MIS. BHARAT STEEL TUBES LTD. ETC. versus IFCI LTD. & ORS.

Citation: [2011] 4 S.C.R. 205 · Decided: 04-04-2011 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Dismissed

Judgment (excerpt)

[2011] 4 S.C.R. 205 
MIS. BHARAT STEEL TUBES LTD. ETC. 
A 
v. 
IFCI LTD. & ORS. 
(SLP (Civil) No(s) 9728-9729 of 2011) 
APRIL 4, 2011 
B 
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] 
COMPANIES ACT, 1956: 
ss. 4A(1)(ii) and 4A(2) Proviso (i) - Industrial Financial c 
Corporation of India Limited (IFCIL) - HELD: Provisions of 
sub-s.(1) of s.4A stand independent of sub-s.(2) of s.4A and 
recognize the financial institutions mentioned therein to be 
public financial institutions which are not covered by embargo 
enforced by proviso to sub-s. (2) - Further, IFCIL was covered 0 
by Proviso (i) to sub-s. (2) of s.4A since it was constituted 
under the Companies Act which is a Central Act - High Court 
rightly held IFCIL entitled to take recourse to provisions of 
SARFAESI Act to enforce a "security interestn which had 
accrued in its favour - Securitisation and Reconstruction of E 
Financial Assets and Enforcement of Security Interest Act, 
2002 -
Industrial Finance Corporation (Transfer of 
Undertaking and Repeal) Act, 1993 - s. 5. 
The instant special leave petitions were filed by the 
petitioner-company challenging the judgment and order 
F 
dated 9-7-2010, passed by a Division Bench of the High 
Court holding that the respondent, Industrial Finance 
Corporation of India Limited, was a "financial institution" 
uls 4A(2) of the Companies Act, 1956, read withs. 2(1)(m) 
of the Securltisation and Reconstruction of Financial G 
Assets and Enforcement of Security Interest Act, 2002, 
and that, as a consequence, the respondent IFCI Ltd. 
would be entitled to take recourse to the provisions of the 
SARFAESI Act, 2002 in order to enforce a "security 
205 
H 
206 
SUPREME COURT REPORTS 
[2011] 4 S.C.R. 
A interest" which had accrued in its favour. The petitioner 
also challenged an order passed by the Single Judge of 
the High Court vacating the injunction order earlier 
passed in the suit. 
8 
It was primarily contended for the petitioner that at 
the relevant time, the Central Government did not hold or 
control 51% or more of the paid up share capital of the 
respondent institute as envisaged by proviso (ii) to s. 4 
A (2) of the Companies Act, 1956 and, as such, it was no 
C longer covered by the definition of "public financial 
institution" ins. 4A of the Companies Act, 1956 and was 
not, therefore, entitled to invoke the provisions of the 
SARFAESI Act, 2002, notwithstanding the provisions of 
s. 5 of the 1993 Act. 
D 
Dismissing the petitions, the Court 
HELD: 1.1. The provisions of sub-s. (1 \ of s. 4A of the 
Companies Act, 1956 stand independent of sub-s. (2) and 
the financial institutions named in sub-s. (1) of s.4A 
E recognize the financial institutions mentioned therein to 
be public financial institutions which are not covered by 
the embargo enforced by the proviso to sub-s. (2) of the . 
said Section. The proviso controls the width of sub-s. (2) 
which refers to the powers of the Central Government to 
F specify by notification in the Official Gazette and subject 
to the provisions of sub-s. (1), such other institutions as 
it may think fit to be a public financial institution. Sub-s. 
(2) of s. 4A is applicable only to institutions which are not 
mentioned in sub-s. (1). It is the latter category of financial 
institutions to which the proviso applies. In view of s. 4 
G A(1)(ii) of the Companies Act, 1956, the Industrial Finance 
Corporation of India was admittedly regarded as a 'public 
financial institution' for the purpose of the said Act. [para 
14] [213-D-G] 
H 
1.2. The conversion of the Industrial Finance 
BHARAT STEEL TUBES LTD. ETC. v. IFCI LTD. & 
207 
'·~ 
ORS. 
Corporation of India into a Company did not alter its 
A 
position and status as a financial institution in view of s. 
5 of the Industrial Finance Corporation (Transfer of 
Undertaking and Repeal) Act, 1993, which was in the 
nature of a saving clause, whereby all matters, including 
all benefits, relating to the Corporation, stood wholly 
B 
transferred in favour of the new Company. [para 14] [213-
G-H; 214-A-B] 
1.3. Clau6es (i) and (ii) are not conjunctive but 
disjunctive and even though Clause (ii) may not have any 
C 
application to r,espondent No.1 Company, it was covered 
by clause (i), since it was constituted under the 
Companies Act, 1956, which is a Central Act. [para 15] 
[214-C-D] 
1.4. There is no reason to interfere with the judgment D 
and orders of the High Court impugned in these special 
leave petitions. [para 16] [214-D-E] 

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