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In the wake of sickness in the country’s industrial climate prevailing in the eighties, the Government of India
set up in 1981, a Committee of Experts under the Chairmanship of Shri T.Tiwari to examine the matter and
recommend suitable remedies therefore. Based on the recommendations of the Committee, the Government of India
enacted a special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)
commonly known as the SICA (hereinafter referred as SICA).
The main objective of SICA is to determine sickness and expedite the revival of potentially viable units or
closure of unviable units (unit here in refers to a Sick Industrial Company). It was expected that by revival, idle
investments in sick units will become productive and by closure, the locked up investments in unviable units would
get released for productive use elsewhere.
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.
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.
The important provisions of SICA were:-
It provided for the constitution of two quasi-judicial bodies, that is, Board for Industrial and Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR). BIFR was set up as an apex board to tackle industrial sickness and was entrusted with the work of taking appropriate measures for revival and rehabilitation of potentially sick undertakings and for liquidation of non-viable companies. While, AAIFR was constituted for hearing the appeals against the orders of the BIFR.
BIFR would make an inquiry as it may deem fit for determining whether any industrial company had become sick, under the following conditions:-
If the Board of Directors of a sick industrial company made a reference to the BIFR for determination of the remedial measures with respect to their company. Such reference was to be made within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year at the end of which the company had become sick. For filing the reference, the Board of Directors must have sufficient reasons to form the opinion that the company had become sick; or
On receiving such information (reference) with respect to a sick company or upon its own knowledge as to the financial condition of a company. Such a reference to the board may be made by:- (i) The Central Government; (ii) The Reserve Bank of India; (iii) State Governments; (iv) Public financial institutions; (v) State level institutions; or (vi) Scheduled banks.
However, such a reference shall not be made in respect of any industrial company by :- (i) the Government of any State, unless all or any of the industrial undertakings (belonging to such a company) were situated in that State; (ii) a public financial institution or a State level institution or a scheduled bank, unless it had, by reason of any financial assistance or obligation rendered by it or undertaken by it, interest in such a company.The Board may order any operating agency to enquire into the matter and complete the inquiry as expeditiously as possible.
If the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company, it may appoint one or more persons as special director(s) of the company for safeguarding the financial and other interests of the company. The appointment of a special director shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 or in any other law for the time being in force or in the memorandum and articles of association or any other instrument relating to the industrial company.
Any special director so appointed shall :- (i) hold office during the pleasure of the Board and may be removed or substituted by any person by order in writing by the Board; (ii) not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto; (iii) not be liable to retirement by rotation and shall not be taken into account for computing the number of directors liable to such retirement; (iv) not be liable to be prosecuted under any law for anything, done or omitted to be done in good faith in the discharge of his duties in relation to the sick industrial company.
If after making an inquiry, the Board is satisfied that the company has become sick, it shall, after considering all the relevant facts and circumstances of the case, may take either of the following decisions:-
If the Board decides that it is practicable, it shall, by order in writing and subject to such restrictions or conditions as may be specified in the order, give such time to the company as it may deem fit to make its net worth exceed the accumulated losses.
If the Board decides that it is not practicable for the sick company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures in relation to the said company, it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare a scheme providing for such measures in relation to that company. The measures may include:-
o The financial reconstruction of the sick industrial company;o The proper management of the sick industrial company by change in or take over of the
management of the company;o The amalgamation of the sick industrial company with any other company (transferee
company), or any other company with the sick industrial company (transferee company);o The sale or lease of a part or whole of the sick industrial company;o Such other preventive, ameliorative and remedial measures as may be appropriate;o Such incidental, consequential or supplemental measures as may be necessary or expedient
in connection with or for the purposes of the measures specified above.
If the Board is of the opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. The High Court shall, on the basis of the opinion of the Board, order winding-up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.
Where in respect of an industrial company, an inquiry is pending, or any scheme referred is under preparation or consideration or a sanctioned scheme is under implementation, then no proceedings for the winding-up of the industrial company or for execution, distress or the like against any of the properties of the industrial company shall be made. Also, no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.
Also with respect to the above conditions, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising there under before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board.
However, such declaration shall not be made for a period exceeding two years, which may be extended by one year at a time so that the total period shall not exceed seven years in the aggregate.
Under the Act, whosoever violates its provisions or any scheme or any order of the Board or of the Appellate Authority, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine. No court shall take cognizance of any offence mentioned except on a complaint in writing of the secretary or any such other officer of the Board or the Appellate Authority or any such officer of an operating agency as may be authorised in this behalf by the Board or the Appellate Authority.
