs, Railways, Defence or State Governments and other cash paying departments,
licence fee recovered is required to be remitted by the respective Accounts Officer to the
Directorate of Estates by cheque or draft duly supported by the detailed schedules.

Recoveries ordered by Accounts Officer:

Deductions on account of sums disallowed from pay or other bills by the Accounts Officer in
the course of post check (or when the deduction could not be effected for any reason from the bill
during pre-check) shall be made strictly in accordance with the instructions issued by him. The

40
recovery of a sum disallowed from a pay bill may be made from the next pay bill. A sum disallowed
from a travelling allowance bill may be recovered from the next payment of travelling allowance, or
in cash or from the next pay bill if the Government servant concerned does not, within a month,
present any other travelling allowance bill.

Attachment of debt:
1) When the pay of a Government servant is attached by any order of a Court of Law, it is the
duty of the officer receiving the attachment order to see that the proper deduction is made in
satisfaction of such order from the pay of the Government servant concerned, and to keep a
record of such deductions.

2) If a Government servant is adjudged insolvent, the attachable portion of his salary vests in the
Court that passed the order of insolvency or the Receiver appointed by the Court. The
amounts which have been under attachment in execution of the decree against the insolvent
shall also, after the order of insolvency, vest in such Court or the Receiver, and the attached
amounts in such cases, instead of being sent to the various courts which issued the orders of
attachment, should be sent to the Insolvency Court or the Receiver for prorata distribution
among all the creditors of the insolvent Government servant.

Action to be taken with reference to a second or subsequent attachment order:

1) If an order of attachment against a Government servant is received before a previous order of

attachment against the same Government servant has been fully complied with, the recoveries
shall be made by the disbursing officer so long as the total amount recoverable with reference
to attachment orders is within the maximum limit prescribed.

2) If a new attachment order has the result of the total attachable amount exceeding the
maximum limit prescribed, the disbursing officer shall return the new attachment order to the
court concerned with a statement showing:

a. particulars of the existing attachment (s),

b. particulars of the amount (s) withheld and paid up-to-date into the Court (s)
concerned,
c. the amount (s) remaining to be recovered.

Deductions which are to be effected from the non-attachable portion:

Any deductions which may have to be made on account of subscriptions to provident funds
recognised by Government, taxes on income payable by the Government servant, dues of co-
operative societies and debts due to Government should be made from the non-attachable portion of
the Government servant's salary.

Procedure for recovery based on attachment orders and remittance to the:

Without prejudice to the appropriate provisions of the Code of Civil Procedure, 1908 (5 of
1908), the procedure to be followed by the drawing and disbursing officers in making recoveries from
pay and allowances of Government servants, of amounts in compliance with attachment orders
issued by Counts shall be regulated in accordance with the following rules namely:

41
 1) Subject as hereinafter provided in this rule, the gross amount of pay and allowances of the
Government servant shall be worked out on the pay bill as usual. Wherever the payment to
the Government servant is by means of cheque,, the net entitlement arrived at after making
deductions on account of provident fund, taxes on income, shall be split into the amount
attachable under the Court attachment order and the balance to be disbursed to the
Government servant concerned, to enable two separate cheques to be prepared respectively
for the amount to be remitted to the Court concerned and that payable to the officer.
Wherever the salary is payable in cash, there is no need of any break up to be shown in the
pay bill, but this may be done distinctly in the acquittance roll.

2) In the case of an attachment order issued by a Court in India against a Government servant
whose pay and allowances are to be disbursed outside the local limits to which the Code of
Civil Procedure, 1908 extends, the drawing and disbursing officer of the concerned Ministry,
Department or Union territory in India will be responsible for drawing the amount
recoverable monthly in compliance with the attachment order and remitting them to the
Court concerned, unless timely intimation is received by him of the death of the Government
servant or of any other event necessitating the discontinuance of such payments.

3) In cases in which a judgment-debtor does not sign the acquittance roll and intentionally
allows his pay to remain undisbursed in order to evade payment on account of an attachment
order issued by a Court of law, the head of the office may draw the pay of the judgment-
debtor in satisfaction of the attachment order, subject to the prescribed restrictions, and remit
the amount to the court concerned.

4) The amounts drawn under sub-rules (2) and (3) shall be treated for all purposes as payment of
the dues of the Government servant to that extent and particulars of the attachment order will
be cited in the pay bill or the acquittance roll as an authority for the charge and the Court's
receipt for the amounts shall be filed with the attachment register or such other suitable
record as, may he kept by the drawing officer.

Cost of remittance to Court:

The cost, if any, of remittance to a Court of money realised under its attachment order shall be
deducted from the amount realised and the net amount remitted to the Court.

Recoveries on account of profession tax, etc:

1) Recoveries from the salaries of Government servants, on account of profession tax levied
under an Act of a State Government and dues of Co-operative Societies registered under the
various Co-operative Societies Acts, where such Acts impose a statutory obligation on the
Government to effect such recoveries, shall be made by the drawing and disbursing officer in
accordance with such procedure as may be laid down by Government from time to time.

2) A drawing and disbursing officer, even when not located within the territorial limits to which
any of the above mentioned Acts applies, may effect recoveries on account of profession tax or
dues of a co-operative society from the salary payable to a Government servant, provided that
such Government servant, in the case of dues of Co-operative societies, authorises the
disbursing officer in writing, to effect such recoveries and the disbursing officer ensures,

42
 before effecting the recoveries, that the authorisation given to him by the Government servant
is clear, unambiguous and has not been revoked.

First payment of pay, allowances etc:

When the name of a Government servant appears for the first time in a pay bill, the bill shall
be supported by a Last Pay Certificate in the Form prescribed for the purpose; if the Government
servant did not previously hold any post under the Government or is re-employed after resignation
or forfeiture of past service, a certificate by the drawing and disbursing officer to the effect that the
medical certificate of fitness in the prescribed form has been obtained in respect of the Government
servant must accompany the bill in conformity with and if so required, by any rule or order
governing the conditions of the service to which he belongs. Where the competent authority under
any rule or order authorises the drawal of pay and allowances of a newly appointed Government
servant for a period not exceeding two months without a medical certificate of fitness, a certificate to
this effect shall be, furnished in the first pay bill. If a pensioner is re-employed, the fact shall be stated
in the bill.

Issue of Last Pay Certificate in the event of transfer, deputation or foreign service:

In all cases of transfers, deputations and foreign service, the last drawing and disbursing
officer of the Government servant should send a copy of the last pay certificate to the new drawing
and disbursing officer. Other documents such as the service book are also to be sent in the case of
transfers from one Ministry or Department of the Central Government to another (including Defence
Posts & Telegraphs and Railways).

Place of payment:

1) Save as hereinafter provided and subject to any special procedure that may be prescribed by
authorised departmental regulations, bills for pay and allowances or leave salary are
ordinarily payable only where the drawing and disbursing officer who draws the claims if
stationed.

2) Nothing contained in this rule shall have the effect of withdrawing any concession that has
been or may be allowed by the Government to an individual Government servant, or class of
Government servants for drawing a part of their pay at places other than their headquarters.

Drawal of arrears pertaining to a post held previously:

The pay and allowances due in respect of the old post (on account of a refixation of pay and
allowances) which could not, be drawn at the time of a transfer, may, be drawn by the drawing and
disbursing officer who is responsible to draw and disburse emoluments of the Government servant
against the new post. 'Due and Drawn Statement' in respect of arrears should be prepared by the
latter drawing and disbursing officer and sent to that of the earlier office or parent office as the case
may be, for verification of the claim. The earlier office or parent office may check these documents,
make entries in their records and return to the concerned drawing officer with a certificate that the
arrears relating to the Government servant have been noted in the relevant office copies of the bills.
On receipt of the 'Due and Drawn Statement' duly vetted, the arrear bill may be drawn. If inter-

43
departmental adjustment is required in regard to the arrears, the concerned office shall record the
classification and acceptance of the debit.

Government servant absent from India to arrange for receipt of his dues in India:

If pay, allowances or leave salary becomes due in India to a Government servant absent out of
India, he must make his own arrangements to receive it in India.

Payment of pay, leave salary, etc. through agents:

1) Save as hereinafter provided, pay and allowances or leave salary may be paid only upon the
personal claim of the Government servant concerned, and to his personal receipt, and not
otherwise, except under the special authority in each case of the Government. The
Government servant may be allowed to receive payment through a messenger duly
authorised by him to receive the money on his account provided that the Government
servant's formal acquittance is produced by the messenger and in such a case the Government
accept no responsibility in respect of money, cheque or draft that may be handed over to the
messenger.

2) Pay and allowances and leave salary of a Government servant, who is unable to present
himself in person to receive payment, may be paid to a banker or agent duly authorised by
him to receive the money and give a legal pittance, provided that the banker or the agent
holds a legally valid power of attorney to act in this behalf. In the absence of such a power of
attorney, the Government servant desiring to receive payment through a banker or agent
must furnish the latter with a legal quittance for the money claimed, signed by himself, which
will have to be surrendered to the disbursing officer, with a letter of authority for the payment
to be made. The banker or the agent must also furnish a formal receipt, which need not be
stamped, to show that the money has been actually received by him. A Government servant
or a single person cannot be constituted as an 'agent' for the purpose of this rule, except when
he holds a legally, valid power of attorney to act for the Government servant concerned.

Bond of indemnity to be entered into by agents:

1. Government servants may make arrangements with their agents to draw their leave salary,
vacation pay and allowances granting suitable, powers of attorney to enable them to do so,
the agents in their turn giving the Government a bond of indemnity as a security against any
loss in the case of over-payment.

2. The bond of indemnity which must be stamped which is required to be executed by a

commercial bank acting as agent.

3. It is not necessary for a separate bond to be entered into for each individual. Such banks as are
included in the Second Schedule to the Reserve Bank of India Act, 1934 may be allowed to
execute a general bond to cover the leave salary, vacation pay and allowances of their
constituents in general.

Leave salary

44
 1. Subject to any special orders issued by the Government in this behalf or to any special
procedure that may be prescribed by departmental regulations, the leave salary of a
Government servant shall of drawn from the office of disbursement from which his pay was
being drawn immediately before proceeding on leave. Normally, the Government servant
must make his own arrangements for getting his leave salary remitted to him. However, if a
Government servant on earned leave exceeding one month specifically requests for the
remittance of his dues by means of demand draft, the drawing and disbursing officer
concerned shall arrange for the remittance. In cases where a period of leave is followed by
transfer, any portion of leave salary which was not drawn at the old station, may be drawn at
the office of disbursement from which the pay in respect of the new post is drawn.

2. When leave salary is drawn for a Government servant other than that belonging to any of the
categories, the bill in which it is first drawn shall be accompanied by a certificate by the
drawing officer, showing the calculations of the amount of the leave salary drawn or quoting
the rule or order under which the leave salary is based on actual pay. If the calculation is
based on pay drawn outside the Government servant's substantive section or office, a
reference to the bills in, or the office from which such pay was drawn shall be given in the
certificate.

3. A Government servant who is granted terminal leave or refused leave under the provisions of
rule 39 of Central Civil Services (Leave) Rules, 1972, shall be paid in lump sum, the amount
equivalent to leave salary and allowances, if, any, admissible during such leave (excluding
Compensatory City Allowance and House Rent Allowance) for the entire period of such leave
as, one time settlement. The city compensatory and house rent allowances during refused
leave, if otherwise admissible shall, however, be paid each month in arrears on the expiry of
the refused leave for that month.

Overtime allowance

Subject to any general or special orders issued by the Government in this behalf, every bill for
overtime allowance shall contain a certificate of the Head of the Office to the following effect:

"Certified that
a) the persons for whom overtime allowances are claimed in this bill, have actually earned it by
working overtime;
b) the periods for which overtime allowances are claimed in this bill have been checked with the
initial records and found correct;
c) overtime allowances are claimed at rates sanctioned by competent authority; and
d) the overtime allowances have been taken into account in calculating the income-tax due from
the Government servants noted in this bill."

Arrear bills:

Arrears of pay, fixed allowances or leave salary shall be drawn not in the ordinary monthly
bill, but in a separate bill, the amount claimed for each month being entered separately with
quotation of the number and date, together with the date of encashment, of the monthly bill from

45
which the charge was omitted or withheld or on which it was refunded by deduction, or of any
special order of competent authority granting a new allowance or an increase in pay. A note of the
arrear bill shall invariably be made in the pay bill register in or in the office copy of the relevant bill
for the period to which the claim pertains, over the dated initials of the drawer of the arrear bill in
order to avoid the risk of the arrear being claimed once again. The drawing officer shall also record
the following certificates on the arrear bill under his dated signature:
a) that no part of the amount claimed has been drawn previously.
b) that a note of the arrear claim has been made in the pay bill register or in the office
copy of the bill as the case may be, for the period to which the claim pertains
Subject to the conditions laid down in rule 32 arrrears bills can be presented at any time and
may include as many items as are necessary

Travelling allowance bills:

1. Bills for travelling allowance other than permanent or fixed travelling allowance shall be
prepared and presented in accordance with the following provisions:
a. The bills shall be prepared in prescribed form the instructions printed on the form
being strictly observed, When a circuitous route is taken, the reason for doing so must
invariably be stated in the bill.

b. When actual expenses are drawn on account of carriage of horses or conveyances,

details of horses or conveyances transported should be furnished in the bill. For the
purpose of drawing the allowance on account of family, a certificate must be furnished
by the Government servant of the number and relationship of, the members of his
family for whom the allowance is claimed. No other details in these or other cases
need be furnished but every claim for the cost of transportation of personal effects and
horses or conveyances should be supported by a certificate that the actual expenses
incurred were not less than the amount claimed.

c. All travelling allowance bills must bear a certificate of the drawing officer in the
following form: "Certified that I have satisfied myself that the amounts included in
the bills drawn one/ two/three months previous to this date, with the exception of
those detailed below (total amount of which has been refunded by deduction from this
bill) have been disbursed to the Government servants named therein and their receipts
taken on the office copy of the bill or in a separate acquittance roll".

2. The bill completed as above may be encashed on the receipt of the Head of the Office; but no
bill requiring previous countersignature of a controlling authority shall be presented before
such counter signature is obtained.

3. The travelling allowance bills of Government servants proceeding on tour shall be presented
at convenient intervals during the period of their tour or immediately on return to the
headquarters and, as far as practicable, before 31st day of March if the tour has been
completed before that date.

Medical charges reimbursement bills:

46
 Bill for reimbursement of the expenditure incurred by Government servants on account of
medical attendance and treatment may be drawn in prescribed Form. The amounts drawn in the bills
must be supported by proper receipts and vouchers in all cases.

Disbursement of pay and allowance etc. and acquittances thereof:

1. The Head of an Office is personally responsible for the amount drawn on a bill signed by him
or on his behalf until he has paid it to the person entitled to receive it and has obtained a legal
quittance. The legal quittance may be obtained in an Acquittance Roll in Form G.A.R. 24 as in
respect of monthly Pay and Allowances and on the office copy of bills for other payments.
Wherever the acquittance is obtained on a separate paper, it must be pasted in the relevant
roll or office copy of bill. The particulars will be filled in from a Bill Check Register in Form. In
cases where the payee Government servant is physically unable to sign the quittance, the
Head of the Office shall disburse the amount or hand over the cheque, as the case may be, to
such member of the Government servant's family as has been nominated by the Government
servant to receive his Provident Fund dues.

2. If, for any reason, payment cannot be made within the course of the month, the amount
drawn for the payee shall be refunded by short drawing in the next bill, and when the
occasion for making the payment arises, the amount may be drawn a new. Provided that, if in
the opinion of the Head of Office, this restriction is likely to operate inconveniently, the
amount of undisbursed pay and allowances may, at his option, be retained for any period not
exceeding three months, but this concession shall not be availed of unless the Head of Office is
satisfied that proper arrangements can be made for the safe custody of the sums retained.

3. It is also not permissible to keep undisbursed pay and or allowances under any circumstances
as a credit under the deposit section of Government Account to facilitate its subsequent
withdrawal.

Last payment of pay and allowances:

Normally, the last payment of pay or allowances in respect of a Government servant who
finally quits service of the Government or who is placed under suspension may be made only after
the Head of Office satisfies himself, by reference to his own records and to other appropriate
authorities where necessary, that there are no demands outstanding against the Government servant.
However, in case, where security for an amount considered by the said Head of Office to be adequate
to cover the aforesaid demands is taken from such Government servant, in cash, or by a surety bond,
or by with-holding a part of the gratuity payable to the Government servant, the last payment of pay
and allowances may be made and the last pay certificate issued, even if the likely dues from such
Government servant remain to be assessed and realised.

Death of payee:

Pay and allowances can be drawn for the day of the Government servant's death; the hour at
which death takes place has no effect on the claim.

47
NOTE:'Day' for the purpose of this rule should mean a calendar day beginning and ending at
midnight.

Arrears payable after death:

1. Pay and allowances of all kinds claimed on behalf of a deceased Government servant may be
paid without production of usual legal authority, under the orders of the Head of office in
which the Government servant was employed at the time of of his death, provided the Head
of office is otherwise satisfied about the right of the claimant. In cases where the gross amount
of the claim exceeds Rs.10,000, payment will be made by the Head of Office only on the
execution of an indemnity bond in Form GAR 26 duly stamped for the gross amount due for
payment with such sureties as may be deemed necessary. Provided that the Head of office
may, subject to the condition prescribed in Para 1, make anticipatory payment of an amount
not exceeding Rs.10,000.

2. In case of any doubt, payment shall be made only to the person (s) producing the legal
authority.

3. On receipt of the claim for payment of arrears of pay and allowances of all kinds (including
travelling allowance claims) on behalf of a deceased Government servant from his heir (s), the
Head of the Office in which the Government servant was last employed should draw the
amount in the appropriate bill form. The claim should be supported by, all the relevant
certificates which the Head of Office is required to furnish in the normal circumstances.
However, in respect of the certificates which solely depend on the personal knowledge of the
deceased Government servant and which obviously cannot be furnished by the Head of
Office, the Head of Office should record if he is satisfied about the correctness of the claim,
and furnish a certificate to the effect that, "the claim, is not susceptible of verification but is
considered reasonable". The amount should be disbursed to the claimant by the Head of the
Office by following the procedure laid down in sub-rule (1). A formal receipt, stamped where
necessary, should be obtained from the claimant.

48
 CONTINGENT CHARGES
(Rule 96 to 123)

Meaning of the term

The term '"contingent charges" or "contingencies'' used in this Section means and includes all
incidental and other expenses (including on stores) which are incurred for the management of an
office as an office or for the working of technical establishment such as laboratory, workshop,
industrial installation, store depot and the like but other than expenditure which has been specifically
classified as falling under some other head of expenditure e.g., 'works', 'tools and plant'.

Types of contingent charges

Contingent charges incurred on the public service are divided into the following types, the
types adopted in each department or office being determined by orders of competent authority

i. Contract contingencies.those for which a lump sum is placed annually at the disposal of a
disbursing officer for expenditure without further sanction of any kind. They generally consist
of charges, the annual incidence of which can be averaged with reasonable accuracy.
ii. Scale-regulated contingenciesto comprise such contingent charges as may be regulated by
scales laid down by competent authority, such as rewards for destruction of wild animals.
iii. Special contingenciesto include such contingent charges, whether recurring or
nonrecurring, as cannot be incurred without the previous sanction of superior authority.
iv. Countersigned contingenciesto include such contingent charges as may require approval
of some controlling authority before they can be admitted as legitimate expenditure against
the Government, such approval usually taking the form of countersignature after payment on
a detailed bill submitted to the Pay and Accounts Officer.
v. Fully vouched contingenciesto comprise contingent charges, which require neither special
sanction nor countersignature, but may be incurred by the Head of Office on his own
authority subject to the necessity of accounting for them. These may be passed on fully
vouched bills without counter-signature.

Payment of contingent expenditure out of permanent advances, etc:

Government officers who have to make payments for contingent expenditure before they can
place themselves in funds by drawing contingent bills, may make such payments out of permanent
advances or imprests which they may be permitted to hold under the orders of competent authority,
subject to recoupment on presentation of contingent bill.

General Limitations:

49
 1. All charges actually incurred must be paid and drawn at once, and under no circumstances
they may be allowed to stand over to be paid from the grant of another year. The charges
relating to two or more major heads may not be included in one bill.

2. No money shall be drawn from Government Account unless it is required for immediate
disbursement. It is not permissible to draw money from Government Account in anticipation
of demands or to prevent the lapse of budget grants.

3. Save as hereinafter provided, no pay of any kind and no additions to pay may be drawn on
bills for contingent expenditure.

4. Subject to any general or special orders issued by the Government, the pay of Group D
servants, by whatever designation they may be called, who have been or may be, declared by
competent authority to be ineligible for pensions and who discharge the duties of the classes
mentioned below, may be treated as contingent expenditure

a. Hot weather establishments;

b. Mazdoors engaged on manual labour and paid daily or monthly wages;
c. Sweepers;
d. Other classes of Group D servants like dhobies, tailors, syces, grass-cutters.
e. The wages of temporary field establishments of Surveys and Settlements and of extra
potdars entertained for accompanying remittances, may also be drawn on contingent
bills.

Certificates relating to certain types of contingent charges

1. Contingent charges incurred on account of the wages of mazdoors engaged on manual labour
and paid at daily or monthly rates shall be supported by certificate signed by the disbursing
officer to the effect that the mazdoors were actually entertained and paid.

2. Contingent bills for claims relating to rents, rates, taxes, electricity and water and other
connected charges incurred on account of the hire of private buildings by Government for
accommodation of Government offices should be accompanied by either of the two following
certificates to be signed by the Drawing Officer:

a. no portion of the building for which the expenditure was incurred, was utilised for
residential or other purposes during the period to which the charges relate; or
b. the share of expenditure required to be recovered for the portion of the building used
for residential or other purposes during the period for which the charges were paid,
has been recovered as indicated against each, from the under-mentioned persons from
whom it was due.

Certificate in support of stores purchase bills:

50
 If not provided otherwise by departmental regulations, bills presented in support of payments
for purchase of stores shall be accompanied by a certificate that the articles detailed in the vouchers,
and their quantities are correct, their quality good and according to specifications, that the rates paid
are not in excess of accepted or market rates, and that suitable notes of payment have been made in
the indents, supply orders and invoices concerned to prevent double payment. The authority, unless
it is a general one, under which the purchase is made, shall also be quoted.

Certificate in support of contingent bills which include sales tax charges:

Contingent bills which include charges on account of purchase of goods on which sales tax
has also been charged, should be supported by the following certificates signed by the disbursing
officer:

"Certified that in the case of sub-vouchers attached to the bill and those retained in my office
relating to the purchase of goods on which sales tax has been charged, the goods have not been
exempted under the Central Sales Tax Act or the rules made thereunder and that the amounts paid on
account of Sales Tax on those goods are correct under the provisions of that Act or the rules made
thereunder, and that in the case of supplies against regular contracts, the relevant contract includes a
specific provision that Sales Tax is payable by Government."

Certificate to be attached to contingent bills which include charges on account of light

refreshments at formal meetings, conferences:

The following certificate signed by the drawing officer shall be attached to all the contingent
bills which include charges on account of expenditure on light refreshments at formal meetings and
conferences:

"Certified that the expenditure on entertainment charges included in this bill was incurred in
accordance with the terms and conditions laid down by the Government, from time to time, and that
the prescribed monetary limits have not been exceeded."

Certificate to be attached to contingent bills for drawing pay of certain group 'D' servants:

In the case of Group D servants whose pay is drawn on contingent, certificates in the
following form shall be furnished by the drawing officer:

a) "Certified that all Group D servants whose pay has been charged in this bill, were actually
entertained in Government service during the period concerned."

b) "Certified that the rates of pay and dearness allowances of part-time and casual employees
drawn in this bill have been fixed in accordance with the orders of the Government of India
presently in force."

Responsibility of drawing officers:

51
 Every Government officer shall exercise the same vigilance in respect of contingent expenses
as a person of ordinary prudence may be expected to exercise in spending his own money. The
drawing officer is further responsible for seeing that the rules regarding the preparation of bills are
observed, that the money is either required for immediate disbursement or has already been paid
from the permanent advance, that the expenditure is within the available appropriation and that all
steps have been taken with a view to obtaining an additional appropriation if the original
appropriation has either been exceeded or is likely to be exceeded, and that in the case of contract
contingencies, the proposed expenditure does not cause any excess over the contract grant.

Responsibility of controlling authority:

The countersigning officer shall be responsible for seeing that the items of expenditure
included in a contingent bill are of obvious necessity and are at fair and reasonable rates, that
previous sanction for any item requiring it is attached, that the requisite vouchers are all received and
are in order, that the calculations are correct, and specially that the grants have not been exceeded nor
are they likely to be exceeded and that the Accounts Officer has been informed either by a note on the
bill or otherwise of the reason for any excess over the monthly proportion of the appropriation. If
expenditure be progressing too rapidly, he shall communicate with the drawing officer and insist on
its being checked.

Cancellation and destruction of sub-vouchers:

The following rules for the prevention of the fraudulent use of sub-vouchers shall be observed
by all drawing and controlling officers in the matter of cancellation and destruction of sub-vouchers:

i. Unless in any case it is distinctly provided otherwise by any rule or order, no sub-vouchers
may be destroyed until after a lapse of three years.

ii. Every sub-voucher which is not forwarded either to the Accounts Officer or to a controlling
officer along with bills but is recorded in the office to which the expenditure relates, must be
duly cancelled by means of a rubber stamp or by an endorsement in red ink across the
voucher, the cancellation being initialled by the officer authorised to draw the contingent bills
of the office. The cancellation should be made at the time when the contingent bill in which
the sub-vouchers are included is actually signed. If the amount of the sub-voucher exceeds the
permanent advance, the cancellation should be made as soon as the payment is made and
entered in the contingent register.

iii. Sub-vouchers submitted to a controlling officer which he is not required to forward to the
Accounts Officer should be duly cancelled by him after check and the cancellation should be
attested by the controlling officer at the time of countersignature on the bill.

iv. In all cases in which sub-vouchers are not required to be submitted to the Accounts Officer or
the controlling officer, the drawing officer should certify in the bill that sub-vouchers other
than those attached to the bill have been so defaced or mutilated that they cannot be used
again. A similar certificate should be furnished by the Controlling authority in respect of sub-
vouchers submitted to him by the drawing officer but which he is not required to submit to
the Accounts Officer.

52
Contingent register

1. A register of contingent expenditure shall be kept in each office and the initials of the Head of
the Office, or of a gazetted officer to whom this duty has been delegated by the Head of the
Office, shall be entered against the date of payment of each item.

2. The actual details such as the number of columns to be opened, the subheads and detailed
heads and such further detailed classification as may be required for the purpose of control,
may be settled by the Accounts Officer and the controlling authority to suit the conditions of
each department or office.

3. As a general rule, the most common sub-heads and detailed heads may have separate
columns with appropriations noted at the top. The less important and trival items may be
lumped together in one column when each of the separate items need not be accounted for or
watched separately. Any charge falling under any of the separate columns but requiring
explanation may be described in the column "Description" though the amount of it is entered
only in its special column; the same "Description" column will serve also for note of the month
or period to which any recurring charges entered in the other columns belong.

4. As each payment is made, entries must be made in the contingent register, of the date of
payment, the name of payee and the number of sub-voucher in the three columns to the left,
and the amount in the proper column, and in the case of any charge requiring explanation, the
initials of the officer incurring it shall be taken against the description.

5. To enable the disbursing officer to watch the progress of the expenditure under each detailed
head as compared with the appropriation for it, a progressive total of all the columns must be
made monthly immediately after the monthly total so as to include all payments under each
head, as also charges intimated by Account Office as adjusted on account of debit received
from the commencement of the year upto the end of the last expired month.

General instructions relating to bills, for drawal of contingent charges.

(1) When it is necessary to draw money for contingent expenses, as for example, when the permanent
advance begins to run short, or when a transfer of charge takes place and in any case, at the end of
each month, a red ink line shall be ruled across the page of the register or registers, the several
columns added up and several totals posted in separate bills for each class of contingent expenditure.
The Head of the Office or the officer to whom this duty has been delegated shall carefully scrutinise
the entries in the register (s) with the sub-vouchers, initial them if this has not already been done, and
sign the bill which will then be dated and numbered and presented for payment.
(2) The heads of contingent expenditure may be entered in manuscript in the bill and the totals
posted against them provided that in a case of expenditure requiring explanation, full details of the
charges must be entered in the bill except when they are given in the sub-vouchers sent to the
Accounts Officer.
(3) Unless the Controller General of Accounts on the advice of the Comptroller and Auditor General
directs otherwise, sub-vouchers for more than Rs.500 each shall be submitted to the Accounts Office
in respect of contingent charges referred to in rules 114 and 115.

Certificate in support of payment to payees whose names cannot he disclosed.

53
When in paying rewards to informers, or in any other case, it is not desirable to disclose the names of
payees, a certificate in the handwriting of the disbursing officer to the effect that the payment has
been duly made shall be submitted to the Accounts Officer in support of the payment in lieu of the
payee's receipt ordinarily required.

Contract contingencies.

In respect of contract contingencies, the bill shall be presented in the prescribed form. No sub-
vouchers need be sent to the Accounts Officer.

Fully vouched contingent charges-and special provisions relating to telephone, electricity and
water charges.

Contingent bills, of officers which do not require countersignature may be drawn by presenting bills
in the prescribed Form showing full details of the charges and supported by sub-vouchers. Provided
that in case any officer has to embody in his bill, charges of any subordinate officer who normally
draws money by presenting his bills directly to the Pay and Accounts Officer or under his cheque-
drawing powers, the countersigning officer must submit monthly bills in the manner stipulated in
rule 119 in adjustment of the abstract bills cashed by himself or his subordinates.

NOTE 1.The proviso is intended to cover cases where a Head of Department or Controlling Officer
has to submit after counter-signature, monthly detailed bills to the concerned Accounts Officer, in
adjustment of the abstract bills cashed by himself and his subordinates under the provisions of rule
117.
NOTE 2.In cases (other than those of a non-cheque drawing D.D.O. situated at a place different
from that of the accredited Pay and Accounts Office or cheque-drawing D.D.O. authorised to pay the
contingent bills, as the case may be) where payments of telephone, electricity and water charges are
generally more than the monetary limit prescribed in rule 99 and which cannot, therefore, be paid out
of the permanent advance, funds required for making only these three types of contingent payments
may be drawn on fully-vouched contingent bills under the provisions of this rules, attaching thereto a
duplicate copy of the demand bill received, as sub-voucher. For such payments, wherever only one
copy of the demand bill is received from the Telephone Department or State Electricity Board or local
body and the payments are made only by cheque, funds required may be similarly obtained by
attaching photostat copy of the demand bill (duly attested in regard of amount) which will serve as a
sub-voucher in support of relevant contingent bill as a special case. This special provision shall not,
however, be extended to any other type of cases; or even to the three instant types if the payment
accrues to a private party.
In the case of telephone bills, 'Government Account' category cheques shall be drawn. Cheques, in
others cases, shall be crossed 'A/C Payee only'. Stamped receipt or receipt thereon, received against
payment of such a bill by cheque may be retained by the drawing and disbursing officer and will be
accorded by him, the same treatment as envisaged in rules.

Scale regulated charges and special contingencies.

(1) In terms of rule 97 of the General Financial Rules, 1963 an authority competent to classify an
expenditure as scale-regulated, shall prescribe the conditions precedent to the application of the scale,
the certificates to be furnished with the bill and whether such a bill shall be countersigned before or

54
after payment. In the latter case, such charges may be drawn in the abstract bill Form, with a full
description of the charges, and subject to presentation of the detailed bill to the Controlling Officer
for countersignature and transmission of the Accounts Officer in accordance with the procedure
prescribed in rules.
(2) Special contingencies, which require the previous sanction of the superior authority before they
can be incurred, may be drawn either in the abstract bill Form with a full description of charges and
subject to presentation of detailed bill in accordance with the procedure laid down in rules; or in the
bill Form as the occasion may demand. When expenditure for which a lump sum is granted under a
single special sanction, is continued over more than one month, the second and subsequent months
bills shall bear a note of how much has been spent up to that date, against the sanction.

General instructions relating to countersigned contingencies.

Items of contingent charges requiring countersignature and list of drawing and disbursing officers
who can draw them on abstract bills should be drawn up as laid down in rules.

Form of abstract bills, etc. pertaining to countersigned contingencies

Except in the case of contingencies requiring countersignature before payment, contingent charges
falling under this group may be drawn by presenting abstract bills in Form subject to the presentation
of detailed bills to the controlling officer for countersignature and transmission to the Accounts
Officer in accordance with the procedure hereinafter prescribed.

Preparation of abstract bill.

The numbers assigned to sub-vouchers (in cases of payment from permanent advance) or to credit
bills or pre-receipted bills, if any (which on payment will become sub-vouchers) pertaining to each
entry in the abstract bill shall be detailed against the entry concerned, the amount being given only in
those cases where a sub-voucher is for more than Rs. 50. A certificate shall be attached to every
abstract contingent bill to the effect that the detailed contingent bills have been submitted to the
controlling officer in respect of abstract contingent bills drawn during the month previous to that in
which the bill in question is presented for payment. On no account may an abstract contingent bill be
cashed without this certificate.

Form and preparation of detailed bill relating to countersigned contingencies

(1) A monthly detailed bill shall be prepared in the case of contingent charges to be countersigned
after payment, from the monthly totals of the contingent register; such detailed bill will be in the
prescribed Form, headed 'Not for payment'" and will show the monthly total of each column with
description of each charge requiring explanation. The numbers assigned to the sub-vouchers shall be
entered in detail against each item; the number and date of every abstract contingent bill cashed, and
the sub-vouchers included in each shall be shown in the memorandum at foot. The amount shown in
the bill must be agreed with the total of the abstract bills cashed during the month. Differences, if any,
between the total of a detailed bill and the register must be adequately explained.
(2) The detailed bill shall be signed by the Head of the Office and submitted to the Controlling
Officer, (or if there be no controlling officer to the Accounts Officer, direct) with all sub-vouchers
above Rs.50 his signature to the certificate endorsed on the bill taking the place of the smaller ones.

55
NOTE.The limit of Rs. 50 above which sub-vouchers are required to be submitted to the
Controlling Officer is subject to alteration by the Controller General of Accounts on the advice of the
Comptroller and Auditor-General.
(3) If, in any month, the monthly proportion of the appropriation has been exceeded, a report of the
special circumstances which rendered the excess necessary shall be sent to the counter-signing officer
with the detailed bill.

Counter signature of detailed bill, etc.

On receipt of the monthly detailed bill in the office of the countersigning officer with the sub-
voucher, any disallowance with the number of the sub-voucher concerned and explanation of the
objection, must be noted on the bill and in the contingent register or such other record as may be kept
in the office of the Controlling Officer. The countersigning officer shall then record the date of
admission, under his initials, sign the bill and despatch it to the Accounts Officer direct with the sub-
vouchers for items for more than Rs.200 each, his signature to the certificate endorsed in the bill,
taking the place of the smaller ones.
NOTE 1.The term 'items' refers to items of expenditure and not items of charge; for example a
charge for Rs.220 for section-writers would not require to be supported by a sub-voucher if the
amount is made up of sums paid to several individuals none of which exceed Rs.200. The limit of
Rs.200 is, however, subject to alteration by the Controller General of Accounts on the advice of
Comptroller and Auditor General.
NOTE 2.In the absence of the countersigning officer, the examination and countersignature of the
bill may be performed by some responsible gazetted officer authorised by the countersigning officer.
NOTE 3.A register of contingent expenditure may also be kept in the office of the controlling
officer in such form and according to such method as may be titled by a Department of the Central
Government in consultation with the Accounts Officer.
NOTE 4.The detailed bills duly signed by the controlling officer shall be sent to the Accounts
Officer direct within a month from the date of receipt of such bills in his office.

Disallowance by the countersigning officer.

After despatch of the bill to the Accounts Officer, the countersigning officer shall communicate any
disallowance to the drawing officer and its amount shall without fail be refunded by short drawing in
the next contingent bill presented for payment by the same department or office. The gross amount of
each sub-voucher shall be entered in such bills, and below the total shall be entered 'Deduct
disallowed from the bill of.............Rs................', the receipt given being for the net amount only. If,
after correspondence, the countersigning officer withdraws his objection, the amount may be
redrawn in the next bill by entering after the total of sub-vouchers 'Add amount disallowed from bill
of......... refunded by deduction from contingent bill No............... dated...........and subsequently
allowed as per...............'; the receipt would be for the gross amount, and the items would be re-
included in the next monthly contingent bill.

Contingencies requiring counter-signature before payment.

Bill for contingent charges requiring counter signature before payment shall be drawn in prescribed
Form.

Payment for purchase of service postage scamps.

56
Crossed 'Government Account' cheque in favour of the Post Master (or Treasury Officers in States
where the work of stocking or distribution or both of service stamps has not yet been taken over by
the Posts and Telegraphs Department) or State Bank of India branches which are authorised to sell
stamps may be drawn or obtained by drawing and disbursing officers from Pay and Accounts office
by preferring a bill indicating the value of postage stamps of various denominations required, and
giving a certificate that the stamps will be used on prepaying postage on communication bona fide on
the public service and that expenditure could not be avoided.

57
 WITHDRAWAL FROM THE GOVERNMENT ACCOUNT

PURCHASE OF STORES.

The term 'Stores' is used to indicate all articles and materials required for the public service and
coming into an office's possession for various purposes which are budgetted for and classifiable
under heads of expenditure such as works, tools and plant, machinery, equipment, material and
supply.

Purchases in India other than through Directorate General of Supplies and Disposals.

As a general rule, payment for supplies is not permissible unless the stores have been received and
surveyed. Payments prior to verification of quality and quantity of the materials may be permitted in
exceptional cases only, provided that adequate safeguards exist to secure the Government against all
losses in the event, of the materials being found short or defective. In all such cases, the amount
required for payment shall be drawn on an abstract bill, giving full description of the charges and
number and date of sanction permitting advance payment (wherever necessary). In such cases of
advance payments, as soon as the supplies are received, a detailed bill prepared on the basis of the
actual verification and measurement of the supplies, along with the required sub-vouchers, must be
submitted to the Accounts Officer in adjustment of the advance drawn earlier quoting Voucher No.
and date of the relevant abstract bill.

Purchases through Directorate General of Supplies and Disposals.

Without prejudice to the generality of the provisions contained in the rules, the procedure relating to
payments for stores purchased through the Director General, Supplies and Disposals may be
regulated by special orders issued by the Government in this behalf.

Subject as aforesaid, payments will be made by the organisation under the Chief Controller of
Accounts, Department of Supply and inter-departmental adjustments effected against the
Department concerned through their accounts organisations in accordance with the procedure
prescribed therefor in the Civil Accounts Manual.

Purchases outside India through the India Supply Missions.

Payments for all purchases ordered through the India Supply Missions at London or Washington will
be arranged by the High Commission of India, London or Indian Embassy, Washington, as the case
may be. The debits being passed on to India for adjustment.

Procedure for payment against direct orders on firms, etc., abroad.

In regard to articles obtained by placing direct orders on firms or individuals in the United Kingdom,
United States of America or any other foreign country, payment shall be arranged in accordance with
the following:
(i) the drawing and disbursing officer of the Ministry or Department which has placed the order after
following the usual procedure (including issue of formal sanction order therefor), shall, as soon as all
the checks necessary in connection with the receipt, inspection and verification of articles have been
applied, forward the firm's bill, in original, with necessary endorsement and, certificate thereon to his

58
Accounts Officer. Particular care must be taken to ensure that no double payment is authorised in
respect of the same claim. The Accounts Officer will apply usual prechecks and pass the bill.
(ii) Where the time schedule of payment permits, the Accounts Officer will, thereafter, purchase a
bank draft in the specified foreign currency in favour of the supplier in the foreign country, through
the accredited bank and forward it to the concerned departmental officer for despatch to the supplier
by mail or otherwise. The cost of the bank draft in rupees as reflected in the bank scroll will be
booked by the Accounts Officer against the relevant head of account.
(iii) Wherever the supply order or order in regard to acceptance of tender involves heavy payments,
with a specific payment schedule clause therein, usually a letter of credit is opened in favour of
foreign suppliers through the accredited bank of the Ministry or Department concerned.
Alternatively, payment could also be arranged by telegraphic bank transfer from India directly into
the payee's pre-specified bank account abroad as soon as the completed invoice and all relevant
documents as required by the terms of the contract are received in the Ministry, Department or by the
bank in India, nominated by the Ministry or Department for the purpose, so as to strictly adhere to
the stipulated time schedule of payment. Special care should be taken to ensure that the requisite
documents are promptly passed on by the bank to the respective authorities in the Ministry or
Department concerned for verification where the time schedule is to reckon from the date of receipt
of the same by the Department or bank whichever is earlier.
(iv) In the case of stores ordered by a Ministry or Department direct from firms abroad on FOB basis
and subject to inspection by the India Supply Mission, London or Washington, the procedure
prescribed above will be supplemented by a check that the inspection certificate on the supplier's bill
has been recorded by the India Supply Mission concerned.
NOTE 1Special care should be taken by the purchasing Department in differentiating the action
required on its part in connection with the purchase of stores or articles or both through the agency of
Indian Supply Mission, London or Washington (the agency function covering invitation and
acceptance of tenders and or placing contracts, inspection of stores or articles and payment aspects),
from that required where inspection and shipping only is arranged through these agencies.
Provisions of rule 128 shall be applicable in regard to payment in the former type of cases and
provisions of clause (iv) will be applicable in the latter type of cases.
NOTE 2.This rule covers purchases from abroad made under the normal procedures and rules.
Purchases and procurement of stores under special arrangements will be governed by the procedure
specified in the relevant agreement or instrument or undertaking.
NOTE 3.Instructions regarding procedures for payments to foreign suppliers for imports covered
under various foreign aid (credits, loans or grants) programmes and, instruction's regarding
procedures for accounting of cash and equipments grants received by the Government from various
foreign Governments or Institutions, are required to be issued by the Controller of Aid Accounts and
Audit (Department of Economic Affairs) -for each loan, credit or grant agreement, separately, duly
approved by the Controller General of Accounts on the advice of the Comptroller and Auditor
General.

59
WORKS EXPENDITURE AND MISCELLANEOUS PAYMENTS

These rules shall apply to expenditure on special services connected with the construction, repair and
maintenance of buildings, roads and other works of public utility, whether carried out by the Public
Works Department or the Military Engineering Service, or under special orders of the Government by
the Department using or requiring such works.

Charges on petty construction and repair works met from contingencies.

When contingent bills are drawn for works expenditure permitted to be treated as contingent
expenditure, details showing the name of the work, the number and date of the order sanctioning the
work and the amount of the sanctioned estimates shall invariably be entered in the bill. A full
description of each item of expenditure together with details where necessary, showing the rates and
quantities shall be given and sub-vouchers, together with the receipt of the actual payee, shall be
furnished. When it is not possible to give details of the expenditure at the time of drawing the bill,
they must be given .subsequently in a bill headed 'Not Payable, to which the necessary sub-vouchers
shall be attached. The transmission to the Accounts officer of the detailed bill and the sub-vouchers
shall never be delayed for more than a month.
NOTE.Payment for labour shall be supported by the certificate prescribed in rule.

Payments to labourers

(1) As a general rule but subject to such exceptions as may be laid down in the authorised
departmental regulations, wages of labourers engaged departmentally, shall be drawn on muster
rolls showing the names of the labourers number of days they have worked and the amount due to
each. The daily attendance and absence of labourers and fines, if any, inflicted on them must be so
recorded as to prevent any tampering with, or unauthorised additions to the entries once made.
(2) The muster rolls may be kept in such form and in accordance with such methods as may be
authorised by departmental regulations.

Witnessing the payments

(1) The payment made on muster rolls must be made or witnessed by the officer of the highest
standing available in the disbursing office, who should certify to the payments individually or by
groups. The amount paid on each date shall be noted in words as well as in figures at the foot of the
muster roll.
(2) If any items remain unpaid, the details thereof must be recorded separately in the muster roll in
which they were originally drawn before it is finally passed by the person who made the payment.
Unpaid items shall subsequently- be carried forward from .muster roll to muster roll until they are
paid, the payments-being recorded and certified in the same way as current items.
(3) Notwithstanding anything contained in rules, it will be optional with the disbursing officer to
adopt any other alternative method of making payment of unpaid wages, provided that a systematic
record of items remaining unpaid is maintained on the basis of the original entries in the muster roll
in which they were drawn and that suitable precautions are .taken to prevent double payment.

Payments to work charged establishment

60
(1) Wages of members of the work-charged establishment may be drawn on the form of pay bill of
regular establishment or such other suitable form as may be prescribed in authorised departmental
regulations, according to local circumstances or to meet local requirements.
(2) The names and claims of the entire work-charged establishment concerned, including absentees,
must be shown in detail in each bill. The names shall be grouped by works on which the men are
employed and the drawing officer must certify that the men were on duty during the periods shown
against their names, each man being employed on the work arid on the duties for which his
appointment was sanctioned. Sanctions to the entertainment of the establishment shall be quoted in
each case.
NOTE 1.Deductions such as on account of fines, income-tax and recoveries of advances such as
festival advances etc. should be shown by special entries against the names concerned.
NOTE 2.If the acknowledgement of the payee cannot conveniently be obtained on the bill itself; it
may be obtained separately and attached to the bill as a sub-voucher.
(3) Wages remaining unpaid on a passed bill on the date fixed for closing the accounts of the month
may be paid subsequently when claimed, on a separate bill, quoting in each case; the reference to the
bill in which the Charge was originally included and the particular-Item thereof. In making payment
of arrears, suitable note of payment must be kept against the original entries in the bill or other
records so as to guard against second payment.

Payments to suppliers and contractors

(1) Unless in any case the Government direct otherwise, payment for all work done other than by
daily labour and for all supplies shall be made on the basis of measurements recorded in
measurement books kept for the purpose. Claims for such payments shall be prepared, as far as
possible, by the claimants themselves in authorised forms of bills and vouchers, and no payment
other than an advance payment may be authorised, unless the correctness of the claim in respect of
quantities and rates as well as the quality of the works done or supplies made have been accepted
and all calculations carefully checked by a responsible officer.
(2) Subject to such general or special instructions as may be issued by the Government, measurement
books may be kept in such form and according to such methods as may be authorised by
departmental regulations.

Payments for works done through local authority

(1) When the maintenance of any Government buildings or roads is entrusted to a Local authority,
the payment made to it on this account shall be treated in the same way as payment for work done by
a contractor.
(2) If lump sum payments have been agreed upon, each payment must be supported by a certificate
recorded by a responsible Government officer that the work has been done in accordance with the
conditions agreed upon.

Advances to contractors.

As a general rule, and subject to such exceptions as may be authorised by the Government, no
payment can be made to a contractor except for work actually done or supplies actually received.
Subject to such general or special orders as may be issued by the Government in this behalf,
advances, if any, made to contractors during the execution of a work shall invariably be recovered

61
from their bills for the value of work done or supplies made, before final payment is made which
must, in no case, be permitted without detailed measurement.

Refund of revenue.

(1) Refunds of revenue can be drawn only on the demands and on the receipt of the person entitled to
receive such refunds after production of proper authority.
(2) A Ministry, Department and or Union territory may, however, permit departmental officers
functioning under it, to draw amounts in lump sum on their receipt and to make payment (by
obtaining separate cheques in favour of the refundees or by cash where the refunds are upto Rs. 100
in each case) to the refundees concerned in certain of the types or classes' of revenue receipts handled
by them which are to be specified by the Ministry, Department, Union territory as the case may be, in
consultation with its Principal Accounts Officer. In such cases, the bill for such drawal should be
accompanied by a statement showing the names of the refundees, the amount refundable to each, and
the number and date of the challan through which the money was originally credited.
(3) On no account may such amounts be drawn to be lodged in a deposit account pending demand.
(4) Refunds of the value of Currency Notes credited to Government in accordance with the provisions
of the Reserve Bank of India (Note Refund) Rules, 1975, shall be made by the Currency Officer by
debit to Government Account (account held under Department of Economic Affairs) and,
simultaneously, the particulars of the original credit together with the receipt of the actual payee shall
be sent by him to the Pay and Accounts Officer, Ministry of Finance (Department of Economic
Affairs).

Refund of revenue from permanent advance.

In such cases where Government officers have to make payments for the refunds of revenue under
the provisions of rules and there is likelihood of delay in drawal, the payment of such claims as are
upto Rs. 100 may be made out of permanent advance or imprest which they may be permitted to hold
under the orders of competent authority, subject to recoupment on presentation of refund bills.

Procedure to be followed for noting the refunds in departmental records, etc.

