special provision of SICA and BIFR by Snigdha Singh

SICA : 

SICA By Snigdha Singh

DEFINITION : 

DEFINITION Section 3(1)(o) : Defines sick company as an industrial company being registered for not less than 5 years, which has at the end of any financial year accumulated losses equal to or exceeding its entire net-worth.

Scope : 

Scope

Determination of sick units : 

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 years after 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 : 

Causes

Internal Factors : 

Internal Factors 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 : 

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 : 

Objectives of SICA

Special Provision : 

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 : 

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 measures as may be necessary or expedient

APPOINTMENTS : 

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 Affairs  Jawahar Vyapar Bhawan, 1, Tolstoy Marg, New Delhi, India : 

Government of India, Ministry of Finance, Department of Economic Affairs  Jawahar Vyapar Bhawan, 1, Tolstoy Marg, New Delhi, India

INTRODUCTION : 

INTRODUCTION 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 companies owning 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 : 

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 Authority for 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 : 

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 Tandon Committee was appointed by RBI in 1975.

Continue… : 

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.