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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 ..... which had accrued in its favour – counsel submitted that since the Respondent No. 1 Company no longer fulfilled the criteria contained in clause (ii) of the proviso to sub- section (2) of section 4A of the Companies Act, 1956, it had lost the 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 – Held 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. no reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier passed in the suit. 3. Appearing for the Petitioner, Mr. Rakesh Dwivedi, learned Senior Advocate, firstly drew our attention to section 4A of the Companies Act, 1956, which was introduced by way of an amendment with effect from 1-2-1975, defining "Public Financial Institutions". It provides that the various financial institutions specified in sub-section (1), including the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948, is to be regarded for the purposes of the said Act, as a public financial institution. Learned counsel also pointed out that sub-section (2) of section 4A also provides that subject to the provisions of sub-section (1), the Central Government may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at of any other private shareholder and the Corporation could no longer enjoy the status of a Public Financial Institution given to it under section 4A of the Companies Act, 1956. 5. In order to bolster his submissions, Mr. Dwivedi referred to the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, hereinafter referred to as "the 1993 Act", whereunder the nature and character of the Industrial Finance Corporation of India underwent a change and the Corporation was incorporated as a Company as defined in section 1( i )( b ) of the aforesaid Act. Mr. Dwivedi pointed out that under section 3, the undertaking of the Corporation was to vest in the Company on a date to be appointed by notification in the Official G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the status given to the Respondent Company was saved or continued under section 5 of the Act and, accordingly, once the Central Government ceased to hold 51 per cent or more of the paid-up share capital of the Company, it ceased to enjoy the benefits under section 5 of the 1993 Act. 8. Mr. Dwivedi submitted that since the Respondent No. 1 Company no longer fulfilled the criteria contained in clause ( ii ) of the proviso to sub- section (2) of section 4A of the Companies Act, 1956, it had lost the 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. Dwive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, 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 8-5-1978, 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 give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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