Except as otherwise provided in these rules, every refund shall be noted against the original credit in
the departmental accounts or other documents in which the moneys received are entered in detail
and a certificate of such a note having been made must be given in all vouchers for refunds.

Form of bill for drawal of refunds of revenue.

(1) Except as otherwise provided in these rules, or unless some other form has been prescribed by
departmental regulations for any particular class of refunds, bills for drawing money on account of
refunds of revenue shall be prepared in prescribed Form.
(2) Where, under the provisions of rules, a departmental officer is required to draw the amount for
refund of revenue, he will prepare a bill in the prescribed form duly supported by the original challan
with which the money was credited' to Government Account or by a duly attested statement showing
the names of the refundee's, the amounts to be refunded and the number and date of the challan with
which the money was originally deposited and the amount, if any, already refunded, in cases where
the amounts received from more than one person were credited by a single challan by him, and
present it for payment after acknowledging the receipt thereof in the space provided for 'Claimant's

62
signature' .and after scoring out the words 'Claimant's signature'. The Accounts Officer will then
make the payment to the departmental officer after verifying the credit as' stated in sub-rule (1).

Refund of income tax, corporation tax etc.

Special rules are prescribed by the Central Board of Direct Taxes, Ministry of Finance (Department of
Revenue) for the refund of Income Tax and Corporation Tax. The said rules also apply mutatis
mutandis to refund of Estate Duty, Wealth Tax, Expenditure Tax, Gift Tax and Hotel Receipt Tax.
Payments of such refunds shall be made to the refundee himself, or to a person duly authorised by
him to receive payment, provided that the receipt at the foot of the refund voucher is signed by the
refundee himself. Such orders of refunds drawn on the bank direct are negotiable instruments and
are, therefore, capable of being transferred by endorsement and delivery in accordance with the
provisions of the Negotiable Instruments Act, 1881 (26 of 1881).

Period of validity of refund order.

Unless otherwise provided by any law, rule or departmental regulation, an order for refund of
revenue shall remain in force for a period of three months only from the date of its issue and no
payment shall be made on its authority thereafter unless it is revalidated by the sanctioning
authority.

Grants-in-aid, contributions.

The terms 'Grants-in-aid' and 'Contributions', include such types of expenditure as grants to local
bodies, religious, charitable or educational institutions and compensation to Government servants for
accidental losses and contributions to public exhibitions and fairs.

Form of bill for grant-in-aid, etc.

Save as hereinafter provided and subject to any general or special Orders of the Government, bills for
grants in-aid or contributions shall be presented by the department in Form, the bills for the
expenditure sanctioned by the Government and subordinate authorities under the powers delegated
to them being drawn by the departmental officer nominated by the Government and the drawing
officer in the office of the sanctioning authority respectively. The orders sanctioning the payment
must be quoted in, each case.

Form of bill for compensation, etc.

Compensation to Government servants for accidental losses due to effect of floods, cyclones,
earthquakes or otherwise, may be drawn in a simple bill form indicating the name and designation of
the person, amount of compensation, sanction order number. The sanction Order should also be
attached thereto, while submitting to the Pay and Accounts Office for pre-check payment.

Investment by Government

63
Bills for Government's investments in a company, corporation or similar autonomous organisation
shall be drawn by the drawing officer in the office of the sanctioning authority by presentation of
simple receipt in a form, duly supported by a copy of sanction for such payment.

Interest on Government debt

The procedure with regard to payment of interest -on different forms of Government securities shall
be regulated by the rules and orders contained in this behalf in the Government securities Manual
issued under the authority of the Government.

Payment to the Reserve Bank

Bills for sums payable to the Reserve Bank, such as bills in connection with the floatation of new
loans or management of Public Debt, shall be countersigned by an officer of the Ministry of Finance
before they are paid.

NOTE.The Reserve Bank is authorised to debit the Government Account in advance of the
submission of consolidated bills for expenses incurred in connection with the floatation of
Government loans or payments which it may make to bankers, on account of brokerage; subject to
the condition that the Reserve Bank accepts the responsibility in the event of any excess payment
being made. The advance so made should be adjusted against the final bill of the Reserve Bank.

Expenditure from discretionary grants at the disposal of any Government authority.

(1) When a sum of money is placed at the disposal of any particular authority for expenditure on
specified objects, all amounts sanctioned against it must be supported by an order of the authority
concerned stating
(i) the particular object of the expenditure, which must always be within the general purpose of the
grant;
(ii) the amount sanctioned for it (the grant is to be non-recurring i.e. not involving any future
commitments);
(iii) the person in whose charge expenditure is to be.
(2) The disbursing officer may draw the money on his receipt specifying the order under which it is
sanctioned. He may not draw more than what he actually requires from time to time for expenditure
but can draw as often as he finds convenient.
(3) An account of the expenditure must be rendered to the Accounts Officer concerned, in which the
disbursing officer should enter on the receipt side all sums he has drawn and on the expenditure side,
all amounts he has spent. Vouchers must be furnished in the same way and under the same rules as
in the case of a contingent bill. A copy of this account, without vouchers, shall also be sent to the
administrative department concerned. The account must be sent at the end of every month, except
when it is estimated that the sanctioned expenditure will be completed and the account closed within
three months from the date of the orders sanctioning it. In such a case, the account may be withheld
till the end of the said period of three months and then sent covering the entire period. An account
must in any case be made up and rendered up to the 31st March, of each year.

Payment on behalf of Defence Services by Union territory administration.

64
(1) Disbursements by civil authorities for the purchase of or compensation for lands taken up for the
Defence Services, and also those for compensation for loss of crops, and damage to lands, shall be
vouched by the bills and receipt of the payees and the original orders or certified extracts therefrom
under which the expenditure is incurred.
(2) When a Civil officer required to supply carriage to troops on the march, makes an advance to the
owners of half the hire charges for the whole journey and recovers the same from the requisitioning
Defence officer on making over the carriage to the Defence authorities, the amount may be drawn for
such advance payment, from the permanent advance held by the Civil officer on an abstract bill, the
amount of the bill and subsequent recovery being taken to the head "858 Suspense AccountsPay
and Accounts office Suspense."
(3) A similar procedure will also be followed in cases in which a Civil Officer is called upon to supply
articles of provision to troops on the march.

Compensation for land.

The procedure to be observed for the payment of compensation for land taken up for public purposes
shall be regulated by the special orders issued.

Discount on stamps.

When discount upon stamps is allowed by deduction from the purchase money, a detailed bill in the
prescribed form headed "Not for payment" shall be prepared by the concerned Officer every month
for the amount of discount allowed, arid submitted to the controlling authority concerned for
counter-signature and transmission to the Pay and Accounts Office.

Commission to registrars.

(1) Commission to Registrars may be drawn under authorised departmental regulations, on bills
which must exhibit the fees upon which the commission is claimed, in such a form as to be capable of
verification by comparison with the accounts.
(2) In cases in which the commission is calculated upon a number of documents registered, the bill
shall be supported by a certificate of the District Registrar or otter controlling officer that the amount
has been correctly calculated.

65
 LOANS AND ADVANCES

Form of bill for loans and advances and drawal thereof

(1) Except as otherwise provided in rules 161 to 166, loans and advances may be drawn on simple
receipt in a form.
(2) Subject to the provisions of rules 161 to 166, bills for loans and advances shall be drawn by the
drawing officer of the office of the authority sanctioning payment of loan or advance. The bill shall be
supported by a copy of the sanction for such payment. In case of payments by cheques or bank drafts,
the drawing officer shall obtain cheques or drafts wherever necessary and make arrangements for
payment.

Mode of repayment of loans and advances

Where repayment is made by deduction from the amount of a claim against the Government, or
where ever repayment by directly crediting Government, Account in the relevant branch of the
accredited Bank is permitted, the original date and amount of the loan or advance should be
indicated in the relevant document so as to provide sufficient particulars for its identification. If the
amount repaid includes interest as well as principal, the interest must he separately specified If the
repayment is a fixed periodical amount, including both interest and principal, the orders fixing the
amount shall be quoted.

Procedure for drawal of revenue advances

(1) Advances may be made either direct to the parties concerned and on their receipt (stamped when
necessary) or may be drawn by departmental Officers who maintain detailed accounts of such
advances in lump sum on abstract bills in prescribed Form for disbursing to the parties.
(a) In the former case, the payments must be supported by mutual payees' receipts, and in the latter
case by a certificate from the authorised disbursing officer to the effect that payment will be made to
the proper payees and their receipts duly taken and filed.
(b) In the later case, the fallowing safeguards shall be adopted:
(i) No officer disbursing these advances should be allowed to draw a second abstract bill without
producing a detailed bill to account for the amounts already disbursed from the last advance taken,
any balance left being at the same time refunded. In no case should the submission of the detailed bill
be delayed beyond the end of the month following that in which the advance was drawn.
(ii) Disbursing officers should take the receipts of the payees on the spot as soon as the advances have
been made, and certify at the foot of the detailed bill that the advances were duly sanctioned by them
and paid in their presence.
(iii) Payees' receipts need not be sent with the detailed bill and their names need not be shown in it.
The detailed bill should be forwarded to the Accounts Officer in adjustment of the advance drawn.
(iv) The head of the department concerned should prescribe a money limit for the amount which can
be drawn on abstract bills by each officer with due regard to the circumstances of each case.
(2) The Accounts Officer shall maintain a plus and minus memorandum with which the
Departmental Officer should reconcile the balances as per accounts records. Special care shall be
taken while paying recoveries into Government Account that the amount of interest and principal
recovered are separately and distinctly credited, as the former must not, and the latter must, be
credited in the plus and minus memorandum.

66
Advances under special laws.

Advances under this head will be regulated in accordance with the provisions of the relevant Acts
and rules framed thereunder, or 'by such orders, general or special as may be issued by the
Government in this behalf.

Advances for departmental purposes.-

(1) Advances granted under special orders of competent authority to Government officers for
departmental or allied purposes may be drawn on the responsibility and receipt of the officer for
whom they are sanctioned, subject to adjustment by submission of detailed accounts supported by
vouchers or by refund, as may be necessary.
(2) In case of advances for survey and other departmental expenditure, which are ultimately
recoverable from private owners or other parties, the duties such as maintaining detailed accounts of
the advances, of watching their recoveries and of supervision, shall rest with the departmental
authorities concerned, the Accounts Officer being responsible only for maintaining a plus and minus
memorandum, where necessary, in accordance with relevant orders of Government.
(3) The provisions of rules shall also apply to advances of this class of which the detailed accounts are
kept departmentally.

Advances to government servants on personal account.

(1) These advances may be drawn on the forms in respect of long term advances and short term
advances. The names of Government servants with their designation and the amounts of advances
sanctioned for each should be clearly indicated.
(2) A personal advance to Government servant may be repaid, either in cash or by deduction from his
pay or travelling allowance bill, as may be required under the rule or order applicable to each case.
The recoveries through pay bills of long term advances referred to in the General Financial Rules and
of interest thereon, should be supported by schedules of recoveries of advances in the prescribed
form, separate schedules being attached for different types of advances. In the case of recoveries of
advances referred in the General Financial Rules, only monthly abstract may be attached to the last
establishment bill drawn during each month.

67
 PUBLIC DEBT PROVIDENT, ETC., FUNDS, DEPOSITS, ETC.

PROVIDENT AND OTHER FUNDS

Responsibility for recovery of subscriptions:-

Subscriptions to a Provident Fond of the Government are recovered ordinarily by deduction from
pay bills of the Government servants concerned and the responsibility for making necessary
deductions regularly and correctly devolves upon the drawers of the bills.

Recovery of premia towards Post Office Insurance fund.

Premia or subscriptions to the Post Office Insurance Fund may be realised either
(i) by deduction from pay bills of the subscribers, attaching thereto a schedule in prescribed Form;
or
(ii) by payment in cash at Post Offices only, in accordance with the rules of the fund.

Entry relating to subscriptions in the last pay certificate on transfer etc.

When a subscriber to any Fund whose subscriptions are realised by deduction from pay bill is
transferred from one office to another, the fact that he is subscribing to the fund shall be certified on
the last pay certificate by noting thereon the amount of his monthly subscription and the number of
the Fund account and Life Insurance policy, if any, financed therefrom as well as of Post Office
Insurance Fund Policy.

Advances and withdrawals from Provident Fund.

(1) Advances and withdrawals from a Provident Fund may be drawn on the prescribed form, the bill
being supported by a copy of the sanction accorded by the competent authority.
(2) Bills for withdrawals from a Fund, when permissible under the rules of the Funds, to meet
payments towards policies of life insurance may be prepared in the same manner as for advances
mentioned in sub-rule (1), the particulars regarding the policy' or policies on which premium of
subscription is to be paid being noted on the bills.
NOTE.Withdrawals from Provident Fund by officers and staff serving abroad for payment of
Insurance premium in India may he remitted by bank drafts.
(3) All bills for payment of advances, or final withdrawals from Provident Fund are to be submitted
to the Accounts Officer for payment. However, cheque drawing DDOs may make payments relating
to Provident Funds under their own cheque drawing powers to the extent permitted under the
relevant departmental regulations, after attaching a certificate to the hill that the advance or
withdrawal is covered by the balance at the credit of the subscriber concerned.

Final Payment of total Accumulations in the Fund etc.

(1) When a Government employee (other than one belonging to Group 'D'), who subscribes to a
Provident Fund, is about to retire or superannuate and, under the rules of the fund, money lying at
his credit in the fund becomes payable to him, he shall submit an application in the prescribed form,
one year in advance of the event, to the Accounts Officer by whom his fund account is maintained,
through his Head of Office-cum-drawing and disbursing officer. The Accounts Officer, after

68
satisfying himself that the claim is tenable, will endeavour to have the relevant account posted and
brought up-to-date and settle all outstanding points, such as missing credits, in consultation with the
drawing and disbursing Officer on a priority basis. He shall issue a "preclosing statement of account"
not later than 10 weeks in advance of the said event, based on ledger card and other records
maintained by him, specifying therein the month up to which the deductions and payments effected
and interest element are included, to the drawing and disbursing Officer, under intimation to the said
applicant-subscriber. Discrepant items, if any, which are under investigation shall also be indicated
therein. The drawing & disbursing Officer shall prefer, irrespective of whether he has received the
said "preclosing statement of account" from the Accounts Officer or not, a bill in the prescribed form
so as to reach the Accounts Officer one month in advance of the event and append thereto a
calculation sheet, indicating the manner in which the amount of final payment claimed has been
arrived at, starting with the amount shown in the "preclosing statement of account" if already
received from the Accounts Officer. The Accounts Officer will conduct necessary pre-check of the bill
with reference to his accounts records and arrange for the payment of the correct sum due, through
the drawing and disbursing 0fficer. The latter should obtain proper acquittance against the payment.
In the type of cases where claims, arise for final payment of balance, requiring applications in the
prescribed form, the Head of office-cum drawing and disbursing officer, shall forward the
application alongwith a bill in the prescribed form to the Accounts Officer for the amount arrived at
with reference to the latest annual statement of the account issued to the subscriber and other details
available in his records. The Accounts Officer shall satisfy himself that the claim is tenable and
determine the amount payable to the claimant with reference to his accounts records and arrange for
payment of the correct amount due, through the drawing & disbursing" Officer, with the greatest
expedition. The drawing & disbursing Officer shall also obtain proper acquittance against payments
in such cases.
NOTE.In the case of Group 'D' Government servants whose General Provident Fund accounts are
maintained by Heads of Offices, the bills for final payment do not have to be submitted to the
Accounts Office for pre-check payment but the verification and arrangement for payment of the
claims shall be made by the Head of Office concerned.
(2) Except as hereinafter provided, final payment on account of any Provident Fund, when
authorised, shall be made against the personal receipt of the subscriber, or when he is absent from
India, on that of his duly authorised agent. Payments may, however, be made to an authorised
banker, if so desired by the subscriber in the manner laid down in the rules. In the event of the death
of the subscriber before payment has been made, payment may be made in consultation with the
Accounts Office against proper acquittance to such person or persons as would be entitled to receive
payment under the rules of the fund concerned and such subsidiary instructions as may be issued by
the Government in this behalf.

Payments under Central Government Employees' Insurance Scheme, 1977.

Amounts payable under the Central Government Employees Insurance Scheme 1977, as amended
from time to time, shall be authorised by the Head of the office to the Government servant or the
deceased employee's nominee entitled to receive the employee's dues, as the case may be after
submitting the claim in the prescribed form (with such modification as may be considered necessary)
to the Accounts Officer.

NOTE.In the absence of valid nomination, the insurance amount payable under the scheme shall
be disbursed in equal shares among all the legal heirs of the deceased Government servant without

69
insisting on the production of the usual- legal authority provided the Head of the Office is otherwise
satisfied about the rights and titles of the claimants.

Central Government Employees' Group Insurance Scheme. 1980 and the Scheme as extended to
All-India Services as per All-India Services (Group Insurance) Rules 1981.

Monthly subscriptions recoverable from members of the Scheme shall be deducted every month from
pay bills. For the purpose of drawal of funds for making disbursements to members or nominees of
deceased members arising under the said Scheme or Rules, procedure prescribed by Government
shall be followed and bills preferred in the prescribed form as the case may be.

Funds not under Government Management.

In the case of such funds which are maintained in the Public Account portion of the accounts of the
Government, withdrawals from the Public Account against sums credited by way of subscriptions or
of interest that is allowed by the Government shall not be permitted except in accordance with the
orders issued by the relevant Ministry, Department or Union territory in consultation with the
Controller General of Accounts.
Wherever such orders envisage that the withdrawals should be by specified authorities connected
with the fund concerned, by means of cheques on the bank nominated for the purpose (and in which
the relevant receipts are credited), the Pay and Accounts Officer of the Ministry, Department or
Union territory concerned may, if need be, be entrusted with the work of issuing letters of credit and
for the work incidental thereto.

DEPOSITS

Broad categories of deposits.

Moneys received for deposit in the Government Account are to be classified under suitable heads of
account appearing under two broad categories of 'Deposits bearing interest' and 'Deposits not
bearing interest' under

Deposits and Advances' of the Public Account.

Limitations.

(I) No moneys shall be received for deposit in the Government Account, unless they are such as by
virtue of any statutory provision or of any general or special orders of the Government are required
or authorised to be held in the custody of the Government.
(2) Subject as aforesaid and save as expressly otherwise provided by these rules, no money is to be
credited as a deposit except under the formal order of a Court or other competent authority.
(3) The treatment of the following items as deposits is prohibited:
(i) No pay, pension or other allowances should be placed in deposit on the ground of the absence of
the payee or any other reasons.
(ii) No fines should be placed in deposit on the ground that appeal is pending, they should be
credited at once to the Government and refunded if necessary, on order of the Appellate Court. But
compensation fines (including costs in criminal cases) due to an injured party, and not to
Government, may be kept in deposit both in appealable and non-appealable cases, till they lapse
under the ordinary rule.

70
(iii) As provided in sub-rule (3) of rule 139, no refunds can be drawn to be lodged in deposit pending
demand by the payee.
(iv) No jewels or other property received for custody and restoration in kind may be brought on the
deposit account, though the value be stated in money.'
(v) Government Promissory Notes or other security deposits (not being cash) received must, on no
account, be credited as deposits.
(4) The net sale proceeds of unclaimed impounded cattle may be kept in deposit for three months and
if no claim be made within that time, are to be credited to the proper account.
(5) The sale proceeds of unclaimed property are not to be placed in deposit at all; under Police Act
1861 (5 of 1861), the property itself is to be kept for six months, but money realised by sale is at once
at the disposal of the Government, and should be taken to credit of the appropriate receipt head.
Exception must, however, be made in the case of property left by persons dying intestate and without
heirs which Civil Courts will secure and hold for certain periods in accordance with the local law.
NOTE 1.If unclaimed property be perishable and be sold because it cannot be kept or it be sold for
the benefit of the owner or because its value is less than ten rupees, its proceeds should be held for six
months, in deposit, but the circumstances should be clearly stated in the challan.
NOTE 2.Money belonging to prisoners in jail should not be held for long terms by the Jain
Department, but should be paid into Government account at convenient intervals.
NOTE 3.The Police Department should have no deposits except security and earnest money
deposits which should be paid into Government Account under the major head '843 Civil Deposits'.
Unclaimed property found by or delivered to a police officer, should. be made over to the Magistrate.
Proceeds of sale of old stores or other Government property should be credited to Government
Account.

Credit deposits into Government Account.

(1) Deposits must be paid into the Government Account either through departmental officers and or
through the accredited bank, along with the appropriate challan as may be directed by the Ministry
or Department concerned. The procedure relating to credit of receipts prescribed in Part II of these
rules will be applicable.
(2) In respect of earnest money deposits made by intending tenderers of Civil and Defence
Departments which are creditable as revenue deposits, the depositor must indicate the designation of
the officer in whose accounts the deposit should enter.

Repayment of deposits.-

(l) Refunds of deposits can be made only on the receipt of the persons entitled to them. Application-
cum-Bill in the prescribed form shall be used for the purpose.
(2) (a) In cases where money on account of deposits were received and credited to Government
Account by a departmental officer or at his instance, and detailed accounts are kept by him, the
officer should draw the amount on his receipt (affixing his signature in the space provided for
'Claimants' signature' in the bill, after scoring out these words) from the Accounts Officer and make
payment to the payee concerned. He may, where necessary, arrange payment from the permanent
advance held by him, or wherever it is permissible in terms of sub-rule 2 of rule 6, from current
deposit receipts and take action to get the permanent advance recouped or account of the current
deposit receipts rendered in the usual manner prescribed therefor, as the case may be.

71
(b) The departmental officer will certify on the bill that the conditions subject to which repayment is
to be made, have been fulfilled and that a note has been kept in his initial records to prevent a second
claim.
(3) Bill for the purpose shall be duly supported by the challan with which the money was credited to
Government Account and departmental receipt, if any, issued to the party. If, however, amount
received from more than one person had been credited by the Departmental Officer to Government
Account through a single challan (or had been remitted by means of a bank draft to the Pay and
Accounts Office for credit to the Government Account), the bill should be supported by (i) a duly
attested 'statement showing the names of the depositors to whom the repayment is to be made, the
amount repaid, the number and date of the challan (bank draft) with which money was originally
credited and the amount, if any, already repaid and (ii) the original departmental receipts, if any,
issued to them. The Accounts Officer will, after verifying the availability of balance from the Deposit
Register, make an entry in the repayment portion of the register and effect payment, subject to other
usual checks.

NOTE 1.No separate permanent advance may be given and held apart specially for the repayment
of deposits; only the office permanent advance may be augmented sufficiently for the purpose.
NOTE 2.The procedure outlined in the above rule shall apply mutatis mutandis in respect of diet
money of witnesses deposited by assesses with the Income Tax Department.

Refund of earnest money deposits of Civil Departments and Defence Services.

Except as provided in the previous rule, earnest money deposits of Civil Departments and Defence
Services may be refunded under the authority of an order endorsed by the departmental officer (in
whose favour the deposit was made) upon the original deposit receipt. Under no circumstances can
part payment be made.

Transfer credit of earnest money into the Consolidated Fund in certain cases.

If the departmental officer desires that an item of earnest-money deposit, instead of being refunded
be carried to the credit of the Government in the Consolidated Fund, he must record the fact on the
deposit receipt and in his initial records and request the Account Officer to effect necessary
adjustment in accounts.

Lapsed deposits.

(1) At the close of March each year, (a) deposits not exceeding twenty five rupees unclaimed for one
whole account year, or residuary balances not exceeding the said amount out of deposits partly
repaid during the year then closing, and (b) all deposits or balances in excess of the aforesaid amount,
unclaimed for more than three complete account years, shall be credited to the Government under
the Consolidated Fund, keeping necessary note in the register of deposits. In the case of deposits, the
detailed accounts of which are kept by departmental officers, a list of deposits and balances thus
lapsing shall be prepared by them and sent to the Accounts Officer in accordance with the relevant
directions.
NOTE 1.For the purpose of this rule, the age of a repayable item, or of a balance of it, may be
reckoned as dating from the time when the item or the balance, as the case may be, was initially
deposited. If, however, a repayable item deposited by a party in connection with a contract or supply
order is on request, decided to be reckoned as deposit against a subsequent contract or supply order

72
awarded to the same party, the age of the item will be calculated with reference to the date of the
latter.
NOTE 2.Such of the deposits (or balances of deposits) referred to in (b) of sub-rule (1) which
pertain to contracts, supply, orders that are under litigation or arbitration shall not be deemed as
"unclaimed deposits" for the purpose of crediting to Government under this rule. They should,
nevertheless, be listed out distinctly along with relevant particulars so as to facilitate action for
releasing the deposit, or for forfeiting it, depending on the judgement or award at the conclusion of
the litigation or arbitration. Relevant claim will require precheck by the Accounts Officer before
repayment.
(2) However, in the case of certain departments such as Central Public Works Department and Salt
Department, which maintain detailed account of deposits themselves, the age for the purpose shall be
reckoned with reference to the provisions in the concerned authorised departmental regulations.
(3) The Government may, in relation to any particular class of deposits, issue orders varying or
relaxing any of the conditions or limitations specified in the preceding sub-rules.

Procedure for repayment of lapsed deposits.

(1) Deposits, the detailed accounts of which are required to be kept by the departmental officer and
which are credited to Government under provisions of rule 189 cannot be repaid without pre check
by the Accounts Officer. On receipt of bill in Form G.A.R. 46 (along with the original departmental
receipts issued to the refundees) from the departmental officer concerned, the Accounts Officer will
pass the bill after checking that the item is covered by the credit reported by the departmental officer
as lapsed and carried to the credit of Government and that the claimant's identity and title to the
money are certified by the departmental officer who signs the application for the refund. The amount
of the bill may, wherever necessary, be paid to the departmental officer on affixing his signature in
token of receipt in the space provided for "Claimants' signature" in the bill after scoring these words.
(2) Deposits, the detailed accounts of which are kept in the accounts office and which are credited to
the Government under rule 189, may be refunded on receipt of an application-cum-bill in the
prescribed form (along with the original challan or departmental receipt as the case may be) from the
departmental officer after verifying that the item was really received, is traceable in his records and
was carried to the credit of the Government as lapsed and was not paid previously and that the
claimant's identity and title to the money are certified by the officer countersigning the application for
the refunds.
(3) The repayment of lapsed deposit shall be recorded in the appropriate deposit register of receipts
so as to guard against a second payment. If the payment is made after the Register of Receipts has
been destroyed, the responsibility for verifying the claimant's title to the refund shall devolve on the
authority who signs the application-cum -bill in the prescribed form.

Personal deposit account.

(1) Personal Deposit Account is a device intended to facilitate the administrator thereof to credit
receipts into, and effect withdrawals directly from, the account subject to an overall check being
exercised by the bank in which the account is authorised to be opened, to ensure (with the help of a
personal ledger account to be maintained by the bank for the purpose) that no withdrawal will result
in a minus balance therein. The administrators thereof shall be only Government officers acting in
their official or any other capacity.
(2) A personal deposit account of a type other than (a), (b) and (e) of sub-rule (3), may be authorised
to be opened only under the special order or permission of the Ministry or Department concerned in

73
consultation with the Controller General of Accounts. Such special order or permission may be issued
or granted by the Ministry or Department concerned after satisfying itself that the initial accounts of
the moneys to be held in a personal deposit account and disbursed, are arranged to be maintained
properly and are subject to audit. The Principal Accounts Officer of the Ministry or Department
concerned shall also be consulted for the purpose.
(3) Personal deposit accounts are generally authorised to be opened in the following types of cases:
(a) In favour of an administrator appointed for the purpose of administering moneys tendered by or
on behalf of ward and attached estates and estates under Government management. It should also be
ensured that proper arrangements are made for the maintenance and audit of connected initial
accounts.
(b) In relation to Civil and Criminal Courts' deposits, in favour of the Chief Judicial authority
concerned.
(c) Where, under certain regulatory activities of the Government, receipts are realised and credited to
a Fund or Account under the provisions of an Act to be utilised towards expenditure thereunder
and no outgo from the Consolidated Fund is involved.
(d) Where a personal deposit account is required to be created by a law or rules having the force of
law and certain liabilities devolve on the Government out of the Special enactments.
(e) Officers commanding units and others concerned in the administration of public funds or
regimental funds in the Defence Departments can be authorised to open personal deposit accounts
for such funds.
NOTE.Without prejudice to clause (e) of sub-rule (3), regimental funds may, under authorized
departmental regulations, be deposited outside the Government account with any branch of the State
Bank of India or any other public sector bank.
(4) Every Personal deposit account so authorised to be opened will form part of the Government
Account and be located in the Public Account portion thereof.

Balances in personal deposit accounts.

(1) Balances in personal deposit accounts of the type referred to in clauses (a) and (e) of sub-rule (3) of
rule 191 do not lapse to Government, even if outstanding for more than three complete account years.
However, if such a personal deposit account is not operated upon for a considerable period and there
is reason to believe that the need for the deposit account has ceased, the same should be closed in
consultation with the officer in whose favour the deposit account has been opened.
(2) While the balance as a whole in a personal deposit account of the type referred to in clause (b) of
sub-rule (3) of rule 191 will not lapse to Government, individual items of deposits included therein
will be governed by the provisions of rule 189.
(3) Balance in the personal deposit account of the type referred to in clause (c) of sub-rule (3) of rule
191 will not lapse to Government until the provisions of the relevant Act are in force.
(4) Personal deposit accounts referred to in clause (d) of sub-rule (3) of rule 191 fall under the
following two categories depending on the manner in which Government liability is to be discharged
out of the relevant provisions made in the Demands for Grants (i.e. out of the Consolidated Fund of
India), either (i) as a lump sum payment as would be specified in the Act (e.g. in connection with the
take over of a company by Government and appointment of a Commissioner of payments, as
Administrator of the Personal Deposit Account) or (ii) in suitable installments sanctioned by the
Ministries or Departments as and when necessary for bridging any deficit or shortfall that may arise
or be anticipated in the account. Unless otherwise directed, no physical transfer of funds from the
Consolidated Fund to the personal deposit accounts will be needed, but only an intimation need be
issued by the Accounts Officer concerned to the concerned branch of the accredited bank indicating

74
the amounts of credit to be reckoned as receipt towards the account'. As and when intimations are
sent to the bank, an account entry will be made by debiting the functional head under the
Consolidated Fund by affording contra credit to the Personal Deposit Account to that extent. In the
former category of cases, the balance in the account shall be allowed to be carried over to the
subsequent years. But in the latter category of cases, at the end of each financial year, based on the
account Statement received from each personal deposit account holder, the balance remaining at the
credit of the account will be brought to 'nil' by affording minus debit to the functional head under the
Consolidated Fund of India and the personal deposit account may be revived in the subsequent year
again, if necessary, in the usual manner.

Receipts towards personal deposit accounts.

Moneys tendered alongwith the appropriate challan for credit into a personal deposit account may be
received at the specified branch of the accredited bank from the administrator of a deposit account.
Details of individual items need net be indicated in or attached to the challan.

Withdrawal from personal deposit accounts.

Unless in any case the Government direct otherwise, withdrawals can be allowed only on cheques
signed by the responsible administrator of the personal deposit account concerned. The
Administrator shall ensure while issuing every cheque that there is adequate credit balance in the
account for the purpose. Withdrawals shall on no account be allowed by the bank to exceed the
balance at the credit in the deposit account. The payment scroll rendered to the Accounts office by the
bank shall be supported by the original paid cheques.

Deposits for works done for local authorities or individuals.

(1) Payments made to the Government by District Boards, Municipalities and other Local Authorities
for the cost of land taken up on their behalf under the Land Acquisition Act shall be credited to
Government Account in accordance with the procedure laid down for the purpose.
(2) The number and date of the award statement as well as the date on which- the deposit was
credited into Government Account shall be noted on all orders, bills and vouchers based on which
payments are made out of the deposit account.
(3) Deposits for works to be done on behalf of Local authorities and other parties may be received
and dealt with by the Public Works and other departments carrying out the works in accordance with
the authorized departmental regulations.
NOTE.When under authorised departmental regulations, the Local authority or the party
concerned is authorised to pay the deposit direct into the accredited bank, accompanying challan
should state clearly the name of the department to which the amount is creditable, and the division
and the work to which the deposit relates.

Deposit of fees.
Fees received from non-Government bodies or private persons for work done for them by
Government servants shall be dealt with as follows:
(i) In cases where a Government servant is permitted to retain the whole of a fee, he should collect it
himself and the Government will not be concerned with the transaction;

75
(ii) In cases where the fees are divisible between the Government and the Government servant
concerned
(a) If the exact amount of the fees and the distribution of shares between the Government and
Government servant are known before hand, the share due to the Government should be credited as
miscellaneous receipt of the department to which the Government servant belongs and the rest
should be collected by the Government servant himself. The Government share should be paid into
Government Account as far as possible by the body or person paying the fee after ascertaining the
procedure therefor from the departmental authority concerned;
(b) If the amount of the fees or the shares are known only approximately, beforehand, all the fees
should in the first instance be similarly credited to Government Account, as far as possible, by the
body or person paying the fees. The receipts should be credited to the appropriate deposit head,
pending final settlement, when the share due to the Government should be credited as miscellaneous
receipt of the department to which the Government servant belongs, and the rest should remain
under the deposit head for disbursement to the Government servant by the Head of Office who will
draw the amount on a bill in ordinary pay bill form specifying therein the authority sanctioning the
payment of fees.

76
GENERAL

FINANCIAL

RULES, 2005

77
 INTRODUCTION TO GENERAL FINANCIAL RULES

Government of India has multi functions. If you imagine, an office has manpower, machines,
furniture and building.

Functions of Government organizations are guided by a set of Rules and Regulations. The
whole Government functions within the frame work of Rules and Regulations formed by
Government of India.

Finance is a very basic requirement for the functions of any Government Organisation.
Government departments get their budget in the beginning of the financial year after the budget
proposals are approved by the Parliament.

Budget so got by the departments are spent on various activities like payment to their staff,
maintenance of office and purchase of goods, materials.

A set of rules to be followed by all the Central Government offices in financial matters is
known as General Financial Rules. General Financial Rules guide the authorities in Government
whenever and wherever they are required to spend Government money.

General Financial Rules (GFRs) are a compendium of general provisions to be followed by all
offices of Government of India while dealing with matters of a financial nature

78
 General System of Financial Management
(Rule 7 to Rule 20)

All moneys received by or on behalf of the Government shall be brought into Government
Account without delay as per Constitution of India1

All moneys received by or deposited with any officer employed in connection with the affairs
of the Union in his capacity as such, other than revenues or public moneys raised or received
by Government, shall be paid into the Public Account 2

Crediting and withdrawal of money will be governed by relevant rules of Government 3

Government departments are to assess the dues /receipts of Government and dues/receipts
are to be credited to Government

Accounts Officer will send an extract from his accounts showing the amounts brought to
credit in the accounts in each month to the Controlling Officer concerned to monitor credit in
the Accounts

Amounts due to Government shall not be left outstanding without sufficient reasons.

The credit to Government must follow and not precede actual realization.

Administrator or a Head of a Department responsible for the collection of revenue shall keep
the Finance Ministry fully informed of the progress of collection of revenue under his control
and of all important variations in such collections as compared with the Budget Estimates

Rents of buildings and lands

Departmental regulations of the departments in charge of buildings will be followed in the demand
and recovery of rent of Government buildings and lands

Fines

Money realized through fines will be deposited into treasury/Bank

GENERAL
1. Article150 andPRINCIPLES RELATING
283 (1) of the Constitution TO EXPENDITURE
2. Article AND PAYMENT OF MONEY
284 of the Constitution
3. Central Government Account (Receipts and Payments) Rules, 1983

79
(Rule 21 to Rule 32)

Standards of financial propriety:

A set of Rules are prescribed to be observed by the officer incurring or authorizing expenditure
from public moneys. They are

Enforce financial order and strict economy.

Follow prescribed Rules and Regulations

Observe vigilance in respect of expenditure from Public money as his money

Ensure that the expenditure should not be prima facie more than the occasion demands.

Ensure that no order to be passed by the authority directly or indirectly to benefit to his
advantage.

Expenditure from public money should not be incurred for the benefit of a particular person
or a section of the people.

Allowances granted to meet expenditure are not on the whole a source of profit to the
recipients

Expenditure from Public Funds and Budget

Expenditure from public funds will be incurred after due sanction by the Competent
Authority.

The financial powers of the Government have been delegated to various subordinate
authorities vide Delegation of Financial Powers Rules, 1978

Financial advisors of the concerned Department/Ministry will be consulted in matters related

to expenditure

Sanction to the expenditure will specify where from the funds are met i.e
grant/appropriation/re-appropriation.

Controlling Officer in respect of Budget allocation will ensure that the expenditure does not
exceed budget, expenditure incurred is in public interest.

80
Sanction

Date of effect of sanction

All rules, sanctions or orders shall come into force from the date of issue unless any other date
from which they shall come into force is specified therein.

Date of creation to be indicated in sanctions for temporary posts

Certain special matters like grant of land, or assignment of revenue, or concession, grant,
lease or licence of mineral or forest rights, or rights to water power or any easement or privilege of
such concessions, or involves relinquishment of revenue in any way will be issued with the previous
consent of the Finance Ministry

All financial sanctions and orders issued by a competent authority shall be communicated to
the Audit Officer and the Accounts Officer.

Lapse of sanctions

A sanction for any fresh charge shall, unless it is specifically renewed, lapse if no payment in
whole or in part has been made during a period of twelve months from the date of issue of such
sanction.

Exceptions

When the period of currency of the sanction is prescribed in the departmental regulations
specified in the sanction itself

When there is a specific provision in a sanction that the expenditure would be met from the
Budget provision of a specified financial year, it shall lapse at the close of that financial year

In the case of purchase of stores, a sanction shall not lapse, if tenders have been accepted (in the
case of local or direct purchase of stores) or the indent has been placed (in the case of Central
Purchases) on the Central Purchase Organization within the period of one year of the date of
issue of that sanction, even if the actual payment in whole or in part has not been made during
the said period.

A sanction in respect of an addition to a permanent establishment, made from year to year

under a general scheme by a competent authority, or in respect of an allowance sanctioned for a
post or for a class of Government servants, but not drawn by the officer(s) concerned, shall not
lapse.

81
 DEFALCATION AND LOSSES

(Rule 33 to 38)

Report of Losses

Any loss or shortage of public moneys, departmental revenue or receipts, stamps, opium,
stores or other property held by, or on behalf of, Government irrespective of the cause of loss and
manner of detection, shall be immediately reported to the next higher authority as well as to the
Statutory Audit Officer and to the concerned Principal Accounts Officer

Report of loss shall be made at two stages-

An initial report should be made as soon as a suspicion arises that a loss has taken place.

The final report should be sent to authorities after investigation indicating nature and extent of
loss, errors or neglect of rules by which the loss has been caused and the prospects of recovery.

Following losses need not be reported:

Cases involving losses of revenue due to

Mistakes in assessments which are discovered too late to permit of a supplementary claim being
made

Under assessments which are due to interpretation of the law by the local authority being
overruled by higher authority after the expiry of the time-limit prescribed under the law

Refunds allowed on the ground that the claims were time-barred

Petty Losses

Cases involving serious irregularities shall be brought to the notice of authorities

In cases of loss to Government on account of culpability of Government servants, the loss

should be borne by the Central Government Department or State Government concerned with the
transaction. Similarly, if any recoveries are made from the erring Government officials in cash, the
receipt will be credited to the Central Government Department or the State Government who
sustained the loss.

All cases involving loss of Government money arising from erroneous or irregular issue of
cheques or irregular accounting of receipts will be reported to the Controller-General of Accounts
along with the circumstances leading to the loss, so that he can take steps to remedy defects in rules
or procedures, if any, connected therewith.

82
Loss of Government property due to fire, theft, fraud

All losses above the value of Rupees ten thousand due to suspected fire, theft, fraud, etc., shall
be invariably reported to the Police for investigation as early as possible.

Once the matter is reported to the Police Authorities, all concerned should assist the Police in
their investigation. A formal investigation report should be obtained from the Police Authorities in all
cases, which are referred to them.

Loss of immovable property by fire, flood, etc: All loss of immovable property exceeding
Rupees fifty thousand, such as buildings, communications, or other works, caused by fire, flood,
cyclone, earthquake or any other natural cause, to Government through the usual channel. All other
losses should be immediately brought to the notice of the next higher authority

Report to Audit and Accounts Officers: A copy of the report or an abstract thereof sent by the
subordinate authority concerned to Government, simultaneously forwarded to the Audit or
Accounts Officer

Responsibility for Losses: An officer shall be held personally responsible for any loss sustained by
the Government through fraud or negligence on his part. He will also be held personally responsible
for any loss arising from fraud or negligence of any other officer to the extent to which it may be
shown that he contributed to the loss by his own action or negligence

SUBMISSION OF RECORDS AND INFORMATION

Demand for information by Audit or Accounts Officer

An authority shall afford all reasonable facilities to the Audit Officer or Accounts Officer for
the discharge of his functions, and furnish fullest possible information required by him for the
preparation of any official account or report and shall not withhold any information, books or other
documents required by the Audit Officer or Accounts Officer. 'Secret' or 'Top Secret' the files maybe
sent personally to the Head of the Audit Office.

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 BUDGET FORMULATION
AND
IMPLEMENTATION

(Rule 42 to 64)

What is a Budget?

Budget is a financial statement that coins down the expected revenue and expenditure of a particular
fiscal year

The period from which the financial records are maintained is called Fiscal year

Fiscal year in Government of India is financial year

Financial Year: Financial year of the Government shall commence on the 1st day of April of each
year and end on the 31st day of March of the following year.

Presentation of Budget to Parliament:

In accordance with the provisions of Article 112 (1) of the Constitution, the Finance Minister
shall arrange to lay before both the Houses of Parliament, an Annual Financial Statement also known
as the `Budget' showing the estimated receipts and expenditure of the Central Government in respect
of a financial year, before the commencement of that year.

The budget shall contain the following:-

Estimates of all Revenue expected to be raised during the financial year to which the budget
relates

Estimates of all Expenditure for each programme and project in that financial year.

Estimates of all interest and debt servicing charges and any repayments on loans in that
financial year

Any other information as may be prescribed

84
Demands for Grants:
The estimates for expenditure for which vote of Lok Sabha is required shall be in the form of
Demand for Grants.

Demands for Grant in respect of Ministry of Defence is given below:-

85
Vote on Account:

The Budget is normally presented to the Parliament on the last day in the month of February but the
corresponding Appropriation Bill seeking authorization of the Parliament to make expenditure in
consonance with the Budget proposal is introduced and passed much later i.e. after due deliberation
and approval by the Parliament.

Pending the completion of the procedure prescribed in the Constitution for the passing of the
Budget, the Finance Ministry may arrange to obtain a `Vote on Account to cover expenditure for one
month or such longer period as may be necessary in accordance with the provisions of Article 116 of
the Constitution. Funds made available under Vote on Account are not to be utilized for expenditure
on a `New Service.

Communication and distribution of grants and appropriations:

After the Appropriation Bill relating to Budget is passed, the Ministry of Finance shall communicate
Budget provisions to the Ministries / Departments which, in turn, shall distribute the same to their
subordinate formations. The distribution so made shall also be communicated to the respective Pay
and Accounts Officers who shall exercise check against the allocation to each subordinate authority.

86
 CONTROL OF EXPENDITURE AGAINST BUDGET

Departments of the Central Government shall be responsible for the control of expenditure
against the sanctioned grants and appropriations placed at their disposal.

In order to maintain proper control over expenditure, a Controlling Officer should obtain
from the spending authorities liability statements in Form GFR 6-A given below every month,
starting from the month of October in each financial year. The Controlling Officer should also
maintain a Liability Register in Form GFR 6.

87
Surrender of savings:

Departments of the Central Government shall surrender to the Finance Ministry, by the dates
prescribed by that Ministry before the close of the financial year, all the anticipated savings
noticed in the Grants or Appropriations controlled by them. The funds provided during the
financial year and not utilized before the close of that financial year shall stand lapsed at the
close of the financial year.

The savings as well as provisions that cannot be profitably utilized should be surrendered to
Government immediately they are foreseen without waiting till the end of the year. No
savings should be held in reserve for possible future excesses.

Rush of expenditure, particularly in the closing months of the Financial year, shall be
regarded as a breach of financial propriety and shall be avoided.

Expenditure on New Service: No expenditure shall be incurred during a financial year on a New
Service not contemplated in the Annual Budget for the year.

Additional Allotment for excess expenditure: A subordinate authority incurring the

expenditure will be responsible for seeing that the allotment placed at its disposal is not exceeded.
Where any excess over the allotment is apprehended, the subordinate authority should obtain
additional allotment before incurring the excess expenditure

Re-appropriation of Funds:

Subject to the provisions of Rule 10 of the Delegation of Financial Powers Rules, 1978, and also
subject to such other general or specific restrictions as may be imposed by the Finance Ministry in this
behalf, reappropriation of funds from one primary unit of appropriation to another such unit within a
grant or appropriation, may be sanctioned by a competent authority at any time before the close of
the financial year to which such grant or appropriation relates.

Supplementary Grants: If savings are not available within the Grant to which the payment is
required to be debited, or if the expenditure is on New Service or New Instrument of Service not
provided in the budget, necessary Supplementary Grant or Appropriation in accordance with Article
115 (1) of the Constitution should be obtained before payment is authorized.

Advance from Contingency Fund: When a need arises to incur unforeseen expenditure in excess
of the sanctioned grant or appropriation or on a new service not provided in Budget and there is not
sufficient time for the voting of the Supplementary Demand and the passing of the connected
appropriation bill before close of the financial year, an advance from the Contingency Fund set up
under Article 267 (1) of the Constitution shall be obtained before incurring the expenditure.

88
Duties and Responsibilities of the Chief Accounting Authority:
The Secretary of a Ministry / Department who is the Chief Accounting Authority of the Ministry /
Department shall

Responsible and accountable for financial management of his Ministry or Department.

Ensure that the public funds appropriated to the Ministry or Department are used for the
purpose for which they were meant.

Responsible for the effective, efficient, economical and transparent use of the resources of the
Ministry or Department in achieving the stated project objectives of that Ministry or
Department, whilst complying with performance standards.

Appear before the Committee on Public Accounts and any other Parliamentary Committee for
examination.

Review and monitor regularly the performance of the programmes and projects assigned to
his Ministry to determine whether stated objectives are achieved.

Responsible for preparation of expenditure and other statements relating to his Ministry or
Department as required by regulations, guidelines or directives issued by Ministry of Finance.

Ensure that his Ministry or Department maintains full and proper records of financial
transactions and adopts systems and procedures that will at all times afford internal controls.

Ensure that his Ministry or Department follows the Government procurement procedure for
execution of works, as well as for procurement of services and supplies, and implements it in
a fair, equitable, transparent, competitive and cost-effective manner;

Shall take effective and appropriate steps to ensure his Ministry or Department: -
o Collects all moneys due to the Government
o Avoids unauthorized, irregular and wasteful expenditure

89
 GOVERNMENT ACCOUNTS

Preparation and presentation of Accounts: Accounts of the Union Government shall be prepared
every year showing the receipts and disbursements for the year, surplus or deficit generated during
the year and changes in Government liabilities and assets. The accounts so prepared shall be certified
by the Comptroller and Auditor General of India. The report of the Comptroller and Auditor-General
of India relating to these accounts shall be submitted to the President of India, who shall cause them
to be laid before each House of Parliament.

Period of Accounts: The annual accounts of the Central Government shall record transactions
which take place during a financial year running from the 1st April to the 31st March thereof.

Currency in which Accounts are kept: The accounts of Government shall be maintained in Indian
rupees. All foreign currency transactions and foreign aid shall be brought into account after
conversion into Indian rupees.

Main Divisions and structure of Accounts: The accounts of Government shall be kept in three
parts, namely Consolidated Fund (Part-I), Contingency Fund (Part-II) and Public Account (Part-III).

Classification of transactions in Government Accounts: As a general rule, classification of

transactions in Government Accounts, shall have closer reference to functions, programmes and
activities of the Government and the object of revenue or expenditure, rather than the department in
which the revenue or expenditure occurs.

Major Heads (comprising Sub-Major Heads wherever necessary) are divided into Minor Heads.
Minor Heads may have a number of subordinate heads, generally known as Sub Heads. The Sub
Heads are further divided into Detailed Heads followed by Object Heads.

Charged or Voted Expenditure: The expenditure covered under Article 112 (3) of the Constitution
of India is charged on the Consolidated Fund of India and is not subject to vote by the legislature. All
other expenditure met out of the Consolidated Fund of India is treated as Voted expenditure.
Charged or Voted Expenditure shall be shown separately in the accounts as well as in the Budget
documents.

