The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997

Summary of the Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997

Key Provisions

1. Commencement & Definitions

• Effective Date: Deemed effective from 24th January, 1997
• Key Entities:
• Appointed Day: Date of transfer notified by the Central Government.
• Company: Industrial Investment Bank of India Limited (under the Companies Act, 1956).
• Reconstruction Bank: Industrial Reconstruction Bank of India (established under the Industrial Reconstruction Bank of India Act, 1984).

2. Transfer & Vesting of Undertakings

• Vesting: All undertakings of the Reconstruction Bank transfer to the Company on the Appointed Day.
• Scope of Transfer:
• Assets & Rights: All properties, assets, rights, and privileges.
• Liabilities & Obligations: All debts, liabilities, and contractual obligations.
• Contracts & Proceedings: Automatically transferred to the Company with full force and effect.
3. Operational & Financial Implications

• Employees: Transfer with the same terms for up to 6 months (excluding top management).
• Tax Benefit: 5-year income-tax exemption for the Company on income from transferred undertakings.
• Guarantees & Concessions: Remain operative in favour of the Company.

4. Legislative & Regulatory Adjustments

• Repeal: Industrial Reconstruction Bank of India Act, 1984, repealed with specific savings.
• Substitution in Laws: References to the Reconstruction Bank are substituted with the Company’s name across all applicable laws and regulations.
• Approved Securities: Shares, bonds, and debentures of the Company are deemed approved securities under relevant Acts.
• Bankers' Books Evidence Act, 1891: Applies to the Company’s books, facilitating the admissibility of its records as evidence.

Legislative History:

The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997

Short Title The Industrial Reconstruction Bank (Transfer of Undertakings and Repeal) Act, 1997

Act Number / Year 7 of 1997

Act ID (India Code) 199707

Presidential Assent / Enactment Date March 19, 1997

Official Gazette Publication March 1997

Enforcement Date January 24, 1997

Nodal Ministry Ministry of Finance

Precedent & Statutory Rationale

• Structural Economic Reforms and Corporate Flexibility:

o Prior to 1997, the Industrial Reconstruction Bank of India (IRBI) functioned as a statutory corporation established under the 1984 Act to aid in the reconstruction and rehabilitation of industrial concerns.

o In the wake of post-1991 economic liberalization, financial institutions required greater operational autonomy, capital-raising flexibility, and market-driven corporate structures rather than rigid government-controlled statutory frameworks.

• Legislative Intervention and Regularization:

o Enacted to provide for the transfer and vesting of all undertakings, assets, liabilities, rights, and obligations of the Industrial Reconstruction Bank of India into a new company—initially incorporated as the Industrial Investment Bank of India Limited (IIBI) under the Companies Act, 1956.

o The core objective was to facilitate smooth workforce transition, preserve tax and financial concessions, maintain ongoing guarantees, and seamlessly convert a public sector statutory bank into a commercially viable corporate entity.

Parliamentary Trajectory & Enactment

• Formulation: Developed by the central government as part of financial sector restructuring reforms to corporatize public development banks.

• Parliamentary Passage: Passed by both houses of Parliament, receiving formal presidential assent on March 19, 1997, with provisions deemed effective from January 24, 1997.

• Enforcement: Enforced on January 24, 1997.

• Source: India Code and Ministry of Finance Official Records.