Case Note & Summary
The dispute arose from Special Leave Petitions filed by M/s Bharat Steel Tubes Ltd. challenging a judgment of the Delhi High Court which affirmed the status of the Industrial Finance Corporation of India Limited (IFCI) as a public financial institution under the Companies Act, 1956. The petitioners contended that IFCI no longer met the criteria for such status due to the Central Government's disinvestment, which resulted in it not holding 51% of the paid-up share capital. The petitioners argued that this change in ownership meant that IFCI could not invoke the provisions of the SARFAESI Act, 2002. In contrast, the respondents maintained that the status of IFCI as a public financial institution was preserved under Section 5 of the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, which transferred all rights and benefits to the newly incorporated company. The court analyzed the relevant provisions of the Companies Act and the 1993 Act, concluding that the status of IFCI as a public financial institution remained intact despite changes in shareholding. The court dismissed the Special Leave Petitions, affirming the High Court's decision and stating that the provisions of Section 4A of the Companies Act were applicable, and the notification issued by the Central Government further supported IFCI's status. The court did not impose any costs.
Headnote
A) Companies Act - Public Financial Institution Status - Retention of Status - Companies Act, 1956, Section 4A - The court held that the Industrial Finance Corporation of India Limited remained a public financial institution despite changes in shareholding, as it was constituted under a Central Act. The provisions of Section 5 of the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, supported this status, and the court found no reason to interfere with the High Court's judgment (Paras 14-16).
Issue of Consideration
Whether the Industrial Finance Corporation of India Limited retains its status as a public financial institution under the Companies Act, 1956, and is entitled to invoke the provisions of the SARFAESI Act.
Final Decision
The Supreme Court dismissed the Special Leave Petitions, affirming the Delhi High Court's judgment that IFCI retained its status as a public financial institution under Section 4A of the Companies Act, 1956, and was entitled to invoke the provisions of the SARFAESI Act.
Law Points
- Public Financial Institutions
- SARFAESI Act
- Companies Act
- 1956
- Industrial Finance Corporation
- Section 4A
- Section 5 of the 1993 Act