Capital or Revenue Expenditure: Significant expenditure incurred with the object of acquiring
tangible assets of a permanent nature (for use in the organisation and not for sale in the ordinary
course of business) or enhancing the utility of existing assets shall broadly be defined as Capital
expenditure.

Subsequent charges on maintenance, repair, upkeep and working expenses, which are
required to maintain the assets in a running order as also all other expenses incurred for the day to

90
day running of the organisation, including establishment and administrative expenses shall be
classified as Revenue expenditure.

Appropriation Accounts: Appropriation Accounts of Central Ministries (other than Ministry of

Railways) and of Central Civil Departments (excluding Department of Posts and Defence Services)
shall be prepared by the Principal Accounts Officers of the respective Ministries and Departments
(under the guidance and supervision of the Controller General of Accounts) and signed by their
respective Chief Accounting Authorities i.e., the Secretaries in the concerned Ministries or
Departments. Union Government Appropriation Accounts (Civil) required to be submitted to
Parliament, shall be prepared annually by the Controller General of Accounts by consolidating the
aforesaid Appropriation Accounts.

Appropriation Accounts pertaining to Defence Services shall be prepared and signed by the
Secretaries to the Government of India in the Ministry of Defence.

91
 WORKS

Original works means all new constructions, additions and alterations to existing works, special
repairs to newly purchased or previously abandoned buildings or structures, including remodeling
or replacement.

Repair works means works undertaken to maintain building and fixtures.

Administrative control of works includes:

Assumption of full responsibility for construction, maintenance and upkeep.

Proper utilization of buildings and allied works.

Provision of funds for execution of these functions.

General Rules: Subject to the observance of these general rules, the initiation, authorization and
execution of works allotted to a particular Ministry or Department shall be regulated by detailed
rules and orders contained in the respective departmental regulations and by other special orders
applicable to them.

Procedure to be followed for commencement of work

No works shall be commenced or liability incurred in connection with it until

Administrative approval has been obtained from the appropriate authority in each case;

Sanction to incur expenditure has been obtained from the competent authority;

A properly detailed design has been sanctioned

Estimates containing the detailed specifications and quantities of various items have been
prepared on the basis of the Schedule of Rates maintained by CPWD or other Public Works
Organisations and sanctioned;

Funds to cover the charge during the year have been provided by competent authority;

Tenders invited and processed in accordance with rules;

A Work Order issued.

92
Exceptions to the above procedure

On grounds of urgency or otherwise, if it becomes necessary to carry out a work or incur a

liability under circumstances when the provisions set out above cannot be complied with, the
concerned executive officer may do so on his own judgement and responsibility. Simultaneously, he
should initiate action to obtain approval from the competent authority and also to intimate the
concerned Accounts Officer

Detailed procedure for Army,Navy,Air Force and Inter services are given in MES
Regulations

93
 PROCUREMENT OF GOODS AND SERVICES
(Rule 135 to 185)

PROCUREMENT OF GOODS

This chapter of GFR contains the general rules applicable to all Ministries or Departments,
regarding procurement of goods required for use in the public service. Detailed instructions relating
to procurement of goods may be issued by the procuring departments broadly in conformity with the
general rules contained in this Chapter.

Examples for Detailed instructions

Example-1

Defence Procurement Manual contains principles and procedure relating to procurement of

goods and services for the Defence Services, Organizations and Establishments.

Purchase Management DRDO

This document will be followed in the DRDO for purchase of all kinds of stores. The term
stores applies generally to all articles and materials purchased or otherwise acquired for use by
Government, including not only consumables stationery, health and hot weather items but also
articles of dead stock of the nature of plant, machinery, instruments, equipment, fixtures, etc. This
procedure will also mutatis mutandis apply to contracts relating to repair, servicing and maintenance
of stores and equipment, transportation, printing and other services to be rendered by Government.

Definition of Goods: The term 'goods' used in this chapter includes all articles, material,
commodities, livestock, furniture, fixtures, raw material, spares, instruments, machinery, equipment,
industrial plant etc. purchased or otherwise acquired for the use of Government but excludes books,
publications, periodicals, etc. for a library.

Fundamental principles of public buying

Responsibility and accountability for

o Efficiency, economy, transparency in matters relating to public procurement
o Fair and equitable treatment of suppliers
o Promotion of competition in public procurement.

Public procurement must conform to the following yardsticks

The specifications worked out should meet the basic needs of the organisation

Superfluous and non-essential features to be avoided expenditure

94
 Care should also be taken to avoid purchasing quantities in excess of requirement to avoid
inventory carrying costs

the procuring authority should satisfy itself that the price of the selected offer is reasonable
and consistent with the quality required

At each stage of procurement the concerned procuring authority must place on record, in
precise terms, the considerations which weighed with it while taking the procurement
decision

Inventory carrying cost

Cost of holding goods in stock. Expressed usually as a percentage of the inventory value and
includes cost of capital, warehousing, depreciation, insurance, taxation, obsolescence, and shrinkage.

Authorities competent to purchase goods : An authority which is competent to incur contingent

expenditure may sanction the purchase of goods required for use in public service in accordance with
Schedule V of the Delegation of Financial Powers Rules, 1978, following the general procedure
contained in the following rules.

Procurement of goods required on mobilisation: Procurement of goods required on

mobilisation and/or during the continuance of Military operations shall be regulated by special rules
and orders issued by the Government on this behalf from time to time.

Powers for procurement of goods: The Ministries or Departments have been delegated full
powers to make their own arrangements for procurement of goods. In case however, a Ministry or
Department does not have the required expertise, it may project its indent to the Central Purchase
Organisation (e.g. DGS&D) with the approval of competent authority.

Rate Contract: The Central Purchase Organisation (e.g. DGS&D) shall conclude rate contracts with
the registered suppliers, for goods and items of standard types, which are identified as common user
items and are needed on recurring basis by various Central Government Ministries or Departments

Registration of Suppliers: - Apart from procurements of Goods from Central Purchase

Organisation A Head of Department may also register suppliers of goods which are specifically
required by that Department or Office following the guidelines given below:-

Credentials, manufacturing capability, quality control systems, past performance, after-sales

service, financial background etc. of the supplier(s) should be carefully verified before
registration.

The supplier(s) will be registered for a fixed period (between 1 to 3 years) depending on the
nature of the goods. At the end of this period, the registered supplier(s) willing to continue

95
 with registration are to apply afresh for renewal of registration. New supplier(s) may also be
considered for registration at any time, provided they fulfil all the required conditions.
Performance and conduct of every registered supplier is to be watched by the concerned
Ministry or Department. The registered supplier(s) are liable to be removed from the list of
approved suppliers if they fail to abide by the terms and conditions of the registration or fail
to supply the goods on time or supply substandard goods or make any false declaration to
any Government agency or for any ground which, in the opinion of the Government, is not in
public interest.

Reserved Items: The Central Government, through administrative instructions, has reserved all
items of handspun and handwoven textiles (khadi goods) for exclusive purchase from Khadi Village
Industries Commission (KVIC). It has also reserved all items of handloom textiles required by Central
Government departments for exclusive purchase from KVIC and/or the notified handloom units of
ACASH (Association of Corporations and Apex Societies of Handlooms). The Central Government
has also reserved some items for purchase from registered Small Scale Industrial Units. The Central
Departments or Ministries are to make their purchases for such reserved goods and items from such
units as per the instructions issued by the Central Government in this regard.

Purchase of goods without quotation: Purchase of goods upto certain Value(Rs.15,000/-) each
occasion may be made without inviting quotations or bids on the basis of a certificate to be recorded
by the competent authority in the following format.

"I, ___________________, am personally satisfied that these goods purchased are of the requisite
quality and specification and have been purchased from a reliable supplier at a reasonable price."

Purchase of goods by purchase committee : Purchase of goods costing above Rs. 15,000/-
(Rupees Fifteen Thousand) only and upto Rs.1,00,000/- (Rupees One lakh) only on each occasion may
be made on the recommendations of a duly constituted Local Purchase Committee consisting of three
members of an appropriate level as decided by the Head of the Department. The committee will
survey the market to ascertain the reasonableness of rate, quality and specifications and identify the
appropriate supplier. Before recommending placement of the purchase order, the members of the
committee will jointly record a certificate as under.

"Certified that we _____________________, members of the purchase committee are jointly and
individually satisfied that the goods recommended for purchase are of the requisite specification and
quality, priced at the prevailing market rate and the supplier recommended is reliable and competent
to supply the goods in question. "

Purchase of goods directly under rate contract

In case a Ministry or Department directly procures Central Purchase Organisation (e.g.

DGS&D) rate contracted goods from suppliers, the prices to be paid for such goods shall not exceed
those stipulated in the rate contract and the other salient terms and conditions of the purchase
should be in line with those specified in the rate contract.

96
 The Ministry or Department shall make its own arrangement for inspection and testing of
such goods where required.

A demand for goods should not be divided into small quantities to make piece meal
purchases to avoid the necessity of obtaining the sanction of higher authority required with reference
to the estimated value of the total demand.

Requirement of goods to be properly planned and accordingly the higher authority under
whose powers procurement powers falls should give sanction for procurement

Purchase of goods by obtaining bids: - Ministries or Departments shall procure goods under the
powers referred above by following the standard method of obtaining bids in

Advertised Tender Enquiry;

Limited Tender Enquiry;
Single Tender Enquiry.

Advertised Tender Enquiry.

Procurement of goods of estimated value Rs. 25 lakh (Rupees Twenty Five Lakh) and above.
Advertisement in such case should be given in the Indian Trade Journal (ITJ), published by the
Director General of Commercial Intelligence and Statistics, Kolkata and at least in one national daily
having wide circulation.
An organisation having its own web site should also publish all its advertised tender
enquiries on the web site.

The organisation should also post the complete bidding document in its web site and permit
prospective bidders to make use of the document downloaded from the web site

Where the Ministry or Department feels it is necessary to also look for suitable competitive
offers from abroad, the Ministry or Department may send copies of the tender notice to the Indian
embassies abroad as well as to the foreign embassies in India.

The selection of the embassies will depend on the possibility of availability of the required
goods in such countries.

Ordinarily, the minimum time to be allowed for submission of bids should be three weeks
from the date of publication of the tender notice or availability of the bidding document for sale,
whichever is later. Where the department also contemplates obtaining bids from abroad, the
minimum period should be kept as four weeks for both domestic and foreign bidders.

Limited Tender Enquiry

This method may be adopted when estimated value of the goods to be procured is up to
Rupees Twenty-five Lakhs

97
 The number of supplier firms in Limited Tender Enquiry should be more than three

Purchase through Limited Tender Enquiry may be adopted even where the estimated value of
the procurement is more than Rupees twenty-five Lakhs, in the following circumstances.

When the demand is urgent and any additional expenditure involved by not
procuring through advertised tender enquiry is justified in view of urgency

There are sufficient reasons, to be recorded in writing by the competent authority,

indicating that it will not be in public interest to procure the goods through advertised
tender enquiry

Two bid system: For purchasing high value plant, machinery etc. of a complex and technical
nature, bids may be obtained in two parts as under:-

Technical bid consisting of all technical details along with commercial terms and
conditions
Financial bid indicating item-wise price for the items mentioned in the technical bid.

Single Tender Enquiry

Procurement from a single source may be resorted to in the following circumstances :

It is in the knowledge of the user department that only a particular firm

is the manufacturer of the required goods.

In a case of emergency, the required goods are necessarily to be purchased from a particular
source.

For standardisation of machinery or spare parts to be compatible to the existing sets of

equipment (on the advice of a competent technical expert and approved by the competent
authority), the required item is to be purchased only from a selected firm.

Contents of Bidding Document: All the terms, conditions, stipulations and information to be
incorporated in the bidding document are to be shown in the appropriate chapters as below:-
Chapter 1: Instructions to Bidders.
Chapter 2: Conditions of Contract.
Chapter 3: Schedule of Requirements.
Chapter 4: Specifications and allied Technical Details.
Chapter 5: Price Schedule (to be utilised by the bidders for quoting their prices).
Chapter 6: Contract Form.
Chapter 7: Other Standard Forms, if any, to be utilised by the purchaser and the bidders

Maintenance Contract

98
 Maintenance contracts are especially needed for sophisticated and costly equipment and
machinery for suitable period either with the supplier of the goods or with any other
competent firm

If the the equipment or machinery is maintained free of charge by the supplier during its
warranty period or such other extended periods as the contract terms may provide and the
paid maintenance should commence only thereafter.

Bid Security: Earnest Money

To safeguard against a bidders withdrawing or altering its bid during the bid validity period
in the case of advertised or limited tender enquiry,Bid Security also known as Earnest Money
is to be obtained from thebidders except those who are registered with the Central
PurchaseOrganisation, National Small Industries Corporation (NSIC) or the concerned
Ministry or Department.

The bidders should be asked to furnish bid security along with their bids. Amount of bid
security should ordinarily range between two percent to five percent of the estimated value of
the goods to be procured. The exact amount of bid security should be determined accordingly
by the Ministry or Department and indicated in the bidding documents.

The bid security may be accepted in the form of Account Payee Demand Draft, Fixed Deposit
Receipt, Bankers Cheque or Bank Guarantee from any of the commercial banks in an
acceptable form, safeguarding the purchaser's interest in all respects.

The bid security is normally to remain valid for a period of forty-five days beyond the final
bid validity period.

Bid securities of the unsuccessful bidders should be returned to them at the earliest after
expiry of the final bid validity and latest on or before the 30th day after the award of the
contract.

Performance Security

To ensure due performance of the contract Performance Security is to be obtained from

every successful bidder irrespective of its registration status etc. Performance Security
should be for an amount of five to ten pecent. of the value of the contract.

Performance Security may be furnished in the form of an Account payee Demand

Draft, Fixed Deposit Receipt from a Commercial bank, Bank Guarantee from a
Commercial bank in an acceptable form safeguarding the purchasers interest in all
respects.

Performance Security should remain valid for a period of sixty days beyond the date
of completion of all contractual obligations of the supplier including warranty
obligations

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 Advance payment to supplier

Ordinarily, payments for services rendered or supplies made should be released only
after the services have been rendered or supplies made

However advance payments can be made in the following types of cases:-

Firms holding maintenance contracts for servicing of Air-conditioners, computers,

other costly equipment, etc.

Against fabrication contracts, turn-key contracts etc.

Advance payments can be made subject to such limits prescribed in GFR

Transparency, competition, fairness and elimination of arbitrariness in the procurement

process:

All government purchases should be made in a transparent, competitive and fair manner, to
secure best value for money and the measures for ensuring the above are as follows:-

The text of the bidding document should be self-contained and comprehensive without any
ambiguities.

Suitable provision should be kept in the bidding document to enable a bidder to question the
bidding conditions, bidding process and/ or rejection of its bid and for settlement of disputes,
if any, emanating from the resultant contract, should be kept in the bidding document.

Bids received should be evaluated in terms of the conditions already incorporated in the
bidding documents; no new condition which was not
incorporated in the bidding documents should be brought in for evaluation of the bids.

Bidders should not be permitted to alter or modify their bids after expiry
of the deadline for receipt of bids.

Contract should ordinarily be awarded to the lowest evaluated bidder whose bid has been
found to be responsive and who is eligible and qualified to perform the contract satisfactorily.

Where the lowest acceptable bidder against ad-hoc requirement is not in a position to supply
the full quantity required, the remaining quantity, as far as possible, be ordered from the next
higher responsive bidder at the rates offered by the lowest responsive bidder
Efficiency, Economy and Accountability in Public Procurement System:

100
 To achieve Efficiency, Economy and Accountability in Public Procurement System following
keys areas should be addressed:-

To reduce delay, appropriate time frame for each stage of procurement should be prescribed by
the Ministry or Department. Such a time frame will also make the concerned purchase officials
more alert.

For Example the time frame given in DPM is appended below:-

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 To minimise the time needed for decision making and placement of contract, every Ministry /
Department, with the approval of the competent authority, may delegate, wherever necessary,
appropriate purchasing powers to the lower functionaries

For example Integrated Financial Advice (IFA) system in services. This system involves greater
decentralization of powers coupled with accountability in the various procurement activities of Armed
Forces

Buy-Back Offer:

To replace an existing old item(s) with a new and better version, the department may trade
the existing old item while purchasing the new one. For this purpose, a suitable clause is to be
incorporated in the bidding document so that the prospective and interested bidders formulate their
bids accordingly.

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 PROCUREMENT OF SERVICES

The Ministries or Departments may hire external professionals, consultancy firms or consultants
for a specific job, which is well defined in terms of content and time frame for its completion or
outsource certain services.

Engagement of consultants may be resorted to in situations requiring high quality services for
which the concerned Ministry/ Department does not have requisite expertise.

The Ministry / Department should be involved throughout in the conduct of consultancy,

continuously monitoring the performance of the consultant(s) so that the output of the
consultancy is in line with the Ministry /Departments objectives.

OUTSOURCING OF SERVICES

The procedures given above for procurements may be followed with suitable modification
wherever required.

103
 INVENTORY MANAGEMENT
(Rule 186 to 202)

Receipt of goods and materials from private suppliers

All materials shall be counted, measured or weighed and subjected to visual inspection at the
time of receipt to ensure that the quantities are correct, the quality is according to the required
specifications and there is no damage or deficiency in the materials.

Technical inspection where required should be carried out at this stage by Technical Inspector
or Agency approved for the purpose.

An appropriate receipt, in terms of the relevant contract provisions may also be given to the
supplier on receiving the materials.

Details of the material so received should thereafter be entered in the appropriate stock
register.

The officer-in-charge of stores should certify that he has actually received the material and
recorded it in the appropriate stock registers

Receipt / issue of goods and materials from internal divisions of the same organisation

While receiving the supply against the indent, the indenting officer shall examine, count,
measure or weigh the materials as the case may be, to ensure that the quantities are correct,
the quality is in line with the required specifications and there is no damage or deficiency in
the materials.

An appropriate receipt shall also be given to this effect by the indenting officer to the division
sending the materials.

A written acknowledgement of receipt of material issued shall be obtained from the indenting
officer or his authorised representative at the time of issue of materials from stock for
departmental use, manufacture, sale, etc.

In case of materials issued to a contractor, the cost of which is recoverable from the
contractor, all relevant particulars, including the recovery rates and the total value
chargeable to the contractor should be got acknowledged from the contractor duly signed
and dated.

104
Custody of goods and materials

The officer-in-charge of stores having custody of goods and materials, especially valuable and / or
combustible articles, shall take appropriate steps for arranging their safe custody, proper storage
accommodation, including arrangements for maintaining required temperature, dust free
environment etc.

Lists and Accounts

The Officer-in-charge of stores shall maintain suitable item-wise lists and accounts and prepare
accurate returns in respect of the goods and materials in his charge making it possible at any point of
time to check the actual balances with the book balances

Hiring out of Fixed Assets: When a fixed asset is hired to local bodies, contractors or others,
proper record should be kept of the assets and the hire and other charges as determined under rules
prescribed by the competent authority, should be recovered regularly. Calculation of the charges to
be recovered from the local bodies, contractors and others as above should be based on the historical
cost

A fixed asset, also known as a non-current asset or as property, plant, and equipment (PP&E) is a
term used in accounting for assets and property which cannot easily be converted into cash. This can
be compared with current assets such as cash or bank accounts, which are described as liquid assets.
In most cases, only tangible assets are referred to as fixed

Physical verification of Fixed Assets &Verification of Consumables

Fixed assets should be verified at least once in a year and the outcome of the verification
recorded in the corresponding register. Discrepancies, if any, shall be promptly investigated and
brought to account

A physical verification of all the consumable goods and materials should be undertaken at
least once in a year and discrepancies, if any, should be recorded in the stock register for appropriate
action by the competent authority

Buffer Stock: Depending on the frequency of requirement and quantity thereof as well as the
pattern of supply of a consumable material, optimum buffer stock should be determined by the
competent authority

Disposal of Goods.

An item may be declared surplus or obsolete or unserviceable if the same is of no use to the Ministry
or Department. The reasons for declaring the item surplus or obsolete or unserviceable should be
recorded by the authority competent to purchase the item

Following methods will be adopted to dispose surplus goods

105
 Obtaining bids through advertised tender or
Public auction

Disposal through Advertised Tender.

The broad steps to be adopted for this purpose are as follows:

a) Preparation of bidding documents.
b) Invitation of tender for the surplus goods to be sold.
c) Opening of bids.
d) Analysis and evaluation of bids received.
e) Selection of highest responsive bidder.
f) Collection of sale value from the selected bidder.
g) Issue of sale release order to the selected bidder.
h) Release of the sold surplus goods to the selected bidder.
i) Return of bid security to the unsuccessful bidders

Note: When procurement action is involved authority will purchase through lowest bidder subject to
quality and other conditions in GFR.
When Government property is disposed authority will select highest bidder

Disposal through Auction

A Ministry or Department may undertake auction of goods to be disposed off either directly
or through approved auctioneers.

The basic principles to be followed here are similar to those applicable for disposal through
advertised tender so as to ensure transparency, competition, fairness and elimination of
discretion.

The auction plan including details of the goods to be auctioned and their location, applicable
terms and conditions of the sale etc. should be given wide publicity in the same manner as is
done in case of advertised tender

106
 CONTRACT MANAGEMENT
(Rule 203-205)

All contracts shall be made by an authority empowered to do so by or under the orders of the
President in terms of Article 299 (1) of the Constitution of India.

Important principles for contract:

The following principles should be observed while entering into contracts

The terms of contract must be precise, definite and without any ambiguities. The terms should
not involve an uncertain or indefinite liability, except in the case of a cost plus contract or
where there is a price variation clause in the contract.

Standard forms of contracts should be adopted wherever possible, with such modifications as
are considered necessary in respect of individual contracts. The modifications should be
carried out only after obtaining financial and legal advice

Price Variation Clause can be provided only in long-term contracts, where the delivery period
extends beyond 18 months. In short-term contracts firm and fixed prices should be provided
for. Where a price variation clause is provided, the price agreed upon should specify the base
level viz, the month and year to which the price is linked, to enable variations being
calculated with reference to the price levels prevailing in that month and year.

Where contracts are for supply of equipment, goods etc, imported (subject to customs duty
and foreign exchange fluctuations) and / or locally manufactured (subject to excise duty and
other duties and taxes), the percentage and element of duties and taxes included in the price
should be specifically stated, along with the selling rate of foreign exchange element taken
into account in the calculation of the price of the imported item

In contracts where government property is entrusted to a contractor either for use on payment
of hire charges or for doing further work on such property, specific provision for safeguarding
government property (including insurance cover) and for recovery of hire charges regularly,
should be included in the contracts.

All contracts shall contain a provision for recovery of liquidated damages for defaults on the
part of the contractor

A warranty clause should be incorporated in every contract, requiring the supplier to, without
charge, repair or rectify defective goods or to replace such goods with similar goods free from
defect. Any goods repaired or replaced by the supplier shall be delivered at the buyers
premises without costs to the buyer

All contracts for supply of goods should reserve the right of Government to reject goods
which do not conform to the specifications

107
Liquidated damages

Sum of money (agreed-to and written into a contract) specified as the total amount of
compensation an aggrieved party should get, if the other party breaches certain part(s) of the
contract.

Management of Contracts

Proper procedure for safe custody and monitoring of Bank Guarantees or other Instruments should
be laid down. Monitoring should include a monthly review of all Bank Guarantees or other
instruments expiring after three months, along with a review of the progress of supply or work.
Extensions of Bank Guarantees or other instruments, where warranted, should be sought
immediately

Wherever disputes arise during implementation of a contract, legal advice should be sought before
initiating action to refer the dispute to conciliation and/or arbitration as provided in the contract or
to file a suit where the contract does not include an arbitration clause. The draft of the plaint for
arbitration should be got vetted by obtaining legal and financial advice. Documents to be filed in the
matter of resolution of dispute, if any, should be carefully scrutinized before filing to safeguard
government interest

108
 ESTABLISHMENT

Proposal for additions to Establishment:

All proposals for additions to establishment shall be submitted to sanctioning authority in

accordance with the instructions contained in Rule 11 of the Delegation of Financial Powers
Rules and other such instructions which may be prescribed in this regard.

All proposals for creation of a new establishment or a revision in an existing establishment,

whether temporary or permanent in excess of delegated powers should contain, inter alia:-

o the present cost of the establishment in existence;

o cost implications of the change proposed giving details of pay and allowances of
post(s) proposed;

o expenditure in respect of claim to pension or gratuity or other retirement benefits

that may arise in consequence of the proposals;

o details on how the expenditure is proposed to be met including proposed re-

appropriations

Adjustment in Appointments:

A Ministry or Department competent to make appointment to posts in any cadre may make
appointments in a lower post in the cadre to the extent of vacancies left unfilled in the higher
posts

Transfer of Charge

A report of transfer of a Gazetted Government servant duly made in Form GFR 33 and signed both
by the relieved and relieving Government servants, shall be sent on the same day to the Head of the
Department or other Controlling Officers concerned

109
110
Date of Birth: Every person newly appointed to a service or a post under Government shall, at the
time of the appointment, declare the date of birth by the Christian era with confirmatory
documentary evidence such as a Matriculation Certificate, where prescribed qualification for
appointment is Matriculation or above. In other cases Municipal Birth Certificate or Certificate from
the recognised school last attended shall be treated as a valid document

Service Book:

Service Books maintained in the establishment should be verified every year by the Head of Office
who, after satisfying himself that the services of Government servants concerned are correctly
recorded in each Service Book shall record the following certificate "Service verified from (the
date record from which the verification is made).. upto (date)." .

The service book of a government servant shall be maintained in duplicate. First copy shall be
retained and maintained by the Head of the Office and the second copy should be given to the
government servant.

In January each year the Government servant shall handover his copy of the Service Book to
his office for updation.

The office shall update and return it to the Government Servant within thirty days of its
receipt.

In case the Government servants' copy is lost by the government servant, it shall be replaced
on payment of a sum of Rs. 500/-.

Retrospective claim due from date of sanction: In the case of sanction accorded with
retrospective effect the charge does not become due before it is sanctioned

Due date of T.A. claim: Travelling allowance claim of a government servant shall fall due for
payment on the date succeeding the date of completion of the journey. He shall submit the travelling
allowance claim within one-year of its becoming due failing which it shall stand forfeited

Due date of Leave Travel Concession claim

Leave Travel Concession claim of a government servant shall fall due for payment on the date
succeeding the date of completion of return journey. The time limit for submission of the claims shall
be as under:-

(i) In case advance drawn: Within one month of the due date.

(ii) In case advance not drawn: Within three month of the due date.

In case of (i) above if the claim is not submitted within one month of the due date, the amount of
advance shall be recovered but the Government employee shall be allowed to submit the claim as

111
under (ii) above. In case of failure to submit the claim in both the cases within three months of the
due date, the claim shall stand forfeited.

Due date of a withheld increment:

In the absence of any specific order withholding an ordinary increment under FR 24 before the date
on which it falls due for payment, the period of one year should be counted from the date on which it
falls due and not with reference to the date on which the Increment Certificate is signed by the
competent authority. Even where an increment is withheld, the time-limit should be reckoned from
the date on which it falls due after taking into account the period for which it is withheld

Note: As per VI CPC recommendation increment is uniformly given to all Government Servants on 01
July of every year.

Arrear Claims:

Any arrear claim of a Government servant which is preferred within two years of its
becoming due shall be settled by the Drawing and Disbursing Officer or Accounts Officer, as
the case may be, after usual checks.

Procedure for dealing with time-barred claims:

A time barred claim of a Government servant, shall be entertained by the concerned authority
provided that the concerned authority is satisfied that the claimant was prevented from submitting
his claim within the prescribed time limit on account of causes and circumstance beyond his control.

Retrospective sanctions: Retrospective effect shall not be given by competent authorities to

sanctions relating to revision of pay or grant of concessions to Government servants, except in very
special circumstances with the previous consent of the Finance Ministry

Currency of sanction of Provident Fund advance/withdrawal:

A sanction to an advance or a non-refundable part withdrawal from Provident Fund shall, unless it is
specifically renewed, lapse on the expiry of a period of three months. This will, however, not apply to
withdrawals effected in instalments. In such cases the sanction accorded for non-refundable
withdrawals from Provident Fund will remain valid up to a particular date to be specified by the
sanctioning authority in the sanction order itself.

112
Compendium of
Rules on
Advances to
Government
Servants
(Selected Rules)

113
 I. GENERAL

Rule 1 A competent authority may grant advances from public funds in accordance
with the provisions contained in this Compendium.
Rule 2 The competent authority shall charge simple interest at such rates as may
be specified by the Ministry of Finance from time to time for this purpose.

GOVERNMENT OF INDIA'S DECISIONS

(1) Rate of interest in cases under Rules 15 to 38-F. -In cases of advances
regulated by Rules 15 to 38-F, sanctions to be issued by the competent
authority/agreement to be executed by the Government servant at the time of drawing
of advance sanctioned to him should provide for recovery of interest at 2 % above the
prescribed rate with the stipulation that if conditions attached to the sanction,
including those relating to the recovery of amount, are fulfilled completely to the
satisfaction of the competent authority, rebate of interest to the extent of 2 % will be
allowed.
(2) In cases regulated under Rules 39 to 84.-In case of advances regulated by
Rules 39 to 84, sanctions to be issued by the competent authority/agreements to be
executed at the time of drawing of advance should stipulate that no interest shall be
chargeable if the conditions attached to the sanction, including those relating to the
recovery of amount, are complied with fully to the satisfaction of the competent
authority. However, in case of default, interest @ 2 % (two per cent) over the
interest rate which is allowed by the Government on the Provident Fund balances of its
employees shall be charged in the following cases:
(i) in cases where the advance is not utilized fully but the adjustment bill is submitted
in time, interest may be charged as stated above on the unutilized portion of advance
from the date of drawal of advance to the date of refund.
(ii) in cases where the adjustment bill is not submitted within the prescribed time,
the entire amount of advance may be recovered one lump sum immediately on
expiry of such time. In such cases also, the interest may be charged as mentioned
above on the entire amount of advance from the date of drawal to the date of
recovery of amount. The claim of the Government servant for reimbursement would,
however, not be forfeited merely on account of recovery of advance.
Heads of Departments may, however, waive such recovery or charging of
interest thereon, in cases where non-submission of adjustment bill can be attributed to
genuine difficulties,
The amount of interest recovered shall be credited to the receipt Major Head
corresponding to the expenditure head to which the advance was debited and in the
absence of such receipt head to the Major Head "068 Miscellaneous General Services -
Other Receipts" .
[ G.I., M.F. (Expenditure), O.M. No. F. 23 (2)-E. II (A)/93, dated the 26th
August, 1993 and D.E.A. (Budget Division), U.O. No. 583-PD/93, dated the 22nd July,
1993. ]

114
Clarification regarding penal interest on unutilized balance of T.A./LTC advance.-
Some of our field offices have raised a doubt, whether the provisions laid down under
Government of India's Decision 2 (i) below Rule 1 of the Compendium regarding
imposition of penal interest would apply even in cases, where the refund arises as a
result of change in programme, proceeding on short leave, lack of hotel facility, non-
availability of class of rail/hotel accommodation to which the Government servants
are entitled and the excess drawal of advance is beyond the control of the Government
servant.

Government of India, Ministry of Finance, Department of Expenditure, E. II

(A) Branch, to whom the above issue had been referred have clarified that it is for
the administrative authority to satisfy itself, whether to charge penal interest or not in
such cases. In view of the above clarification field offices may regulate the
imposition of penal interest on T.A./LTC advance claims.
[ C. & A.G. 's Lr. No. 786-Audit. 1/85-90/III (154), dated the 7th December, 1990.]

Rule 3. A subordinate authority empowered to sanction a cash grant may sanction

any advance not exceeding the amount of the cash grant.

Rule 4. An advance from public funds shall not be granted to a Government

servant without a substantive appointment, except as provided in Rule 5, and the
grant of the advance shall be subject to such general or special instructions as may be
issued from time to time by the Finance Ministry:
Provided that this restriction shall not apply in the case of advances which may be
sanctioned under Section XII of this Compendium.

Rule 5. A Government servant without a substantive appointment may be granted

an advance from public funds provided he furnishes, along with his application for the
grant of such advance, a Surety Bond from a permanent Central Government servant
having a status comparable to, or higher than, that of the Government servant who
applies for the advance.

EXPLANATION.-A permanent employee of a State Government, on deputation to the Central

Government, is not required to furnish a Surety Bond.
NOTE.-State Governments have agreed to accord reciprocal treatment, in the matter of grant
of advances to permanent Central Government employees, on deputation for service under the
State Governments.

GOVERNMENT OF INDIA'S DECISIONS

(1) Provision in the case of probationer, quasi-permanent employee, etc.-A
Government servant without a substantive appointment, including a probationer, a
contract officer or a quasi-permanent employee, may be granted by the competent
authority short term advances, viz., advances of pay recoverable in not more than
three installments and advances of travelling allowances, festival advances, advances
in lieu of leave salary and advances for the purchase of bicycles, warm clothing and
table fans without the production of surety, provided that such authority is satisfied

115
that the same could be fully recoverable or adjusted during the period of temporary
employment of the Government servant concerned. In the case of all other advances,
such a Government servant should be required to produce surety from a permanent
Central Government servant, the surety bonds being cancelled in the event of their
confirmation in permanent posts.
[ G.I., M.F., O.M. No. F. 49 (9)-EV/51, dated the 13th December, 1951; O.M. No. F.
49 (II)-EV/53 , dated the 29th July, 1953; O.M. No. 16 (3)-E.II (A)/55. dated the 19th
September, 1955; and O.M. No. F. 16 (66)-A/56, dated the 5th April, 1957 and the 23rd
August, 1958. ]
(2) Provision in the case of advance in connection with Natural Calamities.- In
the case of a temporary Government servant, surety from a permanent Government
servant should be obtained before an advance under Section XI of this Compendium is
sanctioned. In the case of Government servants, who are quasi- permanent or are on
probation against permanent posts, it is left to the discretion of the authority sanctioning
the advance whether to insist on the production of a surety or not.
[ G.I., M.F., O.M. No. F. 18 (16)-E. II (A)/62, dated the 9th January, 1963. ]

Rule 6. If an advance is granted to Government servant who is due to retire or

whose services are likely to be terminated within the maximum period prescribed for its
repayment, the number of installments shall be so regulated that the repayment of
advance with interest, if any, is completed before retirement, or termination of service, as
the case may be.

GOVERNMENT OF INDIA'S DECISION

No interest chargeable beyond date of death in case of recoveries from DCR
Gratuity or leave salary .-In cases where on account of premature death of a
Government servant, it becomes necessary to recover a part of the outstanding balance of
an interest-bearing advance sanctioned to a Central Government servant and/or interest
on the amount of such advance by adjustment either against Death- Cum-Retirement
Gratuity or leave salary drawn after the date of death of the Government servant, no
interest should be charged on the amount of advance thus adjusted against Death-
cum-Retirement Gratuity/leave salary, if any, beyond the date of death of the
Government servant.
[G.I., M.F., O.M. No. F. 16 (2)-E. II (A)/67, dated the 18th May, 1967. ]
Rule 7. Amount of Advance.-The amount of advance, after it is determined in
accordance with provisions contained in this Compendium should be rounded off to the
nearest multiple of Rs. 50:

Rule 8. Installments of Repayment.-Each installment on account of repayment of

advance except the last one shall be a number of whole rupees; the amount of the last
installment being raised or reduced, if necessary, to admit of the fixation of such
installment and recovery of the balance including any fraction of a rupee.

116
 Rule 9. Variation in the amount of installments.-Where the advance is adjusted by
repayment in monthly installments, an authority competent to sanction an advance
may, in exceptional cases, vary the amount of such installments provided that -
(i) in the case of interest-bearing advances, the whole amount of advance is
completely recovered in the number of installments not exceeding that initially fixed for
repayment of the advance;
(ii) the amount of monthly installment shall not be reduced only on the ground that
the Government servant is drawing leave salary or subsistence allowance as distinct from
pay.

Rule 10. Availability of funds.-No sanction for the payment of an advance shall
be issued unless the authority competent to sanction the advance has satisfied himself
that funds are available in the year in which the amount of the advance is to be paid and
every such sanction must clearly indicate that funds are so available.

Rule 11 Meaning of the word "Pay" .-For the purposes of the rules in this
Compendium 'Pay' shall mean pay as defined in FR 9 (21) (a) (i).
NOTE -Non-Practising Allowance sanctioned to medical posts may be treated as part of 'Pay' for
the purposes of sanctioning of advances contained in this Compendium.

Rule 12. Detailed Accounts of Individual Advances.- (a) Heads of Offices will
effect recovery of the advances granted in accordance with the provisions of the rules
contained in this Compendium, and of interest, if any, recoverable, and see that the
conditions attached to each advance are fulfilled.
(b) Subject to such general or specific directions as may be given by the
Controller-General of Accounts on the advice of the Comptroller and Auditor- General in
this behalf, detailed accounts of individual advances in respect of advances paid under
the rules contained in Sections III and XVII of this Compendium (generally referred
to as 'long term' advances) will be maintained by the Accounts Officers.
(c)Heads of Offices will maintain detailed accounts of advances granted to
Government servants in terms of the rules contained in Sections IV, V, V-A, X, XI and
XV of this Compendium (generally referred to as 'short term' advances) and submit
returns to Accounts Officers, in the manner indicated in Annexure 'A' to this
Compendium.

GOVERNMENT OF INDIA'S DECISIONS

(1) Classification of advances.-Advances referred to in sub-rules (b) and (c) of the
above Rule are debitable to relevant minor, etc., heads under the Major Head "766 -
Loans to Government servants"; advances granted in terms of the rules contained in the
remaining Sections of the Compendium except Sections XII and XIV (Part-I) are
debitable to the final Head of Account to which the salary or travelling allowance, as the
case may be, of the Government servant concerned is debitable.
[ G.I., M.F. O.M. No. F. 23 (5)-E. II (A)/80, dated the 5th-February, 1981. ]
(2) Procedure for acceptance of balances.- The following procedure should be

117
followed for facilitating prompt acceptance of balances outstanding as on 31st March
every year of loans to Government servants:- .
(i) In respect of long-term advances referred to in sub-rule (b) of the rule, the
Accounts Officers will verify the outstanding balance shown in the schedules of
recovery with those worked out in their offices every month and take up the matter
with Drawing Officers if there is any discrepancy. They will send to every Drawing
Officer a communication confirming the correctness of the balances shown in the
schedules of recovery appended to the bills for February paid in March or pointing out
discrepancy, if any, in the same.
(ii) In respect of short-term advances referred to in sub-rule (c) of the rule each
Drawing Officer will record a certificate on the monthly abstract for the month of April
each year that: "The total (namely, Rs. .....) of the amounts outstanding on 31st
March, 20 .......................................................(excluding recoveries from pay bills for March)
against employees on the rolls of the office on that date and accepted by them
individually as correct, is equal to the closing balance indicated in the abstract for
February, plus payments made minus repayment received in cash during March of that
year. ' ,
[ G.I., M.F., O.M. No. F. 23 (5)-E. II (A)/80, dated the 5th February, 1981. ]

Rule 13. Irrecoverable advances.-An officer who is responsible for the detailed,
control, accounting and supervision of advances shall, as soon as any advance is found to
be irrecoverable, take necessary steps to get the advances written off the accounts under
the sanction of the appropriate authority and advise the Accounts Officer accordingly in
order that he may make the necessary adjustment in the accounts and shall also maintain
a record of advances so written off in order that any possible recovery may be eventually
effected.

Rule 14. Date of drawal of an Advance.-For the under mentioned purposes the
date of drawal of an advance sanctioned for the purchase of a conveyance shall be
(a) the date of issue of the cheque by the Treasury Officer/Accounts Officer where
personal cheques are drawn in favour of the Government servant; and
(b) the date of actual disbursement of the Government servants whose pay is drawn
on establishment bills and who are disbursed the advance by the Head of Office after
drawing the money from the Treasury/Bank -
(i) Recovery of the first installment towards repayment of the advance (vide Rule
24).
(ii) Completion of negotiations and purchase of the motor car/motor cycle (vide Rule
28).
(iii) Calculation of interest (vide Rule 20).

GOVERNMENT OF INDIA'S DECISION

Time-lag between date of drawal of money and its disbursement to be reduced to
the minimum.-The Head of Office should invariably intimate the date of disbursement

118
promptly to the Audit Officer/Accounts Officer concerned to enable him to know the
month from which the recovery of the advance should start. He should also ensure that
the time-lag between the date of drawal of money (by cheque or in cash) and its
disbursement is reduced to the minimum. If any delay is apprehended the amount of
advance should be credited back to Government or the cheque got cancelled. [ G.I., M.F.,
O.M. No. 16 (3)-E. II (A)/62, dated the 9th March, 1962. ]

INTEREST-BEARING ADVANCES
II. GENERAL CONDITIONS OF GRANT OF ADVANCES FOR THE
PURCHASE OF CONVEYANCES
Rule 15. Powers of Sanction (1) A Department of the Central Government, an
Administrator, or a Head of a Department may sanction an advance, for the purchase of
conveyances, to Government servants under their respective administrative control.

Rule 15. (2) A Head of Office may sanction an advance for the purchase of a
bicycle to a Government servant under his administrative control.
EXPLANATION.-In this rule the expression "Government servants" includes employees
of a State Government on deputation to the Central Government vide Ministry of Finance,
O.M. No. F. 16 (61)-E. II (A)/56, dated the 27th November, 1957, but does not include a
Government servant on deputation abroad.
NOTE.-An authority competent to sanction advance for the purchase of conveyances may
not sanction such an advance to itself. In all such cases sanction of the next higher
administrative authority will be required.

GOVERNMENT OF INDIA'S DECISIONS

(1) No advance admissible for furnishing security at the time of registration for
a vehicle.- No advance should be granted to a Government servant for furnishing
security at the time of registration as prospective purchaser as required under the
Motor Car (Distribution and Sales) Control Order of 1959.
[ G.I., M.F., O.M. No. F. 16-B (24)-E. II (A)/59, dated the 27th October, 1959. ]
(2) Section Officers may sign sanctions if authorized by Under Secretary
declared as Head of Office.-An Under Secretary, declared as a Head of Office, may
authorize a Section Officer under him to sign, on his behalf, sanctions to the grant of
an advance for the purchase of bicycles.
[G.I., M.F., O.M. No. F. 6 (19)-E. II (A)/56-I, dated the 25th June, 1956; and
O.M. No. F. 6 (19)-E. II (A)/56-2, dated the 25th June, 1956. ]
(3) Defence service officers/Railway officers on deputation to the Civil
Departments.- The authorities mentioned in this rule may sanction advances for the
purchase of conveyances to Defence service officers/Railway officers on deputation to
the Civil Departments subject to the following conditions:
(i) The advance would be met from the allotment of the Civil Department

119
concerned;
(ii) Each individual case will be referred for the approval of the Defence/Railway
Ministry before the advance is actually sanctioned by the competent authority;
(iii) In cases where officers are deputed under Defence/Railway services terms and
conditions, advance may be sanctioned by the authority indicated in Rule 191 ibid
under the same conditions as would apply if the officers were serving with the
Army/Navy/Air Force/Railways;
(iv) If Defence service officers/Railway officers on deputation are allowed terms and
conditions as applicable to officers on the civil side, the grant of advance for the
purchase of conveyances will be governed by the terms and conditions stipulated in this
Chapter. These terms and conditions will continue to apply even after their reversion
to Defence/Railway services till final liquidation of the advance; and
(v) Copies of the sanctions for grant of advance in all such cases should be endorsed
to the Ministry of Defence/Ministry of Railways and the Accounts Officers concerned.
[ G.I., M.F., OM. No. F. 16 (15)-E. II (A)/66, dated the 16th July, 1969. ]

Rule 16. (1) A foreign employer may, with the concurrence of the authority
specified in Rule 15, grant to a Government servant, lent to him on foreign service, an
advance for the purchase of a conveyance, provided that
(i) the advance is granted from the funds of the foreign employer; and
(ii) the advance is regulated by the same conditions as would apply if the
Government servant were serving directly under Government.

Rule 16 (2) Notwithstanding the provisions contained in sub-rule (1) above, in

special cases, under orders of the authority specified in Rule 15, the advance may be met
from Government funds.

Rule 16-A. An employee of an industrial or commercial undertaking or

autonomous organization or corporation wholly or substantially owned or controlled
by the Central Government or a State Government, when on deputation for service
under the Central Government may be granted an advance for the purchase of a motor
vehicle by an authority specified in Rule 15, subject to the fulfillment of the following
conditions in addition to those laid down in this Compendium:
(i) The employee holds a permanent post in the Undertaking/Organi-
zation/Corporation from which he is on deputation and likely to continue to be on
deputation under the Central Government for a period of not less than three years
from the date of drawal of the advance.
(ii) The parent Undertaking/Organization/Corporation concerned has no objection
to the grant of the advance and executes an Agreement to the effect that, in the event
of the reversion of the borrowing officer from the post under Central Government
before the completion of the repayment of the advance together with interest accrued
thereon, it will remit the amount remaining outstanding together with interest, in
installments as originally fixed within seven days from the date of payment of salary

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and allowances to the borrowing officer, to the Audit Officer/Accounts Officer in whose
records the advance stands originally booked by means of a cheque or a demand draft
on a scheduled Bank.
(iii) The applicant furnishes a Surety from a permanent Central Government
servant of a comparable or higher status.

Rule 17. Conditions of Eligibility.-A Government servant may be granted an

advance for the purchase of a motor car/motor cycle/scooter/ moped provided that-
(i) the authority competent to sanction the advance is satisfied that the Government
servant has the capacity to repay the advance;
(ii) the advance for the purchase of a motor car shall be granted to those
Government servants whose basic pay and dearness pay taken together is Rs. 15,750
(Rupees Fifteen thousand seven hundred fifty) per month or more. The Secretary of an
Administrative Ministry/Department shall be competent to relax this condition in
deserving cases;
(iii) the advance for the purchase of motor cycle/scooter/moped shall be granted to
those Government servants whose basic pay and dearness pay taken together is Rs.
6,900 (Rupees Six thousand nine hundred) per month or more. The authority competent to
sanction this advance may, however, relax this condition in deserving cases.

Rule 18. An advance for the purchase of a conveyance shall not be granted to a
Government servant, who has already purchased the conveyance and paid for it,
unless the conveyance has been purchased within a period of three months
commencing from the date the advance was applied for, and has been paid for by
raising a temporary loan.

NOTE.- The Government servant who, having applied for the advance for the purchase of a
conveyance as admissible under the rules could not be sanctioned such an advance due to non-
availability of funds or in whose case due to anticipated delay in sanctioning the advance there
is an obvious need for raising temporary loans to purchase the conveyance, should obtain
prior permission from the prescribed authority under the relevant Conduct Rules applicable to
him for raising a temporary loan to meet the expenditure on the purchase of conveyance and if
this authority is different from the advance sanctioning authority, he should keep the advance
sanctioning authority informed of the permission obtained under the Conduct Rules.

Rule 19. An advance for the purchase of a conveyance shall not, except with
the concurrence of the Finance Ministry, be sanctioned unless the outstanding balance in
respect of an advance previously granted for the same purpose, together with interest
thereon, has been fully repaid.

Rule 20. Interest.-Simple interest at such rates as may be fixed by Government

from time to time shall be charged on advances granted to Government servants for the
purchase of conveyances. Such interest shall be calculated on balance outstanding on
the last day of each month.

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 GOVERNMENT OF INDIA'S DECISIONS
(1) Reckoning of date of repayment if pay disbursed before first of next
month.-In cases where pay bills for a month are disbursed before the end of a
month, an installment in repayment of an advance received through the pay bill will be
taken as having been refunded on the first of the following month, the normal date
for disbursement of pay.
(2) Reckoning of dates in cases of delayed disbursement of pay/ leave salary.-
In cases where the recovery of installments is effected through the pay/leave salary
bills and the Government servant concerned is unable to present his claim for pay/leave
salary in time for certain administrative reasons or for want of a pay slip from Audit
Office, the deductions in respect of the advance should be deemed to have been
made in the month following the month to which the pay/leave salary relates
irrespective of the actual date of its drawal.
[G.I., M.F., O.M. No. F. 16 (7)-E. II (A)/69, dated the 23rd July, 1969.]
(3) Interest to be calculated with reference to date of payment of first
installment.-If in any particular case any advance is drawn in more than one installment,
the rate of interest recoverable should be determined with reference to the date on
which the first installment is drawn.

