Sick Industrial Units in India

Definitions

A small scale industrial (SSI) unit is one in

which investment on

plant and machinery is limited to a maximum of

Rs. 30 million.

A 'tiny' industrial unit is one in which investment in

plant and machinery is limited to a maximum of

Rs. 2.5 million.

Click here if you wish to view list of official liquidators

Industrial units proven to be unable to financially sustain themselves are generally called "sick units" in India. A merely financially-troubled company DOES NOT automatically become a sick unit: it has to be designated as such by the federal government. The Board for Industrial and Financial Reconstruction (BIFR) is assigned with the responsibility of hearing cases that apply for being declared sick and deciding whether or not the unit deserves to be termed "sick." The BIFR is also the authority that must approve takeover of a sick unit. The ultimate recourse in tackling a sick unit is its liquidation by liquidators based in different parts of the country, but revival possibilities are many to avert liquidation.

With the Indian economy opening up progressively since 1991, foreign investors may find take-over of sick units a better alternative to building a unit from scratch. But they have to obtain the approval of the BIFR.

Not all sick units are beyond redemption. A genuine lack of demand for products is RARELY the reason for an industrial unit to go sick in India. Most of them go sick due to inefficient management, over-staffing or obsolete production equipment and techniques. A few cases could arise from dishonesty of the company's promoters who deliberately let their unit go sick after they have transferred funds to their other companies. Some others may find it attractive to approach the BIFR in order to delay payments to their creditors. But such cases of dishonesty are few and far between. Most cases are genuine.

As of March 1995, according to a report in Business Line newspaper, there were more than 271,000 sick industrial units in India  with outstanding bank credit of Rs. 13,739 crores (1 crore = 10 million). Of  these, 99 per cent companies belonged to the small- scale industry.

These sick companies accounted for 6.7 per cent of the total bank credit and 13.3 per cent of the total bank advances to industry. However, the ratios were significantly lower than in the preceding two years, it adds.

The share of the small-scale industry in the list of sick units was at more than 99 per cent. This was despite a positive growth rate of the small-scale sector during the year. Let this statistics however not cloud the fact that the growth of the small-scale sector in India is usually above the growth rates achieved by the industrial sector as a whole.

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Official liquidators of sick units in India

AGARTALA AHMEDABAD ALLAHABADBANGALORE KOLKATA CHANDIGARH

CHENNAI COCHIN CUTTACKDELHI GUWAHATI HYDERABAD

IMPHAL INDORE JAIPURMUMBAI NAGPUR PATNA 

AGARTALA DEPUTY REGISTRAR OFFICIAL LIQUIDATOR AND REGISTRAR JUDICIAL COMMISSIONER TRIPURA, AGARTALA - 799001

TELEPHONE: (91 381) 223 180

AHMEDABAD OFFICIAL LIQUIDATOR ATTACHED TO THE HIGH COURT OF GUJARAT AT 6, NAVYUG CONY, NEAR GUJARAT VIDYAPITH ASHRAM ROAD, AHMEDABAD - 380014

TELEPHONE: (91 79) 446 044

ALLAHABADOFFICIAL LIQUIDATORATTACHED TO THE HIGHCOURT OF UP AT33, TASHKANT MARG,CIVIL LINESALLAHABAD - 211 001TELEPHONE (91 532) 624 943

