The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997
🔹 Background
The IRBI was originally set up under the Industrial Reconstruction Bank of India Act, 1984.
Its purpose was to provide financial assistance and restructuring support to sick and potentially viable industrial companies.
Over time, due to changes in the financial sector, it was decided that IRBI should operate more flexibly as a company rather than a statutory body.
🔹 Purpose of the 1997 Act
The 1997 Act had two main objectives:
Transfer of Undertakings:
Transfer all assets, liabilities, rights, and obligations of IRBI to a new company, namely Industrial Investment Bank of India Ltd. (IIBI), formed under the Companies Act.
Repeal of the IRBI Act, 1984:
Once the transfer is complete, the original 1984 Act is repealed, effectively ending the statutory status of IRBI.
🔹 Key Provisions of the Act
1. Section 3 – Transfer of Undertaking
All properties and assets (movable and immovable) of IRBI were transferred to IIBI.
All contracts, deeds, and legal proceedings involving IRBI were now deemed to involve IIBI.
2. Section 4 – Pending Legal Proceedings
Any legal case, suit, or proceeding that was pending by or against IRBI would continue with IIBI as the party.
3. Section 5 – Employees
All employees of IRBI were transferred to IIBI without any break in service.
Their terms and conditions of service remained the same unless changed by mutual agreement.
4. Section 6 – Provident Fund and Other Funds
All welfare funds (like provident fund, superannuation, etc.) maintained by IRBI were also transferred to IIBI.
5. Section 7 – Repeal of the IRBI Act, 1984
The 1984 Act was officially repealed, ending the statutory body status of IRBI.
6. Section 8 – Removal of Difficulties
The Central Government was given power to resolve any difficulty arising from the implementation of the Act.
🔹 Impact of the Act
IRBI was converted into a company, giving it more operational flexibility and ability to function like other financial institutions.
It was now regulated under the Companies Act and was renamed Industrial Investment Bank of India Ltd. (IIBI).
This conversion aligned with the liberalization and restructuring of the financial sector in India in the 1990s.
🔹 Case Law Reference
There are not many prominent Supreme Court cases specifically interpreting this Act, but legal principles from related cases can help understand its implications:
📌 General Principle from Related Judgments:
In cases involving transfer of undertakings (e.g., from government bodies to companies), courts have upheld the continuity of service and liability.
For example, in LIC of India v. D.J. Bahadur (1981), the Supreme Court held that employees' rights cannot be unilaterally altered during such transfers.
📌 Implication for IIBI Employees:
Based on such precedents, the employees transferred from IRBI to IIBI retained their existing rights and benefits, and any alteration required consent.
🔹 Aftermath
IIBI continued to operate for a few years post-1997 but struggled due to non-performing assets and lack of business viability.
Eventually, in 2012, the government decided to wind up IIBI, marking the end of the institution entirely.
✅ Summary
| Aspect | Details |
|---|---|
| Name of the Act | Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997 |
| Purpose | Transfer IRBI’s undertakings to IIBI and repeal IRBI Act, 1984 |
| Result | IRBI became IIBI, a company under the Companies Act |
| Impact on Employees | Retained service continuity and benefits |
| Legal Continuity | All contracts and cases continued in IIBI’s name |
| Repeal | IRBI Act, 1984 was repealed |
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