Case: M/S Bharat Steel Tubes Ltd Etc Vs. Ifci Ltd

status given to it under Clause (ii) of Sub-Section (1) of Section 4A thereof and was not, therefore, entitled to invoke the provisions of the SARFAESI Act, 2002, notwithstanding the provisions of Section 5 of the 1993 Act.9. Mr. Dwivedi also pointed out that the fact that the Respondent No.1 Company was no longer a public company under the control of the Central Government, had also been admitted on behalf of the Respondent No.1 before the Delhi High Court in Writ Petition (Civil)4596 of 2006, which would be reflected from the judgment delivered therein on 17th August, 2010. Mr. Dwivedi pointed out that in paragraph 10 of the judgment it had been mentioned by the learned Single Judge that a submission had been advanced on behalf of the Respondent No.1 Company that it was neither substantially financed by the Central Government nor did the Central Government hold any share whatsoever in the Respondent No.1 Company. 10. Mr. K.K. Venugopal, learned Senior Advocate, appearing for the Respondent No.1 Company, on the other hand, contended that Section 5 of the aforesaid Act was in the nature of a saving clause, whereby all matters relating to the Corporation stood wholly transferred in favour of the new Company after its incorporation, including, the status which had been afforded to the Corporation under Clause (ii) of Section 4A(1) of the Companies Act, 1956. Mr. Venugopal submitted that in exercise of the powers conferred by Sub-Section (2) of Section 4A of the aforesaid Act, the Central Government issued Notification No.S.O.98(E) dated 15th February, 1995, specifying the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956, to be a financial institution and, accordingly, amended the Notification issued by the Government of India, Ministry of Law, Justice and Company Affairs (Department of Company Affairs) No.S.O.1329 dated 8th May, 1978, to include the Industrial Finance Corporation of India Limited in the said notification.11. Mr. Venugopal urged that the mere fact that the Respondent No.1 Company was no longer under the control of the Central Government did not affect or alter its status under Section 4A(1)(ii) of the Companies Act, 1956, as a public financial institution and that, in effect, more than 4,000 cases filed by the Respondent No.1 Company in its capacity as a public financial institution were pending and would be rendered infructuous if the interpretation being sought to be given on behalf of the Petitioner in relation to the status of the Respondent No.1 Company was to be accepted. 12. Having regard to the large number of cases filed by the Respondent No.2 Company, in its capacity as a public financial institution, which are said to be pending, we have given our anxious consideration to the submissions advanced on behalf of the respective parties and the provisions of the Companies Act, 1956, and the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993. 13. Section 4A of the Companies Act, 1956, as far as the Industrial Finance Corporation of India Limited is concerned, provides as follows :- 4A. Public financial institutions.- "(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely:-(i) ..........................................................................................(ii) the Industrial Finance Corporation of India, established under Section 3 of the Industrial Finance Corporation Act, 1948 (7 of 1948);(iii) ..........................................................................................(iv) ..........................................................................................(v) ..........................................................................................(vi) ..........................................................................................(vii) ..........................................................................................(2) Subject to the provisions of sub-section (1) the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution:Provided that no institution shall be so specified unless-(i) it has been established or constituted by or under any Central Act, or(ii) not less than fifty-one per cent, of the paid-up share capital of such institution is held or controlled by the Central Government." 14. In our view, the provisions of Sub-Section (1) of Section 4A stand independent of Sub-Section (2) and the financial institutions named in Sub-Section (1) of Section 4A recognize the financial institutions mentioned therein to be public financial institutions which are not covered by the embargo enforced by the proviso to Sub-Section (2) of the said Section. The proviso controls the width of Sub-Section (2) which refers to the powers of the Central Government to specify by notification in the Official Gazette and subject to the provisions of Sub-Section (1), such other institutions as it may think fit to be a public financial institution. It appears to us that Sub- Section (2) of Section 4A is applicable only to institutions which are not mentioned in Sub-Section (1). It is the latter category of financial institutions to which the proviso applies. In view of Section 4 A(1)(ii) of the Companies Act, 1956, the Industrial Finance Corporation of India was admittedly regarded as a `public financial institution for the purpose of the said Act. The conversion of the Industrial Finance Corporation of India into a Company did not alter its position and status as a financial institution in view of Section 5 of the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, which, as pointed out by Mr. K.K. Venugopal, was in the nature of a saving clause, whereby all matters, including all benefits, relating to the Corporation, stood wholly transferred in favour of the new Company. 15. Mr. Dwivedi has submitted that the Notification dated 15th February, 1995, had been issued under Section 4A(2) of the Companies Act which will have to conform to the proviso thereto. Mr. Dwivedi has contended that both the conditions in the proviso would have to be fulfilled in order to be eligible for being specified as a public financial institution. We are unable to accept such contention in view of the fact that clauses (i) and (ii) are not conjunctive but disjunctive and even though Clause (ii) may not have any application to the Respondent No.1 Company, it was covered by clause (i), since it was constituted under the Companies Act, 1956, which is a Central Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. In ourprovisions of Sub-Section (1) of Section 4A stand independent of Sub-Section (2) and the financial institutions named in Sub-Section (1) of Section 4A recognize the financial institutions mentioned therein to be public financial institutions which are not covered by the embargo enforced by the proviso to Sub-Section (2) of the said Section. The proviso controls the width of Sub-Section (2) which refers to the powers of the Central Government to specify by notification in the Official Gazette and subject to the provisions of Sub-Section (1), such other institutions as it may think fit to be a public financial institution. It appears to us that Sub- Section (2) of Section 4A is applicable only to institutions which are not mentioned in Sub-Section (1). It is the latter category of financial institutions to which the proviso applies. In view of Section 4 A(1)(ii) of the Companies Act, 1956, the Industrial Finance Corporation of India was admittedly regarded as a `public financial institution for the purpose of the said Act. The conversion of the Industrial Finance Corporation of India into a Company did not alter its position and status as a financial institution in view of Section 5 of the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, which, as pointed out by Mr. K.K. Venugopal, was in the nature of a saving clause, whereby all matters, including all benefits, relating to the Corporation, stood wholly transferred in favour of the new Company.