The Industrial Development (Transfer of Undertaking and Repeal) Act, 2003

The Industrial Development (Transfer of Undertaking and Repeal) Act, 2003 (herein after referred as “the said act”) received assent of the President of India on 30th December, 2003 and was thereafter published in the Official Gazette, the said act came into force in July, 2004.  The sole objective of the Act is to transform Industrial Development Bank of India into a Government Company registered under Companies Act, 1956 and to repeal the existing Industrial Development Bank of India Act, 1964. After the enforcement of the said Act, the undertaking of Industrial Development Bank of India came to be vested in IDBI Ltd.

The IDBI Ltd (said company) was incorporated on 27th September, 2004 and thereby expanding its functions into banking which was previously limited to Financial Institution. According to the said Act, the IDBI Ltd. shall be reckoned as Banking Company and shall function and carry out banking business as per the Provisions laid down in the Banking Regulations Act, 1949. Such provisions shall apply to such Company to the extent that they shall not stand repugnant to this Act (IDBI UNDERTAKING & REPEAL ACT). It is not mandatory for the IDBI Ltd. to obtain license under Section 22 of Banking Regulation Act, 1949 (BR Act) and also to maintain the percentage of assets for a period of five years as otherwise required under Section 24 of BR Act.

A proposed notification of the said company requires approval of both the Houses of Parliament during the sessions for a period of thirty days. Approvals of both the Houses of Parliament is necessary and any proposed modifications to such notification by any of the Houses of Parliament shall be duly implemented by the said company before publishing the notification.

The registration of the shareholders shall be duly carried out by the bank from the appointed day, including the name of the Central Government as a shareholder. Such registration shall be made to the extent of face value of shares held by each shareholder. The charge of the development bank entrusted and vested in the company shall include business, holdings, rights, powers, authorities, entitlements and all properties including real estate, movables and immovables etc. And also includes liabilities, borrowings, loans and other obligations of what so ever nature.

Similarly, all the documentations such as bonds, deeds, contracts, power of attorneys etc shall stand terminated against the development bank after the appointed day and can no longer be implemented or applicable against the development bank. Such documentations will be fully enforceable and be continued to take effect against the company in which undertaking is vested of the development bank. Likewise, any pending litigation or cause of action against the development bank before the appointed day shall stand transferred to the company after the appointed day.

Any officer or employee of the development bank (excluding the Managing Director appointed for whole time or Director or Chairman) shall continue to be an officer or employee of the company after the appointed day and shall enjoy same rights and privileges, being employed for same tenure and remuneration, enjoy same facilities and perform same tasks and duties and be similarly responsible as he was before the appointed day or before the undertaking by the company and shall carry on the same for a period of six months after the appointed day, in case he do not wish to remain employed after the undertaking has vested in the company. The employee or officer is not entitled for any compensation or claim in case of transfer of services and no such claims shall be allowed by any Court, Tribunal or any other authority.

Every employee or other officer of the Development Bank shall receive and enjoy same gains, entitlements and prerogatives, after the appointed day from the Company. The provident fund, pension and gratuity endowed to the employees of the Development Bank shall continue to exist in the similar manner and any tax benefit/exemption made available on account of such provisions shall persist with the Company as it was before the appointed day against the Development bank.

It is also to be noted that any Director, Managing Director or Chairman appointed for whole time management shall not be entitled for any damages or claims for untimely termination of any managing contract or his services or any damage caused to him on account of loss of his office.

The tax exemptions or any exemption available on payment of tax deducted at source or any other monetary or fiscal policies applicable to the Development bank before the appointed day shall continue to be applicable to the Company. It is also pertinent to note that any guarantee given by or in favour of the Development bank against any loan or lease or any other debt shall continue to be functional against the company.

 by Dakshaja Yeolekar.