Special Provision of SICA and BIFR BY Snigdha Singh

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SICA

By Snigdha Singh



DEFINITION

Section 3(1)(o) : Def ines sickcompany as an industrial company

being registered f or not less than 5years, which has at the end of anyf inancial year accumulated losses equal to or exceeding its entire net-

worth.



Scope

Publiccompanies

Private companies



Determination of sick units

the accumulated losses of the company to be

equal to or more than its net worth i.e. its paid up

capital plus its free reserves

the company should have completed five yearsafter incorporation under the Companies Act, 1956

it should have 50 or more workers on any day of

the 12 months preceding the end of the financial

year with reference to which sickness is claimed. it should have a factory license.



Causes

Internalf actors.

Externalf actors



InternalFactors

Mismanagement.

Wrong location of a unit.

Overestimation of demand. Poor inventory management

Poor implementation of projects

Poor labour-management relationship Unwarranted expansion and diversion

of resources



External

Factors

Energy crisis .

Credit squeeze

changes in technology Infrastructural problems

Situations like market recession

Failure to achieve optimum capacity International pressures or

circumstances



Objectives of SICA

Speedyprevention.

Timelydetection of

sick.

expeditious enf orcement

of the

measures



Special Provision Constitution of two quasi-judicial bodies ± BIFR and AAIFR and

their Benches.

Procedure of the Board and the Appellate Authority.

Filing of references u/s 15 and criteria of sickness.

Provision of enquiry u/s 16.

Appointment of Special Directors and OAs u/s 16(4) and 17(3).

Preparation of sanctioned scheme under section 17(2), 17(3) &

18(4).

Provision for monitoring of schemes u/s 18(12)

Rehabilitation by giving financial assistance u/s 19. Winding up of sick industrial companies u/s 20.

Protection to safeguard the interests of the sick companies u/s

22(1), 22(2), 22(3).

Provisions for dealing with potential sickness u/s 23, 23(a), 23(b).

Provision in case of misfeasance u/s 24.



Measures The financial reconstruction

The proper management by change in or take over of

the management of the company;

The amalgamation of the sick industrial company with

any other company

The sale or lease of a part or whole of the sick

industrial company

incidental, consequential or supplemental measuresas may be necessary or expedient



APPOINTMENTS

With effect from such date as the Central Government may, by

notification, appoint, there shall be established a Board to be known as

the "Board for Industrial and Financial Reconstruction" to exercise the

jurisdiction and powers and discharge the functions and duties conferred

or imposed on the Board by or under this Act.

The Board shall consist of a Chairman and not less than two and not

more than fourteen other Members, to be appointed by the Central

Government.

The Chairman and other Members of the Board shall be persons who

are or have been or are qualified to be High Court Judges, or persons of

ability, integrity and standing who have special knowledge of, and

professional experience of not less than fifteen years in science,

technology, economics, banking industry, law, labour matters, industrial

finance, industrial management, industrial reconstruction, administration,

investment, accountancy, marketing or any other matter, the special

knowledge of, or professional experience in which, would in the opinion

of the Central Government be useful to the Board.



GOVERNMENT OF INDIA, MINISTRY OF FINANCE,

DEPARTMENT OF ECONOMIC AFFAIRSJAWAHAR VYAPAR BHAWAN,

1, TOLSTOY MARG,

NEW DELHI, INDIA

Board f or Industrial andFinancial Reconstruction



INTROD

UCTION The Sick Industrial Companies (Special

Provisions) Act, 1985 (hereinafter called the Act)

was enacted with a view to securing the timely

detection of sick and potential sick companiesowning industrial undertakings, the speedy

determination by a body of experts of the

preventive, ameliorative, remedial and other

measure which need to be taken with respect to

such companies and the expeditious enforcement

of the measures so determined and for matters

connected therewith or incidental thereto.



Continues The Board of experts named the Board for

Industrial and Financial Reconstruction (BIFR)

was set up in January, 1987 and functional with

effect from 15th May 1987. The Appellate Authorityfor Industrial and Financial Reconstruction

(AAIRFR) was constituted in April 1987.

Government companies were brought under the

purview of SICA in 1991 when extensive changes

were made in the Act including, inter-alia, changes

in the criteria for determining industrial sickness.



GENISIS OF SICA, 1985

Industrial sickness had started right from the pre-

Independence days.

Government had earlier tried to counter the

sickness with some ad-hoc measures.

Nationalisation of Banks and certain other

measures provided some temporary relief.

RBI monitored the industrial sickness.

A study group, came to be known as TandonCommittee was appointed by RBI in 1975.



Continue« In 1976, H.N. Ray committee was appointed.

In 1981, Tiwari Committee was appointed to suggest a

comprehensive special legislation designed to deal with the

problem of sickness laying down its basic objectives and

parameters, remedies necessary for revival of sick Units.

The committee submitted its report to the Govt. in September

1983 and suggested the following:

Need for a special legislation

Need for setting up of exclusive quasi-judicial body.

Thus the SICA came into existence in 1985 and BIFR started

functioning from 1987.

Special Provision of SICA and BIFR BY Snigdha Singh

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