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TMI Blog2011 (4) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 9-7-2010, passed by a Division Bench of the Delhi High Court in WP(C) No. 7097 of 2008, holding that the Respondent, Industrial Finance Corporation of India Limited is a "financial institution" under section 4A(2) of the Companies Act, 1956, read with section 2(1)(m) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, ('the SARFAESI Act') and that, as a consequence, the Respondent IFCI Ltd. would be entitled to take recourse to the provisions of the SARFAESI Act in order to enforce a "security interest" which had accrued in its favour. The Petitioner has also challenged an order passed by a Single Bench of the Delhi High Court on 10-9-2010, in I.A. No. 12908/09 in CS (OS) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the second clause would have been attracted, but for the fact that at the relevant point of time and even now the Central Government does not hold or control 51 per cent or more of the paid-up share capital of the institution concerned. Mr. Dwivedi submitted that on account of disinvestment at regular intervals, the Central Government does not hold any share in the Company and the day it ceased to hold 51 per cent or more of the paid-up share capital, it ceased to enjoy the benefits of section 4A(ii) and became a private company which could no longer be covered by the definition of "public financial institution" in section 4A of the Companies Act, 1956. It was submitted that even if the Central Government continue to hold shares in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her instruments and working arrangements subsisting immediately before the appointed date and affecting the Corporation would cease to have effect or to be enforceable against the Corporation and would be of full force and effect against or in favour of the Company, in which the undertaking of the Corporation had vested. 7. Reference was then made to sub-section (5) of section 4, whereunder with effect from the appointed date, fiscal and other concessions, licences, benefits, privileges and exemptions granted to the Corporation in connection with the affairs and business of the Corporation under any law for the time being in force would be deemed to have been granted to the Company. Mr. Dwivedi contended that under the said provision, it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 15-2-1995, specifying the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956, to be a financial institution and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)to (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 Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the new Company. 15. Mr. Dwivedi has submitted that the Notification dated 15-2-1995, 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. 16. We, therefore, find no reason to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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