BANGALORE 4th FLOOR D&F WING KENDRIYA SADAN KORAMANGALA BANGALORE - 560034 TELEPHONE: (91 80) 553 7742

KOLKATA 9-D POST OFFICE 5th FLOOR CALCUTTA - 700001 TELEPHONE: (91 33) 2248 2483

CHANDIGARH SCO NO. 9 2ND FLOOR SECTOR- 26 CHANDIGARH - 160019 TELEPHONE: (91 172) 770 378

CHENNAI KURALAGAM BLOCK I, 1ST FLOOR ESPLANADE, CHENNAI - 600108 TELEPHONE: (91 44) 534 1574

COCHIN CERMAL BLDG. BANERJI ROAD COCHIN - 682018 TELEPHONE: (91 484) 355 335

CUTTACK 2nd FLOOR CHALCHITRA BHAWAN BUXI BAZAR CUTTACK - 753001 TELEPHONE: (91 671) 621 959

DELHI A2, W2, CURZON ROAD BARRACKS K G MARG, NEW DELHI - 110001 TELEPHONE: (91 11) 338 8405, 338 9507

GUWAHATI HIGH COURT GAUHATI - 781001 TELEPHONE: (91 361) 540 386

HYDERABAD 3-5-398 1ST FLOOR KENDRIYA SADAN SULTAN BAZAR KOTI HYDERABAD - 500195 TELEPHONE: (91 40) 465 6780

IMPHAL HIGH COURT OF ASSAM IMPHAL BENCH - 795001 TELEPHONE: (91 3852) 391 583

INDORE HIGH COURT OF MP M G ROAD INDORE - 452001 TELEPHONE: (91 731) 433 568

JAIPUR B - 75/A RAJINDER MARG BAPU NAGAR JAIPUR - 302015 TELEPHONE: (91 141) 513 289

MUMBAI BANK OF INDIA BLDG. 5th FLOOR M G ROAD, MUMBAI - 400023 TELEPHONE: (91 22) 267 1851

NAGPUR 2nd FLOOR, NEW SECRETARIAT BLDG. EAST WING CIVIL LINE NAGPUR - 440001 TELEPHONE: (91 12) 522 934

PATNA MAURYA LOK COMPLEX BLOCK A 4th FLOOR DAK BANGLOW ROAD PATNA - 800001 TELEPHONE: (91 612) 221 002

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Court Documents Newsroom Settlement Q & A The Law Firm Contact Info

Notice:

Under Department of Justice guidelines and regulations, members of the Newby shareholders' class-action lawsuit are to be notified of Enron-related court proceedings, including the following events that have or will occur in the near future:

For Class Members

Information about Late Claims

Update / Q&A

Notice re Bayly, Howard, Yeager, Hirko & Shelby Criminal Cases - June 26, 2008

Update re Hirko & Shelby Criminal Cases - September 23, 2008

Update re Hirko & Shelby Criminal Cases - October 10, 2008

Newsroom

  United States v. Daniel Bayly et al. 08-2003 8, 20039, 20040 (5th Cir.) The January 28, 2008 trial date of former Merrill Lynch executives Daniel Bayly and Robert S. Furst (James A. Brown was scheduled for a separate retrial) was vacated by Judge Werlein on January 23, 2008 because of the pending appeals filed by the three defendants with the U.S. Court of Appeals for the Fifth Circuit. These appeals are still pending, and their reply briefs were due July 10, 2008.

United States v. Kevin Howard Jury selection and trial are set for Monday, January 12, 2009, at 1:30 p.m. at 10:00 a.m. before Judge Vanessa Gilmore in Courtroom 9A, United States Courthouse, 515 Rusk Avenue, Houston, Texas, 77002.

United States v. Scott Yeager A pre-trial conference was set for Monday, June 30, 2008, at 10:00 a.m. before Judge Vanessa Gilmore in Courtroom 9A, United States Courthouse, 515 Rusk Avenue, Houston, Texas, 77002. Jury selection and trial are set for Monday, January 12, 2009, at 1:30 p.m.

United States v. Joseph Hirko and Rex Shelby Trial is currently scheduled for December 1, 2008 at 9:00 a.m. before Judge Vanessa D. Gilmore in Courtroom 9A, United States Courthouse, 515 Rusk Avenue, Houston, Texas 77002. Joseph Hirko has pleaded guilty to Count 4 of the Seventh Superceding Indictment, charging him

with wire fraud, in violation of Title 18, United States Code, Section 1343.

Updated information on these events and other future court proceedings in Enron-related cases is available on the Criminal Division's Victim Witness webpage at:http://www.usdoj.gov/criminal/vns/index.html.

