Industrial Reconstruction Bank of India Act,1984
Act No : 62
Section :
Enforcement of claims by the Reconstruction Bank.
40. Enforcement of claims by the Reconstruction Bank.- (1) (a) Where an assisted industrial concern makes any default in the payment of any dues to, or in meeting its obligation in relation to any other assistance given by the Reconstruction Bank or otherwise fails to comply with the terms of agreement with that Bank, or (b) where the Reconstruction Bank makes an order under section 38 requiring the assisted industrial concern to make immediate repayment of any assistance granted to it and the industrial concern fails to make such repayment, then, without prejudice to the provisions of section 39 of this Act and of section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of the Reconstruction Bank generally or specially authorised by the Board in this behalf, may apply to the concerned High Court for one or more of the following reliefs, namely:-- (i) for an order for the sale or lease of the property assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank as security for the assistance granted to it, or for the sale or lease of any other property, of the industrial concern; or (ii) for transferring the management of the industrial concern to the Reconstruction Bank or to its nominee; or (iii) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment from the premises of the industrial concern without the previous permission of the Board, where such transfer or removal is apprehended; or 572 (iv) for an order for the appointment of a receiver where there is apprehension of the machinery, equipment or any other property of substantial value which has been assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank, being removed from the premises of the industrial concern or of being transferred without the previous permission of the Reconstruction Bank. (2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Reconstruction Bank, the ground on which it is made and such other particulars as may be necessary for obtaining the relief prayed for. (3) Where an application is for any relief mentioned in sub- clause (i) of sub-section (1), the High Court may,-- (a) by an order, authorise the Reconstruction Bank to grant lease of such property to such person and on such terms and conditions as may be specified in the said order; or (b) pass an order calling upon the person whose property has been assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank to show cause, on a date to be specified in the notice, as to why an order for the sale of such property or so much of such property, as would, on being sold, realise, in its estimation, an amount equivalent in value to the outstanding dues of the industrial concern to the Reconstruction Bank, together with costs of the proceedings taken under this section, shall not be made; or (c) pass an ad interim order attaching any property of the industrial concern which has not been assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank, or so much of such property, as would, on being sold, realise, in its estimation, an amount equivalent in value to the outstanding dues of the industrial concern to the Reconstruction Bank, together with costs of the proceedings taken under this section, and pass an order calling upon the industrial concern to show cause on a date to be specified in the notice as to why such order of ad interim attachment shall not be made absolute. (4) Where an application is for the relief mentioned in sub- clause (ii) of sub-section (1), the High Court shall issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, as to why the management of the industrial concern shall not be transferred to the Reconstruction Bank or to its nominee. (5) Where an application is for the relief mentioned in sub- clause (iii) of sub-section (1), the High Court shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery or other equipment and issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, as to why such ad interim injunction shall not be made absolute. 573 (6) Where an application is for the relief mentioned in sub- clause (iv) of sub-section (1), the High Court shall pass an ad interim order appointing a receiver in respect of the property assigned, charged, hypothecated, mortgaged or pledged and shall issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, as to why the ad interim order appointing the receiver shall not be made absolute. (7) If no cause is shown, on or before the date specified in the notice issued by the High Court, the Court shall forthwith-- (a) make an order for the sale of the property which has been assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank or so much of such property, as would, on being sold, realise, in its estimation, an amount equivalent in value to the outstanding dues of the industrial concern to the Reconstruction Bank, together with costs of the proceedings taken under this section; (b) direct the sale of the attached property or the transfer of the management of the industrial concern to the Reconstruction Bank or to its nominee; and shall apply the proceeds of such sale for the discharge of the dues to the Reconstruction Bank and the residue of such proceeds, if any, shall be made over to the person entitled thereto in accordance with his rights and interests; (c) make the ad interim injunction made under sub-section (5), and the ad interim order of appointment of the receiver made under sub-section (6), as the case may be, absolute. (8) If cause is shown, the High Court shall proceed to investigate the claim of the Reconstruction Bank and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), shall, as far as practicable, apply to such proceedings. (9) On an investigation made under sub-section (8), the High Court may pass an order,-- (a) for the sale of the property which has been assigned, charged, hypothecated, mortgaged or pledged to the Reconstruction Bank or so much of such property, as would, on being sold, realise, in its estimation, an amount equivalent in value to the outstanding dues of the assisted industrial concern to the Reconstruction Bank, together with costs of the proceedings taken under this section; or (b) confirming the order of attachment and directing the sale of the attached property, or the transfer of the management of the assisted industrial concern to the Reconstruction Bank or to its nominee; or 574 (c) varying the order of attachment so as to release a portion of the property from attachment and directing the sale of the remainder of the attached property; and shall apply the proceeds of such sale for the discharge of the dues to the Reconstruction Bank and the residue of such proceeds, if any, shall be made over to the person entitled thereto, in accordance with his rights and interests; (d) releasing the property from attachment, if it is satisfied, that it is not necessary in the interests of the Reconstruction Bank; or (e) confirming or vacating the injunction or the order for the appointment of the receiver: Provided that when making any order under clause (d), the High Court may make such further orders as it thinks necessary to protect the interest of the Reconstruction Bank, and may apportion the costs of the proceedings in such manner as it thinks fit: Provided further that unless the Reconstruction Bank intimates to the High Court that it will not prefer an appeal against any order releasing any property from any attachment, such order shall not be given effect to until the expiry of the period fixed under sub-section (12) within which an appeal may be preferred, or if an appeal is preferred, unless the court empowered to hear appeals from the decisions of the said High Court otherwise directs, until the appeal is disposed of. (10) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908) for the attachment or sale of property in the execution of a decree as if the Reconstruction Bank were the decree-holder. (11) An order under this section transferring the management of any industrial concern to the Reconstruction Bank or to its nominee shall be carried into effect, as far as may be practicable, in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908) for the possession of immovable property or the delivery of movable property in the execution of a decree, as if the Reconstruction Bank or its nominee were the decree-holder. (12) Any party aggrieved by an order under sub-section (3), sub- section (7) or sub-section (9) may, within thirty days from the date of the order, prefer an appeal to the court empowered to hear appeals from the decisions of the High Court which passed the order and the appellate court may, after hearing the parties, pass such orders as it thinks proper. (13) Nothing in this section shall be construed, where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1), as giving to the Reconstruction Bank any preference over the other creditors of the industrial concern not conferred on it by any other law. 575
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