III. SPECIAL CONDITIONS OF GRANT OF ADVANCES FOR

THE PURCHASE OF MOTOR CARS AND MOTOR CYCLES

A. MOTOR CARS
Rule 21.(1) Amount of Advance.-The total amount of advance which may be granted
to a Government servant for the purchase of a motor car for the first occasion shall not
exceed Rs. 1,80,000 (Rupees One lakh eighty thousand) or eight months' basic pay and
dearness pay of the Government servant taken together, or the anticipated price of the
motor car, to be purchased by the Government servant, whichever is the least. If the
actual price of the motor car purchased by the Government servant is less than the
amount of advance, then he shall refund the balance to Government forthwith.

Rule 21. (2) Quantum of advance.-The quantum of advance that may be granted on the
second or subsequent occasions for the purchase of a motor car shall not exceed Rs.
1,60,000 (Rupees One lakh sixty thousand) or eight months' basic pay and dearness
pay of the Government servant taken together, or the anticipated price of motor car to
be purchased, whichever is the least.
Such second or subsequent advances for the purchase of a motor car will be
admissible only after four years, reckoned from the date of drawal of the last advance,
have elapsed. Provided that this restriction of 4 years shall not apply in the following
cases:
(a) Where an advance had been allowed earlier for the purchase of a motor cycle but it
is desired to draw the advance for the purchase of motor car.
(b) Where a Government servant disposes of his motor car in India prior to his

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posting abroad or deputation/training abroad lasting more than one year and returns to
India without a motor car.
(c) Where a Government servant is appointed to a regular post abroad and does not
take his motor car along with him.

NOTE 1.-The word "price" used in the above sub-rules includes the Registration money
paid for in advance by the Government servant to the dealer while booking for the new car and
which is later adjusted by the dealer on allotment/delivery towards the price of the new car.
NOTE 2.-Where a Government servant desires to keep two vehicles of different types, i.e., a
motor car and a motor cycle/scooter and has purchased one type of vehicle with the advance
drawn from the Government and wants to have advance for purchasing a different type of
vehicle, he may be sanctioned the same under the provisions of the Compendium, as amended from
time to time, without being required to sell the previous vehicle, provided he repays the
outstanding amount of advance with interest before drawing the fresh advance. An advance given
in such a case will be treated as second advance.

Rule 21 (3) A Government servant holding regular post abroad or on

training/deputation abroad for period exceeding one year who is otherwise eligible for
the grant of motor car advance under these rules may be granted an advance
admissible to him in the above sub-rules in two installments - first at the time of
purchase of the car abroad and the second at the time of payment of customs duty on
the car brought in India on completion of his tenure.
NOTE 1.-In this rule, the expression "actual price" includes sales tax and the cost of such
items, e.g., spare wheel, tyre and a tube or a pillion seat in a scooter, on the purchase of which the
purchaser has no choice. It does not, however, cover the cost of certain accessories, e.g., radio in a
car, plastic covers, which are not essential and are purchased by the customer of his own
volition. Insurance and registration charges of the vehicle are also not included in "actual price".
NOTE 2.-The expression "actual price" used in this rule shall also cover in the case of first
purchase, the following items:
(i) the cost of transportation of the conveyance up to the place of the duty of
Government servant concerned at the time of purchase irrespective of whether the transport is
arranged by the distributors or by the Government servant himself; and
(ii) the octroi charges actually paid.
NOTE 3.-The maximum amount of the advance for the purchase of a motor car by officers of
the Indian Foreign Service or Central Government servants holding regular posts abroad will be
the amount specified in this rule or the amount admissible from the foreign exchange angle,
whichever is less. In this case, the 'actual price' may also include purchase tax payable outside
India and customs duty payable in India.

Rule 21 (4) A Government servant who fulfils the conditions specified in Rule 21 (3)
for the grant of advance for payment of customs duty and who has not drawn advance
in terms of Rules 21 (1) and (2) for the purchase of motor car, may be sanctioned the
advance for payment of customs duty levied on the car brought along with him to India,
in one installment, as per his entitlement in terms of Rule 21 (1). The advance paid for
payment of customs duty should be regulated in accordance with the provisions of
rules for sanctioning advance for the purchase of motor car.

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 Rule 21 (5) The authority competent to sanction an advance for the purchase of a
motor car in terms of Rule 15 may sanction an advance not exceeding Rs. 80,000 (Rupees
Eighty thousand) on first occasion and Rs. 75,000 (Rupees Seventy-five thousand) on
second or subsequent occasions or the anticipated price (excluding customs duty, if
any), whichever is less, to a Government servant who is otherwise eligible for the grant
of motor car advance in terms of Rule 17 for purchase of a personal computer.

Conditions of sanction
(1) The Government servant, who has already drawn an advance for purchase
of a personal computer and a period of 3 (three) years has not elapsed from the date of
drawal of the earlier advance, shall not be eligible for the grant of second or
subsequent advance for the purchase of a personal computer.
(2) The personal computer will be required to be mortgaged in the name of the
President and for this purpose. Similarly, Forms of Agreement for drawing an advance
for the purchase of motor car may be used by substituting the words 'motor vehicle'
with the words 'personal computer'. Make, Model and Chassis No. of the personal
computer may be entered in the Mortgage Deed.
(3) An application for the grant of advance for the purchase of a personal
computer shall be required to be made in the prescribed Form.
(4) No advance for payment of custom duty on the personal computer shall be
sanctioned.

Recovery of advance
(5) The advance sanctioned for the purchase of a personal computer shall be
recovered in such number of equal monthly installments as the Government servant may
elect, but not exceeding 150.
(6) Total recoveries on account of all advances including computer advance,
taken by a Government servant shall not exceed 50% of the total emoluments.
Interest
(7) Simple interest at such rates as may be fixed by Government from time to
time for the motor car advance shall be charged on advance granted to Government
servants for the purchase of personal computer.
All other conditions laid down in this Compendium, regulating the sanctioning of
motor car advance will apply to the advance which may be sanctioned for the
purchase of a personal computer.

Rule 22. Notwithstanding anything contained in Rule 17, an advance for the
purchase of a conveyance shall not be granted to a Government servant who is
under suspension and, if an advance has already been sanctioned to him before he was
placed under suspension, he shall not be permitted to draw such advance during the
period of his suspension.

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 Rule 23. Recovery of Advance.-The amount of advance granted to a
Government servant for the purchase of motor car under Rule 21 shall be recovered from
him in such number of equal monthly installments as he may elect, not exceeding 200.
The Government servant may at his option repay more than one installment in a
month.

GOVERNMENT OF INDIA'S DECISION

Special provision in the case of officers on deputation out of India or sent
abroad before advance is repaid.-A Government servant, who is sent on deputation
exceeding 12 months out of India or is transferred to a post abroad before an
advance drawn by him in India for the purchase of a motor vehicle is completely
repaid by him, may, at his option, be allowed by the authority who sanctioned the
advance, to repay the remaining installments in rupees in India. The Government
servant should arrange to remit the amount due by Bank Draft by the 15th of every
month in favour of the Accounts Officer in whose books the accounts of the advance in
question are kept. A written undertaking shall be obtained from the officer to this effect
and the office to which he is attached abroad informed accordingly. If the draft is not
received by the Accounts Officer before the end of the month, he would immediately
report the matter to the Administrative Ministry concerned and also to the office
abroad where the officer is working, for further necessary action. Failure on the part
of the officer concerned to remit the Bank Draft by the due date will constitute
default in terms of Rule 228 of the General Financial Rules, 2005, and render him liable
to pay penal rate at compound interest in accordance with the provisions of the above-
mentioned Rule. On return of the officer to India any amount left unrecovered will be
deducted as before from his monthly pay bills by the Accounts Officer concerned. [ G.I.,
M.F., OM. No. F. 16 (1)-E. II (A)/65, dated the 29th April, 1965. ]

Rule 24. The recovery of the amount of an advance shall commence with the first
issue of pay, leave salary or subsistence allowance, as the case may be, after the advance is
drawn.

GOVERNMENT OF INDIA'S DECISION

Suspension of recovery pending pay fixation not permissible.-Suspension of
recovery of the amount of an advance, pending fixation of pay of a Government
servant, contravenes the provisions of Rule 24 and is, therefore, not permissible.
[G.I., M.F. O.M. No. F. 16-B (8)-E. II (A)/59, dated the 15th July, 1959. ]

Rule 25. Recovery of Interest.-The amount of interest calculated under Rule 20 shall
be recovered in the minimum number of monthly installments; the amount of each
such installment being not greater than the amount of the installment fixed under
Rule 23.

Rule 26. The recovery of the amount of interest shall commence from the month
immediately following that in which the repayment of the advance for the purchase of a
motor car is completed.

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 Rule 27. Sale or Transfer .-A Government servant shall not sell or transfer a motor
car for so long as the amount of advance together with the interest on such amount is
not completely repaid, except with the permission of the competent authority.

GOVERNMENT OF INDIA'S DECISIONS

(1) Conditional transfer to another Government servant.-If a Government
servant seeks permission to transfer a motor car to another Government servant who
should use a motor car in the discharge of his duties, he may be permitted to
transfer the liability attaching to the car to the latter, provided that the transferee
records a declaration that he is aware that the motor car transferred to him remains
subject to the Mortgage Bond and that he is bound by the terms and provisions.
(2) Sale of motor car before repayment of advance and interest- In all cases
where a motor car is sold before the amount of advance and the interest thereon is
fully repaid, the entire amount of outstanding advance together with interest thereon
shall be repaid immediately after the car is sold provided that when the motor car is sold
only in order that another motor car may be purchased, the authority competent to
sanction the advance may permit a Government servant to apply the sale proceeds
towards such purchase, subject to the following conditions:
(a) The entire sale proceeds of the old car should be applied towards the
purchase of the new car and the new car should be purchased within a month from the
date on which the old car sold.
(b) The amount of advance outstanding should not be permitted to exceed the
cost of the newly purchased car.
(c) The amount outstanding should continue to be repaid at the rate previously
fixed.
(d) A fresh Mortgage Bond should be executed in favour of the President for the
amount then due and not for the amount originally advanced.
(e) The newly purchased motor car should be mortgaged to the Government.
[G.I., M.F., O.M. No. 23 (2)-E. II (A)/90, dated the 17th July, 1990.]

Rule 28. Unless Government servant, who is sanctioned an advance for the
purchase of a motor car, completes the purchase of, and pays for, the motor car
within one month from the date on which he draws the advance, he shall refund
forthwith the full amount of the advance drawn together with interest on that amount for
one month.
NOTE 1.-A Department of Central Government, an Administrator or a Head of Department
may, in exceptional cases, extend the period of one month prescribed in this rule to two months.
NOTE 2.-Where a Government servant refunds the full amount of the advance before the
end of the month in which it was drawn for the purchase of a car, the interest may be
recovered for the actual period the advance was retained by the Government servant.

GOVERNMENT OF INDIA'S DECISIONS

(1) Conditions to be specified in sanction.- The condition specified in Rule 28
should be mentioned in all sanctions to the grant of an advance for the purchase of a
motor car.

126
 (2) Advance to be taken only when the delivery of the car is likely to be
made within a month.- Cases have to come to notice where purchase of a motor car
was not effected within the prescribed time-limit. The explanation usually put forward
is that the vehicle is in short supply in the market or it is not available due to strike in
motor car industry, etc. It has been decided that the advance may be applied for well
in time and sanctioned by the authority competent to sanction the advance as early as
possible. The advance should, however, be drawn only after the Government servant
concerned has received a written assurance from the dealer that the supply is likely to be
available within a month and a certificate to this effect is recorded on the bill for the
advance. In the event of delay in supply, despite the written assurance from the
dealer, the Government servant should apply for extension of the time limit within
the permissible period of one month and seek permission for retaining the advance for
a further period which should be specified. Each such request should be supported by
a letter from the dealer, indicating the likely period of supply, and will be considered
on merits.
[ G.I., M.F., O.M. No. F. 16-B (11)-E. II (A)/58, dated the 17th July, 1958 and F. 16-B (24)-
E. II (A)/59, dated the 27th October, 1959.]
(3) Charging of penal interest when purchase not effected within the period.-
Where the amount of advance is retained beyond one month in contravention of Rule 28,
interest will be charged in the manner indicated below
(i) The period of one month laid down in Rule 28, should be a calendar month from
the date of drawal of the advance.
(ii) For the first month or where the period is extended by the competent authority
for such extended period, on the amount of advance at the rate applicable under
Government of India's Decision (1) below Rule 2 on fulfillment of conditions attached to
the sanction.
(iii) For period, in excess of (ii) above, interest should be calculated on the balances
outstanding for actual period in excess of one month (including fraction of a month) or
where the period is extended by the competent authority in excess of such extended
period and not on the monthly balances, at the higher rate stipulated in Government
of India's Decision (1) below Rule 2. [ G.I. M.F., File No. F. 16 (8)-E. II (A)/73. ]
(4) Penal interest to be charged if registration book is not submitted within the
stipulated period.-The authority sanctioning advance for the purchase of conveyance
should also ask the Government servant concerned to produce the registration book of
the vehicle within a period of one month from the date of purchase of the vehicle
or within two months from the date of drawal of advance, whichever is earlier, to
show that the vehicle purchased by him has actually been transferred in his name by
the competent authority, failing which he shall be liable to pay penal interest on the
entire amount of advance as per Government of India's Decision (1) below Rule 2 of the
Compendium, from its date of drawal to the date of submission of registration book. In
case it is established that the delay in submitting the registration book is not
attributable to the Government servant, the penal interest may not be charged for the
late submission of the registration book for the period of such delay. [ G.I. M.F., O.M.
No. F. 16 (7)-E. II (A)/84, dated the 24th September, 1985. ]
(5) Verification of Cash Receipt.-The sanctioning authority should ask the
Government servant to submit the cash receipt within the prescribed time for scrutiny to
ensure that the advance has been utilized for the purchase of conveyance within the

127
prescribed period and that the 'actual price' as defined in Notes 1 to 3 below Rule 21
is not less than the amount of advance. A certificate to this effect that the cash receipt
has been received and after scrutiny it has been verified that the amount of advance has
been fully utilized for the purchase of the conveyance within the prescribed period and
the 'actual price' as defined in Notes 1 to 3 below Rule 21 is not less than the amount of
the advance, should invariably be furnished to the Accounts Officer concerned.
Thereafter the cash receipt may be returned to the borrower.
[ G.I., M.F., O.M. No. F. 23 (4)-E. II (A)/89, dated the 8th June, 1989. ]

Rule 29. Agreement and Mortgage Bonds.-A Government servant shall, before he
draws an advance for the purchase of a motor car, execute an agreement, if the advance
is granted to him under Rule 17, if the advance is granted to him under Rule 18. On
completing the purchase of a motor car, he shall also execute a mortgage bond,
hypothecating the motor car to the President as security for the advance.
NOTE.-Where only one advance is sanctioned, i.e., for the purchase of a motor car or for the
payment of customs duty or where only one advance is sanctioned for both the purchase of a
motor car and the payment of customs duty, the mortgage bond should be executed. Where an
advance for the payment of customs duty is sanctioned, after the motor car has been purchased
with an earlier advance, a bond should be executed.

GOVERNMENT OF INDIA'S DECISIONS

(1) Procedure to be followed after payment of advance.- (a) A certificate
signed by the sanctioning authority to the effect that the agreement in, has been
signed by the Government servant drawing the advance and that it has been
examined and found to be in order, should be attached to the bill in which the
advance is drawn. The sanctioning authority should ensure that the conveyance is
purchased and hypothecated to the President as security for the amount lent to the
borrower together with interest thereon in the prescribed form within one month from
the date of drawal of the advance.
(b) The certificate referred to in sub-paragraph (a) above, to be furnished to the
Audit Officer/Accounts Officer, may be signed by an authorized Gazetted Officer for
the sanctioning authority. The latter should evolve a suitable machinery for
watching the receipt of agreement and for its proper scrutiny. [ G.I., M.F.. O.M. No. F. 23
(11)-E. II (A)/86, dated the 18th August, 1987. ]
(2) Custody and disposal of mortgage bond.-The mortgage bond should be
kept in the safe custody of the authority sanctioning the advance. When the advance has
been fully repaid, the bond should be returned to the Government servant concerned duly
cancelled, after obtaining a certificate from the Audit Officer and/or the Accounts
Officer, as the case may be, as to the complete repayment of the advance and
interest.
(3) When mortgage bond is not executed in time.- The failure to execute a
mortgage bond in time will render the Government servant drawing the advance
liable to refund forthwith the whole of the amount of advance with interest accrued
unless good and sufficient reason is shown to the contrary and the authority mentioned
in Rule 15 waives the condition prescribed in this regard. [ G.I. M.F., O.M. No. F. 16 (4)-E.
II (A)/64, dated the 4th January, 1965. ]

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B. MOTOR CYCLES
Rule 30. Subject to the provisions of Rule 17, an authority competent to sanction the
advance for the purchase of a motor car, may sanction to a Government servant an
advance for the purchase of a motor cycle/scooter/ moped. Such an advance shall
be subject to the same conditions regulating the advance for purchase of a motor car
except provision contained in Rule 29:
Provided that notwithstanding anything contained in Rule 21, the amount of
such advance for the first occasion shall not exceed Rs. 30,000 (Rupees Thirty
thousand) or four months' basic pay and dearness pay taken together or the anticipated
price of the motor cycle/scooter/moped, whichever is the least.
The quantum of advance that may be granted on the second or subsequent occasions
for the purchase of a motor cycle/scooter/moped shall be restricted to Rs. 24,000
(Rupees Twenty-four thousand) or three months' basic pay and dearness pay taken
together or the anticipated price of the motor cycle/scooter/moped, whichever is the
least:
Provided further that notwithstanding anything contained in Rule 23, the amount of
advance granted to Government servant for the purchase of motor
cycle/scooter/moped shall be recovered from the Government in such number of equal
monthly installments as he may elect but such number shall not be more than seventy.

SPECIAL CONDITIONS OF GRANT OF ADVANCES IN CONNECTION

WITH TRANSFERS AND RETIREMENT

Rule 39. Powers of Sanction.-A Head of Office may sanction advances of pay and
travelling allowance to a permanent or temporary Government servant who, while on
duty or on leave, is required to proceed on transfer.
NOTE 1.-An authority competent to sanction the transfer of a Government servant to foreign
service may sanction advances under this rule to the Government servant on such transfer.
NOTE 2.-An authority competent to sanction advances under this rule may sanction such
advances to itself.

GOVERNMENT OF INDIA'S DECISION

Gazetted Officer subordinate to the Head of Office may be authorized to
sanction advances.-A Gazetted Officer, subordinate to the Head of Office, may also
be specifically authorized by the Head of Office to sanction advances of pay and
travelling allowance to a permanent or temporary Government servant who, while on
duty or leave, is required to proceed on transfer. The Head of Office will, however,
continue to be responsible for the correctness, regularity and propriety of the decision
taken by the Gazetted Officer, so authorized. Advance to the Head of the Office and
the Officer authorized to accord sanction on his behalf should be sanctioned by the
Head of Office himself and not by the Gazetted Officer subordinate to him to whom
the power may be delegated. [ G.I., M.F., File No. F. 23 (1)-E. II (A)/76. ]

Rule 40. Amount of Advance.-The amount of advance which may be sanctioned

to a Government servant under this section shall not exceed -

129
(a) one month's pay which he is in receipt of immediately before transfer, or one
month's pay to which he will be entitled after transfer, whichever is less; or
(b) two months' pay in the case of a Government servant in an office, the
headquarters of which is shifted as a result of Government policy; and
(c) in addition to the amount of advance specified in Clause (a) or Clause (b), the
amount of travelling allowance to which he may be entitled in consequence of his
transfer.
NOTE.-The advances to Government servants moving between New Delhi and Simla
with the headquarters of the Government are regulated by the rules laid down in the Simla
Allowances Code.

GOVERNMENT OF INDIA'S DECISIONS

(1) Advance not admissible in mutual transfer case.-No advance of pay or
travelling allowance should be granted in respect of transfers mutually arranged by
Government servants among themselves and approved by the appropriate authority. [
G.I., M.F., O.M. No. F. 16-A (1)-E. II (A)/59, dated the 30th January, 1959. ]
(2) Advance of pay may be taken at the new station.- The advance of pay under
Clause (a) of Rule 40 may be allowed to be drawn at the new station soon after the
arrival of the Government servant there, on production of the Last Pay Certificate
showing that no advance was drawn at the old station.
(3) Second advance for family members eligible.- Clause (c) of Rule 40 does not
preclude the grant of a second advance to a Government servant to cover the travelling
expenses of any member of his family who in cases falling under sub- clause (b) of
Rule 40 follows him within twelve months and, in cases falling under Clause (a) of Rule
40, follows him within six months from the date of his transfer and in respect of whom
an advance of travelling allowance has not already been drawn.
[ G.I., M.F., O.M. No. 15 (17)-E. II (B)/58, dated the 17th July, 1958. ]
(4) No advance of pay in case of temporary transfer.-No advance of pay shall be
granted in respect of temporary transfer for a period not exceeding 180 days.

Rule 41. A competent authority specified in Rule 39 may sanction an advance of

travelling allowance to a retiring Government servant to enable him to proceed to the
place where he intends to reside permanently after retirement. Such an advance may be
sanctioned in the case of journeys performed during leave preparatory to retirement,
but not in the case of journeys performed after the date of retirement. The amount of
such advance shall not exceed the amount to which the Government servant may be
entitled under the rules in force for the grant of travelling allowance for the purpose.

Rule 42. Recovery of Advances.-The amount of an advance of pay granted to a

Government servant shall be recovered in not more than three equal monthly
installments in the case of an advance granted under Clause (a), and not more than
twenty-four in the case of an advance granted under Clause (b) of Rule 40.

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 GOVERNMENT OF INDIA'S DECISION
Rate of recovery from the subsistence allowance to be fixed by Head of the
Department.-The recovery of the advance of pay from the subsistence allowance
drawn by a Government servant while under suspension will be made at such rates as the
Head of the Department may deem it right to fix.

Rule 43. The recovery of the amount of advance granted under Clause (a) or
Clause (b) of Rule 40 shall commence from the month in which the Government
servant draws a full month's pay and/or leave salary or/and, subsistence allowance, as
the case may be, after joining his new appointment. The amount of an advance granted
under Clause (c) of Rule 40 or that under Rule 41 shall be recovered in full on
submission by the Government servant of his travelling allowance bill.

GOVERNMENT OF INDIA'S DECISIONS

(1) Procedure to be followed when advance is granted in single lump sum
and claims preferred piecemeal-When a single lump sum advance is granted under
Clause (c) of Rule 40 to cover the travelling expenses both of the Government servant
himself and of his family, it may be adjusted by the submission of more than one bill if it
so happens that the members of the Government servant's family do not actually make
or complete the journey with him. In such a case, the Government servant should
certify on each adjustment bill submitted by him that a further bill in respect of
travelling allowance of the members of his family, who have not yet completed the
journey, will be submitted in due course and is expected to include an amount not less
than the balance of the advance left unadjusted in his bill.
(2) Procedure to watch over the T.A. advance and effecting recovery when the
claim for T.A. is forfeited.-Where a Government servant has not submitted the
adjustment travelling allowance bill in due time and consequently his right to travelling
allowance claim stands forfeited under SR 194-A, the advance drawn by him shall be
recovered from his pay bill or any other dues in one installment by the authority
competent to sanction such an advance. In order to keep a watch over the travelling
allowances advances drawn by Gazetted Officers who are their own Drawing Officers
and to enforce the refund of such advances after the forfeiture of officer's travelling
allowance claim, the Controlling Officers/Heads of Officers shall maintain a register
indicating(i) Serial No., (ii) Name of the Officer to whom the T.A. advance has been
sanctioned, (iii) Quantum of advance, (iv) No. and date of orders sanctioning the
advance, (v) Date on which adjustment bill has been submitted, (vi) Reasons for not
submitting the bill immediately on completion of the journey, (vii) Whether the time-
limit has expired and if so, whether audit has been requested to issue retrenchment
slips, (viii) Remarks, if any. This register should be checked every month by the
Controlling Officer/Head of Office, as the case may be, and in cases where the right to
T.A. claim stands forfeited in terms of SR 194-A, i.e., T.A. advances are pending
adjustment for more than one year, the Audit and/or Accounts Officer should be asked
to issue the necessary retrenchment slips to the Treasury Officers concerned.
[G.I., M.F., O.M. No. F. 23 (5)-E. II (A)/67, dated the 5th March, 1969 and 30th March,
1970 and No. F. 17 (2)-E. II (A)/70, dated the 16th March, 1971. ]
(3) Grant of advance to a Government servant transferred to foreign service
and on his reversion.- (a) The amount of an advance granted to a Government servant,

131
transferred to service under a foreign employer should be reimbursed to Government by
the foreign employer in lump by sending a cheque or demand draft in favour of the
Audit Officer/Accounts Officer on whose records the advance is originally booked.
(b) (i) An advance of pay to a Government servant on his reversion from foreign
service should be granted by the foreign employer only with concurrence of the
authority competent to sanction the transfer of the Government servant to foreign
service. As for its repayment to the foreign employer immediately on receipt of a
demand from the foreign employer, duly supported by a copy of the cash receipt
obtained from the Government servant concerned (which should be duly certified by
the foreign employer) at the time of the payment of the advance, the competent
authority should refund the total amount to the foreign employer by means of a
Bank Draft. The recovery of the advance from the Government servant should be
watched in the same manner as laid down under Rule 43.
(ii) An advance of Travelling Allowance, which may be granted by a foreign
employer to .a Government servant on his reversion from foreign service, should be
adjusted in the T.A. claim of the Government servant. Since this is to be borne by the
foreign employer, the T.A. bill should be sent direct to him by the Government servant.
[ G.I., M.F., O.M. No. F. 16-A (2)-E. II (A)/60, dated the 15th April, 1961 and O.M. No. F.
16 (11) E. II (A)/65, dated the 30th September, 1965. ]

IV. SPECIAL CONDITIONS OF GRANT OF ADVANCES ON FIRST

APPOINTMENT AND IN CONNECTION WITH DEPUTATIONS AND
LEAVE EX-INDIA

Rule 44. Powers of sanction.-A Department of the Central Government or the

Administrator, as the case may be, may sanction an advance of pay to a Government
servant, who is required to proceed on deputation outside India, provided that the
period of such deputation is not less than one month.
NOTE.-For the purposes of this rule, the Comptroller and Auditor General shall be competent to
sanction such advance of pay to persons serving in the Indian Audit and Accounts Department.

Rule 45. A Department of the Central Government may sanction an advance of pay
to a Government servant who:-
(a) arrives in India on first appointment; or
(b) returns from leave or deputation out of India, provided that such leave is not
leave on average pay not exceeding four months, or any other leave equivalent
thereto.

GOVERNMENT OF INDIA'S DECISION

Grant of advance without production of Last Pay Certificate. When a Government
servant, on arrival in India on first appointment, asks for an advance and does not
produce a Last Pay Certificate, the advance may be granted by a Department of the
Central Government on the Government servant furnishing a declaration that he has
not received any advance before his arrival in India.

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 Rule 46. Amount of Advance.-The amount of advance which may be granted
under Rule 44 or 45 shall be limited to one month's pay, provided that a Government
servant who is granted an advance under Rule 40 shall not be granted, on return from
leave, an advance under Clause (b) of Rule 45.

Rule 47. Recovery of Advance.- The amount of advance granted to a Government

servant under this section shall be recovered in not more than three equal monthly
installments.

V. SPECIAL CONDITIONS OF GRANT OF ADVANCES IN

CONNECTION WITH TOURS

Rule 48. Powers of Sanction.-(I) A Head of Office may sanction to a permanent or

temporary Government servant under his administrative control, who is required to
proceed on tour including a prolonged tour in the interior to places which are difficult
of access, an advance to cover his personal travelling expenses for a period not
exceeding thirty days as well as his expenses on contingent charges arising out of the
tour.

Rule 48. (2) Advances under this rule to Heads of Offices, who are not their own
Controlling Officers, may be sanctioned by the respective Controlling Officers.

Rule 48. (3) An officer who is declared to be his own Controlling Officer for the
purposes of travelling allowance may sanction the grant of an advance under this rule
to himself.
EXPLANATION.-In this rule (i), "Personal travelling expenses" mean steamer, rail or
air fares, incidental charges, road mileage and daily allowance for a period not exceeding
thirty days in cases falling under this rule and for a period not exceeding six weeks in
cases falling under Rule 49; and (ii) "Contingent charges" mean expenses on hire of
conveyances or animals for the carriage of records, tents or other Government property.

GOVERNMENT OF INDIA'S DECISIONS

(1) Gazetted Officer subordinate to the Head of Office may also be
authorized.-A Gazetted Officer, subordinate to the Head of Office, may also be
specifically authorized by the Head of the Office to sanction to Government servants
under his control advances for meeting travelling expenses and contingent charges for
tours. Advances to the officer so nominated should, however, be sanctioned by the
Head of Office himself who will also remain responsible for the correctness, propriety
and regularity of the payments authorized by the nominated Gazetted Officer.
[G.I., M.F., File No. F. 23 (1)-E.II (A)/76. ]

(2) Payment of advance for production of official documents or to give

evidence in civil cases.-An advance under this section may be sanctioned by the

133
authorities, mentioned in Rule 48 above, to Central Government servants who are
summoned by the Courts of Law to produce official documents or to give evidence on
facts coming to their knowledge in the discharge of their official duties in Civil cases to
which Government is not a party, in connection with the journeys performed by them
in response to such summons. The advance so paid will be debited to the Head of
Account to which pay and allowances of the Government servant concerned are
debitable and adjusted from the T.A. claim of the Government servant which will
be admissible as for journeys on tour. The recoveries of the amount should be
accounted for in accordance with the provisions of Article 74 of the Account Code, Vol. I.
The amount of travelling allowance so paid will be got reimbursed from the
Courts concerned, in full in the case of the Courts other than those in West Bengal and
to the extent admissible at the Courts' rates in the case of Courts in West Bengal. It
shall be the duty of the Controlling Officers to see that the amounts due are recovered
from the Courts.
(3) Grant of advance of Travelling Allowance while under suspension.-A
Government servant under suspension may be granted an advance of travelling
allowance to cover his personal travelling expenses and for daily allowance for the
period of journey from his headquarter to place of inquiry and back for one day of
inquiry or otherwise, if the period of inquiry intimated to the Government servant as
admissible under the rules. In case the inquiry is extended, the daily allowance for that
period is to be claimed by the concerned Government servant along with the
adjustment bill for the advance drawn by him.
[ G.I., M.F., O.M. No. F. 17 (2)-E. II (A)/85, dated the 28th August, 1985. ]

Rule 49. Head of Office may sanction to a Government servant under his
administrative control who is required to proceed on tour in the interior to places
which are difficult of access an advance to cover contingent charges and personal
travelling expenses for a period not exceeding six weeks.

GOVERNMENT OF INDIA'S DECISION

Special provisions.-Advances under Rules 48 and 49 may be sanctioned in
connection with prolonged tours in cases like those of officers of the Forest Research
Institute and Colleges, Dehra Dun, and officers joining survey parties visiting the
Himalayas or the Andaman and Nicobar Islands. G.I, M.F., O.M. No. F. 16-A (4)-E.II
(A)/59, dated the 17th April. 1959. ]

Rule 50. Conditions of Eligibility for Second Advance.-A second advance

cannot be made to a Government servant under this section until an account has
been given of the first.
A Government servant who has taken an advance under this rule for any particular
journey may not take payment on travelling allowance or other bills drawn in respect of
the same journey while the advance or any portion of it still remains unadjusted.

GOVERNMENT OF INDIA'S DECISION

(1) Second advance may be sanctioned to undertake the journey soon after the
completion of earlier one.-In cases where a Government servant is required to proceed

134
on tour frequently at short notice and under emergent circumstances, necessitating the
undertaking of a journey soon after completion of earlier one, thus leaving little time for
the official to prefer his T.A. bill, a second T.A. advance may be sanctioned by the
competent authority subject to the following conditions being fulfilled:
(i) The second journey is required to be undertaken soon after the first one, i.e.,
within a week after completion of the first tour.
(ii) The bills for the advances drawn should be submitted latest within a week after
completion of the second journey.
(iii) In any case, not more than two advances should be allowed to remain
outstanding at a time. [G.I.,M.F.,O.M. No. F. 17 (4)-E. II(A)/75. dated the 24th February,
1976. ]

Rule 51. Adjustment of Advance.-The amount of advance granted under this section
shall be adjusted within 15 days from the completion of tour or the date on which the
Government servant resumes duty after completion of tour.

VI. SPECIAL CONDITIONS FOR GRANT OF ADVANCES IN

CONNECTION WITH THE LEAVE TRAVEL CONCESSION

Rule 52. (1) The Head of Office may sanction advances to Government servants to
enable them to avail of Leave Travel Concession. Heads of Offices who are not their
own Controlling Officers may be sanctioned advances by the next higher authority.

Rule 52. (2) The following provisions shall regulate the grant of advances:
(i) The amount of advance in each case shall be limited to 90% of the estimated
amount which Government would have to reimburse in respect of the cost of journeys
both ways;
(ii) Where the Government servant and members of his family avail themselves of
Leave Travel Concession separately, that is, at different times, there would be no
objection to the advance being drawn separately to the extent admissible;
(iii)(a) The advance may be drawn for both the forward and return journeys of the
Government servant and/or the members of his family at the time of the
commencement of the forward journey, provided the period of leave taken by the
Government servant or the period of anticipated absence of the members of the
family does not exceed three months or 90 days;
(b) Where the period of leave or the period of anticipated absence exceeds three
months or 90 days, the advance can be drawn for the forward journey only;
(c) Where an advance has been drawn for both the forward and the return journeys
and later it becomes clear that the period of absence either of the officer or of the
officer's family from headquarters is likely to exceed three months or ninety days, one-
half of the advance shall be refunded to Government forthwith;
(iv) The advance in respect of temporary Government servants and their families

135
shall be sanctioned subject to the production by them of surety of a permanent
Central Government servant;
(v) Where it is proposed to perform the initial part of the outward journey by rail,
the advance, may be granted sixty days before the proposed date of the journey, but
shall have to be refunded forthwith if the Government servant is not able to produce cash
receipt from Railways to show that he has utilized the amount of advance for the
purchase of ticket(s) within ten days of the drawal of advance.
Where the initial part of the outward journey is proposed to be performed otherwise than
by rail, the advance may be granted thirty days in advance of the proposed date of
the journey. But the advance shall have to be refunded forthwith, if the outward journey
is not commenced within thirty days of the grant of advance.

GOVERNMENT OF INDIA'S DECISIONS

(1) Advance to employees in A & N islands for availing free sea passage
facility.-The employees of the A & N and Lakshadweep Islands and Central
Government employees posted in these Islands who are entitled to avail the annual free
Sea Passage between Islands and Mainland as a condition of their service may be given
an advance limited to 90% of the estimated amount which Government should have
to reimburse in respect of the cost of the journeys both ways. Other terms and
conditions laid down in Rule 52 of this Compendium, as amended from time to time
would also apply. [ G.I., M.F., O.M. No. F. 17 (4)-E. II (A)/85, dated the 8th September,
1986. ]
(2) Claim for LTC to be preferred within three months of completion of the
journey.- On a review of the existing provisions relating to submission and settlement
of travelling allowance claims under the Leave Travel Concession Scheme, it has been
decided that in cases where no travel advance had been drawn, the period within which
a Government servant should submit his claim on completion of the return journey
should be reduced from one year to three months. Accordingly, the right of a
Government servant for reimbursement of his Leave Travel Concession claim, where
no advance was drawn by him, shall stand forfeited or be deemed to have been
relinquished, if the claim is not preferred within three months of the date of completion
of the return journey. In cases where advance has been drawn towards LTC, the final
bill will have to be preferred within one month of the completion of return journey. If
that is not done, the authority which sanctioned the advance should enforce lump sum
recovery of the advance forthwith and once such recovery is made, it should be taken as
if no advance had been drawn and the claim allowed to be preferred within a period of
three months, failing which it shall stand forfeited in terms of these orders. [ G.I., Dept.
of Per. & Trg., O.M. No. 31011/28/86-Estt. (A), dated the 26th March, 1987. ]

(3) Head of Account.-The amount of advance will be debited to the sub and
detailed head "Salaries" subordinate to the appropriate final Head of Account to
which the pay, etc., of the Government servant concerned is debited and the adjustment
of the advance will be watched through Objection Book by the Audit
Officer/Accounts Officer concerned.
(4) Grant of advance to Officer on deputation coming on reversion to parent
office.- The procedure for the grant of advance for Leave Travel Concession to an officer
on deputation who, immediately on reversion to his parent office, wishes to proceed on
leave and to join the parent office on the expiry of such leave shall be as follows:

136
(a) In the leave application of the reverting officer, the fact that he would be availing
of the Leave Travel Concession during the period of leave will have been mentioned by
him. The Borrowing Department may, while forwarding the leave application to the
Lending Department for sanction, inform the latter Department that, in the event of
leave being sanctioned, they would sanction advance to the extent admissible under,
and subject to, the conditions laid down in Rule 52 and Government of India's
Decision (1) above. On receipt of intimation regarding sanction of leave, the Controlling
Officer for T.A. purposes in the Borrowing Department, in respect of the officer availing
of the Leave Travel Concession may sanction the advance and endorse a copy to the
Lending Department, which will keep a watch on the adjustment of Leave Travel
Concession advance.
(b) The procedure in (a) above may be made applicable in the event of the reverting
officer applying for leave and intending to avail of, during the leave, the Leave
Travel Concession himself or with any or all members of his family, if during the
period of leave in question, any or all members of his family alone intend to avail of the
concession and not the Government servant himself, even then the procedure at
(b) above may also be made applicable.
(c) The Leave Travel Concession advance granted by the Borrowing Department will
be adjusted against the account of the Department/Office which is ultimately liable to
the expenditure on account of the LTC availed of by the Government servant
concerned and/or his family. [ G.I., M.H.A., O.M. No. 43/9/64-Ests. (A), dated the 7th
December, 1965 ]

VII.
SPECIAL CONDITIONS OF GRANT OF ADVANCES IN
CONNECTION WITH FESTIVALS AND VISITS OF GOVERNMENT
SPONSORED PARTIES TO HILL-STATIONS PART I. - FESTIVAL
ADVANCES

Rule 53. Powers of Sanction.-A Head of Office may sanction an advance, on the
eve of an important festival, to a non-Gazetted Government servant under his
administrative control whose basic pay and dearness pay taken together does not
exceed Rs. 12,450 (Rupees Twelve thousand four hundred and fifty) per month.
EXPLANATION.-In this rule, the term
(a) "non-Gazetted Government servant" includes similar categories on staff in Industrial
Establishments under the Central Government and work-charged staff who are eligible for
Pension or Contributory Provident Fund benefits, but does not includes staff paid from
contingencies.
(b) "important festival" means such festival or one of such festivals, as a Head of
Department/an Industrial Establishment may declare in respect of establishments under his/its
administrative control.

GOVERNMENT OF INDIA'S DECISIONS

(1) Fixing of festival occasions by Head of Department.-A Head of

137
Department/an Industrial Establishment should fix the festival occasions on which
festival advances will be allowed after taking into consideration the importance
attached locally to such festivals and in consultation with recognized associations of staff
where such associations exist. For this purpose, offices including sub-offices of an
office located at different stations should be treated as separate establishments. [G.I.,
M.F., O.M. No. F. 18 (1)-E. II (A)/62, dated the 19th April, 1962.]
(2) Republic Day and Independence Day included.-For the purpose of Rule
53, the Republic Day and the Independence Day may also be treated as festival
occasions.[ G.I., M.F., O.M. No. F. 16-C (3)-E. II (A)/61, dated the 30th March, 1961. ]

Rule 54. Conditions of Eligibility.-An advance under rules in this part may be
granted to Government servant, if he is on duty, or on leave on average pay or any
other leave equivalent thereto including maternity leave, but excluding leave
preparatory to retirement, on the date on which the advance is disbursed.
Rule 55. An advance under rules in this part shall not be granted to a Government
servant more than once in a financial year even if the festival qualifying for advance
falls twice in a year.

GOVERNMENT OF INDIA'S DECISION

Certificate to be furnished in cases of officials having come on transfer.- Where
a Government servant, who has drawn an advance on the eve of an important festival,
is transferred from one establishment to another, after completion of the recovery of the
advance,- if any, applies to the latter for the grant of a similar advance, he should
furnish in his application for the grant of such an advance, a certificate to the effect
that he had not drawn the advance applied for prior to his transfer within the same
calendar year. Such a certificate may be test- checked by the Head of Office where it is
considered necessary. [ G.I., M.F., O.M. No. F. 19 (4)-E. II (A)/62, dated the 21st
November, 1962. ]

Rule 56. An advance under rules in this part shall not be granted to a Government
servant unless an advance already granted to him under rules in this part or Rule 63
has been fully recovered.

Rule 57. An advance under rules in this part shall not be granted to a temporary
Government servant unless he is likely to continue in service for a period of at least six
months beyond the month in which the advance is disbursed.

Rule 58. Amount of Advance.- The amount of advance which may be granted to a
Government servant shall not exceed Rs. 1,500 (Rupees one thousand five hundred)
provided that a Government servant who is granted an advance under Rule 63 shall not
be granted an advance under this rule in the same financial year.

Rule 59. Disbursement of Advance.-A Drawing and Disbursing Officer shall draw
the amount of advance sanctioned under rules in this part before the festival in respect of
which the advance is sanctioned.

138
 Rule 60. Recovery of Advance.- The amount of advance granted under rules in
this part shall be recovered in not more than ten equal monthly installments.

Rule 61. The recovery of the amount of advance shall commence with the issue of
pay for the month following that in which such amount is drawn.

GOVERNMENT OF INDIA'S DECISION

Date of disbursement to be date of drawal.-The date of drawal of the advance
should be the date on which the amount of advance is actually disbursed to the
Government servant. The time-lag between dates of drawal and disbursement should be
reduced to the minimum.

Rule 62. Account of Advances.-The procedure for the maintenance of accounts and
watching the recoveries of festival advances is as laid down in Rule 12(c) to this
Compendium.

PART II.-ADVANCES IN CONNECTION WITH VISITS TO HILL- STATIONS

Rule 63. Subject to the conditions laid down in Part I of this Section regulating the
grant of advance on the eve of important festivals, an advance may be granted to a
Government servant who, as a member of a Government-sponsored party, visits hill-
stations during summer months, provided that a Government servant who is granted
an advance under Rules in Part I of this Section shall not be granted an advance
under this Rule in the same financial year.

VIII. SPECIAL CONDITIONS OF GRANT OF ADVANCES IN

CONNECTION WITH NATURAL CALAMITIES

Rule 64. Powers of Sanction.-A Head of Office may sanction the grant of an
advance to a non-Gazetted Government servant under his administrative control
whose property, movable or immovable, has been substantially affected or damaged in
an area affected by a natural calamity, subject to the following conditions:
(i) that the concerned State Government of the State in which the natural calamity
has occurred, has declared the area as having been affected by the natural calamity;
(ii) that the State Government has also issued orders sanctioning financial assistance to
their own employees whose property, movable or immovable, has been damaged by the
natural calamity in the areas declared as having been affected by the natural calamity;
and
EXPLANATION.-In this rule, the term "non-Gazetted Government servant" includes
similar categories of staff in industrial establishments under the Central Government and
work-charged staff who are eligible for pension or Contributory Provident Fund benefits, but
does not include staff paid from contingencies.

139
 GOVERNMENT OF INDIA'S DECISIONS
(1) Head of Account.-The advance sanctioned under this Rule should be booked
under the detailed head "Salaries" to which the pay and allowances of the employees
are ordinarily debited and the recoveries thereof be watched through the Pay Bill
nd
Register. [ M.F., O,M. No. 18 (I)-E. II (A)/90, dated the 22 January, 1991.]
(2) Government servant liable to disciplinary action if his declaration is found
not true.-An employee applying for natural calamity advance in terms of this Rule
shall also be required to give a declaration showing the details of the
movable/immovable property damaged due to the natural calamity along with his
application. In case the declaration given by him is not found true at any stage, he shall
be liable to disciplinary action in terms of Rule 11 of the Central Civil Services
(Classification, Control and Appeal) Rules, 1965, as amended from time to time.

Rule 65. Notwithstanding anything contained in Rule 64, no advance shall be

sanctioned to a Government servant, if he does not apply for it within three months
from the date of Government orders under which an area is declared to be affected by a
natural calamity.

Rule 66. Amount of Advance.-Subject to the provisions of Rule 67, the amount of
an advance which may be granted to a Government servant shall not exceed Rs.
2,500 (Rupees Two thousand five hundred).

Rule 67. Normally, a second advance on this account should not be sanctioned, if an
earlier advance for the same purpose remains unadjusted. If, however, the grant of
second advance becomes necessary, the quantum of the second advance plus the
outstanding balance of the first advance should not exceed the limit prescribed in Rule
66 above.

Rule 68. Recovery of Advance.- The amount of advance granted under Rule 66 shall
be recovered in not more than twenty-five equal monthly installments.

Rule 69. The recovery of the amount of an advance shall commence from the
second issue of pay after the advance is drawn.

GOVERNMENT OF INDIA'S DECISIONS

(1) Date of drawal to be reckoned with reference to date of payment.-The
date of drawal of the advance should be the date on which the amount of advance is
actually disbursed to Government servant. The timelag between dates of drawal and
disbursement should be reduced to the minimum.
(2) Clarification regarding grant of second advance.-l. According to G.I.,
M.F., O.M. No. F. 18 (4)-E. II (A)/77, dated 30-11-1977, the Heads of Offices have been
delegated power to sanction natural calamity advance to non-Gazetted Central
Government employees under their administrative control for rendering immediate
assistance to the employees whose property, movable or immovable, has been

140
substantially affected or damaged by a natural calamity subject to the fulfillment of the
following two conditions:
(i) that the concerned State Government of the State in which the natural calamity
has occurred, has declared the areas as having been affected by the natural calamity; and
(ii) that the State Government has also issued orders sanctioning financial assistance to
their own employees whose property, movable or immovable, has been damaged by the
natural calamity in the areas declared as having been affected by the natural calamity.
The grant of this advance will also be subject to the fulfillment of all other
conditions laid down under Rules 64 to 69 of the Compendium, as amended from time
to time.
2. But despite the above position obtaining under the rules/orders in force, instances
have come to notice of this Ministry that some Heads of Offices have been
sanctioning advances in infringement of the conditions prescribed, thus creating
embarrassment for the Government. It is clarified that the delegated power has to be
exercised only when the above two conditions are fulfilled. It is also clarified that in
terms of Rule 67of the Compendium, normally a second advance on this account is not
to be sanctioned if an earlier advance for the same purpose remains unadjusted.
However, keeping in view the severity of the natural calamity, second or subsequent
advance may be sanctioned.
IX. SPECIAL CONDITIONS OF GRANT-OF OTHER MISCELLANEOUS
ADVANCES FOR DEPARTMENTAL PURPOSES
Rule 70. Powers of Sanction.-The Director-General of Archaeological Survey of
India may sanction an advance to an officer of the Archaeological Survey for the
purchase of antiquities.

Rule 71. A Deputy Commissioner/Collector may sanction an advance to a Treasury

Officer, or a District Superintendent of Police, to meet expenses in connection with
remittance of treasure.

Rule 72. A Head of Office may sanction an advance in connection with a law suit
to which Government is a party.

Rule 73. Amount of Advance.-The amount of advance which may be granted to

Government servant under this section shall be regulated as specified hereunder -
(a) in the case of an advance granted under Rule 70, an amount not exceeding five
hundred rupees on each occasion;
(b) in the case of an advance granted under Rule 71, an amount which the Deputy
Commissioner/Collector may consider reasonable; and
(c) in the case of an advance granted under Rule 72, an amount which the Head of
Office may consider reasonable.

141
 Rule 74. Adjustment of Advance.-The amount of advance which may be granted to a
Government servant under Rule 73 shall be adjusted on the completion of the work for
the performance of which it was granted.

Rule 75. Other Special Advances.- (1) Advances to Government servants and others
for special departmental purposes shall be regulated by special orders issued by
Government or an Administrator, as the case may be.

Rule 75 (2) A Government servant who is granted advances from public funds
under sub-rule (1) shall be responsible for its adjustment and/or repayment.

