TRANSFER AND VESTING OF THE UNDERTAKING OF DEVELOPMENT BANK IN COMPANYCentral
Section 4 of The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003
- (1)The Central Government, being the shareholder of the Development Bank and every other shareholder of the Development Bank immediately before the appointed day shall be deemed to be registered on and from the appointed day as a shareholder of the Company to the extent of the face value of the shares held by such shareholder.
- (2)The undertaking of the Development Bank which is transferred to, and which vest in, the Company under section 3 shall be deemed to include all business, assets, rights, powers, authorities and privileges and all properties, movable and immovable, real and personal, corporeal and incorporeal, in possession or reservation, present or contingent of whatever nature and wheresoever situate including lands, buildings, vehicles, cash balances, deposits, foreign currencies, disclosed and undisclosed reserves, reserve fund, special reserve fund, benevolent reserve fund, any other fund, stocks, investments, shares, bonds, debentures, security, management of any industrial concern, loans, advances and guarantees given to any person or industrial concern, tenancies, leases and book debts and all other rights and interests arising out of such property as were immediately before the appointed day in the ownership, possession or power of the Development Bank in relation to its undertaking, within or without India, all books of account, registers, records and documents relating thereto and shall also be deemed to include all borrowings, liabilities and obligations of whatever kind within or without India then subsisting of the Development Bank in relation to its respective undertaking.
- (3)All contracts, deeds, bonds, guarantees, powers of attorney, other instruments and working arrangements subsisting immediately before the appointed day and affecting the Development Bank shall cease to have effect or to be enforceable against the Development Bank and shall be of as full force and effect against or in favour of the Company in which the undertaking of the Development Bank has vested by virtue of this Act and enforceable as fully and effectually as if instead of the Development Bank, the Company had been named therein or had been a party thereto.
- (4)Any proceeding or cause of action pending or existing immediately before the appointed day by or against the Development Bank in relation to its undertaking may, as from the appointed day, be continued and enforced by or against the Company in which the undertaking of the Development Bank has vested by virtue of this Act as it might have been enforced by or against the Development Bank if this Act had not been enacted and shall cease to be enforceable by or against the Development Bank.
Summary
- Anyone who owned shares in the old bank automatically becomes a shareholder in the new Company for the exact same share value.
- Every piece of property owned by the old bank, including buildings, cars, cash, loans, and even secret reserves, is transferred to the new Company.
- All old contracts, agreements, and guarantees are now fully valid for or against the new Company as if it had signed them itself.
- Any ongoing legal cases or lawsuits involving the old bank will continue with the new Company taking its place.
- All existing debts, borrowings, and financial obligations of the old bank are taken over completely by the new Company.
Practical examples
1An investor named Anil owned shares worth ten thousand rupees in the old bank on July 1, 2004, and woke up the next day as an official shareholder of the new Company with the exact same share value.
2A construction company named BuildCorp had a pending lawsuit against the old bank for breach of contract, which simply continued in court with the new Company's name substituted as the defendant.
FAQ
1. What happens to my old shares after the transfer?
You are automatically registered as a shareholder of the new Company, keeping the same face value of the shares you held right before the transfer.
2. Does the new bank inherit the debts and liabilities of the old bank?
Yes, all borrowings, liabilities, and obligations of the old bank are transferred to and taken over by the new Company.
3. What happens to active contracts signed with the old bank?
All existing contracts, deeds, and agreements remain fully active and are enforced by or against the new Company instead of the old bank.
4. Can pending legal proceedings still be fought?
Yes, any pending legal cases can be continued and enforced by or against the new Company, and they stop applying to the old bank.
Test yourself
Q1.What happens to shareholders of the old Development Bank on the appointed day?
Q2.Which of the following is transferred to the Company as part of the undertaking under Section 4?
Q3.What is the status of contracts that were active right before the appointed day?
Q4.What happens to pending lawsuits involving the Development Bank?
Q5.Under Section 4, the face value of the shares held by a deemed registered shareholder: