ACQUIAITON AND TRANSFER OF THE UNDERTAKINGS OF THE TWO COMPANIESCentral

Section 7 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984

(1)Notwithstanding anything contained in sections 3 and 4, where the undertakings of each of the two companies have been directed, under sub-section (1) of section 6, to vest in an existing Government company, the Central Government may, if it is satisfied that a new Government company is willing to comply, or has complied, with such terms and conditions as that Government may think fit to impose, declare, by notification, that the undertakings of each of the two companies and the right, title and interest of each of the two companies in relation to its undertakings be transferred to that new Government company, and on the issue of such declaration, the right, title and interest of each of the two companies in relation to its undertakings which had been directed under subsection (1) of section 6 vest in an existing Government company, shall, instead of continuing to vest in that existing Government Company, vest in that new Government company with effect from the date on which such declaration is made. (2) Where the right, title and interest of the existing Government company in relation to the undertakings of the two companies vest, under sub-section (1), in a new Government company, that Government company shall, on and from the date of such vesting, be deemed to have become the owner in relation to such undertakings and the rights and liabilities of the existing Government company in relation to such undertakings, shall, on and from the date of such vesting, be deemed to have become the rights and liabilities, respectively, of that new Government company

Summary

The Central Government has the power to transfer the undertakings of Inchek Tyres Limited and National Rubber Manufacturers Limited from an existing Government company to a new Government company.
This transfer happens through an official declaration published as a notification in the Official Gazette.
For the transfer to occur, the Central Government must be satisfied that the new Government company is willing to follow, or has already followed, any terms and conditions the Government decides to impose.
Once the declaration is published, the ownership of the undertakings, along with all rights and liabilities, shifts completely from the existing Government company to the new Government company.
This transfer is effective from the exact date on which the Central Government makes the declaration.
The new Government company is deemed the legal owner from the date of vesting, overriding any general vesting provisions under Sections 3 and 4 that previously applied.

Practical examples

1In 1985, after the Central Government had temporarily placed the factories and machines of Inchek Tyres Limited under the control of National Rubber Corporation (an existing government company), the Ministry decided to form a brand new company called Bharat Tyres New Limited. The Minister issued a notification stating that Bharat Tyres New Limited met all conditions, transferring all properties and operations to them on November 12, 1985. Bharat Tyres New Limited immediately became the sole legal owner and operator.

2Suppose National Rubber Manufacturers Limited had its undertakings vested in an existing state-run firm, Bengal Rubber Works. On March 4, 1986, the Central Government created a fresh entity, National Rubber Successor Limited, to run the business. After the new company agreed to set terms, the Government notified the transfer, making National Rubber Successor Limited fully liable for all operations from that date onward, replacing Bengal Rubber Works.

FAQ

1. When can the Central Government transfer these undertakings to a new Government company?

The transfer can happen after the undertakings have first been directed to vest in an existing Government company under Section 6 of the Act.

2. What must a new Government company do to receive these undertakings?

The new Government company must show the Central Government that it is willing to comply, or has already complied, with whatever terms and conditions the Central Government chooses to set.

3. How is this transfer officially announced?

The transfer is officially announced through a declaration made by notification in the Official Gazette by the Central Government.

4. What happens to the rights and liabilities of the old, existing Government company after the transfer?

On the date of the transfer, all rights and liabilities of the existing Government company regarding these undertakings instantly become the rights and liabilities of the new Government company.

Test yourself

Q1.Under Section 7 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, what is a necessary condition before the Central Government can declare the transfer of undertakings to a new Government company?

Q2.Under Section 7 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, from what date does the vesting of the undertakings in the new Government company take effect?

Q3.Under Section 7 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, what happens to the rights and liabilities of the existing Government company once the undertakings vest in the new Government company?

Q4.Under Section 7 of The Inchek Tyres Limited and National Rubber Manufacturers Limited (Nationalisation) Act, 1984, how must the Central Government declare the transfer of the undertakings to a new Government company?

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