GOVERNMENT OF INDIA'S DECISIONS

(1) Control, accounting and supervision of recovery of special advances.-In the
case of advances for departmental purposes which are recoverable ultimately from
private owners or other parties, the responsibility for the detailed control,
accounting and supervision devolves on the departmental authorities and detailed
rules and instructions for discharge of such responsibility are contained in
departmental regulations.
(2) Advance to Government Pleader in connection with law suits to which
Government is a party.-A Head of Department may sanction the grant of an advance to
a Government Pleader in connection with law suits, to which Government is a party,
up to the maximum limit of Rs. 500 at a time. The amount so advanced should be
adjusted by the Head of Department at the time of settlement of Counsel's fee bills. [ G.I.,
M.F., OM. No. F. 10 (13)-E. (Coord.)/75, dated the 10th April, 1975. ]
(3) Sanction of advance for making security deposits with State
Governments, State Electricity Boards, Corporations, Municipalities, etc.-In case where
a Department of the Central Government or a Head of Department or a subordinate
authority is required to make security deposits with State Governments/Statutory
Organizations like State Electricity Boards, Corporations, Municipalities, etc., as a
safeguard against delay/default in payment of their dues, a Department of the Central
Government or a Head of Department may sanction the drawal of a special
departmental advance under this Rule subject to the following conditions:
(1) The advance shall be sanctioned only when the Department concerned is
satisfied that a letter of guarantee by the Central Government in lieu of deposit in cash
will not be acceptable to the authority requiring the deposit as a sufficient
safeguard.
(2) The Departmental Officer, drawing the advance, shall keep a record of this
deposit for recovery at the appropriate time. He shall also see that interest, if due, is
received from the authority, with which deposit is made at prescribed intervals.
(3) Adequate safeguards shall be provided to effect refund of security when it is
necessary to do so.

(4) The payment of security deposit shall be debited to distinct detailed heads with
appropriate descriptions, e.g., "8674 Security Deposits made by Government - Security
Deposits with.

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(5) The interest thereon, if any, recoverable from the authority, with which the
deposit is made, may be credited under' '0049 Interest Receipt - C. Other Interest
Receipts of Central Government - Other Receipts - Interest on Security Deposits made
by Government with (name of the Electricity Board - Corporation/Municipality to be
indicated)". [G.I. M.F., O.M. No. M. 8 (1) E. II (A)/68, dated the 24th July and 7th
September, 1968; F. 10 (13)-E. (Co-ord.)/75, dated the 10th April, 1975; and O.M. No. F.
23 (2)-E. II (A)/82, dated the 19th June, 1982. ]

SPECIAL CONDITIONS OF GRANT OF ADVANCE IN LIEU OF LEAVE

SALARY
Rule 76. Powers of Sanction.-A Head of Office, or any other subordinate officer to
whom power may be specially delegated, may sanction an advance in lieu of leave salary
to a Government servant who proceeds on leave for a period not less than one month/30
days. A Head of Office may sanction such an advance to himself also.
NOTE 1.-The concession under Rule 76 may be allowed also to Central Government
servants transferred temporarily to some other post either on deputation or on foreign service. A
suitable provision to this effect should be made by the lending authority in the terms of transfer
of the Government servant concerned.
NOTE 2.-The concession under Rule 76 regarding the grant of an advance in lieu of
leave salary may be allowed also to State Government servant transferred temporarily to posts
under the Civil Departments of the Central Government.

GOVERNMENT OF INDIA'S DECISION

Payment to Official on foreign service to be made without authority from
Audit/Accounts Officer.-An advance in lieu of leave salary to a Government servant
who avails himself of leave during or on reversion from foreign service should be
paid by the foreign employer without any specific authority from the Audit
Officer/Accounts Officer concerned for the drawal of advance. [ G.I., M.F., O.M. No. F. 7
(75)-E. VI (A)/60, dated the 5th June, 1962. ]

Rule 77. Amount of Advance.- The amount of advance in lieu of leave

salary which may be granted to a Government servant proceeding on leave for not less
than 30 days, shall be fixed in whole rupees and shall not exceed the net amount
of leave salary, including allowances, for the first 30 days of leave, that is clearly
admissible to him after usual deductions on account of Income Tax, Provident Fund,
House Rent, Recovery of Advances, etc.

GOVERNMENT OF INDIA'S DECISIONS

(1) Determining amount of advance in the case of Gazetted officers.-To
determine the amount of advance in lieu of leave salary admissible to a Gazetted
Government servant, the details of deductions to be effected from the leave salary may
be ascertained from the previous pay bills of the officer concerned. In addition to this,
deductions in respect of advances, if any, the recovery of which has not commenced
before the officer proceeds on leave, but falls due during its currency or deductions to be
made in respect of any other event which comes to notice, viz., taking of Postal Life
Insurance Policy, Court attachment, etc., may also be taken into account to the extent

143
information is readily available.
[ G.I., M.F., O.M. No. F. 7 (75)-E. IV (A)/60, dated the 12th January, 1961. ]
(2) Determining amount when leave commences in the middle of a month.-
When a Government servant proceeds on leave for more than a month from about the
middle of a month, the advance in lieu of leave salary may be on the basis of leave
salary payable for one month of leave from the date of commencement of the leave.
[ G.I., M.F., O.M. No. F. 7 (75)-E. IV (A)/60, dated the 12th January, 1961. ]
(3) Usual recoveries to be made from duty pay, if duty is for major portion of a
month.-The usual deductions on account of Income Tax, Provident Fund, House Rent,
repayment of advances, etc., may be effected from the duty pay which the
Government servant will draw for the portion of the month in which the leave
commences if the period of duty is for the major part of a month. Otherwise such
deductions may be made from the leave salary.
[ G.I., M.F., O.M. No. F. 7 (75)-E. IV (A)/60, dated the 12th January, 1961. ]

(4) Advance to Gazetted Government servants may be granted even without

report from the Accounts Officer if eligibility to leave is otherwise verified.-An
advance in lieu of leave salary may be sanctioned to a Gazetted Government servant even
without a report from the Audit Officer/ Accounts Officer regarding the nature and
period of leave admissible. For the purpose of sanctioning an advance in lieu of leave
salary to a Gazetted Government servant, the nature and period of leave admissible to
him may be ascertained from the previous leave application of the officer or any
other records available with the authority sanctioning the leave and the leave earned
during the period from the date of his last return from leave to the date he again
proceeds on leave. In doubtful cases, however, or where the requisite information is not
available with the Head of Office, the Audit/Accounts Officer's report regarding
admissibility of leave to the officer concerned should be awaited. [ G.I., M.F., O.M. No. F.
7 (75)-E. IV (A)/60 dated the 12th January, 1961. ]

Rule 78. Adjustment of Advance.-The amount of advance granted under this

section shall be adjusted in full in the leave salary bill in respect of the leave availed of by
Government servant concerned. If the amount of advance cannot be so adjusted, the
balance shall be recovered from the next payment of pay or/and leave salary.

GOVERNMENT OF INDIA'S DECISIONS

(1) When payment is made by foreign employer.-The following procedure
should be observed in respect of an advance in lieu of leave salary to a Government
servant on foreign service in India:
(i) As soon as the foreign employer pays the advance, he should place a demand on
the Audit Officer/Accounts Officer or Head of Office responsible for
authorizing/drawing leave salary duly supported by the cash receipt obtained from the
Government servants.
(ii) The Audit Officer/Accounts Officer or Head of Office should check the
correctness of the amount paid as advance and refund the amount of the advance to the
foreign employer by means of a Bank Draft. If it is found that the advance already

144
paid by the foreign employer is more than the correct amount admissible under the
rules, the Audit Officer/Accounts Officer or Head of Office should reimburse only the
correct amount and request the foreign employer to recover the balance from the
Government servant direct.
(iii) The amount of Bank Draft should be classified under the final Head of Account to
which the leave salary is debitable.
(iv) Suitable entries should also be made by the Audit Officer and/or the Accounts
Officer, as the case may be, in the Objection Book and the Audit Register for
watching the adjustment of the advance in the usual course. Likewise, the Head of
Office should keep appropriate note in his records to watch the adjustment of the
advance from the final leave salary.
(v) The foreign employer should indicate in the Last Pay Certificate the outstanding
advance so that recovery of the advance is not lost sight of by the Audit
Officer/Accounts Officer or Head of Office.
[ G.I, M.F., O.M. No. F. 7 (75)-E. IV (A)/60, dated the 5th June, 1962. ]
(2) Government servants on deputation availing leave at time for reversion to
parent Department.-The following procedure should be followed for payment and
adjustment of advance in lieu of leave salary in a case where a Government servant on
temporary transfer from one Department/Government to another avails of leave at the
time of his reversion to his parent Department/Government:
(i) As the borrowing Department would be in 'possession of the Audit Officer's
previous leave report or leave account of the Government servant concerned, the
entitlement of leave can be verified by that Department with reference to the relevant
documents. The payment of advance in lieu of leave salary should then be made by the
borrowing Department after ascertaining from the lending Department the period and
nature of leave that would be sanctioned.
(ii) In cases of transfer from one Central Civil Department to another such
Department and also in other cases, where the Rules of Incidence in Account Code, Vol.
I, do not apply, the Department paying the advance in lieu of leave salary would
bear the charges initially and finally. The payment of advance should be indicated
in the LPC to enable necessary adjustment by the Department to which the
Government servant is transferred.
(iii) In cases of transfer from one Department/Government to another where, under the
Rules of Incidence the leave salary is to be borne by the lending
Department/Government, the borrowing Department/Government should pay the
advance from out of its own Budget and later raise a debit for the amount against the
lending Department/Government. The amount thus recovered from the lending
Department/Government should be classified in the accounts according to the general
principles enunciated in Chapter 5 of Accounts Code, Vol. I. [ G.I., M.F., O.M. No. F. 7 (I)-
E. IV (A)/65, dated the 22nd December, 1965.]

145
 XI. SPECIAL CONDITIONS FOR GRANT OF ADVANCES TO
THE FAMILIES OF GOVERNMENT SERVANTS WHO DIE
WHILE IN SERVICE
PART I. LUMP SUM ADVANCE TO PROVIDE FOR IMMEDIATE
FINANCIAL RELIEF

Rule 79. Powers of Sanction.-A Head of Department or a Head of Office may

sanction an advance to the family of a Government servant in permanent or temporary
employ (excluding casual and daily-rated staff) who dies while in service (whether on
duty or on leave with or without pay) in order to enable the family to meet its
immediate requirements, if in the opinion of the Head of Department or the Head of
Office, as the case may be, the family concerned has been left in indigent circumstances
upon the death of the Government servant on whom it was dependent and is in
immediate need of financial assistance

GOVERNMENT OF INDIA'S DECISION

(a) In the case of a Government servant who was eligible for the benefits of liberalized
pension rules, payment should be made only to the person or persons nominated by
him or otherwise eligible (that is, where there is no nomination) to receive the Death-
Cum-Retirement Gratuity, in the same proportion as they are entitled to. In the case
of a Government servant who was not eligible for the benefits of the liberalized
pension rules, but was eligible for the benefits of the Contributory Provident Fund
or the General Provident Fund, payment should be made to the person or persons,
nominated by him in the same proportion as they are entitled to the Provident Fund
amount as specified in the nomination. In cases where there are no nominations and
there is a family, the amount of advance may be paid to the person or persons entitled to
receive payment of cash equivalent of leave salary in the case of death of a Government
servant under Rule 39-C of the CCS (Leave Rules), 1972.
(b) In cases of temporary/quasi-permanent Government servants and permanent
Government servants with less than 5 years' qualifying service, the advance should be
made to the person or persons eligible to receive Death-Cum-Retirement Gratuity
under Finance Ministry, Office Memorandum No. F. 1 (l)-E.V (A)/60, dated the 11th
July, 1960, as amended from time to time.
(c) In all cases, an undertaking should be taken from the person or persons
concerned, before the payment is made, that he/she or they agree to the amount
being deducted from the Death-Cum-Retirement Gratuity, or the Contributory
Provident Fund amount or the General Provident Fund amount or the Death-Cum-
Retirement Gratuity under orders of 11th July, 1960, referred to in sub-para. (b)
above, as the case may be, ultimately payable to him/her or to them.
(d) The sanction to the advance, copies of which should be sent to the Audit Officer
and/or the Accounts Officer, as the case may be, should contain the following particulars:
1. Name of the official.
2. Designation and office in which the person was last working.
3. Last pay drawn (Permanent and officiating).
4. Amount of advance sanctioned.

146
5. Name of the payee.
(e) In order to provide timely relief, Heads of Offices may use permanent advance
or other resources available with them. If the permanent advance or other resources
available are not sufficient to meet the payment of the amount of advance, Heads of
Offices should draw the amount from Treasury on a simple receipt in a Form similar to
TR-42 as provided in Rule 669 of the Central Treasury Rules, Vol. I. The fact of payment
in this behalf should be noted in the Last Pay Certificate sent with the papers relating
to Death-Cum-Retirement Gratuity and similar other payments, sent to the Audit Officer
and/or the Accounts Officer, as the case may be. In cases where submission of the Last
Pay Certificate has been dispensed with, the fact of payment of the advance should be
indicated in the No Demand Certificate or on Page 3 of the Pension Application or in
the letter forwarding the pension papers to the Audit Officer and/or the Accounts
Officer, as the case may be. [ G.I., M.F., O.M. No. 10 (18)-E.V(A)/60, dated the 16th
December, 1960 and F.10 (3)-E.V(A), dated the 1st November, 1965.]

Rule 80. Amount of Advance.-The amount of an advance which may be granted

under Rule 79 shall be equal to two months' basic pay and dearness pay taken
together of the deceased Govt. servant, subject to a maximum of Rs. 8,000 (Rupees
Eight thousand only).

Rule 81. Adjustment of Advance.-The Heads of Departments/Offices shall see that

the advance (granted under Rule 79) is adjusted as early as possible, and in any case,
within a period of six months from the date of its sanction, by deduction from the
amount that may be payable on account of arrears of salary due, the Death- Cum-
Retirement Gratuity or the Contributory Provident Fund or the General Provident
Fund or any other payments due to the deceased.

GOVERNMENT OF INDIA'S DECISION

Head of Account.-The advance granted under this Section should be debited tothe Head
"8550 CIVIL ADVANCES OTHER ADVANCES - LUMP SUM ADVANCE to
provide immediate financial relief to the deceased Government servant's family". If the
amount of Death-Cum-Retirement Gratuity or similar other payments is less than the
advances initially sanctioned, and if the balance is eventually treated as irrecoverable,
the same should be debited to the Head "2075 - MISCELLANEOUS GENERAL
SERVICES - OTHER EXPENDITURE WRITE OFF OF IRRECOVERABLE LOANS
advanced to provide immediate financial relief to the deceased Government servant's
family", under special sanction of Government. [G.I., M.F., O.M. No. 10 (l8)-E.V/(A)/60,
dated the 16th December, 1960 and 10 (3)-E. V (A)/65, dated the 1st November 1965
and correction slip No. 81 of 2nd list of amendment and OM. No. 23 (1)-E. II (A)/90,
dated the 19th October, 1990 and Budget Division's U.O. No. 442-B (AC)/90, dated the
29th May, 1990. ]

PART II. ADVANCES TO MEET TRAVEL EXPENSES

Rule 82. Powers of Sanction.-All authority, who would have been competent to
countersign the Travelling Allowance claim if the Government servant were alive, may
sanction an advance of Travelling Allowance to the family of the Government servant,

147
who dies while in service, to meet travel expenses, which may be admissible to the
family under orders issued by Government from time to time.

GOVERNMENT OF INDIA'S DECISIONS

(1) Admissible only to one member.- (a) The advance should be admissible to
only one member of the family of the deceased Government servant on behalf of all.
He/She should be the widower/widow or any other member of the family (within the
definition of the term "family") who is a major and of sound mind. The decision of the
sanctioning authority, as to whom the advance may be given should be final.
After the advance is sanctioned by the competent authority it may be drawn by the
Head of Office and paid to the member of the family in this behalf.
(b) Only one advance should be admissible irrespective of the fact that the members of
the deceased Government servant's family travel in separate batches from the same or
different stations. [G.I., M.F., O.M. No. F. 16-A(5)-E. II (A)/61 , dated the 31st August,
1961.]
(2) Undertaking from the member and surety of a permanent Government
servant necessary.-The surety of a permanent Central Government servant of status
comparable to or higher than that of the deceased Government servant should be
obtained before the advance is sanctioned. The person receiving the advance should also
give an undertaking in writing to the effect that he/she would abide by the provisions
contained in Rule 84. [ G.I., M.F., O.M. No. F. 16-A (5)-E. II(A)/61, dated the 31st August,
1961.]
(3) Head of Department may sanction advance in the case of deceased
Government servant having been his own Controlling Officer. In case of the
deceased Government servant himself being Controlling Officer of his T.A. claims, a
Head of Department may sanction such an advance if otherwise admissible under this
Rule. [ G.I., M.F., File No. F. 23 (1)-E. II (A)/76. ]

Rule 83. Amount of Advance.-The amount of advance, which may be granted

under Rule 82 shall be limited to 3/4ths of the probable amount of Travelling Allowance
admissible under the orders issued by Government from time to time.

Rule 84. Adjustment of Advance.-The account of the advance drawn shall be

rendered within one month of the completion of the journey if the family travels in one
batch. In case the family travels in more than one batch, the account may be rendered
within one month after the completion of the journey by the last batch. In any case, the
journey must be completed before the stipulated period of six months and the account
of the advance rendered within one month of the expiry of the stipulated period at
the latest. The advance shall, however, be refunded forthwith if the journey is not
completed within the stipulated period.
NOTE.-The stipulated time-limit of six months has since been raised to one year,
vide G.I., M.F., O.M. No. 19030/l/76-E. IV (B), dated the 30th January, 1978.

148
 XII. SPECIAL CONDITIONS FOR GRANT OF ADVANCES IN
CONNECTION WITH LEGAL PROCEEDINGS

Rule 84. A. Advances to Government servants involved in legal proceedings shall

be regulated by orders issued by the Government from time to time.

XIII. SPECIAL CONDITIONS FOR THE GRANT OF ADVANCES OF

TRAVELLING ALLOWANCE TO NON-OFFICIAL MEMBERS OF
COMMITTEES/COMMISSIONS
Rule 85 (1). A Department of the Central Government and an Administrator may
sanction to non-official members of Committees and Commissions appointed by
Government advances of Travelling Allowances in exceptional cases where it is
considered that it will be difficult for the members to meet the cost of long and
expensive journeys. Before such advances are sanctioned, a written undertaking shall be
obtained from the member concerned.

Rule 85 (2). A second advance shall not be sanctioned until the first one has been
adjusted.

GOVERNMENT OF INDIA'S DECISION

Rendering of account of advance taken.-The amount of advance sanctioned under
this rule should be accounted for and adjusted on return from tour or on the 31st
March, whichever is earlier.

XIV. SPECIAL CONDITIONS FOR GRANT OF ADVANCES TO

GOVERNMENT SERVANTS FOR BUILDING HOUSES, ETC.

Rule 86. Advances to Government servants for the purpose of building houses, etc.,
shall be regulated by the rules issued by Government from time to time.
NOTE.-The Rules to regulate the grant of advances to Central Government servants for building,
etc., of houses, issued by the Ministry of Urban Development with the concurrence of the Finance
Ministry have been published separately.

149
 Excerpts from
House Building
Advance Rules,
1978

150
 Eligibility

(a) All permanent employees.

(b) Other employees having rendered at least 10 years continuous service.
(including military service in case of re-employed ex-servicemen).
(c) Members of All India Services (IAS, IPS & IFS) deputed to Central Government,
public sector undertakings under the control of the Central Government,
international organizations, autonomous bodies or a private body.
(d) Central Govt. employees on deputation and on Foreign Service.
(e) Staff artists of All India Radio with 10 years continuous service and with long
term contract.
(f) Staff Covered under payment of Wages Act.
Note:
(i) Employees of UTs and North-East Frontier Agency (NEFA) are also eligible as per the
above criterion.
(ii) If both husband and wife are Central govt. employees eligible for HBA, the advance
shall be admissible to only one of them.
Purpose of Advance
(a) Acquiring a plot and constructing a house thereon.
(b) Constructing a new house on a plot already owned singly or jointly with spouse.
(c) Getting a plot under cooperative schemes and building a house where title will vest
in the official after the house is built.
(d) Enlarging living accommodation in a house owned by self or jointly with spouse.
(e) Constructing the residential portion alone in a shop-cum-residential plot in a
residential colony.
(f) Purchase of a ready-built house/flat from/under:
(1) Government, semi Government, local bodies, housing boards,
development authorities
(2) Self-Financing Housing Schemes.
(3) Cooperative Group Housing Schemes.
(4) Private parties such as registered builders, architects, house building
societies etc. (but not from private individuals).
(g) Conversion of hire purchase of house/flat into outright purchase, from State
Housing Board or similar government controlled bodies.
(h) Repayment of a loan taken for purchase/construction of a house/flat if employee
had applied for HBA before taking the loan (even if construction has been started
already). Loan may have been taken from government source, or a non-
Government source including private institutions, friends and near relatives, PSUs,
Autonomous Bodies and other Registered Societies funded by the Govt. Before
obtaining loan from a non-govt. source, the employee must apply for HBA, and go
for the private loan only when HBA is denied due to paucity of funds.

151
 Cost Ceiling of the House
Cost of the house (excluding cost of land) should not exceed 134 times of pay in the
pay band subject to a minimum of Rs. 7.50 lakhs and a maximum of Rs. 30 lakhs.
In case of Self-Financing Scheme, cost ceiling will be inclusive of land and
development charges.
Maximum Cost Ceiling may be relaxed upto 25% by the Administrative
Ministry/Department in appropriate cases.
Note: Family pension, if any, received by the employee shall also be included in pay. Besides,
where both husband and wife are Government employees, pay of both shall be taken into
account for determining the cost ceiling.
Amount of Advance
Purpose Amount of Advance
(1) For Construction of a house in an 34 times pay in the pay band of the employee
existing plot in urban areas. or Rs. 7.50 lakhs or the estimated cost, or
(2) For purchasing a plot repaying capacity, whichever is the least (In
and
constructing a house thereon. case of HBA sanctioned during 1.1.2006 to
(3) 27.11.2008, enhanced HBA if applied for may
For purchasing a ready built house.
be granted provided earlier sanctioned
amount is not fully drawn and/or
construction is not completed).
(4) For enlarging accommodation in an 34 times of pay in the pay band or Rs. 1.80
existing house in urban area. lakhs, or the estimated cost, or the repaying
capacity, whichever is the least.
(5) For construction/enlargement of The advance should not exceed 80% of true
accommodation in rural areas. (not cost of a land and construction or cost of
falling on the periphery of a town or enlargement and further restricted to his
city) repayment capacity.
(6) Where the employee owns a house
jointly with other relations, or has The amount of HBA shall be restricted to 60%
coparcenary share in a house of the amount normally admissible to him.
belonging to HUF of which he is a
member, and the employee desires
to have a separate house for himself.
Note: Amount of advance can be reduced at the request of the employee (to avail reduced
rate of interest), if the entire advance is not drawn.
Repaying Capacity
Repaying capacity is calculated in terms of specified percentage of pay and of
gratuity depending on the length of remaining service as follows:
Length of remaining Service Slab of Repaying Capacity
Officials retiring after 20 years 40% of Pay (Basic Pay+SI+Dearness Pay+NPA)
Officials retiring after 10 years but 40% of pay after adjustment of 65% of gratuity
before 20 years
Officials retiring within 10 years 50% of Pay after adjustment of 75% of gratuity

152
 Once HBA is sanctioned, it cannot be enhanced as a result of subsequent upward
revision of gratuity limit, and the repaying capacity.
Note: Pay for this purpose will also include family pension, and NPA, if any drawn by the
employee

Conditions for eligibility/admissibility of HBA

(a) The house to be purchased/constructed should be either at the place of duty or at the
place where the employee proposes to settle after retirement.
(b) Employee/spouse/minor child should not own a house in the town/urban
agglomeration where house/flat is proposed to be constructed/acquired.
(c) The title of the land should be clear in the name of employee/spouse/jointly.
(d) In case of purchase of ready-built house/flat from private parties, the house/flat
should be new and unlived in.
Note: Private parties include registered builders, architects, house building societies, but not the
private individuals. Registered builders means a company registered under the Companies Act,
1956/a firm registered with the Registrar of Firms under the Indian Partnership Act with fulfils
following conditions:
(i) The company/firm should be registered in the panel of Builders/Architects etc. with Urban
Development Authority/Housing Boards of State Government/Municipal Authorities, etc.
In case the company/firm is not so registered, it shall produce an Income-Tax Clearance
Certificate or other documentary evidence showing that the company/firm has
undertaken/executed housing projects for Government agencies.
(ii) The company/firm should have a clear title to the land on which house/flats are erected
evidenced by a registration deed.
(iii) The company/firm should be financially sound. Audited accounts including balance
sheet/income and expenditure accounts, etc. for the preceding three years may be
examined.
(iv) The employee should obtain an undertaking from the company/firm to the effect that the
house is ready for possession and for moving in, and it has obtained completion certificate
from the map/plan approving authority.
(e) The house/flat should used for residential purpose only.
(f) Advance shall be granted in respect of only one house/flat, in the entire service. The
advance may, however, be drawn at different stages, say, for purchase of plot,
construction of house, enlargement/addition, etc..
(g) Employee should not have taken any loan from any other Government source/ semi-
Government bodies/Housing bodies/Local bodies/ Development authorities etc.
and where the employee has taken any such loan, he should undertake to repay such
loans with interest in lumpsum.
(h) Advance for ready-built house will be only for outright purchase.
(i) HBA together with GPF/CPF withdrawal if any, taken for house building should not
exceed the prescribed cost ceiling.
(j) In case of construction of residence in shop-cum-residential plot.

153
 (1) Cost of land+cost of superstructure for both residence and shops should not
exceed the prescribed cost ceiling.
(2) Entire property including shops should mortgaged.
(3) Entire building including shop(s) should be insured.
(k) In case of HBA for enlargement of the house-
(i) Funds will be arranged from the officers own resources and this does not in
any way affect his repaying capacity, (a declaration of the employee to that
effect is needed).
(ii) Two years should have elapsed after completion of te house, (as per
completion certificate).
(iii) Certified copy of approved plan is to be furnished.
(iv) The foundation is capable of taking additional load (to be certified by a
qualified engineer).
(v) HBA+loan raised from other institutions shall be restricted to the prescribed
cost ceiling.
(l) In case of Central Government employee on deputation, the case is to be processed
by the parent department.
(m) Sanctioning authority should be satisfied that employee is likely to be in service till
the house is built and/or mortgaged.
(n) The advance should be utilized only for the purpose it is sanctioned. Misutilisation
of advance shall entail disciplinary action. Any unutilized amount should be
refunded immediately.
(o) Sanctioning Authority must ensure that all the term and conditions under HBA
Rules like clauses of Insurance, Mortgage, Completion Certificate, good repairs and
maintenance, provision of penal Interest etc. are invariably incorporated in sanction
letter so that the loanee Government servant is not given any opportunity to
represent against such clauses including invoking of penal interest.
Any relaxation/condonation of provisions of HBA rules including those of
mortgaging and insurance shall be allowed by the sanctioning authority, only after
thoroughly examining the case and on being satisfied with the justification/merit of the
case. The case shall be referred to the Ministry of urban Development with the specific
relaxation along with all supporting documents.
Disbursement of Advance
The amount of HBA sanctioned will be disbursed in following order:

Purpose/Stage Amount of Advance Conditions

For purchase of plot
40% of advance (30% in An agreement is to be executed
case of double storey and surety bond should be
house)6 produced before hand.
Plot to be purchased and copy of
sale deed to be furnished within 2
months of drawal of advance.

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Purpose/Stage Amount of Advance Conditions
For construction of House 50% of the balance Plot to be mortgaged with the
advance (after house to be built thereon, in
deducting advance for favour of government
purchase of plot, if any)
When construction reaches Balance of the advance
plinth level
For enlargement of house 50% of the advance House to be mortgaged in favour
of government.
When construction reaches Balance 50% of the -
plinth level in case of single advance
storied house/roof level in
case of double storied
house
Purchase of ready-Built Entire amount in one House to be acquired and
House lump sum mortgaged in favour of Govt.
within 3 months of drawal of
advance
Purchase/Construction of In one lumpsum or in Advance to be utilized one month
Flat suitable instalments of drawal.
Purchase of flat under self- If not more than five The payment shall be made direct
financing schemes of instalments (the 5th to the Board/ Authorities
Development Authorities/ instalment being not
Housing Boards etc. less than 10% restricted
to the amount actually
demanded.
Purchase of flat through (i) 20% of advance A demand letter from the society,
Co-operative Group towards cost of land, if indicating progress of
Housing Societies. any. construction is to be produced.
(ii) 30% of advance on
executing personal
bond and surety bond
(iii) Balance in suitable
installments as per the
payment schedule.
Acquiring house/flat under As per eligibility Follow standard terms &
SFS/outright purchase conditions laid down for SFS
from joint venture of under HBA Rules. In addition
Authorities/ Boards and execute Tripartite Agreement
Registered Private Builders. between Joint venture, buyer and
the Government; incorporating
following clauses:
(a) If project is abandoned for any
reason, by the builder, money
shall be refunded in full by joint

155
Purpose/Stage Amount of Advance Conditions
venture.
(b) If booking is cancelled and
earnest money forfeited, the
balance amount paid by the flat
buyer shall be refunded buy joint
venture.
Forfeited amount and interest due
and not paid by joint venture shall
be payable by the flat buyer
applicant.
(d) No terms & conditions shall
prejudice the interest of the govt.

Surety/Collateral Security
(a) In addition to the mortgage deed, a surety bond from a permanent of official is
needed in following cases.
(1) Advance to temporary employees.
(2) Advance to employees, who are due to retire within 18 months from the
date of application of advance, or
(3) Employees requiring advance for purchase of ready built house. The surety
bond will be deemed as cancelled when the property released from
mortgage or the advance with interest thereon is repaid, whichever is
earlier.
(4) In case of purchase/construction of flat, if and is not mortgaged, adequate
collateral security has to be furnished.

Enhancement of HBA in Past Cases

Due to revision of cost ceiling limits, quantum of HBA and rates of interest w.e.f.
16.12.1997, enhancement of HBA in past cases shall be allowed on an application by the
employee, subject to fulfillment of following conditions:
(1) Enhancement of HBA shall not exceed the amount of HBA already
sanctioned i.e. not more than 100% of the HBA previously sanctioned.
(2) The employee should not have drawn the entire amount of HBA sanctioned
and/or the construction is not yet complete/full cost towards acquisition of
house/flat is yet to be paid.
(3) There is no deviation from the originally approved plan of construction.
(4) Supplementary Mortgage Deed, Personal Bond and sureties should be
drawn and executed.
(5) The entitlement shall be restricted to the employees repaying capacity.
(6) The advance with interest shall be recoverable before retirement.

156
(7) Interest on old sanctioned amount shall be payable at old rates. On the
enhanced HBA amount, interest shall be payable at revised rate, as
applicable for the total sanctioned HBA.
(8) In the event of escalation, the revised cost of the original plan should be
considered for additional amount of HBA.

Construction and Maintenance of House

(1) The construction must adhere to the approved plan and specifications.
(2) Alteration in the plan can be done only with concurrence of Ministry of
Urban Development.
(3) The construction must be completed within 18 months of drawal of first
installment of advance. The limit can be extended by one year by Head of
Department and further extended by Government, if work is delayed by
circumstances beyond the control of the employee.
(4) The house constructed/purchased should be insured at employees cost
against fire, flood, lightening for the value of the house not less than the
amount of HBA plus interest. However, in case of acquisition of house
through co-operative societies, where the society has insured the complex,
the employee need not himself insure the house. The insurance policy must
be reviewed every year. Insurance can be done from any of the nationalized
insurance companies.
(5) The house shall be maintained in good repair at employees cost.
(6) The house shall be kept free from all encumbrances.
(7) The employee shall pay regularly all municipal taxes.
(8) The house may be inspected annually by the Head of the Department.

Second Mortgage for Further Loan

(a) A second mortgage on the house can be created for further loan from
recognized financial institutions like banks, govt. corporations, co-operative
housing financial institutions, public companies registered in India with the
purpose of financing of housing, like Housing Development Finance
Corporation Ltd.
(b) Second mortgage of the house can be permitted for enlargement/additional
construction also.
(c) Total amount of HBA and loan raised from such institutions shall not
exceed the prescribed cost ceiling.
(d) Second charge may be transferred from one financial institution to another
provided the 1st charge remains with the President of India and the
necessary changes in the documents are affected, ensuring that only one 2nd
charge exists at a time.
(e) The HoD shall intimate the mortgagor (Government employeer concerned)
giving permission for creation of second charge by way of equitable
mortgage.

157
 Assignment of CGEGIS Benefit for Further Loan
Employees interest in Insurance Fund and Savings Fund under CGEGIS, can be
assigned in favour of recognized financial institution to raise further loan for the purpose
of housing.

Interest
(a) Simple interest from date of payment of first installments on the balance
outstanding on the last day of each month will be calculated at specified rate
prevailing on the date of release of advance/first installment of advance.
The rates of interest for different periods and different amounts of loan are
given in Annexure to this Chapter.
(b) 0.5% concession in the interest is allowed for employees promoting small
family norm by undergoing sterilization operation. The incentive is
available, from the date of sterilization, after drawal of first installment of
HBA, but not after drawal of final installment.
(c) As the rate of interest is lower for lower slabs of HBA, if the amount of HBA
sanctioned is not drawn in full, the employee can request for reduction in
HBA and avail the benefit of lower rate of interest.
Repayment of Advance
(a) The HBA is repayable with interest thereon, within maximum 20 years, or
before the date of retirement, whichever is earlier.
(b) Advance is recovered first and than interest.
(c) The amount of advance shall be repaid in maximum 180 monthly
instalments and interest in maximum 60 monthly instalments.
(d) Employee has the option to repay in a shorter time.
(e) In case of advance for construction or enlargement, recovery will start in the
month following the month of completion or the 18th month after drawal of
first instalment of advance, whichever is earlier.
(f) In case of advance for purchase of land and construction, it will start from
the month following the month of completion or the 24th Month after drawal
of first instalment of advance, whichever is earlier.
(g) In case of advance for purchase of ready-built house, recovery will start
from the pay of the month following the month in which advance is drawn.
(h) The amount is normally recovered from the monthly pay/leave salary or
subsistence allowance payable to the employee.
(i) In case of employees due to retire within 20 years, a portion of advance
and/or interest can be adjusted against death/retirement gratuity, at the
request of the employee.
(j) In case of failure to repay, recovery can be made from gratuity or by
enforcing te security of the mortgage by sale of the house or in any other
manner.
(k) recovery cannot be postponed without prior concurrence of Government.

158
 Rates of Interest on House Building advance
Amount Rate of Interest p.a.
of
25.11.1985 24.6.1987 26.7.1990 16.12.1997 1.4.2001 1.4.2002 1.4.2003
Advance
to to to to to to onwards
23.6.1987 25.7.1990 15.12.997 31.3.2001 31.3.2002 31.3.20033
Up to 7% 7% 7.5% 7.5% 6.5%
Rs.
6% 5%
25,000
Upto Rs. 7.5% 7% 7.5% 7.5% 6.5%
50,000
Upto Rs. 8% 8% 9% 9% 8%
75,000
Upto Rs. 8.5% 8% 9% 9% 8% 7.5% 6.5%
1,00,000
Upto Rs. 9% 9% 10% 9% 8%
1,50,000
Upto Rs. - 10% 11% 11% 10%
2,00,000
Upto Rs. - 10.5% 11.5% 11% 10%
2,25,000
9.5%
Upto Rs. - 11% 12% 11% 10%
2,50,000 8.5%

Upto Rs. - - - 11% 10%

5,00,000
Upto Rs. - - - 12% 11% 10.5% 9.5%
7,50,000

159
 DEFENCE
PROCUREMENT
MANUAL, 2009

160
 PROCUREMENT OBJECTIVE AND POLICY

Procurement

Fundamental Principles of Public Buying: Every authority delegated with the

financial powers of procuring goods in public interest shall have the responsibility and
accountability to bring efficiency, economy, and transparency in matters relating to public
procurement and for fair and equitable treatment of suppliers and promotion of
competition in public procurement.

Procedural Propriety: The procedure to be followed in making public procurement must

conform to the following yardsticks:

a) the specifications in terms of quality, type etc., as also quantity of goods to be procured,
should be clearly spelt out keeping in view the specific needs of the procuring
organizations. The specifications so worked out should meet the basic needs of the
organization without including superfluous and non-essential features, which may
result in unwarranted expenditure. Care should also be taken to avoid purchasing
quantities in excess of requirement to avoid inventory carrying costs;
b) offers should be invited following a fair, transparent and reasonable procedure;
c) the procuring authority should be satisfied that the selected offer adequately meets the
requirement in all respects;
d) the procuring authority should satisfy itself that the price of the selected offer is
reasonable and consistent with the quality required;
e) at each stage of procurement the concerned procuring authority must place on record,
in precise terms, the considerations which weighed with it while taking the
procurement decision.

Channels of Procurement: Procurement of stores will in general be done by one of the

following methods:

(a) Placing demands on the Director General of Ordnance Factories for manufacture of
stores in Ordnance Factories;
(b) Placing demands on:
(i) Other Ministries of the Government of India.
(ii) State Governments, for supply from factories/ workshops/ other procurement
agencies under them
(c) Placing demands on the Industries/Factories/Statutory Corporations whether
wholly or partly financed by the State set-up for the manufacture of specific range of items
in the country;
(d) Placing demands on the indigenous trade either directly or through the Director
General of Supplies and Disposals including Textile Commissioner, Mumbai;
(e) Local Purchase in respect of items which are not supplied by the central procurement
authority/ organizations of the Services / Departments and stores emergently required;
and

161
(f) Placing demands on Defence Public Sector Undertakings and other Government Public
Sector Undertakings for purchase/repair/manufacture/fabrication of
items/equipment/systems/ aircrafts etc. to meet Defence Services requirements.

Policy Guidelines

Economy: Purchases of stores must be made in the most economical manner and
in accordance with the definite requirements of the Defence Services. Stores should not be
purchased in small quantities. Periodical indents should be prepared covering the
requirement for one year or more, except where for reasons of short life or for other
recorded reasons it is necessary to procure lesser quantities. Care should also be taken not
to purchase stores much in advance of actual requirements, if such purchase is likely to
prove unprofitable to the Government, and thus locking up of capital in stock should be
minimized.

Scales: Where scales of consumption or limits of stores have been laid down by the
Competent Authority, the officer ordering a supply should certify on the purchase
order/demands that the prescribed scales or limits are not exceeded.

Splitting: Purchase order should not be split to avoid the necessity for obtaining
the sanction of the higher authority required with reference to the total amount of the
orders.

Open competitive tendering: When stores are purchased from contractors, the
system of open competitive tender should normally be the preferred mode, except where
otherwise permissible under the rules and the purchase should be made from the lowest
tenderer.

Decentralization and delegation of powers

Decentralization: With implementation of the New Management Strategy (NMS)

in the three Services, the Government has decentralized decision-making process so as to
enhance efficiency and expedite decision-making. The procurement function has also been
decentralized and most of the Defence organizations undertake bulk of the central
procurement and local purchase themselves. While DGS&D continues to conclude Rate
Contracts for supply of general use items, service specific items are being procured by the
procurement agencies of the Service concerned. It must be ensured that all procurement
officers meticulously follow the laid down procedures.

Delegation of Powers: With the objective of decentralizing powers to enable

effective use of resources by the actual operators, financial powers have been delegated to
various authorities in the Defence establishments down to the Unit Commanders. These
powers are to be used within the framework of laid down procedures, cannons of financial
propriety and amplificatory instructions. The powers so delegated also imply
accountability and the CFAs must ensure that financial propriety and probity are observed
in all cases.

162
Types of Procurement

Capital Procurement: As per Rule 90 of the General Financial Rules, 2005,

significant expenditure incurred with the object of acquiring tangible assets of a permanent
nature (for use in the organization and not for sale in the ordinary course of business) or
enhancing the utility of the existing assets, shall broadly be defined as Capital
Expenditure. Further, as per Rule 91 (a) of the General Financial Rules, 2005, Capital shall
bear all charges for the first construction and equipment of a project as well as charges for
intermediate maintenance of the work while not yet opened for service. It shall also bear
charges for such further additions and improvements, which enhance the useful life of the
asset. Capital procurement would, therefore, refer to procurement of all goods and services
that fit the description of capital expenditure. The procedure for capital procurement is
separately laid down in the Defence Procurement Procedure, 2008.

Revenue Procurement: As per Rule 91 of the General Financial Rules, 2005,

revenue should bear all subsequent charges for maintenance and all working expenses,
including all expenditure on working and upkeep of the project and also on such renewals
and replacements and such additions, improvements or extensions, etc., as under rules
made by the Government are debitable to revenue account. The revenue procurement,
therefore, implies procurement of items and equipments, including replacement
equipment (functionally similar) assemblies/sub assemblies and components, to maintain
and operate already sanctioned assets in the service, the necessity of which has been
established and accepted by the Government. In the context of Defence procurements,
what would constitute revenue procurement is defined in Chapter 1 of the DPM 2009.

Financial powers for procurement: For Revenue Procurement, Government has

delegated financial powers under revenue heads to a number of authorities in each
Service/Department. Procurements involving financial implications beyond the delegated
powers of the Service HQrs and Heads of the ISOs are undertaken with the approval of the
Ministry of Defence.

Indigenous Procurement: Procurement from indigenous sources is called

indigenous procurement. It is the policy of the Government to encourage indigenization,
particularly in the field of Defence to achieve self-reliance. Hence, indigenous firms should
be given all support to produce and supply quality goods conforming to specifications.
Proper loading criteria for all taxes, duties and other expenses involved in procurement of
an item need to be applied to provide a level playing field to the indigenous
manufacturers. Payments against indigenous procurement are made in rupee terms.
Procurement of goods of foreign origin from indigenous firms/suppliers will not be
treated as import in the following cases
a. Sale of imported goods which are supplied from the already existing stock of
supplier.
b. Import of raw materials and components which have been utilized by the suppliers
in assembling or manufacturing the goods ordered for sale where price of such raw
materials, components and accessories have not been shown separately.
c. Sale of imported goods which have been further processed in India before supply
to the consignee.
d. Sale of goods which are to be imported against firms own Stock and Sale licence
for supply to various customers.
e. Sale of goods that may have moved from foreign country to India as a result of the
Indian Supplier purchasing the goods from the foreign supplier, i.e.

163
 i. the movement of goods has been occasioned by the contract for purchase
which the Indian supplier entered with the foreign seller.
ii. there is no privity of contract between the Government Department and the
foreign seller.
iii. the foreign seller has not entered into the contract by himself or through the
agencies of the Indian supplier.

Foreign Procurement (Import): For such Defence equipments and assets, which are of
foreign origin, items required to maintain and operate these equipments may also need to
be procured from suppliers abroad. The procedure for such procurement is laid down in
Chapters 9 and 10 of the DPM 2009. Procurement of goods of foreign origin from
indigenous firms/suppliers will be treated as import purchases in the following cases
a) Where the movement of goods from the foreign country to India is occasioned
directly as a result of the sale.
b) Where there is a privity of contract between the foreign supplier and the Defence
Department / purchaser.
c) Where the Indian Supplier acts as the agent of the foreign manufacturer in the
agreement of the sale.

Central Procurement: Central Procurement (CP) is undertaken against indents

resulting from planned provisioning process like the Annual Provision Review, refit
planning, obsolescence planning and planned routines. CP indents normally cover the
entire requirement of the item for the duration of the provisioning period.

Local Procurement: Local Purchase (LP) is undertaken within the LP powers of

various authorities as per the delegated powers in the following circumstances:

(a) To meet the short-term, ad-hoc or urgent requirements of units/ establishments

when supplies are not available through the central
provisioning agency. Intimation regarding such purchases should immediately be sent
to the central provisioning agency so that the latter could take the quantities procured
through local purchase into account.
(b) To meet the normal requirements of units/establishments for stores which are not
within the purview of central purchase organizations.

Procurement from Ordnance Factories and Defence Public Sector

Undertakings: The following guidelines should be followed for procurement of
goods/services from the Ordnance Factories and Defence Public Sector Undertakings:

(a) After acceptance of necessity, all stores falling within the product range of the
Ordnance Factories should be procured through the Ordnance Factories Board (OFB) by
placing indents without issuing RFPs. In the case of emergent purchase, items falling
within OFBs product range may be procured from trade following the tendering
procedure but only after obtaining a No Objection Certificate from the OFB. All requests
for obtaining No Objection Certificate should be addressed to the Secretary, Ordnance
Factories Board, 10-A, S. K. Bose Road, Kolkata 700 001.
(b) Goods and Services may be procured from Defence Public Sector Undertakings by
following the tendering procedure. Any item developed/ manufactured by a Defence PSU
specifically for the Defence Services, with transfer of technology or through design and
development, should be procured from the concerned Defence PSU only. Similarly,
Defence PSUs shall be approached for providing any service, such as repairs and

164
overhauling, if facility for providing such services has been set up by a Defence PSU
exclusively for the Defence Services.
(c) Cases falling under (a) & (b) above, including procurement against provision review for
scaled items, will not be treated as STE/PAC procurements.
(d) For induction of new equipment or procurement of new goods and services on the
basis of global/open/limited tendering, RFPs should also be issued to the OFB/concerned
Defence PSUs. In such cases, tender fee, EMD and PBG need not be taken from the
OFB/Defence PSU.

Purchase of goods and services without quotation: Purchase of goods and

services up to the value of Rs. 15,000/- (Rupees Fifteen Thousand) only on each occasion
may be made without inviting quotations or bids on the basis of a certificate to be recorded
by the Competent Financial Authority in the following format.

"I, ___________________, am personally satisfied that these goods/services

purchased are of the requisite quality and specification and have been
purchased from a reliable supplier/service provider at a reasonable price."

Purchase of goods by Purchase Committee: Purchase of goods costing above Rs.

15,000/- (Rupees Fifteen Thousand) only and up to Rs. 1,00,000/- (Rupees one lakh) only
on each occasion may be made on the recommendations of a duly constituted Local
Purchase Committee consisting of three members of an appropriate level as decided by the
Competent Financial Authority. The committee will be required to survey the market to
ascertain the reasonableness of rate, quality and specifications and identify the appropriate
supplier. Before recommending placement of the purchase order, the members of the
committee should jointly record a certificate as under:

"Certified that we, _____________________, members of the local purchase

committee are jointly and individually satisfied that the goods/services
recommended for purchase are of the requisite specification and quality, priced
at the prevailing market rate and the supplier recommended is reliable and
competent to supply the goods in question."

Obtaining of Quotations by the Local Purchase Committee: The Competent

Financial Authority may direct the Local Purchase Committee responsible for carrying out
the market survey to obtain quotations as a part of the market survey. Where no such
direction has been given, it would be up to the Purchase Committee to decide whether or
not to obtain quotations as a part of documentation of market survey. In either case,
however, details of the market survey (suppliers contacted and the rates quoted by them)
would be recorded by the Local Purchase Committee.

Purchase of goods directly under Rate Contract: Goods for which Director
General of Supply & Disposal (DGS&D) has Rate Contracts can be procured directly from
the suppliers. Apart from the original Rate Contract holding firm, the term supplier
includes the authorized dealers / distributors / agents of the RC holding firm, provided
the latter has pre-disclosed the names of these agents /authorized dealers at various
locations or the local stockist/authorized dealers can substantiate their claim by
producing a certificate from the RC holding firm to the effect that they are the firms
authorized stockist/ distributor/ agent /dealer or can show an agency agreement between
the supplier and the RC firm as proof thereof. The purchase must be accompanied by a
proper manufacturer certification. While resorting to such procurement it should be

165
ensured that the prices to be paid for the goods do not exceed those stipulated in the Rate
Contract and the other salient terms and conditions of the purchase are in line with those
specified in the Rate Contract. The Purchaser should also make its own arrangement for
inspection and testing of such goods, where required. In the case of drugs, consumables,
FOL, hygiene chemicals, etc. the inspection may be done by DGQA/NABL but any costs
incurred thereon should be borne by the Suppliers. Payment in such cases would be made
by the concerned Principal Controllers/Controllers of Defence Accounts, their subordinate
offices or other paying authorities as per the existing arrangement. Wherever Senior
Accounts Officers/Imprest Holders are authorized, payment may be made by them. The
format for placing Supply Order on Rate contracts is given at Appendix F of DPM 2009.

Non-application of the provisions of DPM 2009: Provisions of the DPM 2009

will not be applicable in the case of procurements made under delegated financial powers
of certain specified authorities in the Defence Services which are exercisable by them
without IFAs concurrence during period preparatory to war, hostilities, special
operations, natural calamities and disasters. Provisions of this paragraph should be
invoked only as and when the aforesaid eventualities are notified by the Government.
Separate orders laying down the fast track procedure to be followed uniformly by the
three Services would be laid down by the Ministry of Defence.