 

Background on the Enron Victims' Lawsuit to Recover Damages from Wall Street Banks that Orchestrated the Enron Fraud

Background of the Banks’ Role in the Enron Debacle

As a result of the massive fraud at Enron, shareholders lost tens of billions of dollars. Many Enron executives, Enron’s accounting firm and certain bank officials were indicted.

Andrew Fastow, Enron’s now-imprisoned former finance chief, testified that many of the banks’ transactions were contrived, deceptive deals done solely to create the false appearance of profits and cash flow.

Internal Enron documents and testimony of bank employees detailed how the banks engineered sham transactions to keep billions of dollars of debt off Enron’s balance sheet and create the illusion of increasing earnings and operating cash flow. For example:

Merrill Lynch purchased Nigerian barges from Enron on the last day of 1999 only because Enron secretly promised to buy the barges back within six months, guaranteeing Merrill Lynch a profit of more than 20%. As a result of this fraud, Merrill Lynch ultimately paid $80 million to settle with the SEC.

Barclays entered into several sham transactions with Enron, including creating a “special purpose entity” called Colonnade, a shell company to hide Enron’s debt, named after the street in London where the bank is headquartered.

Credit Suisse First Boston engaged in “pre-pay” transactions with Enron, including serving as one of the stop-offs for a series of round-trip, risk-free commodities deals in which commodities were never actually transferred or delivered.

Although three banks (and others) have settled with the victims for $7.2 billion, several huge banks still named in this suit have not paid a penny to the victims of the fraud.

The Fifth Circuit’s Decision

After years of preparation and just a few weeks before trial, the Fifth Circuit Court of Appeals vacated the class certification order.

Although the 2-to-1 decision of the Fifth Circuit acknowledged that the banks’ conduct was “hardly praiseworthy,” it ruled that because the banks themselves did not make any false “statements” about their conduct, they could not be liable to the victims even if they knowingly participated in the scheme to defraud Enron’s shareholders.

Enron in the News

  • Billions to be Shared by Enron Shareholders, 09/09/08

  • Enron Payout Plan Approved, 09/09/08

  • A "Monumental Job", 03/29/08

  • Filing Argues a Duty to Tell, 03/29/08

more...

Press Releases

  • UC Reaches $11.5 Million Settlement with Goldman Sachs in Enron Securities Lawsuit, 02/05/08

  • Enron Victims Comment on Stoneridge, 10/09/07

  • Frank and Conyers File Amicus Brief in Stoneridge Case, 07/30/07

  • UC Announces Plan to Distribute Recovered Funds to Defrauded Enron Investors, 07/27/07

more...

Multimedia

  • Stoneridge and Enron - An Interview with Patrick Coughlin from Bloomberg TV, 10/08/07

  • Investors vs. Wall Street, 10/08/07

  • Enron Victims Seek SEC Support08/09/07

As the Court's dissenting Judge summarized, the ruling “immunizes a broad array of undeniably fraudulent conduct from civil liability . . . effectively giving secondary actors license to scheme with impunity, as long as they keep quiet.”

In an extraordinary admission, the Court's two-member majority acknowledged that their ruling runs afoul of “justice and fair play” (“We recognize, however, that our ruling . . . may not coincide, particularly in the minds of aggrieved former Enron shareholders who have lost billions of dollars in a fraud they allege was aided and abetted by the defendants at bar, with notions of justice and fair play.”)

For more background on the Enron lawsuit: www.universityofcalifornia.edu/news/enron

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  • Sue the Banks, 06/22/07

  • CNBC, Keeping America Great06/12/07

Q&A: The Enron case

With former Enron heads Ken Lay and Jeffrey Skilling now found guilty of fraud, conspiracy and other charges, the scandal that brought down the former US energy giant in 2001 is back in the headlines.

We look back at the implications of the verdict and how Enron collapsed.

What charges were Lay and Skilling facing?

Jeffrey Skilling, Enron's former chief executive, faced 28 counts of fraud, conspiracy, insider trading and lying to auditors for allegedly trying to fool investors into believing Enron was healthy before the firm crashed.