SICA applies to companies both in public and private sectors owning industrial undertakings:-
(a) pertaining to industries specified in the First Schedule to the Industries (Development and Regulation) Act, 1951,
(IDR Act) except the industries relating to ships and other vessels drawn by power and;
(b) Not being "small scale industrial undertakings or ancillary industrial undertakings" as defined in Section 3(j) of
the IDR Act.
(c) The criteria to determine sickness in an industrial company are (i) 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 (ii) the company should have
completed five years after incorporation under the Companies Act, 1956 (iii) 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. (iv) it
should have a factory license.
The institution of BIFR had hardly satisfied the call for revival and rehabilitation of sick industrial undertakings and
SICA has proved to be a complete failure. The lenders i.e. the banks and financial institutions, found SICA to be the
biggest obstacle on their road map to recovery of dues. The existing legal framework of corporate insolvency faced
several follies, which may be rectified once the proposed amendments are notified in the Official Gazette.
Following were the flaws in the present framework regarding sick industrial companies.
Procedural delays
There were inherent defects both, procedural and legal in proceedings before BIFR. The BIFR takes nearly
one year to determine whether a company is sick. Thereafter, it takes around one year to formulate revival strategy.
Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy
in decision making, leading to avoidable delays. The decisions by the banks are also neither transparent, nor subject
to judicial review. By the time decisions are taken and communicated, the plan, which had been conceived, has lost
its viability resulting in failure of revival schemes even after sanction.
Lack of timely commencement of proceedings
Under the existing law, a company can approach the BIFR for adopting steps for its revival, on erosion of its
entire net worth. The erosion of entire net worth is too late a stage to attempt restructuring as by the time the net
worth is eroded the company is too sick to be revived and has lost its resilience to restructure and revive itself.4
Poor enforcement mechanism:-
The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law.
The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for
such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions.
However, this aspect and solution to this problem has to be found out in the proposed legislation.5
Misuse of protection against recovery proceedings
Under SICA, an automatic stay operates against all kind of recovery and distress proceedings against all
creditors once the reference filed by the company is registered. This is the principal drawback of the existing
legislation as this has led to BIFR becoming a haven for defaulting companies. Erring debtors have misused SICA to
seek protection and moratorium from recovery proceedings. The companies are able to enter easily into the
reference, sometimes by manipulating their accounts to reflect net worth erosion and are then able to attract
immunity against the recovery action by the creditors and this benefit is then attempted to be perpetuated.
Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting
manipulations. The provisions for suspension of legal proceedings are misused and perpetuated.6
This problem arises due to the fact that unscrupulous promoters enter into the process of rehabilitation by
manipulating sickness; take undue benefits arising out of delay in decision making of BIFR. If the reference is
rejected, a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. There is
no fear of reprisal or punitive action against the companies indulging in this malpractice.7
Lack of extra territorial jurisdiction
Insolvency laws do not have any extra-territorial jurisdiction, nor do they recognize the jurisdiction of
foreign courts in respect of branches of foreign banks operating in India. Therefore, if a foreign company is taken
into liquidation outside India, its Indian business will be treated as a separate matter and will not be automatically
affected unless an application is filed before an insolvency Court for winding up of its branches in India.
The recommendations of the Eradi Committee have been incorporated into the Companies (Amendment)
Act, 2002 and the Sick Industrial Companies (Special Provisions) Repeal Act, 2002 to mend these defects in the
existing laws and the end result being tribunalisation of justice. The Companies (Amendment) Act, 2002 amended
Article 323B of the Constitution of India and provisions of Part VII of the Companies Act, 1956 for setting up of a
National Company Law Tribunal (NCLT) and its Appellate Tribunal. The Act repealed SICA and abolished
Company Law Board.8
Though tribunalisation of justice is now recognized trends, But India’s experience with Tribunals have
nothing cheer. They have largely unsuccessful to serve the purpose with which they are set up. NCLT would be
burdened with workload of enormous magnitude and in the process would be likely to lose focus on revival and
rehabilitation of sick entities. Lastly, the misuse of the said forum in making an entry by manipulating/feigning
sickness must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure
that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found
out in the proposed legislation.
At present the Government is considering the adoption of UNCITRAL Model Law on Cross-Border
Insolvency to meet the demands of globalizations of economy and to deal with international insolvency. This will
radically change the orientation of Indian law and make it suitable for dealing with the challenges arising from
globalizations and increasing integration of Indian economy with the world economy.9
"The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and
investment. However, national insolvency laws have by and large not kept pace with the trend, and they are often ill
equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal
approaches, which hamper the rescue of financially troubled businesses, are not conducive to fair and efficient
administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against
dissipation, and hinder maximizations of the value of those assets."10
While drafting the substantive and procedural rules of bankruptcy, international standards for both national
and cross-border insolvency should be taken into consideration which, based on Indian situation, should be suitably
incorporated.