Cash and Carry Procurement: Cash and Carry purchase is a type of LP (local
purchase) resorted to in case of extreme urgency or when the supplier is not willing to
supply the required item on credit. Cash and Carry powers are very limited as such
procurement is made only in exceptional cases when cash payment is made from the
imprest of the unit and the same is claimed from the paying authority who reimburses the
amount after due audit of the transaction.

Product Reservation, Purchase/Price Preference and other facilities

Product Reservation for Khadi Village Industries Commission (KVIC),

etc.: The Government of India, through administrative instructions, has reserved all items
of handspun and hand woven textiles (khadi goods) for exclusive purchase from Khadi
Village Industries Commission (KVIC). It has also reserved all items of handloom textiles
required by Central Government departments for exclusive purchase from KVIC and/or
the notified handloom units of ACASH (Association of Corporations and Apex Societies of
Handlooms). Purchases of such reserved goods and items would be made from these
units. Form DPM-4 of DPM 2009 gives the details of such items.

Product Reservation and other facilities for Micro, Small and Medium
Enterprises (MSMEs): The Government of India has also reserved some items for
purchase from registered Micro, Small and Medium Enterprises (MSMEs). A list of 358
such items is given in Form DPM-1 of DPM 2009. Under the Government Stores Purchase
Programme, the Government of India has been extending various facilities as given below
to these MSMEs registered with NSIC under its Single Point Registration Scheme:
(a) Issue of Tender Sets free of cost;
(b) Exemption from payment of Earnest Money;
(c) Waiver of Security Deposit up to the monetary limit for which the unit is
registered; and
(d) Price Preference up to 15% over the quotation of large-scale units.

166
 Purchase Preference Policy (PPP) for products of Pharmaceutical Central
Public Sector Enterprises (CPSEs) and their subsidiaries: The policy of the
Government of India to grant purchase preference exclusively to Pharmaceutical CPSEs
and their subsidiaries, as laid down in Ministry of Chemicals and Fertilizers, Department
th
of Chemicals and Fertilizers Office memorandum No. 50013/1/2006-SO(Pl-IV) dated 7
August 2006, would be followed while purchasing medical stores. A copy of the said office
Memorandum is at Form DPM-2 of DPM 2009.

Local Purchase of Stationery and other articles from Kendriya Bhandar,

NCCF, etc.: Keeping in view the avowed objectives of the cooperative movement to
ensure supply of goods and services to the consumers at the most economical and
competitive prices and taking note of the changed concepts of marketing, the Government
th
of India vide DoP&T (Welfare Section) OM No. 14/12/94-Welfare (Vol II) dated 5 July
2007 (given in Form DPM-3 of DPM 2009) has decided to adopt the following dispensation
in respect of all Central Government Departments, their attached and subordinate offices
and other organizations financed and/or controlled by them in making local purchases of
stationery and other items from Kendriya Bhandar/National Consumer Cooperatives
Federation:

(a) Purchase of goods up to Rs.15,000 is permissible without inviting quotations or bids.

Further, a Local Purchase Committee constituted by the CFA can make purchase of goods
up to Rs.1 lakh on the basis of a market survey to ascertain the reasonableness of rate,
quality, etc. and submission of a certificate to that effect. In partial modification of these
provisions, it would be permissible to make purchase, at the discretion of the CFA, of all
items required for office consumption up to Rs.1 lakh on each occasion directly from
Kendriya Bhandar/NCCF without calling for quotations. The responsibility for ensuring
the reasonableness of rates, quality specifications etc. will be equally that of the Purchasing
Ministry/Department and KB/NCCF. Further, the reasonableness of rates, quality,
specifications, etc. should be certified by the Local Purchase Committee as envisaged in
above paragraph.

It is to be ensured that supply orders are not split under any circumstances with the
objective of circumventing the limit of Rs.1 Lakh.

(b) For procurement of all items of office consumption beyond Rs.1 lakh up to Rs 25 lakh,
where limited tenders are to be invited as per the provisions of DPM 2009, KB and NCCF
among others should also be invited to participate in such limited tenders, in case these
cooperatives are functioning at the station. Other things being equal, Purchase Preference
will be granted to KB/NCCF, if the price quoted by the cooperatives is within 10% of the
L1 price and if these cooperatives are willing to match the L1 price. No price preference
over and above the L1 price shall be given to these cooperatives. However, KB/NCCF will
be exempted from furnishing bid security (Earnest Money Deposit).

(c) Supply orders up to Rs. 25 lakh, in respect of office equipments covered under the
DGS&D rate contract may also be procured from KB and NCCF provided KB/NCCF offer
the items at DGS&D rate contracted prices as also fulfill all the contractual obligations
which the manufacturers/suppliers of such products are required to meet under the
DGS&D rate contract. The Purchaser will have to make his own arrangements for
inspection and testing of such goods, where required.

167
(d) The above dispensation shall be applicable for a period of two years beyond
31.3.2010 i.e. upto 31.3.2012.

(e) Other Multi-State Co-operative Societies registered prior to the issue of DoP&T
th
(Welfare Section) OM No. 14/12/94-Welfare (Vol II) dated 5 July 2007 in which the
majority of the shares are held by the Central Government, are also permitted to avail of
the facility of Purchase Preference in respect of limited tender enquiries up to Rs. 25 lakh.

Purchase Preference: Purchase preference policy for Central Public Sector

Enterprises has been terminated with effect from 31.03.2008 vide DPE OM No.
st
DPE/13(15)/2007-Fin dated 21 November 2007. However, this termination does not
apply to the purchase preference allowed for sector specific CPSEs for which the purchase
preference policy is laid down by the Ministries concerned, as in the case of pharma
products, as per paragraph 2.5.3 of DPM 2009.

Time Limit for Procurement & Accountability: The effect of delay in

processing and clearance of various procurement activities needs no emphasis. The
decentralization of decision-making mechanism and delegation of financial powers are
aimed at facilitating faster decision making and obtaining the best value for money.
However, delegation of powers also implies authority with accountability. Every
individual in the chain of the procurement process is accountable for taking action in a
specified time period so that the requirements of the Defence Departments are met on
time.

168
 SOURCING AND QUALITY

General

Identification of suitable suppliers: Proper source knowledge and

identification of suitable suppliers capable of meeting the product quality required by the
Defence departments, particularly by the Defence Services, are vital functions for ensuring
procurement of quality goods. Providing equal opportunity and ensuring fair play are also
important requirements in any procurement process so as to achieve transparency. Hence,
the selection and registration of firms, their performance appraisal and classification must
be clearly spelt out and properly disseminated.

Registration of Firms

Registration by the Central Procurement Agencies: The detailed procedure

for registration of firms is given in Joint Services Guide on Assessment and Registration
of Suppliers for Defence (JSG: 015: 03:2007) published by the Directorate of
Standardization, Department of Defence Production, Ministry of Defence. JSG is an
enabling document which serves as a guide for procurement agencies to formulate
guidelines for registration of vendors. The publication is available on DGQA website
www.dgqadefence.gov.in. It can also be obtained on payment from the Director,
Directorate of Standardization, Ministry of Defence, New Delhi.

Registration by Agencies at the Command and Other Levels: Apart from the
central procurement agencies at the Services Headquarters, firms should also be registered
by the Command Headquarters, Depots, Workshops and Naval Dockyards, etc., as per the
instructions contained in this Chapter.

Registration at the Unit Level: It would not be necessary to register the firms at
the unit level for the purpose of carrying out local purchase. However, the reputation,
capacity and credibility must be ascertained before obtaining quotations from or placing
supply orders on a particular firm.

Scrutiny of the Credentials of the Firms: It is essential that the credentials of

the firms applying for registration, including their financial status, the manufacturing and
quality control facilities, the business ethics and their market standing are thoroughly
scrutinized before registering them as an approved source of supply.

Inter-Services and Inter-Departmental Acceptability of Registration: A

firm registered with any department of the Ministry of Defence, the Services or OFB or the
Inter-services organizations, may be considered as a registered firm for procurement by
other departments of the ministry or the other services, for the same range of
products/goods/services for which the firm is registered with any of the aforesaid
organizations.

Registration of Suppliers and Service Providers: The Joint Services Guide on

Assessment and Registration of Suppliers for Defence (JSG: 015: 03:2007) is applicable
mainly to registration of manufacturing firms as suppliers. The guidelines and procedures
laid down therein may, however, also be applied, mutatis mutandis, by the Registering
Agencies to other suppliers and service providers till such time as a separate procedure is

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laid down by DGQA /DGAQA / Other QA agencies may assist central procurement
agencies at Service HQrs in registration of vendors, as per their request.

Assessment of Performance of the Registered Firms

Criteria for Assessment of Performance: Performance of the registered firms

must be reviewed by the procurement agencies periodically and reported to the
Registering Agency. While the detailed guidelines in this regard are contained in DGQA
Publication JSG:015:03 2007, the general criteria for assessing the performance of the
registered firms are as follows:

(a) Quality: Quality has to be assessed from the inspectors report as well as the
feedback from the actual users.

(b) Delivery: Delivery compliance has to be assessed from the delivery data
against purchase orders placed on the firm. The purchaser could generate the data from
the computer records to determine the percentage of orders in which delivery was
completed within the original delivery date as per the contract/supply order.

(c) Price: Price competitiveness of a firm has to be assessed against its ability to
secure orders on competitive basis. Orders secured as percentage of quotes should indicate
the price competitiveness of the supplier. This data can be generated from the computer
records.

(d) Response: The response analysis of the firms could be carried out in terms of
number of quotes submitted against the number of RFPs sent to them. Computer
generated data for quotes received as a percentage of RFPs sent could be one of the valid
criteria for response analysis.

(e) Product Support: Product support record of a firm may be determined on the
basis of response to enquiries for spare parts and maintenance services for the equipment
originally supplied by that firm.

Assessment of Technical and Financial Capabilities: The technical and

financial capabilities of the firms, including their past performance, must be carefully
evaluated and verified by a Board of Officers constituted by AHSP/Registering Agencies
for the purpose of considering registration/renewal of registration. The Registering
Agency may also co-opt a representative of the User. IFA may be associated with
assessment of the financial capabilities of the firm, if considered necessary by the CFA.

Removal from the List of the Approved Firms

Removal from the List: Whenever a firm is found lacking in performance in

terms of response, delivery compliance, capacity, quality standards, ethics or any other
valid reason, the firm may be removed from the list by the Registering Authority after
giving notice of proposed removal to the firm. Besides, there may be registered firms
which may have ceased to exist or may have been acquired by or merged with another
firm, may have switched over to other sectors of business operation or indulged in
unethical business practices and influence peddling. Such firms should be removed from
the list of approved vendors after giving them notice of the proposed removal.

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 Effect of Removal from the List: Whenever a firm is removed from the list of
approved vendors, its registration stands cancelled. Such removal must be communicated
to all other registering and procuring agencies so that no further business relations are
maintained with such firms.

Ban on dealings with a firm

Ban on dealings: When the misconduct of a firm or its continued poor

performance justifies imposition of ban on business relations with the firm, this action
should be taken by the appropriate authority after due consideration of all factors and
circumstances of the case and after giving due notice.

Ban on Dealings by Other Ministries/Departments: The banning of business

dealings will be of two types, namely (i) banning confined to one Ministry; and (ii)
banning to be implemented by all Ministries. In the second category of cases before any
banning orders relating to other Ministries are passed, the matter is required to be placed
before the Committee of Economic Secretaries and their approval obtained. As such, any
reference received from any other Ministry/Department needs to be forwarded to MoD/D
(Vigilance) section for dissemination in case approval of the Committee of Economic
Secretaries has been taken. The departments/organisations under Ministry of Defence will
not take cognizance of any other order/letter received from another Ministry imposing
ban on dealing which is confined to one Ministry.

Specification

Specifications: Items bought by the Defence Department, particularly the Defence

services, must be manufactured as per or conforming to the specifications. The
specifications are the detailed qualitative requirements of the item being procured and
should indicate the material composition, physical, dimensional and performance
parameters, tolerances, if any, manufacturing process where applicable, test schedule,
preservation and packing etc. AHSP/ Specification promulgating authority should
forward copies of specification/amendments to all the concerned procurement agencies
periodically. Various types of specifications relevant to the Defence items are as follows:

(a) PAC Specifications: These are available only with the proprietary firms and
are protected by the intellectual property right. Hence, PAC specifications are normally not
available with the purchaser and firms certificate of quality is accepted. However,
essential characteristics required for inspection should be available with the procuring and
inspecting agencies.

(b) Branded Product: The specification for branded commercial product is not
available with the purchaser or the inspecting agency and these are to be accepted on the
firms guarantee.

(c) Industrial Specification: There are standard industrial specifications like the
IS, BS, DIN and GOST available for sale in the market. In the case of medical stores
standard specifications are issued by WHO, FDA, CE etc. Every procuring and inspecting
agency should acquire such specifications for reference to ensure quality standards of the
product being procured.

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 (d) Defence Specifications: There are Defence specifications for specialist items
for use by the Defence departments, particularly the Defence Services. These are Joint
Services Specification, Milspecs, etc. Copies of such specifications should be available with
the procuring agency, authority and the AHSP.

(e) Indigenized Item:. The manufacturing agency, QA agency, DRDO and Service
Headquarters, involved in the indigenization efforts often successfully indigenize some
items as import substitute. In such cases, the specification including the drawing and other
details are formulated by these agencies in consultation with the manufacturing firms/QA
agency/Design agency/Service HQrs, as the case may be, to guide future production. Such
specifications should be available with the purchase agency as well as the inspecting
authority so as to ensure conformity with the required quality standards of the items being
supplied.

(f) Ad-hoc Specifications: There are items for which neither industrial nor
Defence specifications are available. In such cases, the indentor must indicate the general
parameters, normally the dimensional and performance parameters to enable procurement
and inspection. Such ad-hoc specifications must be broad enough to permit wider
participation by the suppliers and should not be restrictive so that adequate competition is
not obviated.

(g) As per Sample: There are occasions when items, normally PAC products,
cannot be procured from the original manufacturer and have to be procured from another
manufacturer as per sample in the absence of detailed specifications or drawing. For such
items the supplier prepares detailed specification as well as the drawing. The purchaser
and the inspecting authority should acquire such specifications and drawings and retain
with them to guide future production and inspection.

(h) Common Use Items: There are a large number of items in use by the Defence
Departments and Defence Services, which are common-use items, freely available in the
open market. As in the case of ad-hoc specifications, specifications of common use items
should also be broad enough to permit wider participation by the suppliers and should not
be restrictive so that it does not pre-empt adequate competition.

Inspection Note

Waiver of Inspection Note: There would be no requirement of Inspection Note

in respect of items procured against specifications mentioned at (f), (g) & (h) above or for
items available commercially off-the-shelf (COTS) or in respect of items for which testing
facilities do not exist with AHSP/DGQA. Such items may be accepted based on self-
certification by the firm and inspection by a Board of Officers at the users end. Relevant
certificate from the firm should be enclosed with the bill by the procurement agency.

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 TENDERING/RE-TENDERING, ROLE OF COMMERCIAL
NEGOTIATION COMMITTEE (CNC) & IFA

Types of Tendering

Procurement of goods by obtaining bids: Except purchase of goods without

obtaining quotations, purchase of goods through Purchase Committee, and purchase of
goods against Rate Contracts, goods should be procured by adopting one of the following
standard methods of obtaining bids:
(a) Advertised Tender Enquiry (also known as Open Tender Enquiry);
(b) Limited Tender Enquiry; and
(c) Single Tender Enquiry.

Procurement of Services: The above mentioned methods will also be applicable

for procurement of services, subject to other instructions contained in DPM 2009 being
followed.

Advertised Tender Enquiry/Open Tender Enquiry (ATE/OTE)

Advertised/Open Tender Enquiry: The Open Tendering system should be the

preferred mode for procurement of common use items of generic or commercial
specifications which are readily available off-the-shelf in the market from a wide range of
sources/vendors. It must be adopted in all such cases in which the estimated value of the
tender is more than Rs Twenty Five lakhs, subject to the exceptions as provided.

Global Tender Enquiry: Where it is felt that the goods/services of the required
quality, specifications, etc., may not be available in the country and it is necessary to also
look for suitable competitive offers from abroad, copies of the tender enquiry may be sent
to the Indian embassies abroad as well as the foreign embassies in India. The selection of
embassies would depend on the possibility of availability of the required goods/services
in such countries. The tender enquiries may also be sent through the Defence Attachs
wherever they are posted in the Embassies and High Commissions.

Publicity: Open tender system involves wide publicity through advertising media
(Press, Trade, Journals etc). Open tender notifications should be sent to the Director
General of Commercial Intelligence and Statistics, Kolkata for publication in the Indian
Trade Journal (ITJ) and to the DAVP, New Delhi for publication at least in one leading
daily, which has a wide circulation. Such notifications should also be published in the
bulletin, if any, of the Service/Department concerned.

Preparation of the Notice Inviting Tender: The Notice Inviting Tender (NIT),
to be published in the journals/newspapers in the case of Advertised/Open Tender
Enquiry, should be carefully drafted. It should contain salient features of the requirement
in brief to give a clear idea to the prospective tenderers about the requirements.
Superfluous or irrelevant details should not be incorporated in the tender notice, as it will
needlessly increase the cost of advertisement. The tender notice should normally contain
the following information:
(a) Description and specification of the goods and quantity
(b) Period and terms of delivery
(c) Cost of the tender/bidding document

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 (d) Place(s) and timing of sale of tender documents
(e) Address of the website from where the tender document could be downloaded
(f) Place and deadline for receipt of tenders
(g) Place, time and date for opening of tenders
(h) Amount and form of Bid security/Earnest Money Deposit
(i) Any other important information

Publicity through the website: All OTE notifications in respect of non-

lethal/security and non-sensitive items should invariably be posted on the website of the
Ministry of Defence, as also on the websites of the Service HQ/Department concerned,
wherever such websites already exist. A link may also be provided to the NIC website. The
website address should also be given in the notifications advertised through the ITJ and
the newspapers.

Direct dispatch of tender documents: In case of OTE, Notice Inviting Tenders

(NIT) and/or tender forms may also be sent to all suppliers registered for the particular
range of items.

Tender documents on the website: The complete tender document should be

posted on the website and the prospective bidders should be permitted to make use of the
documents downloaded from the website. If such a downloaded document is priced, there
should be clear instructions for the bidder to pay the amount by demand draft, etc., along
with the bid. Such documents must be secured to avoid possibility of modification and
restriction of access to bidders.

Time to be given for submission of bids: Ordinarily the minimum time to be

allowed for submission of bids should be three weeks from the date of publication of the
tender notice or availability of the bidding document for sale, whichever is later. Reduced
time frame for submission of bids may be adopted in the case of emergent local purchase
of supplies, provisions and medicines by use of FAX, e-tendering etc. as permissible.

Unregistered firms claiming compliance: In OTE cases, where an unregistered

firm claiming compliance of technical specifications meets the laid down technical
parameters detailed in the RFP, before opening the commercial bid of such firm,
assessment of capability of the firm by procuring/registering agency would be mandatory.
This capability verification will, however, not amount to automatic registration of the firm
by the Registering Authority. However, in the case of specialized and critical medical
equipment/stores, where DGQA and DGS&D are presently not registering the firms on
the grounds that SPQR are not formulated by them but by the users, manufacturers of
national repute or their authorized agents may be considered, based on financial status
and market reputation/past performance of the firm, as at present.

Limited Tender Enquiry (LTE)

Limited Tender Enquiry: This method may be adopted when estimated value of
the goods to be procured is up to Rupees Twenty-five lakhs. Normally, the number of
supplier firms in Limited Tender Enquiry should be more than three. However, Limited
Tender Enquiry may be resorted to also when there are only two or three known sources
of supply.

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 Limited Tender Enquiry in Special Circumstances: Purchase through Limited
Tender Enquiry may be adopted even where the estimated value of the procurement is
more than Rupees twenty five lakhs, in the following circumstances, subject to approval by
the CFA and in consultation with the IFA, where required as per delegation of financial
powers:
(a) The Indenter certifies that the demand is urgent and any additional expenditure
involved by not procuring through advertised tender enquiry is justified in view of
urgency. The nature of the urgency and reasons why the procurement could not be
anticipated should also be placed on record.
b) There are sufficient reasons, to be recorded in writing by the Competent Authority,
indicating that it will not be in public interest to procure the goods through advertised
tender enquiry.
(c) The sources of supply are definitely known and possibility of fresh source(s)
beyond those being tapped is remote.
(d) The nature of item to be procured is such that pre-verification of the competence of
the firms and their registration is essential.

Publicity and dispatch of tender documents: Copies of the bidding document

should be sent directly by speed post/registered post/ courier/email/fax to firms which
are borne on the list of registered suppliers for the goods in question. Copies of the bidding
documents should also be sent by registered post to the firms to whom these are initially
sent by fax/email. Web based publicity should be given for Limited Tender Enquiry also
and efforts should be made to identify a higher number of approved suppliers to obtain
more responsive bids on competitive basis.

Time to be given for submission of bids: Sufficient time, normally ranging

from one to three weeks, should be allowed for submission of bids in Limited Tender
Enquiries. For perishable goods or consumables, a reduced time frame may be followed. A
reduced time frame of less than one week may also be given for submission of bids in case
of emergent repairs of equipment, plant and machinery, ships, aircraft etc. to make them
operational /functional.

Unregistered firms claiming compliance: Though normally no such occasion

should arise in the case of LTE, some unregistered firms may nevertheless submit
unsolicited bids. In such cases action may be taken as follows:
(a) If it is a two-bid tender, the technical bid of the firm may be opened and evaluated,
where procurement does not involve any trials. If the firm is found to be technically
compliant, further action may be taken as per provisions of Para 4.2.9 of DPM 2009,
provided it does not entail any delay in procurement, defeating the very purpose of
procurement.
(b) If the firm is not found to be technically compliant, further cognizance of the tender
need not be taken and the firm advised accordingly, with the advice to apply
separately for registration.
(c) In a single bid tender, the tender may be considered if it does not involve any trials
or does not result in delay in procurement.

Single Tender Enquiry (STE)

Single Tender Enquiry (STE): Procurement from a single source may be

resorted to with the prior approval of the CFA and in consultation with the IFA, where

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required as per delegation of financial powers for reasons to be recorded in writing in the
following circumstances, after determining reasonableness of the rates:
(a) In a case of emergency/urgency, the required goods are necessarily to be
purchased from a particular source.
(b) On account of any other operational or technical requirement, which should,
however, be clearly recorded.

Reasons for recommending procurement on STE: Wherever applicable, the

Indentor should communicate to the Procuring Agency the reasons for recommending
STE.

STE to be sent only to OEMs and registered firms: STE should generally be
sent to the OEM or to a registered firm.

Procurement on the basis of the Proprietary Article Certificate (PAC)

PAC Tendering: Certain items, particularly equipments, are the propriety

product of a manufacturing firm. Such items are only available with that firm or their
dealers, stockiest or distributors as the detailed specifications are not available for others to
manufacture the item. Situations may also arise when, for standardization of machinery or
ensuring compatibility of spare parts with the existing sets of equipment, as per the advice
of the competent technical expert, goods and services have to be obtained from a particular
source. In such situations, a Proprietary Article Certificate (PAC) may be issued to the
Original Equipment Manufacturer (OEM) and items procured on PAC basis from that
particular firm or its authorized dealers, stockists or distributors. While PAC is issued only
in respect of the concerned OEM, the item may be bought from any dealer, stockist or
distributor specified in that particular PAC on the basis of the information provided by the
OEM, provided the purchase is accompanied by a proper manufacturer certification. PAC
once issued will be valid for two years from the date of issue unless cancelled earlier by the
CFA.

Caution to be exercised while granting PAC: PAC bestows monopoly and

obviates competition. Hence, PAC status must be granted after careful consideration of all
factors like fitness, availability, standardization and value for money. Many OEMs do not
manufacture assemblies, subassemblies and components but outsource these items. Hence,
such items may be available at cheaper prices with the actual manufacturers. The
procurement officers must, therefore, keep abreast of the proper source knowledge and
procure items from the right source to protect the interest of the State. However, the spares
have to be sourced from OEM or OEM approved/recommended manufacturers only in
order to make the OEM responsible for the malfunctioning of the main equipment in
which the spares have been fitted.

Concurrence of IFA is, necessary at the time of grant of PAC in case the delegated
financial powers of CFA are exercisable in consultation with Integrated Finance. For PAC
purchases under delegated financial powers of CFAs exercisable without consultation of
integrated finance, concurrence of IFA is not necessary in individual procurement cases,
provided the Proprietary certification of the firm for that item has been established by the
Service/Department previously at the appropriate level. The PAC certificate should be
given at the level of PSO/ APSO / DG / ADG (equivalent) at Service HQ and by the C-in-
C / Corps Commander/Area Commander and Heads of Establishment / Formations or

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Units not below the rank of Brigadier / Commodore /Air Commodore in the Command
HQrs and below.The PAC Certificate should be as per the following format:

Proprietary Article Certificate

(Description of Goods/services): _________________________
It is certified that:
(i) The goods are manufactured/services are provided by
... (name of the OEM)
(ii) No other make or model/service provider is acceptable for the following reasons:
(a) ....
(b) .
(c) .
(iii) M/s (name of the firm) are the authorized dealer/stockist/distributor of
the OEM/original service provider.
(iv) Concurrence of integrated finance to grant this PAC has been obtained vide
______________.
(v) Grant of this PAC has been approved by _____ as the competent authority,
vide.

(Signature with date and designation of the Officer signing the PAC)

Single and Two Bid Systems

Single Bid system: For stores available commercially off-the-shelf (COTS) and
LP items, where qualitative requirements and technical specifications are clear, single
commercial bid system may be followed. This system may also be followed for other
procurements of non-complex nature. No sample should be called for in single bid system
at the RFP stage.

Two bid system: For purchasing high value plant, machinery, equipment, IT and
communication systems and for turnkey projects, etc., which are of a complex and
technical nature or for procurement of items which have indeterminable parameters, such
as shade, tone, make-up, feel, finish and workmanship, etc., bids should normally be
obtained in two parts as follows:

(a) Technical bid consisting of all technical details along with commercial terms and
conditions; and
(b) Financial bid indicating item-wise price for the items mentioned in the technical
bid and all other commercial terms and conditions.

Description of the user requirement: The RFP should lay down user
requirements in a comprehensive, structured and concrete manner and should be broad
based. The user requirements should be expressed in terms of functional characteristics. Its
formulation must not prejudice the technical choices by being narrow and tailor-made.
Specific Quality Assurance requirements, if any, should be included in the RFP.

Manner of submission of bids in two bid system: The technical bid and the
financial bid should be sealed by the bidder in separate covers duly superscribed and both
these sealed covers are to be put in a bigger cover which should also be sealed and duly
superscribed. The technical bids are to be opened and evaluated in the first instance. At the

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second stage, financial bids of only the technically acceptable offers should be opened for
further evaluation and ranking before awarding the contract.

Performance parameters: The performance parameters should be verifiable and

provide for the minimum essential military requirements. Fulfillment of essential
parameters mentioned in the RFP would be the basis for further consideration by TEC
(Technical Evaluation Committee).

Cost of Tender and Bid Security/Earnest Money Deposit

The cost of the Tender document: Tender sets in respect of Advertised (Open)
Tender Enquiry will be sold on payment of the prescribed price given below.

Estimated value of the Tender Price of the Tender set (Rs)

1 Upto Rs 50 lakhs 100
2 More than Rs 50 lakhs but upto Rs 1 crore 250
3 More than Rs 1 crore but upto Rs 5 crores 500
4 More than Rs 5 crores 1,000

Note: Cost of drawings and specifications will be extra. This may be decided in
consultation with integrated finance at the time of issuing the RFP.

Bid security: To safeguard against a bidders withdrawing or altering his bid

during the bid validity period in the case of advertised or Limited Tender Enquiry, Bid
Security (also known as Earnest Money Deposit) is to be obtained from the bidders. The
bidders should be asked to furnish the bid security along with their bids.

Amount of Bid Security: Amount of bid security should ordinarily range

between two percent to five percent of the estimated value of the goods to be procured.
The exact amount of bid security should be determined judiciously while processing the
proposal for CFAs approval and indicated in the RFP.

Form of Bid Security: The bid security may be accepted in the form of Account
Payee Demand Draft, Fixed Deposit Receipt, Banker's Cheque or Bank Guarantee from any
of the public sector banks or a private sector bank authorized to conduct government
business, as per Form DPM-13 of DPM 2009, safeguarding the purchaser's interest in all
respects.

Validity of the Bid Security: The bid security is normally to remain valid for a
period of forty-five days beyond the final bid validity period.

Refund of Bid Security of Bidders: Bid securities of the unsuccessful bidders

should be returned to them at the earliest after expiry of the final bid validity and latest on
th
or before the 30 day after the award of the contract. The Bid Security of the successful
bidders should be returned, without any interest whatsoever, after the receipt of
Performance Security from them as called for in the contract.

Exemption from Submission of Bid Security: Bid security is not required to be

obtained from those firms who are registered with the Central Purchase Organization, e.g.
DGS&D, National Small Industries Corporation (NSIC) or concerned Departments or

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Ministries of the Government of India for the same item / range of products, goods or
services for which the tenders have been issued. Bid security need not be asked for if the
value of the tender is Rs two lakh or less.

Forfeiture of the Bid Security: The bid security/earnest money will be liable to
be forfeited if the bidder withdraws or amends, impairs or derogates from the tender in
any respect during the period between the deadline for submission of bids and expiry of
the bid validity period. No separate order is required for forfeiture of Bid Security which
follows on default and should be credited at once to the Government Account.

Tendering Process

Expression of Interest: In those cases where specifications of the desired goods

or services are not clear or the sources are not known and it is considered desirable to
resort to pre-qualification of suppliers, a notice calling for expression of
interest/information may be issued and pre-bid conference may be held with the firms
which fulfill the criteria prescribed in the notice to firm up the Qualitative Requirements
(QRs)/specifications before issuing the Request for Proposal.

Preparation of the Request for Proposal/Tender Enquiry: The Request for

Proposal (RFP), also called Tender Enquiry (TE), is the most important document in the
procurement process. The RFP should be prepared with due care and with complete
details of the items or services required, terms and conditions including payment terms,
and clear instructions to the bidders. The RFP should contain full and clear specifications,
scope of requirement and the evaluation criteria, both for technical bids and commercial
bids. RFP should be vetted by integrated finance in those cases where financial powers are
to be exercised with their concurrence.

Reference to Brand Names in the RFP: Standards and specification, quoted in

bidding documents in generic terms shall promote the broadest possible competition while
assuring the critical performance or fulfillment of other requirements for the goods.
Reference to the brand names, catalogue numbers, etc. in the RFP should be avoided.

Receipt of tenders

Tender Box: In order to ensure that the bids are received by the purchaser in time,
a tender box is to be placed in an easily accessible but secured place, duly locked and
sealed, clearly indicating the name of the department. The words Tender Box should be
written on the box in bold font.

Delivery of Bids by Hand: In cases where the tenders are required to be

submitted by hand, it may be ensured that the names and designation of at least two
officers are mentioned in the bid documents. The information about these officers should
also be displayed at the entrance reception of the premises where tenders are to be
deposited so as to ensure convenient approach for the bidders.

Amendment to the RFP and Extension of Tender Opening Date

Amendment to the RFP: Sometimes situations may arise necessitating

modification of the tender documents already issued (in Limited Tender Enquiry cases) or

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already put on sale (in Advertised/Open Tender Enquiry cases) due to change in the
required quantity or specifications. In some cases, after receiving the documents, a
tenderer may point out some genuine mistakes necessitating amendment in the tender
documents. In such situations, it may become necessary to amend/modify the tender
documents suitably prior to the date of submission of bids. Copies of such amendment/
modification should be simultaneously sent to all the selected suppliers by
registered/speed post/ courier/e-mail in case of Limited Tender Enquiry. In case of
Advertised/Open Tender Enquiry, copies of such amendments/ modifications should be
dispatched simultaneously free of cost by registered/speed post/courier/e-mail to all the
parties who may have already purchased the tender documents and copies of such
amendments are also required to be prominently attached to the unsold tender documents
(which are available for sale), including the tender documents put on the website.

When the amendment/modification changes the requirement significantly and/or

when there is not much time left for the tenderers to respond to such amendments, and
prepare revised tender, the time and date of submission of tenders are also to be extended
suitably, along with suitable changes in the corresponding time-frames for receipt of
tender, tender validity period etc and validity period of the corresponding EMD/Bid
security. Depending on the situation, such an amendment may also need fresh publication
adopting the same procedure as for publication of the original tender enquiry.

Extension of Tender Opening Date: In those cases where extension of tender

opening date does not become necessary because of amendment of the RFP (due to change
of QRs/SQRs or terms and conditions of contract) but on request of the vendors, extension
upto a maximum period of two months may be accorded by the CFA without consultation
of IFA, even where CFAs procurement powers are exercisable with financial concurrence.
For any extension beyond this period, the Competent Financial Authority, with the
concurrence of integrated finance, where required as per delegation of financial powers,
may extend the date of opening of the tender specified in the RFP but such extension
should not exceed the total delivery period envisaged in the RFP. Any further extension
would require approval of the next higher CFA. Such extensions and amendments should
be published in the same journals/newspapers in which the original RFP was published
and must be given publicity through the website if the original RFP was hosted on the
website.

Extension of Tender Opening Date After Due Date of Opening: In

exceptional circumstances, date of opening of the tender may be extended within a
reasonable period after the due date of the opening of tenders for reasons to be recorded in
writing, with the approval of the higher CFA and in consultation with the IFA, where
financial powers are to be exercised with the concurrence of integrated finance.

Withdrawal of bids: In case a firm requests for withdrawal/return of his bid

before the due date of tender opening, when such date has been extended by the
purchaser, the bid may be returned to the concerned firm as the documents may be
accompanied by EMD

Tender Opening

Opening of Tenders Under Single Bid System: The following procedure

should be followed for opening of tenders:

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 (a) All the tenders received on time should be opened in the presence of authorized
representatives of the tenderers at the prescribed time, date and place by the
official/Tender Opening Committee, to be nominated by the CFA in advance. The
authorized representatives, who intend to attend the tender opening, would be
required to bring with them letters of authority from the tenderers concerned. The
representative of integrated finance need not be a member of the tender opening
committee, unless the CFA specifically desires to associate such a representative.
(b) The tender opening official/committee should announce the salient features of the
tenders like description and specification of the goods, quoted price, terms of
delivery, delivery period, discount if any, whether EMD furnished or not and any
other special feature of the tender for the information of the representatives
attending the tender opening.
(c) After opening, every tender should be numbered serially, initialed, and dated on the
first page by the official(s) authorized to open the tenders. Each page of the price
schedule or letter attached to it shall also be initialed by them with date, particularly
the prices, delivery period etc., which should also be circled and initialed indicating
the date. Blank tenders, if any, should be marked accordingly by the tender opening
officials.
(d) Alterations in tenders, if any, made by the tenderers, should be initialed with date
and time by the official(s) opening the tenders to make it perfectly clear that such
alterations were present on the tenders at the time of opening.
(e) Wherever any erasing or cutting is observed, the substituted words should also be
encircled and initialed with date and time to make clear that such erasing/cutting of
the original entry was present on the tender at the time of opening.
(f) The tender opening official(s) should prepare a list of the representatives attending
the tender opening and obtain their signatures on the list. The list should contain the
representatives names and the corresponding tenderers names and addresses. The
authority letters brought by the representatives should be attached with this list. This
list should be signed by both the tender opening official(s) with date and time.
(g) An on-the-spot report containing the names of the tenderers (serial number wise)
salient features of the tenders, as read out during public opening of tenders should
be prepared by the tender opening official(s) duly signed by them with date and
time.
(h) The tenders, which have been opened, the list of the representatives attending the
tender opening and the on-the spot report should be handed over to the nominated
officer of the procuring agency and acknowledgement obtained for the same.

Opening of tenders under two bid system: The procedure laid down in the
preceding paragraph should be followed mutatis mutandis under two bid system also but
only the technical bids should be opened in the first instance. Commercial bids of only QR-
compliant tenderers should be opened only after evaluation of the technical bids and
approval of the TEC report by the CFA. The commercial bids of other tenderers, who are
not found to comply with the QRs as above, will be returned to the tenderers, in sealed
and unopened condition as received.

Return of Technical Bids: Technical bids will not be returned to the vendors once
they are opened, whether the bids are found to be compliant or non-compliant by TEC.
These will be maintained as part of the file documentation for processing and award of the
tender. Similarly, the commercial bids of vendors who are technically compliant but are
not successful in getting the contract will be retained along with the papers/file relating to
award of the contract.

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Evaluation of Technical Bids

Opening of Technical Bids: Where quotations are invited as separate technical

and commercial bids, initially only the technical bids are to be opened in the presence of
the tenderers or their duly authorized representatives.

Evaluation of Technical Bids: After opening of the technical bids, technical

evaluation is to be carried by a duly appointed Technical Evaluation Committee (TEC).

Technical Evaluation Committee (TEC): TEC, wherever formed, should

invariably have representatives of the user, designated inspecting agency, maintenance
agency, procurement agency and CFA, apart from the Chairman. Finance representative
need not be associated with the TEC.

Objective of the TEC: The main objective of the TEC is to prepare technical
matrix showing how the technical parameters of bids received compare with the
parameters mentioned in the tender document/RFP. If the offers conform to essential
parameters they should be accepted.

Preparation of Compliance Report by TEC: The TEC should prepare a

compliance statement bringing out the extent of variations and differences, if any, in the
technical characteristics of the equipment/ tendered item(s) offered by various vendors
with reference to QRs and compliance or noncompliance with the essential parameters. If
considered necessary, the TEC may invite those vendors who meet essential parameters
for technical presentation/clarification.

Format of the TEC Report: The TEC report should be prepared keeping in mind
the following aspects:

(a) The basic profile/character of technical offer must not be permitted to be changed.
(b) Opportunity for revision of minor technical details should be accorded to all vendors
in equal measure to ensure fair play.
(c) No extra time should be given to any vendor to modify his offer to make it QR
compliant.
(d) Original commercial quotes must remain firm and fixed and no loading/unloading
in price should be permitted during TECs discussion with the vendor.
(e) No conditional offer should be accepted which is not in conformity with the
specifications mentioned in the RFP.

Mandate of the TEC as regards commercial aspects: The TEC is not

authorized to discuss commercial aspects of the case. However, the TEC should prepare a
compliance statement in respect of commercial terms and conditions, such as bid security,
warranty, etc., included in the technical bid as per the RFP.

Association of IFA: Whenever two bid system of tendering is followed, technical

evaluation of the bid becomes a vital step not only for ascertaining conformity of the
technical bids with the technical specifications mentioned in the tender, but also to bring
all bidders on a level playing field in respect of qualitative requirements. While technical
evaluation is to be carried out by the TEC and integrated finance need not be associated at

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this stage, CFA may, if considered necessary, evolve a system of associating the IFA or his
representative in examination of the TEC Report in regard to compliance with the
commercial terms and conditions before opening of the price bid. TEC report, once
finalized, should be sent to CFA for acceptance.

Approval by the CFA: The TEC report should be approved by the respective
CFA. TEC report may be accepted by Defence Secretary and Special/Additional Secretary
in those cases where Raksha Mantri and Defence Secretary respectively are the CFAs.

QR-compliant Offers: Those offers which meet the essential parameters as per
the TEC report, duly approved by the CFA, should be considered by the Commercial
Negotiation Committee (CNC) which, in turn, should evolve methods for benchmarking of
price and holding internal meetings to finalize approach for conducting negotiations with
the L1 vendor, if considered necessary by the CFA, in consultation with the IFA where
powers are to be exercised with the concurrence of integrated finance.

Revised Commercial Bids in Two Bid System: In case of procurement

involving two-bid system, it may not be practicable to incorporate all possible details in
the technical specification(s), thereby requiring elaborations/clarifications during technical
discussion. This may necessitate submission of revised commercial bids consequent upon
discussion during TEC/CNC. If the original price bids have not been opened, it would be
advisable to give equal opportunity to all technically acceptable vendors to give their
revised commercial bids in a sealed cover. The CNC would take into account the revised
commercial bids to arrive at L1.

CFAs Approval for Obtaining Revised Commercial Bids: Before calling for
revised commercial bids where original price bids have not been opened, approval of CFA
should invariably be taken, after consulting integrated finance, where required as per
delegation of financial powers. It is absolutely essential to give equal opportunity to all
qualified vendors.

Evaluation of Commercial Bids

Preparation of the Comparative Statement of Tenders: After opening of the

commercial bids (of QR-compliant tenderers in the case of two bid system and after
approval of the TEC report by the CFA), the procuring agency should prepare a
comparative statement of tenders (CST). The comparative statement of tenders should be
prepared with due care showing each element of cost (basic cost, taxes, levies, etc.)
separately against each tenderer. The CST should be prepared soon after opening of the
commercial bids and got vetted by the IFA as to its correctness, where financial powers are
to be exercised with the concurrence of integrated finance.

Commercial Evaluation: Evaluation of commercial bids is the core activity in any

purchase decision. If the correct evaluation of quoted rates, freight, insurance, taxes, duties
and other expenses involved is not carried out as per the criteria incorporated in the RFP,
purchase decision may become deficient and faulty.

Commercial Negotiations: It is not mandatory to hold commercial negotiations

in each case, particularly in open and limited tender cases, where the response has been
substantial and the L1 price is found to be very close to the reasonable price, if such an
assessment had been carried out prior to opening of the commercial bids. However,

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commercial negotiation may become necessary to ensure that the interest of the State is
fully protected and the price paid is reasonable. Commercial negotiations are invariably
conducted in case of single tender situations, including PAC cases, or when price is
considered high with reference to assessed reasonable price, irrespective of the nature of
tendering. Such negotiations are invariably conducted by a duly appointed Commercial
Negotiation Committee (CNC), which should invariably include a finance member,
unless the negotiation is carried out by the committee CFA itself.

Composition of CNC: Apart from the Chairman, there should be representatives

of the User, Integrated Finance, designated Inspecting Agency, Maintenance Agency,
Directorate concerned with post-contract management and the CFA, wherever applicable.
CFA may nominate any other member, like a costing expert, in case of high value single
vendor offers while constituting the CNC.

Chairman of the CNC: The CNC may be headed by an officer one rank below
that of the CFA. The CNC may be headed by a Joint Secretary where Raksha Mantri or
Defence Secretary is the CFA. The CFAs in the Ministry of Defence may also authorize an
officer from the Services Headquarters to be the chairman of a CNC, particularly in those
cases where the proposal was initially processed under the delegated powers but on
opening of the tenders the cost was found to have exceeded the financial powers delegated
to the CFAs in the Services Headquarters.

Price Reasonableness: The basic objective of the CNC is to establish

reasonableness of price being paid by the Government. This is a complex task and many
factors need to be considered. However, factors like the last purchase price (LPP),
movement of price indices, the market intelligence regarding cost of the item or similar
items, material composition, cost analysis of raw materials, technological complexities
involved, whether the items are of current production or otherwise, maintenance
requirements, requirement of spares and warrantee etc. need to be considered while
examining price reasonableness.

Responsibility of the CNC: Wherever negotiations are conducted by the CNC,

minutes of the CNC meetings should be recorded clearly and expeditiously. CNC should
determine L1 and make unambiguous and specific recommendations giving reasons for
making the recommendations. Detailed record of discussions regarding compliance with
tendered QRs, price and contract clauses held during the CNC should be prepared and
placed on record in the form of minutes of the meeting. All the members of the CNC
should sign the minutes.

Acceptance of CNCs recommendations: The recommendations of the CNC

should be processed on file by the Procuring Agency for the approval of the CFA with the
concurrence of the IFA, wherever required as per the delegation of powers.

Lack of Competition

Lack of competition. The following situations would imply lack of competition:

(a) The number of acceptable offers is less than two.

(b) Ring prices have been quoted by all tenderers (Cartel formation).

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(c) The product of only one manufacturer has been offered by all the tenderers irrespective
of the number of quotations.
(d) Store under purchase is chronically in short supply against which the number of
acceptable offers never exceeds two.

Resultant Single Vendor Situation

Action to be taken in Resultant Single Vendor Situations: There are cases

when only a single quote or a single valid acceptable quote is received even against LTE or
OTE. This situation may arise in single bid tendering as well as in two-bid tendering before
or after technical evaluation. This results in a single vendor situation indicating lack of
competition. In such situations, the following aspects will be examined:

(a) Whether all necessary requirements such as standard tender enquiry conditions,
industry-friendly specifications, wide publicity, sufficient time for formulation of
tenders had been taken care of while issuing the RFP;
(b) Whether the RFP had been properly dispatched and duly received by the
prospective vendors to whom these were sent.
(c) Whether the SQRs, particularly in the LTE cases, could be reformulated and made
more broad based to generate wider competition.
(d) Whether time and criticality of requirement permits reformulation of the SQRs.

If the examination reveals that (a) and (b) had been complied with and (c) and (d)
are not feasible, the proposal may be processed further treating it as a case of OTE or LTE,
as the case may be, with the approval of the CFA. In case, however, there is any doubt
about the tendering process or it is considered feasible to consider reformulation of SQRs
without compromising on operational requirement, the RFP should be retracted and re-
issued after rectifying the deficiencies and/or reformulating the SQRs.

Re-tendering

Re-tendering: Re-tendering may be recommended by the CNC and approved by

the CFA with the concurrence of integrated finance, where original sanction was accorded
with the concurrence of integrated finance, with utmost caution, generally under the
following circumstances:

(a) Offer(s) do not conform to qualitative requirements and other terms and conditions
set out in the RFP.
(b) There are major changes in specifications and quantity, which may have
considerable impact on the price.
(c) Prices quoted are unreasonably high with reference to assessed reasonable price or
there is evidence of a sudden slump in prices after receipt of the bids.
(d) Where there is lack of competition and there are clear and reasonable grounds to
believe that the lack of competition was due to restrictive specifications, which did
not permit many vendors to participate. In such cases, which should, however, be
rare as the specifications should normally be formulated with due care and after
pre-bid conference, wherever required, CFA should consider if there is a possibility
of reviewing the specifications to facilitate wider and adequate competition.

Withdrawal of offer by L1: In case the lowest tenderer withdraws his offer, re-
tendering should be resorted to as per the instructions issued by the Central Vigilance

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Commission. While re-tendering RFP may not be issued to the vendor who had backed out
and EMD, if any, of such a firm should be forfeited.

Procurement of bare minimum quantity in case of re-tendering: In cases

where it is decided to resort to re-tendering due to unreasonableness of the quoted rates
but the requirement is urgent/inescapable and re-tendering for the entire quantity is likely
to delay the availability of the item(s) jeopardizing the essential operations, maintenance
and safety, negotiation may be held with the L1 bidder for supply of a bare minimum
quantity. The balance quantity should, however, be procured expeditiously through re-
tender, following the normal tendering process.

Signing of Contract/Placing of Supply Order

Signing of Contracts/Placing of Supply Orders:Once the CNC

recommendations are accepted by the CFA or approval accorded by the CFA in those cases
in which no CNC is held, the contract should be signed or the supply order placed, as the
case may be, immediately. It must be ensured that the contract/supply order is as per the
approved terms and conditions and the rates are correctly shown as finally negotiated and
accepted by the CFA. Contracts/supply orders should be vetted by the IFA, wherever
required as per delegation of financial powers, prior to acceptance of the purchase
proposal by the CFA. Copies of the contract/supply order should be sent to all concerned,
including the IFA, the audit authority and the paying authority, and their
acknowledgement obtained.

Cartel Formation / Pool Rates

Cartel Formation/Pool Rates: Sometimes a group of tenderers quote identical

rates against a rate contract tender. Such Pool/Cartel formation is against the basic
principle of competitive bidding and defeats the very purpose of open and competitive
tendering system. Such practices should be severely discouraged with strong measures.
Suitable administrative actions like rejecting the offers, reporting the matter to Registrar of
Companies, MRTP Commission, National Small Industries Corporation etc. should be
initiated against such firms, on case to case basis, as decided by the competent authority.
Ministries/ Departments may also examine the desirability of bringing such unhealthy
practice to the notice of the concerned trade associations like FICCI, ASOCHAM, NSIC,
etc. requesting them, inter alia, to take suitable strong action against such firms. New firms
should also be encouraged to get themselves registered for the subject goods/services to
break the monopolistic attitude of the firms forming cartels. All requests for making
reference to outside agencies, such as Registrar of Companies or trade associations, are to
be made to the Ministry of Defence.

Procedure to be Followed for Procurement of Stores Involving

Validation/Testing

Circumstances in which the procedure is to be followed: Due to constant

changes in technology, various weapons, equipments, ammunition, etc., which are already
in service, need to be replaced by newer variants or upgraded/refurbished/re-
equipped/modified/ overhauled to incorporate advancements in technology. This may
necessitate validation trials/testing of upgraded/refurbished/re-equipped/modified
equipment, if considered necessary by the Service Headquarters concerned. The procedure
set out in this paragraph would be applicable to cases processed at the level of the Ministry

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of Defence/Service Headquarters only and should be suitably indicated while seeking
AON. Such cases will not be treated as new introduction into Service.

