IBC prevails over State Financial Corporation Act, 1951 – Mr. Rajesh Lahila Vs. West Bengal Industrial Development Corporation Ltd. – NCLT Kolkata Bench
Hon’ble NCLT Kolkata Bench holds that:
(i) Section 29(5) of the State Financial Corporation Act contains provisions which makes the Financial Corporation Corporation to be deemed owner of such concern, only for the purposes of initiating suits by or against the concern, and the State Financial Corporation shall sue and be sued in the name of the concern. This in our view is only for the purpose of initiating or defending any suit with reference to the property which has been pledged with the Financial Corporation, and do not make the State Financial Corporation the owner of such properties.
(ii) In this case, the inconsistency arises between Section 18 of the Code and Section 29 of State Financial Corporation Act. While Section 18(f) of the Code, the Code enunciates that any asset recorded the balance sheet of the Corporate Debtor as its assets, and it is the duty of the resolution professional to take custody of such assets of the Corporate Debtor. The explanation to the said Section 18 of Code also provides that assets owned by Corporate Debtor but not in possession of Corporate Debtor will also need to be taken custody whereas Section 29 of State Financial Corporation Act provides that if the borrower fails to owner honour the terms and conditions of the borrowings then the Corporation which has got first charge over the immovable properties of the Corporate Debtor would be entitled to retain and dispose properties pledged.
(iii) Thus, this inconsistency needs to be resolved and the same is resolved by applying Section 238 of Code, which provides that IBC would prevail over any other statute in the case of such inconsistency.