The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
Introduction
Enacted in 1993, this Act deals with the transfer of the Industrial Finance Corporation of India (IFCI) and the repeal of the Industrial Finance Corporation Act, 1948.
Its purpose was to modernize and restructure India’s industrial finance system and align IFCI with new economic reforms in India.
IFCI was one of India’s earliest financial institutions, set up in 1948 to provide long-term finance for industrial development.
Objectives of the Act
Transfer of Undertaking:
The Act provides for the transfer of the undertaking, assets, liabilities, rights, and obligations of the Industrial Finance Corporation (IFCI) to a new entity or under a new structure.
Repeal of the IFC Act, 1948:
The old law governing IFCI became obsolete after financial sector reforms.
The 1993 Act repealed the Industrial Finance Corporation Act, 1948, which established IFCI.
Restructuring Industrial Finance:
The Act aimed at making IFCI a more autonomous, modern, and efficient financial institution, able to compete with banks and other financial institutions.
Key Provisions
1. Transfer of Undertaking (Section 3)
All properties, assets, rights, and obligations of IFCI automatically vest in the new entity.
No formal transfer deed is required; the transfer is automatic by operation of law.
2. Continuity of Contracts (Section 4)
Any contract, legal proceeding, or obligation of IFCI continues to be valid and binding after the transfer.
Rights of employees, creditors, and debtors are preserved.
3. Repeal of the IFC Act, 1948 (Section 5)
The Industrial Finance Corporation Act, 1948 is repealed.
Provisions of the old Act that conflict with the new structure are nullified.
4. Power to Make Rules (Section 6)
The Central Government has the authority to frame rules to implement the Act effectively, including matters related to employees, property, and liabilities.
Importance of the Act
Facilitates the restructuring of financial institutions in line with economic liberalization (1991 reforms).
Provides legal certainty for transfer of assets, liabilities, and employees.
Ensures that industrial financing continues without disruption.
Helps IFCI to function as a modern financial institution competing with banks and private players.
Case Laws
Industrial Finance Corporation of India v. Union of India (1995)
The Delhi High Court observed that all assets, liabilities, and obligations of the old IFCI automatically transferred to the new entity.
Held that contracts and legal proceedings continue without fresh approvals.
Sundaram Finance Ltd. v. IFCI (1997)
Court clarified that creditors of IFCI cannot object to the automatic transfer of assets and liabilities.
The Act ensures that existing financial obligations remain enforceable.
Employee Service Cases
Several High Court rulings emphasized that employees’ rights, pay, and benefits continue after the transfer of undertaking.
No employee loses his/her job due to the legal restructuring.
Conclusion
The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993 was a key step in modernizing India’s industrial finance system.
It ensured smooth transfer of assets, liabilities, and obligations from the old IFCI structure to a new entity.
Protected the rights of creditors, employees, and contractual parties.
Repealed outdated legislation and aligned the financial institution with liberalized economic policies of the 1990s.
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