Categories of Cases: The cases to be processed under the provisions of this

paragraph would generally fall into the following category:

a) Procurement of upgraded new versions of equipment, ammunition, vehicles, etc., which

are classified as stores that can be procured from the revenue head, provided these
conform to the existing laid down QRs and meet the prescribed performance parameters
or certain enhanced parameters which have been incorporated as an amendment to the
existing QRs.

b) Upgradation, refurbishment, re-equipment, modification, Technical Life Extension,

Overhaul, etc. of weapon platforms/systems/aggregates which can be carried out under
the provisions of this Manual and as per the existing orders. The upgradation,
refurbishment, re-equipment, modification, overhaul, etc. may be carried out at OEMs
premises abroad or in India, or partially in India and partially at OEMs premises abroad,
or even at a venue such as a Repair Overhaul Plant (ROH) where the requisite facilities are
available, which may neither be in India nor at the OEMs premises, provided it is certified
by the OEM as having the technical capacity/capability.

Procedure to be followed for Procurement of Stores: For procurement of

items mentioned in paragraph 4.19.2 of DPM 2009, the Service Headquarters should decide
whether a validation process would be required and, if so, it should be indicated in the
proposal. If such validation process (trial/testing) is considered necessary, the scope and
duration thereof should also be finalized and indicated in the RFP. It should be mentioned
in the RFP that the vendors which are found technically compliant would be required to
provide specified quantities of the item on no-commitment-no-cost basis for trial
evaluation/testing. The period within which the Vendor must submit the
equipment/sample after being found technically complaint must be indicated in the RFP.
The Technical evaluation will be a two-stage process. After the technical bids are opened,
the TEC will short-list the vendors, which are technically compliant, and the TEC Report
will be approved by the CFA. Thereafter, the technically compliant vendors will go
through the process of evaluation/testing. The evaluation/testing should ideally be
completed within a period not exceeding eight months from receipt of the
equipment/sample from the vendors. The Validation Trial/Testing report will be again
ratified by the TEC and approved by the CFA.

Opening of Commercial Offer After Trial Evaluation/Testing: The

commercial offer should be opened only after acceptance of the TEC/Validation
Trial/Testing Report of those vendors who have been recommended as technically
compliant. The commercial offer should normally have a validity period of twelve months
from the date of submission of the offer to ensure that the offer is still valid when the
commercial bid is opened, commercial negotiations held and the order placed. A shorter
validity period may be prescribed commensurate with the period of trial/testing.

Dispensing with Trial Evaluation/Testing: For equipment available

commercially off-the-shelf (COTS), which are upgrades of in-service items and have
requisite IS/BIS or equivalent certification, the Service Headquarters may accept the
equipment on the basis of self-certification by the vendor without going through the
validation/testing process, provided it is confirmed by the QA Agency/AHSP or any

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other technical agency concerned. However, in such cases also TEC Report should be
approved by the CFA.

Procedure to be followed for Upgradation, Refurbishment, Re-Equipment,

Modification, Technical Life Extension and Overhaul: For upgradation,
refurbishment, etc., as mentioned in paragraph 4.18.2 of DPM 2009, the vendors should be
short-listed with the prior approval of the CFA and with the concurrence of integrated
finance and the short listed vendors may be provided an opportunity to survey the
weapon platform/systems, etc., which is to undergo upgradation/refurbishment/re-
equipment/ modification/Technical Life Extension/Overhaul prior to issue of the RFP. In
case the upgrade, refurbishment, etc. is to be done in India, the vendors should certify the
capability and confirm the adequacy of the facility to the satisfaction of the Service
Headquarters. If required, a Detailed Project Report (DPR) may be got prepared by the
Service Headquarters after obtaining the AON but before issuing the RFP with a view to
defining the scope and other technical details of the upgrade/Overhaul programme.

Special provisions to be made in the RFP: The RFP for upgradation,

refurbishment, etc. should invite technical and commercial offers separately and may also
have a provision for pre-bid conference prior to submission of the offers so that the
technical and other issues could be clarified to vendors. The RFP should ask the vendors to
specify the location of the plant/factory where upgradation, refurbishment, etc. will be
undertaken and whether the vendor owns the facility. If the facility is not owned by the
vendor, a certificate of agreement between the OEM and the plant owner would be
required to be submitted by the vendors along with their offer. There should be a
provision in the RFP that one lead equipment (where there are more than one number) will
be tested by the vendor along with the representatives of the Service Headquarters (either
in India or abroad) before the balance equipments are taken up for upgradation,
refurbishment, etc. In case of a single weapon platform, there should be a provision for
concurrent testing along with the upgradation, refurbishment, etc.

Approval of the Final TEC Report and Opening of Commercial Offer: The
TEC Report should be approved by the CFA and the commercial offer of the vendors who
have been recommended as technically compliant should be opened only thereafter. This
would be applicable in respect of cases covered by paragraph 4.19.2 (b) of DPM 2009.

Validity of the Offer: The commercial offer should have a validity of up to

eighteen months from the date of submission of the offer, depending on the period
required for completing the technical evaluation, so as to ensure that the offer remains
valid till the time the order is placed/contract signed.

Assessment of the Vendors Facility: If required and considered necessary, a

composite delegation of representatives of the User Department, CFA and integrated
finance may be deputed to visit the plant/factory of the vendor finally recommended by
the CNC to assess the capability/capacity of the selected vendors to carry out upgradation,
refurbishment, etc. before commercial negotiations are finalized and approved by the CFA.

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 APPROVAL PROCESS AND CONCLUSION OF CONTRACT

Procurement of Goods and Services

Procurement of Goods: The need for procurement of goods may arise in the
following circumstances:

(a) to make up the deficiency of stores, which are authorized as per scales laid down in
various Government letters, revealed as a result of provisioning reviews;
(b) to build up authorized stocks; or
(c) on account of non-scaled and not-in-vocabulary (NIV) items, which may include
any kind of equipment, spares and other medical/ miscellaneous stores.

Procurement of Services: The need for procurement of services may arise for any
of the following reasons:

(a) Maintenance of any equipment/asset already held on charge;

(b) Performance of any task being performed in-house but considered appropriate for
outsourcing;
(c) Need for engaging consultants;
(d) Any new function which can be performed economically by an outside agency.

Processing of Procurement Proposals

Processing of Proposals for CFAs Approval: All procurement proposals

should be initiated in the form of a statement of case (SOC), which should clearly bring out
all aspects of the proposal, including the justification/reason for procurement, quantity,
cost, likely sources of supply, mode of tendering, etc. It needs to be kept in view that
expeditious processing of the proposal depends on the comprehensibility and quality of
the SOC. Draft NIT/RFP should also be submitted along with the SOC for approval of the
CFA in consultation with integrated finance, where required as per the delegation of
financial powers. A simplified SOC may be prepared in case of small value local
procurements of stores/services valuing upto ` 5 lakhs, particularly for COTS items, items
with standard / ad hoc specifications etc. However, it should contain all essential details
which are relevant for taking the purchase decision

Costing of Procurement Proposals: It is important that the procurement

proposal is costed with due attention and care. The basis of costing must be placed on
record. The level of approval by the CFA would depend on the entire cost of a proposal,
inclusive of all taxes, levies and other charges.

Processing of Proposals after CFAs Approval: After CFAs approval, the

procuring agency is required to go through the tendering action approval and obtain
CFAs approval for the proposed procurement in consultation with integrated finance,
where required as per the delegation of financial powers.

Processing of Proposals Subject to Availability of Funds: A procurement

proposal should normally be processed only if it figures in the Annual Procurement Plan
(wherever such Plans are being prepared, irrespective of the nomenclature of the Plan) and
subject to availability of funds. Availability of funds should be determined only after

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accounting for cash outgo during the relevant financial year on account of committed
liabilities.

Processing of Proposals without linking them with availability of Funds:

Subject to the general rule that purchase proposals should be processed with due regard to
availability of funds, a procurement proposal may be processed without linking it with
actual availability of funds, if it is certified by the budget holder that there is reasonable
certainty of funds becoming available by the time the proposal reaches the final stage of
contracting/placing of supply order. In such cases, however, availability of funds would
be determined after taking into account cash outgo on account of the committed liabilities.
In the case of stores having a long lead time, a purchase proposal may be processed
without linking it with actual availability of funds and the supply order/contract placed in
the last quarter of the Financial Year (FY) (January to March) when the delivery will take
place in the ensuing FY/s and there is a reasonable assurance of availability of funds in the
budget of that/those year/s, taking into account the anticipated cash outgo against the
contractual /committed liabilities for the FY/s. However payments against the Supply
Orders will only be made after confirmation of availability of funds in the FY in which it
becomes due.

Prior Concurrence of Integrated Finance: Competent Financial Authoritys

approval is subject to prior concurrence of integrated finance, if required as per the
delegation of financial powers.

Ex post facto Financial Concurrence: There is no provision under the delegated

financial powers to obtain ex post facto concurrence of integrated finance. Such cases where
prior concurrence is not obtained, though required as per the delegation of financial
powers, would be treated as cases of breach of rules and regulations and referred to the
next higher CFA for regularization. Such regularization will be subject to concurrence of
IFA to the next higher CFA.

Ex post facto approval of the CFA: Where a proposal is approved, with or

without the concurrence of integrated finance, by an authority not competent to sanction
that proposal as per the delegation of financial powers, ex post facto sanction may be
accorded by the appropriate CFA with or without the concurrence of the IFA, as the case
may be, as per delegation of financial powers.

Disagreement with the IFA: In case of disagreement with the IFA, the CFA can
overrule the IFA under intimation to the next higher CFA as well as the IFA giving reasons
for overruling the financial advice. In such cases, it would be open to the IFA to take up
the matter with the higher IFA and CFA or drop it.

Acceptance of Necessity

Acceptance of Necessity in respect of Scaled Items: Acceptance of Necessity

in case of scaled items would actually only entail vetting of quantities, assessment of
physical requirement of various resources with respect to targets fixed and budget
availability.

Acceptance of Necessity in respect of Scaled Items whose Inventory is

Computerized: In case of scaled items where inventories are maintained through
automated systems and IFAs have been provided terminal on the same, IFA will vet the

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quantity on the automated systems based on data available on such automated systems,
which would be deemed to be financial concurrence for acceptance of necessity also.

Acceptance of Necessity in respect of Non-Scaled and NIV Items:

Acceptance of necessity in respect of non-scaled and NIV items would depend entirely on
the justification provided for their procurement. It must be ensured that procurement of
such items does not introduce a new practice and does not have the effect of changing the
existing scales or policy. However the quantity of stores/equipment required by the
DGQA for proof activity will be included for procurement

Acceptance of Necessity in respect of Items Included in Procurement

Plans: Some of the Services HQrs/Command HQrs and other establishments prepare
annual procurement plans for revenue procurement. Where such a plan, irrespective of its
nomenclature, is being prepared with the concurrence of Integrated Finance, necessity
would be deemed to have been accepted in respect of each item included in the plan. No
separate AON would be necessary in such cases. However, the AON would be for the item
and not the quantities required. In such cases, however, Integrated Finance should be
consulted for vetting of quantity, mode of tendering, identification of vendors in case of
LTE/STE/PAC and vetting of draft RFP, where financial powers are to be exercised with
the concurrence of integrated finance.

Provided that if in any such case Integrated Finance wishes to make any
observation regarding necessity, it may be done with the specific approval of the IFA
concerned. Further processing of the proposal would, however, not be deferred pending
resolution of the issue raised by Integrated Finance, unless the procuring agency considers
it desirable to resolve the issue before proceeding further. Where it is decided not to defer
further processing of the proposal, the observations made by Integrated Finance would be
brought to the notice of the CFA while seeking approval for the proposal.

Provided further that AON of the CFA would need to be taken in consultation with
the IFA, where financial powers are to be exercised with the concurrence of integrated
finance, before the proposal is processed any further in case of non-scaled items which do
not also figure in any approved procurement plan.

Quantity Vetting

Quantity Vetting in respect of Scaled Items: Care should be taken to avoid

purchasing quantities in excess of requirement to avoid inventory carrying costs. The IFA
is supposed to vet the quantity indented/ projected for procurement of scaled items so as
to ensure timely provisioning. In order to ensure that there is no infructuous provisioning,
the IFA must have access to all inputs required to assess the basis of the projection of
indented quantity. The calculation sheet showing the authorized scales, dues-in, dues-out,
reserves, etc. must be made available to the IFA. In case an IT based management system is
operational in the department, the IFA is to undertake such vetting of quantity on the
system itself

Quantity Vetting in respect of Non-scaled and NIV Items: While no fixed

guidelines can be laid down for vetting of quantities of non-scaled and NIV items, it has to
be ensured that purchase proposals of such items are based on the bare minimum
inescapable requirement with due regard to economy of scales. Where financial powers are
to be exercised with the concurrence of integrated finance, IFA should vet the quantity of

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such items if the procurement is proposed to be made under the delegated financial
powers exercisable with the concurrence of integrated finance. If requirement of such
items is found to be arising repeatedly, central procurement agencies should be intimated
about the requirement.

Seeking Approval of the CFA

Combining Various Stages of Processing: It is not necessary that a proposal

should be processed sequentially for AON, Quantity Vetting, financial concurrence, etc. A
proposal, when initiated, should be complete in all respects so that all the aspects relating
to AON, quantity vetting, costing, vetting of NIT/RFP, etc., could be examined
simultaneously by the IFA, where required as per the delegation of financial powers.

CFAs Sanction: A sanction is a written authority from the CFA authorizing the
expenditure. A sanction invariably indicates the reference to the authority under which
expenditure is being sanctioned, the financial implication, the item for which the
expenditure is approved and the budget code head. Whenever the final expenditure
exceeds the sanctioned amount, revised financial sanction of the CFA, in whose delegated
powers the total expenditure would fall, is required to be obtained.

Transparency, Competition, Fairness and Elimination of Arbitrariness in the

Procurement Process

Need for Ensuring Propriety of Procurement Process: All government purchases

should be made in a transparent, competitive and fair manner, to secure best value for
money. This will also enable the prospective bidders to formulate and send their
competitive bids with confidence. Some of the measures for ensuring the above are as
follows:
(i) the text of the bidding document should be self-contained and comprehensive without
any ambiguities. All essential information, which a bidder needs for sending responsive
bid, should be clearly spelt out in the bidding document in simple language. The bidding
document should contain, inter alia:
(a) the criteria for eligibility and qualifications to be met by the bidders such as
minimum level of experience, past performance, technical capability,
manufacturing facilities and financial position etc.;
(b) eligibility criteria for goods, indicating any legal restrictions or conditions about
the origin of goods etc which may be required to be met by the successful bidder;
(c) the procedure as well as date, time and place for sending the bids;
(d) date, time and place of opening of the bid;
(e) terms of delivery;
(f) special terms affecting performance, if any.
(ii) Suitable provision should be kept in the bidding document to enable a bidder to
question the bidding conditions, bidding process and/ or rejection of its bid.
(iii) Suitable provision for settlement of disputes, if any, emanating from the resultant
contract, should be kept in the bidding document.
(iv) The bidding document should indicate clearly that the resultant contract will be
interpreted under Indian Laws.
(v) The bidders should be given reasonable time to send their bids.
(vi) The bids should be opened in public and authorized representatives of the bidders
should be permitted to attend the bid opening.

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(vii) The specifications of the required goods should be clearly stated without any
ambiguity so that the prospective bidders can send meaningful bids. In order to attract
sufficient number of bidders, the specification should be broad based to the extent feasible.
Efforts should also be made to use standard specifications which are widely known to the
industry.

Responsibility of the CFA

Responsibility of CFA in Purchase Decision: The CFA must consider all

aspects of the case, including the quoted terms and conditions of the contract, delivery
period, taxes and duties applicable, freight, insurance and other charges and the
compliance to the specification before a purchase decision is taken. One of the important
responsibilities of the CFA to ensure proper ranking of all offers so that the decision
making process is totally transparent. The financial implication should be considered as
the all-inclusive cost to the User on delivery to the designated consignee(s). Conditional
offers and those with specifications not in conformity with the tendered specifications
(Essential QRs) should not be considered. Before according sanction, concurrence of
integrated finance should be taken wherever the powers are exercisable subject to such
concurrence.

Compliance with Procedures: While taking the purchase decision, the CFA
needs to satisfy himself that proper procedures have been followed at various stages of
procurement, purchase policies of the Government have been complied with and capacity
and financial status of the firm have been checked. Purchase decisions should be taken
through a formal order in a written form.

Accountability: The decentralization of decision making mechanism and

delegation of financial powers are aimed at facilitating faster decision making and
obtaining best value for money. However, the delegation of powers also implies authority
with accountability. The CFA approving the expenditure must ensure financial propriety
and probity, transparency and fair play as well as optimum utilization of resources. The
designated CFA and all members of committee CFA are accountable for all decisions taken
by them while approving any measure involving Government funds. This accountability is
unconditional and absolute.

Time frame

Need for Expeditious Processing: It is imperative that the procurement process

is fully responsive to the need of the Defence Services and other departments and
facilitates expeditious procurement so that requirements are met on time. It is, therefore,
essential that all prescribed activities are undertaken expeditiously and advice rendered
within a specified time frame.

Time Frame: The time frame as suggested for all activities in the procurement
process to ensure that the bids are finalized within validity period. In case the prescribed
time frame cannot be adhered to in any specific case, suitable extension of validity of the
bids should invariably be asked for well in time.

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 CONTRACT, CONDITIONS OF CONTRACT & IMPORTANT
AREAS OF CONCERN FOR FINANCE REP

Law

Elementary Law: The elements and principles of contract law and the meaning
and import of various legal terms used in connection with the contracts are contained in
the Indian Contract Act, 1872 read with the Sale of Goods Act, 1930. The law relating to
redressal of disputes is laid down in the Arbitration and Conciliation Act, 1996. Some of
the salient principles relating to contracts are set out briefly in the following paragraph.

Applicability to Defence Procurement: Government contracts, including those

for defence procurement, are governed by the same laws which are applicable to contracts
between private parties.

Elementary Legal Practices

What is a Contract?: The proposal or offer when accepted is a promise, a promise

and every set of promises forming the consideration for each other is an agreement, and an
agreement if made with free consent of parties competent to contract, for a lawful
consideration and with a lawful object is a contract.

Proposal or Offer: When one person signifies to another his willingness to do or

to abstain from doing anything, with a view to obtaining the assent of the other to such act
or abstinence, he is said to make a proposal or offer. In a sale or purchase by tender, the
tender signed by the tenderer is the proposal. The invitation to tender and instructions to
tenderers do not constitute a proposal.

Acceptance of the Proposal: When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted
becomes a promise.

Which agreements are Contracts?: An agreement is a contract enforceable by

law when the following are satisfied. A defect affecting any of these renders a contract un-
enforceable.

(a) Competency of the parties

(b) Freedom of consent of both parties
(c) Lawfulness of consideration
(d) Lawfulness of object

All contracts and agreements executed, and licenses and permits, notices and
forms of tender issued by or on behalf of the Central Government should be issued
bilingually, in Hindi and English in terms of Article 3 (3) of the Official language Act, 1963

Competency of Parties

Who Can Enter Into Contract?: Under law any person who has attained
majority and is of sound mind or not debarred by law to which he is subject, may enter

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into contracts. It, therefore, follows that minors and persons of unsound mind cannot enter
into contracts nor can insolvent person do so.

Categories of Parties to the Contract: Categories of persons and bodies who are
parties to the contract may be broadly sub-divided under the following heads: -

(a) Individuals
(b) Partnerships
(c) Limited Companies
(d) Corporations other than limited companies

Contracts with Individuals: Individuals tender either in their own name or in

the name and style of their business. If the tender is signed by any person other than the
concerned individual, the authority of the person signing the tender on behalf of another
must be verified and a proper power of attorney authorizing such person should be
insisted on. In case, a tender is submitted in a business name and if it is a concern of an
individual, the constitution of the business and the capacity of the individual must appear
on the face of the contract and the tender signed by the individual himself as proprietor or
by his duly authorized attorney.

Contracts with Partnerships: A partnership is an association of two or more

individuals formed for the purpose of doing business jointly under a business name. It is
also called a firm. It should be noted that a partnership is not a legal entity by itself, apart
from the individuals constituting it. A partner is the implied authority to bind the firm in a
contract coming in the purview of the usual business of the firm. The implied authority of
a partner, however, does not extend to enter into arbitration agreement on behalf of the
firm. While entering into a contract with partnership firm care should be taken to verify
the existence of consent of all the partners to the arbitration agreement.

Contracts with Limited Companies: Companies are associations of individuals

registered under Companies Act in which the liability of the members comprising the
association is limited to the extent of the shares held by them in such companies. The
company, after its incorporation or registration, is an artificial legal person, which has an
existence quite distinct and separate from the members of shareholders comprising the
same. A company is not empowered to enter into a contract for purposes not covered by
its memorandum of association; any such agreement in excess of power entered into the
company is void and cannot be enforced. Therefore, in cases of doubt, the company must
be asked to produce its memorandum for verification or the position may be verified by an
inspection of the memorandum from the office of the Registrar of Companies before
entering into a contract. Normally, any one of the Directors of the company is empowered
to present the company. Where tenders are signed by persons other than Directors or
authorized Managing Agents, it may be necessary to examine if the person signing the
tender is authorized by the company to enter into contracts on its behalf.

Corporation other than Limited Companies: Associations of individuals

incorporated under statutes such as Trade Union Act, Cooperative Societies Act and
Societies Registration Act are also artificial persons in the eye of law and are entitled to
enter into such contracts as are authorized by their memorandum of association. If any
contract has to be entered into with any one of such corporations or associations, the
capacity of such associations to enter into contract should be verified and also the
authority of the person coming forward to represent the said associations.

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 Parties to Defence Contracts: The parties to the Defence contracts are the
President of India as the purchaser acting through the authority signing the
Contract/Agreement/Purchase Order etc., and the supplier named in the contract.

Consent of both the Parties

Consent of Both Parties: Two or more persons are said to consent when they
agree upon the same thing in the same sense. When two persons dealing with each other
have their minds directed to different objects or attach different meanings to the language
which they use, there is no agreement. The misunderstanding which is incompatible with
agreement may occur in the following cases: -

(a) When the misunderstanding relates to the identity of the other party to the agreement;
(b) When it relates to the nature or terms of the transactions;
(c) When it related to the subject matter of the agreement.

Free Consent of the Parties: The consent is said to be free when it is not caused
by coercion, undue influence, fraud, misrepresentation or mistake. Consent is said to be so
caused when it would not have been given but for the existence of coercion, undue
influence, fraud, misrepresentation or mistake. When consent to an agreement is caused by
coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable
at the option of the party whose consent was caused. A party to a contract, whose consent
was caused by fraud or misrepresentation may, if he thinks fit, insist that the contract shall
be performed, and that he shall be put in the position in which he would have been if the
representations made had been true.

Consent Given Under Mistake: In case consent to an agreement has been given
under a mistake, the position is slightly different. When both the parties to an agreement
are under a mistake as to a matter essential to the agreement, the agreement is not voidable
but void. When the mistake is unilateral on the part of one party only, the agreement is not
void.

Mistake of Fact and Law: Distinction has also to be drawn between a mistake of
fact and a mistake of law. A contract is not void because it was caused by a mistake as to
any law in force in India but a mistake as to law not in force in India has the same effect as
a mistake of fact.

Consideration

What is Consideration?: Consideration is something which is advantageous to

the promisor or which is onerous or disadvantageous to the promisee. Inadequacy of
consideration is, however, not a ground avoiding the contract. But an act, forbearance or
promise, which in contemplation of law has no value, is no consideration and likewise an
act or a promise, which is illegal or impossible, has no value.

Lawfulness of Object

Lawfulness of Object: The consideration or object of an agreement is lawful,

unless it is forbidden by law or is of such a nature that if permitted, it would defeat the

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provisions of any law, or is fraudulent or involves or implies injury to the fraudulent
property of another or the court regards it as immoral or opposed to public policy. In each
of these cases the consideration or object of an agreement is said to be unlawful.

Communication of an Offer/Proposal and Acceptance

Communication of an Offer or Proposal: The communication of a proposal is

complete when it comes to the knowledge of the person to whom it is made. A time is
generally provided in the tender forms for submission of the tender. Purchaser is not
bound to consider a tender, which is received beyond that time.

Communication of Acceptance: A date is invariably fixed in tender forms up to

which tenders are open for acceptance. A proposal or offer stands revoked by the lapse of
time prescribed in such offer for its acceptance. If, therefore, in case it is not possible to
decide a tender within the period of validity of the offer as originally made, the consent of
the tenderer firm should be obtained to keep the offer open for further period or periods.

When is communication of Acceptance Complete?: The communication of an

acceptance is complete as against the proposer or offerer, where it is put in the course of
transmission to him, so as to be out of the power of the acceptor, and it is complete as
against the acceptor when it comes to the knowledge of the proposer or offerer. The
medium of communication in government contracts is generally by post and the
acceptance is, therefore, complete as soon as it is posted. So that there might be no
possibility of a dispute regarding the date of communication of acceptance, it should be
sent to the correct address by some authentic foolproof mode like registered post
acknowledgement due, etc.

Acceptance to be Identical with Proposal: If the terms of the tender or the

tender, as revised, and modified, are not accepted or if the terms of the offer and the
acceptance are not the same, the acceptance remains a mere counter offer and there is no
concluded contract. It should, therefore, be ensured that the terms incorporated in the
acceptance are not at variance with the offer or the tender and that none of the terms of the
tender are left out. In case, uncertain terms are used by the tenderers, clarifications should
be obtained before such tenders are considered for acceptance. If it is considered that a
counter offer should be made, such counter offer should be carefully drafted, as a contract
is to take effect on acceptance thereof. If the subject matter of the contract is impossible of
fulfillment or is in itself in violation of law such contract is void.

Withdrawal of an Offer/Proposal and Acceptance

Withdrawal of an Offer or Proposal: A tenderer firm, which is the proposer,

may withdraw its offer at any time before its acceptance, even though the firm might have
offered to keep the offer open for a specified period. It is equally open to the tenderer to
revise or modify his offer. Such withdrawal, revision or modification must reach the
accepting authority before the date and time of opening of tender. No legal obligations
arise out of such withdrawal or revision or modification of the offer as a simple offer is
without a consideration. Where, however, a tenderer agrees to keep his offer open for a
specified period for a consideration, such offers cannot be withdrawn before the expiry of
the specified date. This would be so where earnest money is deposited by the tenderer in
consideration of his being supplied the subsidiary contract and withdrawal of offer by the

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tenderer before the specified period would entitle the purchaser to forfeit the earnest
money.

Withdrawal of Acceptance: An acceptance can be withdrawn before such

acceptance comes to the knowledge of the tenderer. A telegraphic revocation of
acceptance, which reaches the tenderer before the letter of acceptance, will be a valid
revocation.

Signing, Acceptance and Stamping of the Defence Contracts

Who can Sign the Defence Contracts?: All defence contracts are in the name
and on behalf of the President of India. However, the contract, after due approval of the
CFA, may be signed by a staff officer, duly authorized by the CFA in writing. The
specimen signature of such staff officer is to be sent to all concerned, including the paying
and inspecting authorities. As for the contractor, the person signing the contract is deemed
to have been authorized by the supplier.

Acceptance of the Defence Contracts: Any contract, when not signed by both
parties, namely the purchaser and the supplier, is deemed to come into force with the
acceptance of the tender as per mutually agreed terms and conditions contained in the RFP
and the firms offer. However, in the case of supply orders, the firm should check the
supply order and convey acceptance of the same within seven days of receipt of the supply
order. If such an acceptance or communication conveying their objection to certain parts of
the contract is not received within the stipulated period, the supply order is deemed to
have been fully accepted by the firm. In case of foreign contract, normally both parties sign
the document thus conveying their acceptance of the contract.

Stamping of Defence Contracts: Under Entry 5 of Schedule I of the Indian

Stamp Act, an agreement or memorandum of agreement for or relating to the sale of
goods or merchandise exclusively is exempt from payment of stamp duty.

Types of Contract and General Principles for Contracting

Types of Contracts: Government contracts can be of many types depending on

the nature of the item being procured, work to be executed, services required to be
rendered and support to be provided. The provisions contained in this Manual are not
applicable to the contracts for works and projects. These will apply to all other types of
revenue contracts. The general types of contract could be as follows:

(a) Purchase order for items of stores, spares or equipment.

(b) Rate Contract.
(c) Price Agreement.
(d) Service Contract.
(e) Annual Maintenance Contract (AMC)/Comprehensive Maintenance
Contract (CMC).
(f) Consultancy Contract.
(g) Development Contract.
(h) Works Contract/Project.

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 General Principles of Contracting: The following principles are laid down for
the guidance of the authorities who have to enter into contracts or agreements involving
expenditure from public funds:

(a) The terms of contract must be precise and definite and there must be no room for
ambiguity or misconstruction therein.
(b) Standard forms of contracts should be adopted, wherever possible, and the terms
of the contract should be subjected to close prior scrutiny.
(c) As far as possible and where mandated, particularly if standard format of contract
is not to be adopted, legal and financial advice should be taken in drafting of
contracts and before they are finally entered into.
(d) The terms of a contract, once the contract is concluded, should not be materially
varied without the previous consent of the authority competent to enter into the
contract as so varied.
(e) No contract involving an uncertain or indefinite liability or any condition of an
unusual character should be entered into without the previous consent of the
competent financial authority.
(f) Whenever practicable and advantageous, contracts should be placed only after
tenders have been openly invited.
(g) In selecting the tender to be accepted, the financial status of the individuals and
firms tendering must be taken into consideration in addition to all other relevant
factors.
(h) Even in those rare cases where a formal written contract is not made, no order for
supplies, etc., should be placed without at least a written agreement as to the
price.
(i) Adequate provision must be made in the contracts for safeguarding Government
property entrusted to the service provider.

Placement of Supply Order/Signing of Contract: The decision to issue a supply

order or sign a formal contract will be taken on the basis of the following broad
guidelines:-
a) Purchase/Supply orders containing basic terms and conditions may be issued in
the case of purchases upto ` one lakh.
b) Purchase/Supply orders may generally be placed for purchases valuing between
` one to ` 10 lakhs in single bid cases, local purchase of commercially off the shelf
items, items with standard specifications, etc.
c) In case of orders for purchases valued between ` one lakh to ` 10 lakhs, issue of the
purchase order and the letter of acceptance thereof, will result in a binding contract
where the tender documents include the General Conditions of Contract, Special
Conditions of Contract and detailed scope of work.
d) A contract document should generally be executed for purchases valuing above
` 10 lakhs.
e) However Purchase/Supply orders should be placed in all cases when the purchase
is made against Rate Contracts / Price Agreements centrally concluded by the
DGS&D/Central Procurement Authorities /Departmental authorities who are
empowered to do so.
f) A Contract document should invariably be executed in respect of all turnkey
projects or agreements for maintenance of equipment and provision of services.

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Changes in the Terms of/Amendment to a Concluded Contract

Changes in the Terms of a Concluded Contract: No variation in the terms of a

concluded contract should normally be made, unless the contract specifically provides for
it, in which case this can be done with the specific written consent of the parties to the
contract.

Amendment to a Concluded Contract: Amendment to a contract already

concluded may become essential in certain situations when either party to the contract
requests for an amendment and the proposed amendment is acceptable to other party to
the contract.

Enhancement in Rates: No enhancement in rates/prices should be made unless

the contract specifically provides for it. Such situations may arise in those cases where the
contract provides for price variation clauses or the change is due to variation in
Excise/Custom Duties/other Government taxes & levies and the contract provides for
payment of these duties on the basis of actual rates, provided the supplies are made during
the original delivery period. Consultation with Integrated Finance in such cases would be
required if the original contract was concluded with the concurrence of Integrated Finance
or, after increase in value, the contract falls within the delegated powers of the CFA,
exercisable with the concurrence of Integrated Finance.

Vetting of Price Variation Clause: Financial Advisor should be consulted for

vetting of price variation clauses/exchange rate variation clauses.

Imposition of LD While Granting Extensions: While granting extensions of

delivery period on an application of the contractor, the letter and spirit of the application
should be kept in view in fixing a time for delivery and it must be decided while granting
extension whether it would be with or without imposition of Liquidated Damages.

Liability on Account of Taxes etc in the Event of Grant of Extension of

Delivery Period: While grating extension of delivery period, any increase in the taxes
and levies would not be payable, unless the contract specifically provides for it or it is
expressly agreed to with the concurrence of the Integrated Finance.

Consultation with IFA: All amendments to contracts, which have financial

implications, including short closing and delivery period extensions (with or without LD)
should be approved by the CFA in consultation with the IFA, where the original contract
was concluded with the concurrence of integrated finance.

Amendments of Minor and Non-financial Nature: Amendments of minor

nature concerning Drawing No., Part Nos., etc., which do not have financial implication,
may be approved by an authority one step below the contract approving authority, if such
authority is specifically authorized by the CFA.

Termination of Contract

Termination of a Concluded Contract: A contract may be terminated in the

following circumstances:

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 (a) When the supplier fails to honour any part of the contract including failure to
deliver the contracted stores/render services in time.
(b) When the contractor is found to have made any false or fraudulent declaration
or statement to get the contract or he is found to be indulging in unethical or
unfair trade practices.
(c) When both parties mutually agree to terminate the contract.
(d) When the item offered by the supplier repeatedly fails in the inspection and/or
the supplier is not in a position to either rectify the defects or offer items
conforming to the contracted quality standards.
(e) Any special circumstances, which must be recorded to justify the cancellation
or termination of a contract.

Contract Effective Date

Contract Effective Date: The contract effective date is normally the date on
which the contract is signed by both the parties unless otherwise mutually agreed to and
clearly indicated in the contract as per agreed terms and conditions.

Conditions of Contract

Conditions of Contract: A contract is a legal document and must be governed by

certain terms and conditions to protect the interest of both the parties to the contract. It is
important that every purchase officer is not only thoroughly familiar with each conditions
of a contract, but that he is also able to take appropriate and timely action to safeguard the
rights and honour of the Purchaser. It is also desirable that the conditions of a contract are
practical, fair and just for both the Purchaser and the Supplier. The conditions of contract
become binding for both parties on signing/acceptance of the mutually agreed contract.

Standard Conditions of Contract (SCoC): In order to facilitate clear

understanding of the conditions of contract, a set of standard conditions, generally
applicable to all contracts, is formulated and made available to all firms at the time of
registration itself. The contract must include the standard as well as special conditions
specific to a particular case, as mentioned in the RFP. A simplified RFP form can be used in
case of Local Purchase by suitably modifying Appendix C (Parts III &IV).

Applicability of SCoC to Supply Orders: The Standard and Special Conditions

of Contract are applicable to Supply Orders also. Acceptance of Supply Order by the
Firms/PSUs is essential to make the same as legally valid document.

Special Conditions of Contract: Special conditions of contract are

supplementary conditions applicable to a specific tender and contract. Such conditions
become essential particularly in cases of contract for supply of services or even equipment.
In addition, there may be a need to stipulate conditions like stage inspection, acceptance
trials, installation, setting to work, and commissioning or pre-defined stages of payment
for services. Such conditions should be decided while processing the proposal for CFAs
approval and mentioned in the Request for Proposal as well as the contract/supply order.

Applicability of Conditions of Contract

Applicability of all terms and conditions: The formats of the RFP and the
contract agreement contain all the standard and special conditions of contract. The clauses

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given in the Standard Terms and Conditions and Special Terms and Conditions of RFP, as
applicable in a particular contract, may be included in the RFP and subsequently in the
Contract. Generally all applicable clauses will be included from Appendix C Part III
Standard Conditions of Contract in the RFP/Contract, to the extent considered feasible in a
specific case / type of procurement, while there will be a greater flexibility in selection of
the clauses from Part IV-Special Conditions of Contract. Minor changes in the text would
be permissible, as long as such changes do not materially alter the context or import of the
relevant article. CFAs would be competent to take a decision in this regard in consultation
with Integrated Finance, wherever such consultation is required for sanctioning the
proposal. Legal opinion may be sought, if considered necessary, before making any such
alteration.

Amplification of the terms and conditions: The terms and conditions included
in the specimen format of the RFP and the contract are self-explanatory. However, some of
the salient terms and conditions are also explained in the succeeding paragraphs for better
understanding.

Effective Date of Contract

Effective Date: The effective date of commencement of contract should be

invariably indicated in each contract as per agreed terms and conditions. However, except
when specifically provided otherwise in the contract. Where specifically agreed to by the
parties to the contract, effective date may be the date on which any or the last of the
following conditions, as applicable, is complied with:

(a) Furnishing of the Performance Bond in the form of PBG by the Seller
(b) Obtaining of the Export License for supply of stores by the Seller and a
confirmation in writing sent to the Buyer within specified days of signing of the
contract.
(c) Receipt of Bank Guarantee for advance payment
(d) Date of Issue of the End User Certificate. (The Purchaser should normally
provide the End User Certificate within 30 days of the signing of the contract.)

Payment of Advance:

Advance Payment to Suppliers: Ordinarily, payments for services rendered or

supplies made should be released only after the services have been rendered or supplies
made. Therefore, no advance should be offered in the RFP. However, it may become
necessary to make advance payments in the following types of cases:

(a) Advance payments are demanded by firms holding maintenance contracts for
servicing of air-conditioners, computers, other costly equipments, etc.
(b) Advance payments demanded by firms against fabrication contracts, turnkey
contracts, etc.

Where it is decided to provide advance payment, the quantum should be

incorporated upfront in the RFP.

Quantum of Advance: Advance payment should not exceed fifteen percent of the
contract value or the amount payable for six months in case of maintenance contracts.

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 Relaxation of the Prescribed Ceilings: The ceilings mentioned above may be
relaxed only with the approval of the Secretary (Defence Finance) and the Secretary of the
concerned Department of the Ministry of Defence.

Stage/Part Payments: If stage/part payments are proposed to be made on

achievement of milestones, it should be clearly mentioned upfront in the RFP with the
approval of CFA and the concurrence of the IFA, wherever required as per the delegation
of financial powers.

Securing the Advance: While making any advance payment, adequate

safeguards in the form of bank guarantee, etc., should be obtained from the firm.

Price Variation Clause/Price Adjustment Clause

Normally a contract should be entered into on a fixed price basis. Nevertheless, in

the fluctuating market conditions it may sometimes become necessary in the case of long
term contracts to consider variable price quotes given by the suppliers. The following
guidelines will be followed in cases where a price variation provision is sought to be
included in the contract:

(a) Price Variation Clause can be provided only in long-term contracts, where the
delivery period extends beyond 18 months. In short-term contracts, firm and
fixed prices should be provided for. (Where a price variation clause is provided,
the price agreed upon should specify the base level viz., the month and year to
which the price is linked, to enable variations being calculated with reference to
the price levels prevailing in that month and year.)
(b) A formula for calculation of the price variations that have taken place between the
Base level and the Scheduled Delivery Date should be included in this clause.
The variations are calculated by using indices published by Governments or
Chambers of Commerce periodically.
(c) The Price Variation Clause should also specify cut-off dates for material and
labour, as these inputs taper off well before the scheduled delivery dates.
(d) The Price Variation Clause should provide for a ceiling on price variations,
particularly where escalations are involved. It could be a percentage per annum
or an overall ceiling or both. The buyer should ensure a provision in the contract
for benefit of any reduction in the price in terms of the Price Variation Clause
being passed on to him.
(e) The clause should also stipulate a minimum percentage of variation of the contract
price above which price variations will be admissible (e.g. where resultant
increase is lower than two per cent no price adjustment will be made in favour of
the supplier).
(f) Where advance or stage payments are made, there should be a further stipulation
that no price variations will be admissible on such portions of the price, after the
dates of such payment.
(g) Where deliveries are accepted beyond the scheduled Delivery Date subject to levy
of liquidated damages as provided in the Contract, the liquidated damages (if a
percentage of the price) will be applicable on the price as varied by the operation
of the Price Variation Clause.
(h) No price variation will be admissible beyond the original Scheduled Delivery
Date for defaults on the part of the supplier.

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 (i) Price variation may be allowed beyond the original Scheduled Delivery Date, by
specific alteration of that date through an amendment to the contract in cases of
force majeure or defaults by Government.
(j) Where contracts are for supply of equipment, goods, etc., imported (subject to
customs duty and foreign exchange fluctuations) and/or locally manufactured
(subject to excise duty and other duties and taxes), the percentage and element of
duties and taxes included in the price should be specifically stated, along with the
selling rate of foreign exchange element taken into account in the calculation of
the price of the imported item. The mode of calculation of variations in duties
and taxes and Foreign exchange rates and the documents to be produced in
support of claims for such variations should also be stipulated in the Contract.
(k) The clause should also contain the mode and terms of payment of the price
variation admissible.

Exchange Rate Variation (ERV)

ERV Clause: This clause is only to be included in the contracts concluded with
Defence PSUs, in case the delivery period exceeds one year from the date of contract which
involves import content (foreign exchange). The offer should indicate the import content.
In case DP is re-fixed / extended, ERV will not be admissible, if this is due to default of the
supplier. Base exchange rate of each major currency used for calculating FE content of the
contract is to be indicated. The base date for ERV to be admissible would be the contract
date and variation on the base date can be given upto the midpoint of manufacture unless
the firm has already indicated the time schedule within which materials will be exported
by the firm. Other conditions as above for price adjustment would be applicable.

Documentation for Claiming ERV: The following documents would need to be

submitted in support of the claim on account of ERV:

(a) A bill of ERV claim enclosing worksheet.

(b) Bankers Certificate / debit advice detailing FE paid & Exchange rate.
(c) Copies of import orders placed on the suppliers.
(d) Invoice of supplier for the relevant import orders.

Performance Security Deposit

Performance Security / Warranty Bank Guarantee: Performance security is

payable by the supplier at the rate of 5%-10% of the contract value and is to be taken from
every successful bidder irrespective of the registration status of the firm. Performance
Security deposit payable to the Purchaser is furnished by the Supplier in the form of a
Performance Bank Guarantee (PBG) issued by a public sector bank or a private sector bank
authorized to conduct government business, in the prescribed format within thirty days
from the date of contract. At present, ICICI Bank Ltd., Axis Bank Ltd. and HDFC Bank Ltd.
are the three private sector banks authorized to carry out government transactions. The
performance security deposit is meant to compensate the Purchaser for any loss suffered
due to failure of the supplier to complete his obligations as per the contract. The
PBG/WBG will remain valid throughout the duration of the contract upto completion of
supplies and continue thereafter as a Warranty Bank Guarantee upto sixty days beyond
the date of completion of all contractual obligations, including warranty. This obviates the

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need to obtain a fresh Warranty Bank Guarantee from the supplier on commencement of
the warranty period, with corresponding return of the Performance Guarantee. In case the
execution of the contract is delayed beyond the contracted period and the purchaser grants
extension of delivery period, with or without LD, the supplier must get the BG revalidated,
if not already valid. The format of PBG cum WBG is given in Form DPM-15

Payment

Payment Terms: Payment terms are of great importance both for the purchaser
and the supplier as the cost of finance plays a very important role in deciding the cost of an
item or service being contracted for. Normally, 95% of the contract amount is released
against provisional receipt of the item at the consignees premises along with inspection
note and other documents. Balance 5% is released after the stores have been properly
checked and accounted for. Some suppliers prefer 100% payment after delivery and
accounting, which may be accepted. In many cases, suppliers request for allowing part
supply and corresponding part payment. Such requests can also be considered by the CFA
for acceptance on merit of individual cases.

Paying Authority: The specific office of the Principal Controller/Controller or the

Unit Accounts Office, which would be responsible for making payment, should be clearly
mentioned in the RFP and the contract.

E-payments: It will be mandatory for the suppliers/vendors to indicate their bank

account numbers and other relevant e-payment details so that payments could be made
through ECS/NEFT/RTGS mechanism instead of payment through cheques. The details
given in the mandate form should also be incorporated in the supply order/contract.

Documents to be submitted for Claiming Payment: The documents to be

submitted for audit and payment depend upon the nature of procurement and the terms
and conditions of a particular supply order/contract. However, essential documents that
are required for audit and payment are as follows:

(a) Documents to be submitted to the Audit Authority Along With Advance Copy of the
Supply Order/Contract:
(i) Ink singed copy of the Supply Order/Contract Agreement/ Accepted
Tender (AT) Note
(ii) An ink-signed copy of sanction of the CFA indicating UO Number and date
of IFAs concurrence, where applicable
(iii) A copy of the techno-commercial evaluation and rejection details, if any, in
case of two bid system
(iv) A copy of the Comparative Statement of Tenders (CST) with price bids
(v) A copy of TPC/PNC proceedings, if held
(vi) PAC certificate/OEMs Certificate/ any other certificate that may be
peculiar to the procurement
(vii) Specimen signatures of sanctioning and countersigning authorities
(viii) VAT/CST/Service Tax Registration No./PAN.

Note: The budget allotment letter(s) conveying allocation of funds under the concerned
code-heads of expenditure are required to be sent as and when the allocations are made.

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 In case documents listed above are not sent in advance to the audit authority, they
may be called for by such authority at the time of payment of bills/post audit, where
applicable.

(b) Documents to be submitted to Paying Authority for payment along with the Bill

(i) An ink-singed copy of the Contingent Bill/Sellers Bill

(ii) An ink-signed copy of the Commercial Invoice

(iii) A copy of the Supply Order with UO No. and date of IFAs concurrence,
where required under delegation of financial powers.

(iv) CRVs in duplicate

(v) Inspection note

(vi) Relevant documents/proof of payment in support of the claim for
statutory and other levies, such as Excise duty challan, Customs duty
clearance certificate, Octroi receipt, proof of payment for EPF / ESIC
contribution with nominal roll of beneficiaries, etc., as applicable
(vii) Exemption certificate for Excise duty/Customs duty, if applicable
(viii) Bank Guarantee for advance, if any
(ix) Guarantee/Warranty Certificate
(x) Performance Bank Guarantee/indemnity bond, where applicable
(xi) DP extension letter with CFAs sanction, UO No. and date of IFAs
concurrence, where required, indicating whether extension is with or
without LD
(xii)
Details for electronic payment as per mandate form given in Form DPM-
11 of DPM 2009, if these details are not incorporated in the Supply
Order/Contract or in case there is a change in these details

(xiii) User acceptance

(xiv) Any other document/certificate that may be provided for in the supply
order/contract.

Note: Depending upon the peculiarities of the procurement being undertaken,

documents may be selected from the list given above and specified in the RFP and
supply order/contract.

Delivery

Delivery: Timely delivery as per the delivery period (DP) stipulation in the
Contract/Purchase Order is one of the most important procurement objectives as timely
availability of items is vital, particularly for the department of defence. The stores are
considered to have been delivered only when these are handed over to the consignee after
due inspection by the designated inspecting agency. Most contracts stipulate door delivery
at the consignees end by road. In some cases, the stores are also dispatched by rail, in
which case the delivery is deemed to have been made on receipt of RR and inspection note.

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In certain cases where the contractor offers stores for inspection during the last few days of
contract DP or on the last day of the contract DP, the inspector can inspect the store and
sentence it as per standard franking clause.

As per the standard franking clause, the fact that the stores have been inspected
after the delivery period and accepted by the inspectorate does not bind the purchaser,
unless at his discretion he agrees, to accept delivery thereof. The stores are accepted
without prejudice to the right of the Purchaser.

Correctness of the Quality and Quantity: On receipt at the consignees

premises, the stores are checked for ascertaining the correctness of quantity, quality and
documents. In case the stores are found deficient in any way, the consignee has the right to
reject the stores even if these were inspected and cleared by the inspector.

Failure to deliver within the DP: When the supplies do not materialize by the
stipulated contract delivery date, the purchaser has the option of:

(a) Extending the delivery date with imposition of LD and denial clause, which
implies denial of increase in price, taxes, duties, etc. taking place during the
extended period.
(b) Re-fixing the delivery date.
(c) Canceling the contract and repurchasing the non-supplied quantity.

Deciding the Course of Action in the Event of Failure of Supply: For

deciding on these options the Procuring Authority has to balance the time factor required
for making repurchase and whether the supply can be arranged earlier than the period of
extension sought for at cheaper rates from alternative sources and in the latter case
whether the indentor can reasonably wait to take advantage of lower trend in prices.
Extension shall be granted only where the CFA is convinced that supplier would come
forward during extended DP.