Both Mr Lay and Mr Skilling has always protested their innocence

Enron's founder and former chairman Ken Lay had faced six counts of fraud and conspiracy for perpetuating the scheme after Skilling quit in August 2001.

Both had pleaded not guilty, with each blaming junior managers and claiming ignorance of the fraud schemes.

Lay laid the burden of blame at the feet of the company's former finance chief Andrew Fastow, who struck a bargain with prosecutors and agreed to testify against his bosses in return for a lighter prison sentence of 10 years.

Lay died of a heart attack on 5 July, leaving Skilling to face sentencing alone. He could face a very long jail sentence, of 25 years or more.

What happens now?

The judge will be pronouncing the sentence later after further arguments and a pre-sentencing report by the probation service.

This could take two to three months.

This would be the point at which substantial jail sentences could be announced.

But the legal wrangles are not necessarily over.

The two executives will most likely appeal to the US court of appeals, which could take a further 2 years.

The main issue could be the judge's directions to the jury, which pointed out that deliberate ignorance of fraud was no excuse.

This meant the jury could still convict Lay and Skilling even if the two had deliberately not wanted to know what was going on.

How will it affect corporate America?

The Enron case was the biggest in a series of scandals that damaged the reputation of corporate America.

As a direct result the US Congress passed a tough new law,

Former finance boss Andrew Fastow was blamed by the bosses

called Sarbanes-Oxley, which imposed stricter rules on auditors and made corporate directors criminally liable for lying about their accounts.

The conviction of Lay and Skilling will be seen as a vindication of the legislation, and make it harder for Republicans in Congress to try and weaken the law, as some companies would like.

It has also moved the balance of power away from company boards towards investors - at least a little bit.

Could it ever happen again?

There is a fierce debate among corporate experts about whether the reforms introduced after Enron have done enough to prevent future fraud.

There is certainly more caution among chief executives about signing off accounts that might be inaccurate now that they face criminal penalties.

But the temptation to boost stock prices has been a consistent feature of booming markets - from the 1920s to the present - especially when the rewards for chief executives can be so high.

In one year, Ken Lay earned $252m including stock options.

As a result, the US has been the pioneer in tougher financial regulation, from the creation of the Securites and Exchange Commission itself in the l930s.

Nevertheless, many argue that it has to be a change in corporate culture, rather than legal restrictions, that are needed to prevent another recurrance of corporate fraud.

What sort of company was Enron?

Enron began life as an energy producer in 1985 following the coming together of two companies - Internorth and Houston Natural Gas.

It moved to become an energy trader, and ended up an energy "bank" providing guaranteed quantities at set prices over the long term.

Thousands were affected when Enron collapsed

Enron owned power plants, water companies, gas distributors and other units involved in the delivery of services to consumers and businesses.

But it was the first to realise energy and water could be bought, sold, and hedged just like shares and bonds.

Enron became a huge "market-maker" in the US, acting as the main broker in energy products, also taking financial gambles far bigger than its actual core business.

As a result, in just 15 years it grew from nowhere to become America's seventh largest company, employing 21,000 staff in more than 40 countries.

Fortune magazine named Enron "America's Most Innovative Company" for six consecutive years from 1996 to 2001.

How did it all go wrong?

Its trading operations relied heavily on complicated transactions, many relating to deals many years in the future.

Many of these gambles on the future energy prices were losing money, and to disguise this a network of dubious "partnerships" were created - Enron devices for keeping debts off the balance sheet and thus keeping profits high and shareholders happy.

It is alleged that these partnerships bought losing businesses from Enron to boost its balance sheet.

Some of the partnerships were set up by the company's executives, benefiting them, their families and friends to the tune of millions of dollars.

In addition, many of the company's executives allegedly raked in massive profits by selling their shares before the company's problems went public and its stock price collapsed.

After a while the losses were being shuttled around corners of the empire to keep them hidden, eventually coming to light in 2001.

And when that happened, Enron left behind $31.8bn (£18bn) of debts, its shares become worthless, and 21,000 workers around the world lost their jobs.