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2011 (1) TMI 1198 - SC - Companies LawDefault in repayment of loan - Pursuant to enforcement of 1997 Act undertakings of IRBI were transferred to appellant-IIBIL with effect from 27-3-1997 - Appellant gave notice to respondent for repayment of loan and on its failure to pay filed an application before High Court under section 40 - High Court rejected that application holding that same was not maintainable as it was filed under provision of a repealed Act Held that - High Court in the impugned judgment referred to section 13 of the 1997 Act but failed to notice the true import of sub-section (2)(b) of section 13. Further the High Court completely overlooked the provisions of sub-section (4) of section 4 of the 1997 Act and as a result arrived at a conclusion that is patently erroneous and cannot be sustained for a moment. application filed by the appellant under section 40 of the 1984 Act for the enforcement of its claim against respondent No. 1 was perfectly maintainable before the High Court.
Issues Involved:
1. Maintainability of the application filed under section 40 of the Industrial Reconstruction Bank of India Act, 1984, after its repeal by the Industrial Reconstruction Bank (Transfer of Undertaking and Repeal) Act, 1997. 2. Interpretation of the repeal and saving provisions under section 13 of the 1997 Act. 3. Applicability of Chapter VIII of the 1984 Act post-repeal. Detailed Analysis: Issue 1: Maintainability of the Application Filed Under Section 40 of the 1984 Act The appellant, Industrial Investment Bank of India Limited (IIBIL), filed an application under section 40 of the Industrial Reconstruction Bank of India Act, 1984, for the enforcement of its claim against the borrower, M/s Jain Cables Pvt. Ltd. The High Court rejected the application, holding it was not maintainable since it was filed under a provision of a repealed Act. The High Court reasoned that section 40 of the 1984 Act was purely procedural and not saved by the repeal and saving provisions of the 1997 Act. The Supreme Court found this conclusion erroneous, highlighting that the High Court failed to consider the true import of section 13(2)(b) of the 1997 Act and overlooked the provisions of section 4(4) of the 1997 Act. Issue 2: Interpretation of the Repeal and Saving Provisions Under Section 13 of the 1997 Act Section 13(2)(b) of the 1997 Act states that the provisions of Chapter VIII of the 1984 Act, which includes section 40, will continue to apply to arrangements entered into by the IRBI with an industrial concern under section 18 of the 1984 Act up to the appointed day. The Supreme Court emphasized that this provision allows the IIBIL to enforce claims as if the 1997 Act had not been enacted. The High Court's failure to recognize this led to an incorrect judgment. Issue 3: Applicability of Chapter VIII of the 1984 Act Post-Repeal The Supreme Court clarified that section 4(4) of the 1997 Act, in conjunction with section 13(2)(b), ensures that any cause of action existing immediately before the appointed day (27-3-1997) by the IRBI can be continued and enforced by the IIBIL. This includes the enforcement provisions under Chapter VIII of the 1984 Act. The Supreme Court held that the application under section 40 of the 1984 Act was maintainable, and the High Court should have considered it on its merits. Conclusion The Supreme Court set aside the High Court's order dated 1-11-2002, restoring S.B.C. Misc. Application No. 40/99 to the High Court's file. The High Court is directed to examine the application on its merits and dispose of it in accordance with the law. The Supreme Court's judgment clarifies the continuity of procedural provisions for enforcement of claims despite the repeal of the 1984 Act, ensuring that the rights and liabilities of the IIBIL are preserved and enforceable.
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