The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

Summary of Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993
Purpose:
• Transfer and Vesting: Transfer and vesting of the undertaking of the Industrial Finance Corporation of India to a company formed under the Companies Act, 1956.
• Repeal: Repeal of the Industrial Finance Corporation Act, 1948.
Key Provisions:
1. Transfer of Undertaking: - Vesting Entity: The undertaking vests in "The Industrial Finance Corporation of India Limited" (the Company).
• Effective Date: On the "appointed day", notified by the Central Government.
2. Effects of Vesting: - Comprehensive Transfer: Includes all assets, liabilities, rights, and obligations.
• Contractual Continuity: Contracts, deeds, etc., become enforceable against the Company.
• Ongoing Proceedings: Can be continued against the Company.
3. Concessions, Licences, and Benefits:
• Deemed Grant: All concessions, licences, and benefits granted to the Corporation are deemed granted to the Company.
4. Tax Implications: - Continuity of Tax Benefits: Tax exemptions, assessments, and benefits continue for the Company.
• Capital Gains Exemption: Transfer not construed as a transfer for capital gains under the Income-tax Act, 1961.
5. Employee Provisions: - Employment Continuity: Officers and employees (except top management) transfer with the same terms.
• Option to Opt Out: Within six months, with no compensation for transfer.
• Retiree Benefits: Continue from the Company.
6. Governance and Securities: - Bankers' Books Evidence Act: The Company is deemed a bank under this Act.
• Approved Securities: Shares, bonds, and debentures of the Company are deemed approved.
7. Repeal and Saving Clause: - Repealed Act: Industrial Finance Corporation Act, 1948, repealed on the appointed day.
• Continuity of Actions: Actions under the repealed Act are deemed taken under this Act.
Important Dates:
• Commencement: Deemed effective from 1st October 1992.
• Repeal Effective Date: On the appointed day.

Legislative History:

The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

Act Title The Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993

Act Number 39 of 1993

Act ID (India Code) 199339

Presidential Assent Date April 3, 1993

Enforcement Date July 1, 1993

Nodal Ministry Ministry of Finance

Precedent & Historical Rationale

1. Post-1991 Financial Sector Reforms:

o Established in 1948 under the original Industrial Finance Corporation Act, IFCI had operated for decades as a statutory corporation owned primarily by the government and financial institutions. In the wake of the 1991 economic reforms and the shift toward market-driven autonomy, statutory development banks needed structural flexibility to raise capital directly from public markets.

2. Transition to Corporate Autonomy:

o To enable IFCI to shed its rigid government-controlled statutory status, compete effectively in the deregulated financial sector, and convert into a public limited company (IFCI Ltd.), the original Act had to be repealed and its undertaking legally transferred to the new corporate entity.

Parliamentary Trajectory & Enactment

• Formulation: Drafted by the Ministry of Finance to facilitate the corporatization and restructuring of the Industrial Finance Corporation of India into a company registered under the Companies Act, 1956.

• Parliamentary Passage: Introduced and debated during the Budget Session of Parliament, securing formal passage by both the Lok Sabha and Rajya Sabha in 1993.

• Presidential Assent: Received Presidential Assent on April 2, 1993.

• Enforcement: Enforced on July 1, 1993.

• Source: Official Records of Parliament, India Code, and Ministry of Finance (Department of Financial Services).