Maximum Period of Extension: The maximum period of extension of delivery

that can be granted by the CFA under delegated powers should be such that the total
period - the original delivery period plus the extension does not exceed twice the original
delivery period. Extensions beyond this period would require sanction of the next higher
Service/Administrative authority/ CFA in the chain of Command.

Refixation of Delivery Period: The delivery period can be re-fixed only in the
circumstances mentioned below
(a) Where manufacture is dependent on approval of advance samples and delay occurs in
approving the samples even though submitted in time.
(b) Extension is granted due to omission on the part of the purchaser to enforce delivery
date within the stipulated time.
(c) Where the entire production is controlled by the Government.

Liquidated Damages (LD)

Liquidated damages: Compensation of loss on account of late delivery where loss is

pre-estimated and mutually agreed to is termed as the Liquidated Damage (LD). Law
allows recovery of pre-estimated loss, provided such a term is included in the contract. For

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imposition of LD, there is no need to establish actual loss due to late supply. The legal
position with regard to claim for liquidated damages is as follows:

(a) Whatever the quantum of the loss sustained, the claim cannot exceed the sum
stipulated in the contract.
(b) Only reasonable sum can be calculated as damages, which in given situation may
be less than the sum stipulated.
(c) What is a reasonable sum would depend on facts.
(d) Court may proceed on the assumption that the sum stipulated reflects the genuine
pre-estimates of the parties as to the probable loss and such clause is intended to
dispense with proof thereof.
(e) The distinction between penalty and LD has been abolished by the Indian Contract
Act and in every case, the Court is not bound to award more than reasonable
compensation not exceeding the amount so named.

Quantum of LD: As a general rule, if the contractor fails to deliver the

stores/service or any installment thereof within the DP or at any time repudiates the
contract before expiry of such period, the CFA, without prejudice to the right of the
purchaser to any other remedy for breach of contract, may recover from the contractor a
sum equivalent to 0.5% of the prices of any stores which the contractor has failed to deliver
within the period agreed for delivery in the contract, for each week or part thereof during
which the delivery of such stores may be in arrears, where delivery thereof is accepted
after expiry of the aforesaid period. The total LD will not exceed 10% of the total value of
goods / services delayed beyond the original date of delivery / completion of supplies /
service as indicated in the contract/ supply order. The LD cannot exceed the amount
stipulated in the contract.

Guidelines for levying of LD: The following guidelines would be followed

while taking decision for imposition of LD:

Sl.
Circumstances Quantum of LD
No.
1 Delay in supplies resulted in actual/ Full LD subject to the LD not exceeding
demonstrable monetary loss and the 10% of the total value of goods /
Supplier was responsible for the delay services delayed beyond the original
date of delivery / completion of
supplies / service as indicated in the
contract/ supply order
2 Delay in supplies resulted in actual/ Full LD for the period for which the
demonstrable monetary loss but the Supplier was responsible for the delay,
Supplier was responsible only for a part subject to the LD not exceeding 10% of
of the delay and the remaining part was the total value of goods / services
beyond Suppliers control delayed beyond the original date of
delivery / completion of supplies /
service as indicated in the contract/
supply order
3 Delay in supplies resulted in actual/ LD may be waived in full
demonstrable monetary loss but the entire
delay was due to circumstances beyond
the control of the Supplier

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4 Actual/demonstrable monetary loss LD may be waived in full
cannot be certified and no inconvenience
has been caused

Waiver of LD: Liquidated damages may be waived in full or part, as per the
guidelines contained in the preceding paragraph, with the approval of the CFA and the
concurrence of the IFA, wherever such concurrence is mandated as per delegation of
financial powers. In all such cases, adequate reasons should invariably be recorded for
waiving the Liquidated Damages.

Consequential Damages: Consequential damage is imposed over and above LD

in case of time critical Turn-key Projects. Where considered necessary, it should be
included in the RFP and the contract.

Arbitration

Arbitration: If a dispute arises between the Purchaser and the Supplier and it does
not get resolved through mutual discussions, the parties may agree for arbitration.
MOD/CFAs should prepare a panel of arbitrators for selection by the Defence Secretary
/CFAs who appoint an arbitrator, whose decisions taken after due consideration of
factors brought out by both parties are considered final. The option of approaching
Ministry of Law for appointment of Arbitrator can also be exercised. Services
Headquarters have the power to appoint Arbitrators within their delegated financial
powers.

Appointment of Arbitrators through Court: There may be situations when

either party approaches a court of law for appointing an independent arbitrator. Purchase
officers must consult the Legal Advisor (Defence) and Government counsel in all cases of
arbitration.

force majeure

force majeure: Wherever considered necessary, this clause may be included in the
RFP and in the Contract. In this context provisions of paragraph 10.9 of this Manual will
apply, mutatis mutandis, to procurement from indigenous sources also, though this clause
should be included in such contracts only if absolutely necessary.

Option Clause and Repeat Order Clause

Repeat Order and Option Clauses: Provision for repeat order and option clause
should not be made as a matter of course in the RFPs as these clauses have an impact on
price. Either or both these clauses may be provided in the RFP only in exceptional
circumstances, where the consumption pattern is not predictable, with the stipulation that
while exercising one or both these clauses the overall ceiling of fifty percent of the
originally contracted quantity will not be exceeded. Repeat Order and/or Option Clause
may be exercised more than once, provided altogether these orders do not exceed 50% of
the original order quantity.

Option Clause: Under this clause, the Purchaser retains the right to place orders
for additional quantity up to a maximum of 50% of the originally contracted quantity at

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the same rate and terms of the contract. Such an option is available during the original
period of contract provided this clause had been incorporated in the original contract with
the supplier. Option quantity during extended DP is to be limited to 50% of balance
quantity after original Delivery Period. This clause may be exercised in case of
procurement from single vendor/OEM also subject to there being no downward trend in
prices. However, in multi vendor contracts, great care should be exercised before operating
the option clause.

Conditions governing Option Clause: Against an outstanding indent for which

acceptance of necessity has been approved by CFA, it may be advantageous to the
Purchaser to exercise the option clause in accordance with the terms and conditions of
contract. The option clause may be exercised on approval of the CFA, within whose
powers total value of original supplies plus value of the option clause falls, in consultation
with IFA, where applicable as per the delegation of financial powers, during currency of
the contract. It should be ensured that there is no downward trend in the market prices.
No fruitful result will accrue by floating fresh RFP when items are urgently required. If the
contract also contains the repeat order clause, it may be kept in mind while placing order
under the option clause that the total quantity under the option clause and the repeat order
cannot exceed fifty percent of the originally ordered quantity.

Repeat Order: Wherever considered necessary, provision may be made in the RFP
and the contract for Repeat Order. A Repeat Order against a previous order may be placed
at the same cost and terms and conditions as per the original order/contract with the
approval by the CFA and concurrence of integrated finance, wherever required as per the
delegation of financial powers.

Conditions Governing Repeat Order: A Repeat Order may be placed subject to

the following:

(a) Items ordered against the previous order had been delivered successfully.
(b) Original order should not have been placed to cover urgent/emergent demand.
(c) Repeat Order is not placed to split the requirement to avoid obtaining the
sanction of the next higher CFA.
(d) The original order should have been placed on the basis of lowest price
negotiated and accepted by CNC, and not on the basis of delivery or any other
preference.
(e) There is no downward trend in the price of the item. (A clear certificate should
be recorded to that effect.)
(f) The requirement is for stores of identical nature/ specifications, nomenclature
etc. Minor improvements in spec(s) or phasing out of products due to
obsolescence should not be precluded from the purview of repeat order but this
aspect should be very carefully examined from the point of view of
interchangeability of the product offered as an improved substitute.
(g) The repeat order is to be placed within six months from the date of completion
of the supply against the original order.
(h) The repeat order quantity is to be restricted to a maximum of 50% of last order
quantity in case of indigenous and foreign procurement, where the contract
does not also include the option clause. In case of orders for small quantities,
the Repeat Order quantity may be rounded off to the next whole number.

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 (i) This provision may be exercised in case of PAC/Single vendor OEM also.
However, care should be taken before exercising this provision in multi-vendor
situation.
(j) Where the contract also includes an Option clause, Repeat Order may be placed
only for such quantity, which, along with the quantity for which Option clause
may have already been exercised, does not result in the total quantity under the
Option clause and the Repeat Order exceeding 50% of the originally ordered
quantity.
(k) The CFA will be decided taking into consideration the value of the originally
ordered quantity and the Option clause/Repeat Order quantity.

Risk and Expense Purchase

Risk & Expense Purchase: Risk and expense purchase clause may be included in
the RFP and the contract, if considered necessary. Risk and Expense purchase is
undertaken by the purchaser in the event of the supplier failing to honour the contracted
obligations within the stipulated period and where extension of delivery period is not
approved. While initiating risk purchase at the cost and expense of the supplier, the
purchaser must satisfy himself that the supplier has failed to deliver and has been given
adequate and proper notice to discharge his obligations. Whenever risk purchase is
resorted to, the supplier is liable to pay the additional amount spent by the Government, if
any, in procuring the said contracted goods/ services through a fresh contract, i.e. the
defaulting supplier has to bear the excess cost incurred as compared with the amount
contracted with him. Factors like method of recovering such amount should also be
considered while taking a decision to invoke the provision for risk purchase.

Risk and Expense purchase clause not mandatory: Risk purchase at the cost
and expense of the supplier may not always be a practical proposition as it may not be
feasible to enforce recovery without legal action. This clause is rarely invoked in case of
import contracts for this reason. In such cases where the item is of proprietary nature or
there is only one qualified firm to supply the items and there is a remote possibility of
procuring the same item from an alternative source, it will be essential that instead of
having risk and cost clause in the contract, the contract should have performance
guarantee clause to cover any such default.

Alternative remedies to Risk & Expense Purchase Clause: In case of foreign

contracts, risk and expense clause is generally not applicable. The other remedies available
to the purchaser in the absence of the Risk and Expense Clause are as follows:

(a) Deduct the quantitative cost of discrepancy from any of the outstanding
payments of the supplier.
(b) Avoid issue of further RFPs to the firm till resolution of the discrepancy.
(c) Bring up the issue of discrepancy in all meetings with the representative of
supplier.
(d) Provide for adequate Bank Guarantee to cover such risks.
(e] In case of foreign contracts, finally approach the Government of the
Suppliers country through the Ministry of Defence, if needed.

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Apportionment of Quantity

Apportionment of Quantity: In global and limited tender enquiry cases, if there

is an apprehension that the L1 may not have the capacity to supply the entire requisite
quantity, it should be mentioned in the RFP that the order may be placed on L2, L3 and so
on for the balance quantity at L1 rates, provided this is acceptable to them. Even if there
was no prior decision to split the quantities and it is discovered that the quantity to be
ordered is far more than what L1 alone can supply, the balance quantity will be offered to
the L 2 for supply at L 1 rate and if the latter is unable to meet the requirement or the rate
is not acceptable to him, then the offer will be made to L-3, L-4 etc. in that sequential order
before moving to the next higher bidder to supply the remaining quantity at L1 rate.
Where it is decided in advance to have more than one source of supply (due to vital or
critical nature of the item) the ratio of splitting should be indicated in the RFP.

Acceptance of Excess or Short Deliveries

Acceptance of Excess or Short Deliveries: There may be occasions when excess

or short supplies are made by the vendors due to various reasons like, exact multiples of
the standard units of measure, or where it is difficult to mention exact weight in case of
steel plates etc. A clear indication should be made in the RFP if this clause is to be applied
in any particular case. These variations in supplies may be accepted with the approval of
CFA, subject to the value of such excess/short supplies not exceeding 5% (five percent) of
the original value of the contract. CFA will be determined with reference to the value of
the original order plus excess/short supply.

Buy Back Offer

Buy Back Offer: When it is decided to replace an existing old item(s) with a new
item(s), a suitable clause should be incorporated in the RFP so that the prospective and
interested bidders may formulate their bids accordingly. Depending on the value and
condition of the old item(s) to be traded, the time as well as the mode of handing over of
the old items to the successful bidder should be decided and relevant details in this regard
suitably incorporated in the RFP. Suitable provision should also be made in the RFP to
enable the Purchaser either to trade or not to trade the old item(s) while purchasing the
new one(s).

Fall Clause

Fall Clause: In cases where contracts have to be concluded with the firms, whose
rate contract with DGS&D/other central procurement agencies has expired and renewal of
RC has not taken place, a 'fall clause' should be incorporated in the Supply Order/Contract
to the effect that during the currency of the Supply Order/Contract, in case rates are found
to be lower on conclusion of rate contract, the lower rates as in the rate contract shall be
applicable.

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 RATE CONTRACT

General

Objective: The basic objective of a procurement agency is to provide the right

items of right quality and in right quantity, at the right place and right price so as to meet
the requirement of the users. One of the ways to ensure this is to conclude Rate Contracts
for all common user items which are regularly required in bulk by the users and whose
prices are likely to be stable and not subject to considerable market fluctuations. A Rate
Contract (RC) enables procurement officers to procure indented items promptly and with
economy of scale and also cuts down the order processing and inventory carrying cost.
The RC system takes care of supply chain management and enables an efficient transaction
both for the purchaser and the supplier.

Definition: A Rate Contract (commonly known as RC) is an agreement between

the purchaser and the supplier for supply of specified goods (and allied services if any) at
specified price and terms & conditions (as incorporated in the agreement) during the
period covered by the Rate Contract. No quantity is mentioned nor is any minimum
drawal guaranteed in the Rate Contract. The Rate Contract is in the nature of a standing
offer from the supplier firm. The firm and/or the purchaser is/are entitled to
withdraw/cancel the Rate Contract by serving an appropriate notice on each other, of not
less than thirty days. However, once a supply order is placed on the supplier for supply of
a definite quantity in terms of the rate contract during the validity period of the rate
contract that supply order becomes a valid and binding contract and the supplier is bound
to supply the ordered quantity.

Price Agreement: While procuring goods and services, it may be expedient to

enter into a Price Agreement (PA)/Fixed Price Quotation (FPQ) with the Original
Equipment Manufacturers (OEMs). The PA/FPQ may be finalized after due negotiation
and market survey. Such PA/FPQ may be normally valid for a period upto three years
and may be extended further suitably with next higher CFAs sanction.

Types of Items Suitable for RC: The types of items which may be considered
for RC are:

(a) Items required by several users on recurring basis and having clear
specifications.
(b) Fast moving items with short shelf life or storage constraints.
(c) Items with minimum anticipated price fluctuation during the currency of the
RC. Items with high probability of considerable price fluctuation should not
be considered to be covered by RC except for short term contract.
(d) Items that take long gestation period to manufacture and for which there is
only one source for manufacturing.

Items already on DGS&D Rate Contract: No Rate Contract should normally be

concluded for items in respect of which DGS&D Rate Contracts are already in place. If,
however, it becomes necessary to enter into contracts for items which are already on
DGS&D Rate Contract, the reasons for doing so should be recorded and CFAs approval
taken after consulting integrated finance.

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Authorities Competent to Conclude Rate Contract/Long Term Product Support

Authorities competent to conclude Rate Contracts: Rate Contract or Price

Agreement for goods and services should be concluded only by the authorized Central
and local Procurement Agencies.

Long Term Product Support: The Price Agreement for long term product
support should be concluded with the approval of the authorities to whom such powers
have been specifically delegated.

Period of Rate Contract

Period of RC: A Rate Contract should normally be concluded for one year.
However, in special cases, shorter or longer period, not exceeding three years, may be
considered. Any extension of the existing RC or conclusion of an RC beyond a period of
three years would need the approval of the Ministry of Defence.

Fixing of the Termination Period: As far as possible termination period of RC

should be so fixed as to ensure that budgetary levies would not affect the price and thereby
frustrate the contracts.

Determination of the Competent Financial Authority to approve RC

Competent Financial Authority: Value of anticipated drawal over a period of

one year should be taken into account while determining the level of CFA for conclusion of
Rate Contract/Price Agreement.

Process of concluding Rate Contracts

Estimate/Indent/Requisition: A Rate Contract can be concluded based on

estimated annual requirements of various users under the authority processing an RC
proposal. The contract concluding authority must scrutinize the estimates for their
completeness in terms of authority for raising the indent, specification of the item, desired
delivery schedule, packing and preservation, etc. Adequate budget provisions must be
made and confirmed in the normal manner.

Selection of Firms: Rate Contracts should be normally concluded only with the
registered firms based on their capacity assessment by the designated
Registering/Inspecting Agency. In respect of new items being bought on Rate Contract for
the first time, RC can be awarded to unregistered firms also on the basis of favourable
technical capability, capacity and financial status. Past performance of a firm will be a
major consideration while awarding a Rate Contract. The following aspects should
normally be kept in mind:

(a) No new RC should be placed with firms having backlog, which is likely to
continue for major portion of the year.
(b) Performance of the contractor for the last 3 years should be taken into
consideration.
(c) If the contractor does not have current RC, performance against earlier two
immediate rate contracts should be considered.

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 (d) If the RC holder is a defaulter in furnishing drawal report, this should be
looked into, if the defaulter is bidding.
(e) The minimum performance level / performance criteria should be specified
in the bid documents.

Price Negotiation: While concluding RC, it is preferable to conduct price

negotiations by the CNC in order to obtain best value for money and also to clarify all
aspects of the RC to avoid ambiguity and dispute at a later stage. All Rate Contracts and
Price Agreements should be processed through the committee CFA or the CNC so as to
ensure best value for money, quality assurance and transparency. Participation of finance
member in all deliberations, particularly regarding the pricing and conditions of contract,
is mandatory.

Signing of Rate Contract: RC concluded for various wings of the MOD will be
signed for and on behalf of the President of India. RC itself may be signed by the authority
to whom powers to enter into RC are delegated or an officer authorized to sign financial
documents on his behalf, after CFAs approval.

Conclusion of Parallel RC

Parallel Rate Contracts: In case it is observed that a single supplier does not
have enough capacity to cater to the entire demand of an item or where it is desirable to
have a wider vendor base due to criticality of the items, it may become desirable to
conclude parallel RCs with more than one firm. The CFA, based on the merit of each case,
may decide the number of firms to be awarded RC for an item so that DDOs will have a
wider choice. Efforts should be made to conclude parallel RCs with firms located in
different parts of the country to cater to users over a wider geographical spread. Parallel
RC may be concluded with marginal price difference say up to 5%. In such cases approval
of the next higher CFA is to be taken.

All DDOs to operate the RCs: Orders against a Rate Contract concluded by any
authority may be placed on the same terms and conditions by all Direct Demanding
Officers of Services/ Departments/ Organizations/Units/Establishments under the
Ministry of Defence, subject to there being no downward trend in prices. To facilitate such
operation, a suitable provision should be made in the RCs and the details of the RCs
posted on the website of the Service/Organization concerned.

Special Conditions Applicable for Rate Contract

Special Conditions: Some conditions of rate contract differ from the usual
conditions applicable for other contracts. Some such important special conditions of rate
contract are as follows:

i) Earnest Money Deposit (EMD) is not applicable in case of registered firms but will
apply in case of bids from unregistered firms.

ii) In the Schedule of Requirement, no quantity is mentioned; only the anticipated

drawal may be mentioned without any commitment.

iii) The purchaser reserves the right to conclude more than one rate contract for the
same item.

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 iv) The purchaser as well as the supplier may withdraw the rate contract by serving
suitable notice to each other. The prescribed notice period is generally thirty days.

v) The purchaser has the option to renegotiate the price with the rate contract holders.

vi) In case of emergency, the purchaser may purchase the same item through ad hoc
contract with a new supplier.

vii) Usually, the terms of delivery in rate contracts are FOR dispatching station. This is
so, because the rate contracts are to take care of the users spread all over the
country. However, wherever it is decided to enter into RCs which are FOR
destination, the cost of transportation should be separately asked for.

viii) Supply orders, incorporating definite quantity of goods to be supplied along with
all other required conditions following the rate contract terms, are to be issued for
obtaining supplies through the rate contract.

ix) The purchaser and the authorized users of the rate contract are entitled to place
supply orders upto the last day of the validity of the rate contract and, though
supplies against such supply orders will be effected beyond the validity period of
the rate contract, all such supplies will be guided by the terms and conditions of the
rate contract.

x) The rate contract will be guided by Fall Clause.

Fall Clause: Fall clause is a price safety mechanism in rate contracts. The fall
clause provides that if the rate contract holder reduces its price or sells or even offers to sell
the rate contracted goods following conditions of sale similar to those of the rate contract,
at a price lower than the rate contract price, to any person or organization during the
currency of the rate contract, the rate contract price will be automatically reduced with
effect from that date for all the subsequent supplies under the rate contract and the rate
contract amended accordingly. Other parallel rate contract holders, if any, are also to be
given opportunity to reduce their price as well, by notifying the reduced price to them and
giving them 15 (fifteen) days time to intimate their revised prices, if they so desire, in
sealed cover to be opened in public on the specified date and time and further action taken
as per standard practice. On many occasions, the parallel rate contract holders attempt to
grab more orders by unethical means by announcing reduction of their price (after getting
the rate contract) under the guise of Fall Clause. This situation is also to be dealt with in
similar manner as mentioned earlier in this paragraph. It is, however, very necessary that
the purchase organizations keep special watch on the performance of such rate contract
holders who reduce their prices on one pretext or other. If their performances are not upto
the mark, appropriately severe action should be taken against them including
deregistering them, suspending business deals with them, terminating the contract, etc.

Performance Security: Depending on the anticipated overall drawal against a

rate contract and, also, anticipated number of parallel rate contracts to be issued for an
item, the authority concluding the Rate Contract(s) may consider obtaining performance
security of reasonable amount from the Rate Contract holders. A suitable clause to this
effect is to be incorporated in the tender enquiry documents. Performance Security shall,
however, not be demanded in the supply orders issued against rate contracts.

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Renewal, Extension, Termination and Revocation of Contracts

Renewal and Extension: It should be ensured that new rate contracts are made
operative right after the expiry of the existing rate contracts without any gap for all rate
contracted items. In case, however, it is not possible to conclude new rate contracts due to
some special reasons, timely steps are to be taken to extend the existing rate contracts with
same terms, conditions etc. for a suitable period, with the consent of the rate contract
holders. Rate contracts of the firms, which do not agree to such extension, are to be left out
of consideration for renewal and extension. Period of such extension should generally not
be more than three months. Also, while extending the existing rate contracts, it shall be
ensured that the price trend is not lower.

Termination and Revocation of RC: RC is in the nature of standing offer and a

legal contract comes into being only when a supply order is placed by the CFA/Direct
Demanding Officers. Being just a standing offer, embodying various terms of the offer, the
contract holder may revoke it at any time during its currency. However, reasonable
opportunity should be given to the supplier to represent against any
revocation/cancellation of RC.

Payment

Payment Terms: Standard Payment terms, as indicated below, should be

incorporated in all Rate Contracts:-

(a) Upto 95 % on receipt of stores at consignees premises against dispatch

document, provisional receipt and copy number 1 of Inspection Note.
However, in case it becomes essential to dispatch stores by train, 90% payment
can be released against proof of dispatch, i.e., copy of the RR and inspection
note.
(b) Balance on accounting of stores by the consignee.
(c) Payment should be effected by the paying authority within 21 working days
from the date of receipt of bill, if the supporting documents meet paying
authority requirement. Consolidated observations, if any should be forwarded
within 10 working days by paying authority to the CFA.

Paying authority: The organization of the Principal Controller/ Controller of

Defence Accounts concerned or an authority holding cash assignment/imprest and duly
authorized to make payment for such procurements will be the paying authority.

Format of the Supply Order

Format of the Supply Order: The format of the Supply Order on which the
orders against Rate Contract could be placed by the Direct Demanding Officers is given in
Appendix F of DPM 2009. For DGS&D RC cases, FORM-131 of DGS&D may be used with
suitable changes.

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e-procurement

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2
GePNIC Procurement Simplified!
Overview
Government eProcurement System of NIC
(GePNIC) is an online solution to conduct all
stages of a procurement process. GePNIC
converts tedious procurement process into
an economical, transparent and more secure
system. Today, many Government
organizations and public sector units have
adopted GePNIC. Understanding
valuable benefits and advantages of this
eProcurement system, Government of India,
has included this under one of the Mission
Mode Projects of National eGovernance Plan
(NeGP) for implementation in all the
Government departments across
country.
Digital Signature Certificates (DSC)
The Digital Signature Certificate (DSC) is an integral part
of an eProcurement process. Using DSC, buyers and
bidders can be assured of origin/source, security of the
transactions, and authentication of the users. DSCs are
the legal requirements under the Indian IT Act. GePNIC
supports multivendor DSCs / eTokens from suppliers
such as NICCA/SIFY/TCS/nCode/eMudhra etc.
Work Flow of
eProcurement
System
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National Informatics Centre
Features Stack
GePNIC Modules: Registration, publishing of tender, bid
submission, tender opening, technical evaluation, financial
bid opening, financial evaluation, award of contract.
Enrollment of Government officials & bidders
Tender creation & publishing
Publishing of corrigendum
Publishing of prebid meeting documents
the
Clarification on the tenders published
Online bid submission/re submission as many times as
required
Facility for Online payment collection through bank
payment gateway
Encryption of bids submitted by the bidder
the Facility for single/multiple cover bid system
Withdrawal of bids
Tender opening online
Live bid opening view for the bidders
Automatic evaluation of the financial bid
Committee recommendations updated at each stage of
the tender process
Award of the Contract (AOC)
Mail/SMS alerts at different stages
Built on open source based technologies
 The Technology Advantage - GePNIC
Tender Inviting Authorities (TIA) & the bidders should enroll to
carry out the procurement activities
Entry will be through two factor login using user id & password
followed by the login through DSC
Allows multi- cover tenders, online/offline payment and online
bid submission and other important clauses as necessary
Allows publishing of corrigendum and intimating bidders/users
through email / SMS
Bidders can resubmit the bid any number of times. Bidder can
also withdraw the bid
Comparative statement of the price bids for evaluation by the
committee
Email / SMS alerts on the results to the bidders at various stages
Bidder is informed by mail/SMS about the result after every
level of evaluation
The bidders can see the recommendations after every stage
under tender status bringing in transparency in the
procurement process
Award of the contract can be viewed under Results of the
tender in the site
Security
Usage of legally valid class of Digital Signature Certificates as per
IT Act 2000 for authentication and non-repudiation at all levels
Usage of time stamping services
128/256 bit encryption with SSL security
Access to the sensitive content such as price bid, solely on
authorization
Rights/roles allocation to ensures only authorized personnel
perform the tasks
Complete compliance with IT Act 2000 for legal sanctity
Security audit certification from the recommended CERT-In
Certified Auditors
Audit Log:
The GePNIC has been in built with comprehensive audit log facility
for detailed auditing of all transactions. The audit logs are secured
and tamper proof with provision to know the details whenever
required.
National Informatics Centre
Tamil Nadu State Centre
E2A, Rajaji Bhavan, Besant Nagar, Chennai - 600 090.
etender@nic.in
24
Benefits of GePNIC
For Tender Inviting Authorities (TIA)
Approvals updated at each stage
Highly secured
Fast & efficient process, reduces the procurement cycle time
Hassle free workflow
Lesser turnaround time
MIS Reports can be retrieved in minimal time
For Bidders
Information available on 24x7
Automated system - cuts down on logistical & stationary cost
Prompt alerts
Bidder gets better access to all department tenders
Modifiable; even after submitting the bid
GePNIC has brought in confidence among the bidders as being
fair & transparent
Implementations in State/PSUs
Successfully processed for around 56,274 tenders worth over
` 88,610 Crores over a period of 3 years
Implemented in more than 7 States across the country
Provided solutions for organizations like NICSI, Mahanadi
Coalfields Limited (MCL) Orissa, and Visakhapatnam Port Trust
Implemented for procurement under Pradhan Mantri Gram Sadak
Yojana (PMGSY) of Rural Development Ministry in 21 States,
covering some of the North Eastern States.
Awards & Recognitions
G2B Initiative of the year 2009 eIndia Award
India-Tech Excellence Award - 2009 for the Orissa Implementation
Skoch-Challenger Award 2010
CII-IT award 2011 in Orissa for MCL implementation.
Compliance to World Bank, Asian Development Bank and CVC
eProcurement guidelines
National Informatics Centre Services Incorporated
Hall No.2 & 3, 6th Floor, NBCC Tower,
15, Bhikaji Cama Place, New Delhi - 110066.
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 PRELIMINARY GUIDELINES E-PROCUREMENT MODULE OF NIC
th
As per the Office Memorandum (OM) no. 10/3/2012-PPC dated 30 March, 2012 and all
subsequent OMs, issued by the Department of Expenditure, all Ministries / Departments of
the Central Government, their attached and subordinated offices need to commence e-
Procurement in respect of all procurements with estimated value of Rs. 10 lakhs or
above, in a phased manner.

For facilitating User Ministries / Departments, NIC has developed an e-Procurement

application, which is accessible through the Central Public Procurement (CPP) Portal
(URL:http://eprocure.gov.in). Ministries/Departments which do not have a large volume of
procurement or carry out procurements required for day to day running of offices and also have not
initiated e-Procurement through any other solution provider may use the e-Procurement solution
developed by NIC, if they wish.
Ministries/Departments with large volume of procurement other than of the nature mentioned
above may either use the e-Procurement solution developed by NIC or engage any other
service provider.
Ministries/Departments, which are already carrying out e-Procurement through other service
providers or have developed e-Procurement solutions in house, may continue to do so, ensuring
the conditions/guidelines provided in the above DoE OM are fulfilled.
Earlier, DoE vide its O.M No.10/1/2011-PPC dated 30th November, 2011 had issued
instructions for mandatory publication (e-Publishing) of all tender enquiries, corrigenda thereto
and details of contracts awarded thereon on the CPP Portal by all Ministries/Departments, their
attached and subordinate offices, Central Public Sector Enterprises and autonomous/statutory
st
bodies from 1 January 2012 in a phased manner. DoE vide its OM No. 10/1/2011-PPC dated
30th November,2011 had issued instruction for mandatory publication of award of contract
details in CPP portal for the tender published using e Publish.
The table below shows the key differences between e-Publishing module and e-Procurement
module of NIC accessible through the CPP Portal.
e-Publishing module e-Procurement module

1. Entails publishing of all tender enquiries,
corrigenda thereto and awards of contract
thereon on the CPP Portal.
Under e-Publishing, the User
Organisations will continue to invite bids
in paper based format.
1. Covers the complete tendering process
starting from online publishing of tender
enquiries, online bid submission by the
bidders, online bid opening, online bid
evaluation and publication of award of
Contract.
Under e-Procurement, the complete
tendering, including the submission of bids
by the bidders, will be online.

2. Under the e-Publishing module, the User 2. Under the e-Procurement module, the User
Organisations are required to define two Organisations will be required to define two
roles for their officials authorised to use additional roles apart from the Tender
this module, viz. Creator and Tender Publisher, viz.

238
 e-Publishing module e-Procurement module

a. Tender Creator - responsible for filling a. The role of bid opener is

up and uploading the details of a
tender enquiry / corrigenda / award of
Contract on the CPP Portal.
b. Tender Publisher - responsible for
publishing the tender enquiry /
corrigenda / award of contract created
by the Tender Creator on the CPP
Portal.
Critical for e-Procurement. Bid openers
should be identified for each tender at
the time of publishing of the tender
Enquiry.
b. Bid Evaluator - authorised to upload the
results of the various stages of bid
Evaluation on the CPP Portal.
c. Minimum of 4 Bid openers must be
configured to avoid any issues in tender
opening
d. At least 5 Digital Signature Certificate is
required to complete one tender cycle.

3. All authorised department users, from the
User Organisations, can login using a
login ID and password assigned to them,
to operate the e-Publishing module of the
CPP Portal. They do not need any
Additional mode of authentication.
3. All authorised department users, from the
User Organisations, will be required to have
valid Digital Signature Certificates (DSCs),
along with their user ID and password, to
be able to operate the e-Procurement
Module.

4. e-Publishing does not require the bidders
to enrol on the CPP Portal, since the
bids will continue to be submitted in the
paper based format.
4. e-Procurement requires the bidders to
enrol on the CPP Portal, using a valid
Digital Signature Certificate (DSC) and
Valid email address. The bidders will be
required to submit their bids online on the
e-Procurement module.

The following document provides the pre-requisites and guidelines for using the e-Procurement
module of NIC.

A. Enrolment on e-Procurement module of NIC

To enrol, each User Organisation (Ministry/ Department, attached or subordinated office)
should follow the steps listed below:
I. Acquire Digital Signature Certificates(DSCs)
To carry out e-Procurement using NICs e-Procurement Module, the authorised users
of the User Organisation as well as the bidders will be required to obtain valid DSCs.
DSCs may be obtained from any authorised agency registered with the Certifying
Authority (CA) in India. Authorised users will be required to procure Class-II or Class-
III DSCs.
Please refer to Annexure 2 for obtaining DSC through NICSI.

239
 II. Selection/ Nomination of Nodal Officer
Nodal Officer Accounts already created by Ministries/Departments for e-Publishing
Module of CPP Portal can also be used for NICs e-Procurement Module. User
Organisations that have not enrolled on the e-Publishing module or organisations who
wish to nominate a different officer as Nodal Officer for e-Procurement, should submit
their request by completing the Nodal Officer Account Creation form and sending it to
NIC.
The first level Nodal Officers in User Organisations may further create sub-Nodal
Officers, and designate them the responsibility of creating user accounts in the
organisation. For further details, please refer Annexure 1.
III. Setting up of Organizational Hierarchy for mapping on the CPP Portal
Every User Organisation has to ensure that their organisational structure is properly
mapped in the e-Publishing module of CPP Portal and for e-Procurement Module .The
User Organisations, whose organisational structure has already been mapped in the e-
Publishing module, need not recreate it for e-Procurement, unless they wish to make a
change to their existing organisational structure. User Organisations that have not
enrolled on the e-Publishing module or organisations that wish to make a change to their
existing organisational structure mapping should send an updated organisational structure
to NIC. For further details, please refer Annexure 1.
IV. Creation of User Accounts for officials of the User Organisation

The Nodal Officer/ sub-Nodal Officer(s) of each User Organisation will authorise users
within the organisation for various roles such as Tender Creator, Tender Publisher, Bid
Opener and Bid Evaluator who would use the e-Procurement module. For further details,
please refer Annexure 1.
V. Mapping of DSCs for all user accounts created in the User Organisation
On obtaining the DSCs, the authorised users will be required to login and map their DSCs
with their respective user profiles created by the Nodal Officer on the e-Procurement
module.

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 Annexure 1

DETAILED INFORMATION ON PRE-REQUISITES FOR ENROLMENT ON

THE E-PROCUREMENT MODULE OF NIC

I. Selection / Nomination of Nodal Officer

Nodal Officer(s) can be nominated by filling up the Nodal Officer Nomination Form
(available at http://eprocure.gov.in/cppp/sites/default/files/eproc/nodal_datasheet_0.pdf)
and sending to NIC at cppp-nic@nic.in. NIC will create the Nodal Officer account, with the
details provided in the form and the password for the account will be automatically sent to the
email address of the nominated Nodal Officer.
In case, a Nodal Officer account has already been created for the User Organisation under
the e-Publishing module of the CPP Portal, the same need not be re-created for the purpose
of e-Procurement. The User Organisations shall indicate such preference over email to
cppp-nic@nic.in. However, if the User Organisation chooses to nominate a different officer as
Nodal Officer for e-Procurement, they need to submit a new Nodal Officer request form to
NIC at cppp-nic@nic.in.
II. Setting up of Organizational Hierarchy for mapping in e-Publishing portal
The Nodal Officer(s) of each User Organisation must create a mapping of its
organisational structure / hierarchy in e-Publishing module of CPP Portal and for e-
Procurement Module of NIC as per guidelines as mentioned below :
The organisational structure of a User Organisation may be provided (up to max 4 levels)
in the following manner:
LEVEL 0 - Parent Ministry

LEVEL 1 - Organization (Department/CPSE / Autonomous/Statutory Body)

LEVEL 2 - Functional/ Zonal/ Regional Offices etc.

LEVEL 3 - Division/ District level offices etc.

LEVEL 4 - Sub-Division/Block level offices etc.

The organisation structure as per format depicted below is to be sent via email cppp-
nic@nic.in. The User Organisations that have already submitted their organisational structure
for the e-Publishing module on the CPP Portal need not resend it, unless they wish to make any
changes.

241
A sample organizational structure is given below.

ORGANISATIONAL STRUCTURE REQUIREMENT OF TENDER FLOATING

LOCATIONS IN 5 Level
Sl LEVEL 0 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4
.NO (Ministry) (Organisatio (Department (Division) (Sub division)
n name) )
1 Administration
2 Commercial Department
3 Marketing Department
Corporate
4 Fiber Development &
Head
Procurement
Quarters
5 Human Resource &
Employee Services
Department
6 Administration
7 Contract Cell
8 Commercial Department
9 Nagaon Paper Fiber Development &
Mill, Jagiroad Procurement
10 Human Resource &
Employee Services
Department
11 Hindustan Administration
12 Paper Contract Cell
Ministry
13 Corporation Commercial Department
of Heavy Cachar Paper
Limited, (A
14 Industries Mill, Fiber Development &
Govt. of
& Public Panchgram Procurement
India
15 Enterprise Human Resource &
Enterprises)
s Employee Services
Public Sector
Undertaking Department
16 Administration
17 Commercial Department
18 Contract Cell
Hindustan
19 Fiber Development &
Newsprint
Procurement
Limited
20 Human Resource &
Employee Services
Department
21 Administration
22 Contract Cell
23 Nagaland Commercial Department
24 Pulp & Paper Fiber Development &
Company Procurement
25 Limited Human Resource &
Employee Services
Department

24
III. Creation of User Accounts for officials of the User Organisation
The Nodal Officer / sub-Nodal Officer(s) of each User Organisation will authorise users
within the organisation to use the e-Procurement module of NIC. The various roles
defined for e-Procurement module are:

i. Tender Creator - responsible for filling up and uploading the details of a tender
enquiry / corrigenda / award of contract.

ii. Tender Publisher - responsible for publishing the tender enquiry / corrigenda /
award of contract created by the Tender Creator.

iii. Bid Opener - authorised to decrypt and download the bids received from the
bidders in response to a tender document.

iv. Bid Evaluator - authorised to upload the results of the various stages of bid
evaluation.

Please note that the Nodal Officer cannot perform any of the above roles. The Nodal
Officer should create the above users and assign roles in the e-Procurement module of
NIC for authorised officials in the User Organisation. Upon creation of user accounts, the
password will be automatically emailed to the respective authorised users in their mail
IDs.

243
 Annexure 2

NATIONAL INFORMATICS CENTRE SERVICES INCORPORATED (NICSI)

NEW DELHI

4/9/2014

Sub : Initiation of procurement/supply of Digital Signature Certificates (DSCs), Tokens and SSL
Certificates through NICSI.

On the directions of NIC, the procurement of DSC's, Tokens and SSL Certificates (previously)
managed by NIC would henceforth be done through NICSI till the time NIC -CA operations restart. Like other
procurements in the area of PCs, Servers and Networking equipments the Government departments, PSUs
will follow a similar process to procure the items. For the information of all concerned the process and rates
are mentioned below :

Process:
J. Client organisations will request for Proforma Invoice from NICSI via E-Mails to nicsi-pi@nic.in specifying
requirement: I) DSC/Token/SSL Certificate ii) For DSC whether Class 2 or 3 iii) validity period 1 or 2 Years (For
SSL it is 2 Years).

K. PI Division of NICSI will provide the Proforma Invoice and mandatory User Information sheet
to the organisation at its email id.

L. Organisation concerned will transfer the Invoice value through cheques/ RTGS, NEFT and follow it up
by sending back the filled up and signed User Information Sheet.

M. NICSI, on receipt of the User Information Sheet will reconcile the payment received, initiate the
project and place order on the vendor.

N. The vendor will contact the concerned Organisation, collect the mandatory documents like
photograph, identity & address proof etc before servicing the request.

O. After the client organisation certifies the satisfactory provision of the service, the bills of the vendor will
be submitted to NICSI and payments released by NICSI.

P. The support services would be provided by the vendor to the client organisation during the validity of the
services.
Rates

Following are the rates:

(i) Token Cost : Rs. 555
(ii) Class 2 DSC Charges : Rs. 445
(validity 2 Years)
(iii) Class 3 DSC Charges
(validity 1 Year ) : Rs. 746
(validity 2 Years) : Rs. 999

(iv) SSL Certificate

(validity 2 Years ) : Rs. 1685

NICSI will not be in a position to offer any technical consultancy on the DSCs. Client
organisations may seek assistance from the whoever is their I.T. Consultant. Post procurement
standard support services of the vendor will be available in respect of installation.

(P.V. Mohan Krishnan)

General Manager

24
What is MMP?

Mission Mode Projects (MMPs) are individual projects within the National e-Governance
Plan (NeGP) that focus on one aspect of electronic governance, such as banking, land
records or commercial taxes etc.

Who is monitoring respective MMPs?

MMPs are owned and spearheaded by various Line Ministries concerned for Central, State,
and Integrated MMPs. The concerned Ministry/ Department is entirely responsible for all
decisions related to their MMPs. However, decisions impacting NeGP as a whole are taken
in consultation with Department of Electronics & Information Technology (DeitY).
Additionally, wherever required by the concerned Ministries/ Departments, DeitY provides
necessary support for project formulation and development.

What is e-Procurement?

e-Procurement is the process by which the tendering activity is carried out using internet
and associated technologies.

Which Ministry/Department is monitoring e-Procurement MMP?

e-Procurement is monitored by Department of Commerce and implemented by National

Informatics Centre(NIC).

What are the objectives of e-Procurement MMP?

The objectives of the MMP are:

To establish a one stop-shop for all services related to government procurement.
To reduce cycle time and cost of procurement.
To enhance transparency in government procurement.
To enhance efficiency of procurement.
To bring about procurement reform across the government.

What is GePNIC?

GePNIC is Government e-Procurement solution developed by National Informatics centre

(NIC).

FAQs related to e-Procurement MMP

245
What is the role of NIC in MMP e-Procurement?

National Informatics Centre (NIC) is the implementing agency for the e-Procurement
project.

How does any State government join MMP e-Procurement?

Respective State governments may write a letter to Commerce Secretary consenting to join
e-Procurement MMP.

What is the role of State Government?

State Government plays a vital role in implementing the e-Procurement .Following are the
roles of the State Government:-

A state level core committee to be set up by the implementing State.

The core committee of each state shall identify one or two departments as the pilot
departments.
The state level core committee to meet once every month during initial six months of
Implementation which shall enable in regular monitoring of the project.
The core committee can guide the smooth rollout of GePNIC by taking swift decisions
and following up implementation plan at each stage. All policy related decisions like
revision of tendering rules, issue of executive instructions, finalising the Standard
Bidding Document across line Departments, vetting them, drafting and signing of MOU
with banks etc to be taken by the committee.
Awareness workshop of GePNIC Solution by NIC to the Core committee.
Inputs from the Finance and Legal teams.
Issuing of enabling Government Orders and Notifications.
Setting up of Local Help Desk / Project Monitoring Unit.
Infrastructure Setup for Facility Management Personnel.
Identifying and providing Training to department users and bidders.
Creating Awareness about e-Procurement through various channels.
Launching of pilot tenders.
Extend the solution to other departments by adding more departments under the
e- procurement platform
Enhance the scope of coverage by decreasing the threshold limit to Rs.10 Lakhs and
gradually reducing to Rs. 1 Lakh.
State Government can also mandate e-Procurement by necessary Government
Orders/Legislations/Acts.

FAQs related to e-Procurement MMP

246
What is Mission Mode Project (MMP) portal?

MMP Portal is Central Portal accessible at http://www.eprocure.gov.in/mmp/.

What all would be available in MMP portal?

MMP portal contains all tender enquiries floated by all States/UTs. It will have all Circulars/
O.M.s/ Instructions related to MMP. It will have links to various sites related to e-Tendering
of all States/UTs. It will also have the details of Award of Contract for all tenders which have
been awarded.

What is expected out of State Governments in this portal?

All users of State Government Departments/Divisions, PSUs, Attached Offices/Subordinate

Offices, Autonomous Bodies, Local Bodies etc are expected to upload all tender enquiries,
its corrigendum and award details of contract after the bid award on the portal.

What is Digital Signature Certificate (DSC)?

Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of
physical or paper certificates. Examples of physical certificates are drivers' licenses,
passports or membership cards. Certificates serve as a proof of identity of an individual for a
certain purpose; for example, a driver's license identifies someone who can legally drive in a
particular country. Likewise, a digital certificate can be presented electronically to prove the
identity of individual, to access information or services on the Internet or to sign certain
documents digitally.

Why is DSC required?

Like physical documents are signed manually, electronic documents, for example
e-forms are required to be signed digitally using a Digital Signature Certificate. Transactions
that are carried out electronically using internet, if signed using a Digital Signature
certificate becomes legally valid.

What are all the requirements to use State e-Tendering portal?

For a user who has to upload tender enquiries to the portal, the basic requirements would
be to get a Login ID created by filling up the user creation form.

FAQs related to e-Procurement MMP

247
Who will create users?

State Nodal officers will create users for department/divisions etc. who would have the
roles of tender creator and/or Tender Publisher and/or Bid Opener and/or Bid Evaluator, as
per the need.

The list of nodal officers with their contact details is available in the MMP Portal
(http://www.eprocure.gov.in/mmp/sites/default/files/eproc/MMP_Nodal_Officers.pdf )

Who is a Nodal Officer of State/UT?

Nodal officer is the key official who drives the implementation of the project in their
State/UT. He also creates users for his organization of States/UTs thereby facilitating
complete user management.

What is meant by role?

Role is the activity assigned to a person to be performed in his official capacity. The assigned
role can be for Tender Creator, Tender Publisher, Tender/Bid Opener, Tender/Bid Evaluator,
etc.

Who is a Tender Creator?

Tender Creator is an official who has been assigned the role for Tender Creation in the State
e-Tendering Portal. The user with this role can create tenders.

Who is a Tender Publisher?

Tender Publisher is an official who will verify the correctness of the tender being published
and has been assigned the role for Tender Publishing in the State e-Tendering Portal.

Who is a Tender Opener?

Tender opener is an official who will open/decrypt the Bids received against the tender both
for technical as well as financial packets.

Who is a Tender Evaluator?

Tender evaluator is an official who will upload the summary of various stages of the
tendering processes.

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During login only 3 attempts are allowed if the password goes wrong. What do
we do?

System blocks the user after 3 attempts of wrong password entry as it is a security
requirement to avoid malicious user entering the system. User has the option to revoke it
using Forget password. In case that also does not work the nodal officer can reset the
password of the users.

How do I locate my tenders in MMP main page?

Click on Search option available on the MMP main page.

(http://www.eprocure.gov.in/mmp/tendersearch).The search can be performed on State
Name, Location/City or Product category.

What are Bid Awards in MMP portal?

Bid Awards shows the list of all the Bids / Contracts /Tenders Awarded and updated in the
System. It shows important information like Number of Bids received; Names of qualified
bidders after technical evaluation; Name of the selected bidder(s); Contract Date; Contract
Value etc. This brings in complete transparency to the process.
(http://www.eprocure.gov.in/mmp/resultoftenders).

What is the basic infrastructure requirement to use MMP portal?

The complete backend hardware and software support at the Server end for
implementation of the system will be made available by NIC. The user department has
to make provisions for the front end infrastructure such as desktop , printer &
scanner, NICNET/ internet connection.

When I face some problem in using MMP portal what should I do?

As a first step kindly refer the User Manual. One can call the toll free Help Line Number
1800-3070-2232 and Mob Nos. +91-7878007972 and +91-7878007973. A mail can be sent to
cppp-support@nic.in for all technical issues. A mail can be sent to eproc-mmp@nic.in for
any policy matters or call at 011-23062805.

If some problem is faced during publishing of Tender / Corrigendum / AOC, users may kindly
send a mail to cppp-support@nic.in OR eproc-mmp@nic.in along with the screen shot of the
page.

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How does Private Application Service Providers upload the data on MMP Portal?

Private Application Service Providers can upload the data by using the facility of XML
upload. At the initial stage, a demo user ID and Password is allotted to the Nodal Officer for
test upload. When the test upload is successful, another user ID and password is issued for
uploading the meta data on the live portal. In addition to the States/UTs using the services
of private Application Service Providers; States/UTs using any solution other than GePNIC
are also required to upload their meta data on the live portal on the URL:
www.eprocure.gov.in/mmp.

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 Regional Training Centre,
C. D. A. (Army),
Belvedere Complex, Ayudh Path,
Meerut Cantt. - 250001
Tele. No. 0121-2647791
Fax No. 0121-2648388
e-mail id: cdartcme-up@nic.in

RTC MEERUT