.
Double Window System
One of the major defects during the tenure of SICA was the lengthy procedure that has to be adopted at the
instances of winding up. The BIFR, not being a winding up authority under SICA and only being a recommendatory
body, when directs for the winding up of the non-viable sick companies, then the entire cumbersome procedure as
laid down takes place under the supervision of High Court and the entire procedure ending up in more than a decade
in most of the cases.
Omkar Goswami Committee Report
It seems the problem of industrial sickness is a far fetching one. This Committee believes that the barriers to
industrial and corporate restructuring serve no economic goal. Barriers to restructuring help inefficient capitalists
maintain their stranglehold over the assets of a company, and encourage them to renege on their obligations to
banks, financial institutions, the government, and the workers.15 It suggested certain problems of SICA. They can be
outlined as follows:
1.the definition as per SICA are backward looking and based on the historical book value of a firm’s assets, not its
future earning potential, not its current realizable market value.
the BIFR process is very time consuming because of the fact that it needs consensus at all stages.
3.it is essential for BIFR to use the winding up provisions of section 20(4) of SICA more frequently – not only to
expedite the sale of economically unviable firms, but also as a threat to force the pace of decision making and
consensus among various parties.
4.A sick company’s own reference to BIFR should be voluntary, not mandatory. Making the reference voluntary
would reduce the number of cases that get registered with BIFR and, hence, lessen the administrative burden.
5.getting SICA outside FERA will encourage foreign investors to takeover potentially viable sick companies and, if
nothing else, raise the market price and bid value of the poorly utilized industrial assets
6.The RBI should closely examine the Revised Irregular System(RIS) and compare it with its own health code
classification.
JUSTICE ERADI COMMITTEE REPORT ON INSOLVENCY
It was long felt that the enacted of the SICA was a failure. So what the Government did was, it appointed Justice
V Balakrishana Eradi to suggest remedial measures in this regard. In the year 1999, the Government of India set up a
High Level Committee headed by Justice V.B. Balakrishna Eradi, a superannuated Judge of Supreme Court of India
for remodeling the existing laws relating to insolvency and winding up of companies and bringing them in time with
the international practices in this field. The Committee has recommended that the provisions of Part VIA of the
Companies Act, 1956, be amended to include the provisions for setting up of a National Tribunal which will have,-
1. The jurisdiction and power presently exercised by Company Law Board under the Companies Act, 1956;
2. The power to consider rehabilitation and revival of companies – a mandate presently entrusted to
BIFR/AAFIR under SICA ;
3. The jurisdiction and power relating to winding up of companies presently vested in the High Courts. In view
of above recommendations Article 323B16 of the Constitution should be amended to set up National
Tribunal. SICA should be repealed and the Companies Act, 1956 be amended accordingly.
The Committee completed its work and submitted its report to the Central Government in the year 2000. In
August 2001, the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions)
Repeal Bill, 2001 were introduced in the Parliament of India. The object behind the introduction the bill is to avoid
the multiplicity of litigation before various court/quasi-judicial bodies and the reduction of entire process which at
present takes a long time.
The Bills, if passed in their present form will bring the curtains down on the Sick Industrial Companies
(Special Provisions) Act, 1985 and will restructure the Companies Act, 1956 in a big way leading to the new regime
of tackling corporate rescue and insolvency procedures in India with a view to creating confidence in the minds of
investors, creditors, labour and shareholders.
Sick Industrial Companies (Special Provisions) Repeal Act, 2003
This Act repeals the working of Sick Industries Company (special provision) Act, 1985. Indian Government
was unsatisfied with the working of BIFR after so many committee recommended for abolishing SICA, this dream
got materialized in 2003 but still the NCLT working is not been notified. By this Act the BIFR and AAIFR stands
dissolved.17
Recommendations of the JJ Irani Committee on Company Law (2005) 18
JJ Irani Committee wanted to omit the term ‘sick industrial company’ and replace it with ‘insolvent company’ and
thereby erase the sickness test on the basis of erosion of net worth with that of the liquidity test. Moreover, it
recommended that CA/CS/CWA/law professionals should play an active role in the insolvency process so that there
would be expertise persons dealing with the specialized, commercial and technical characteristics of insolvency law.
It also recommended the establishment of the National Company Law Tribunal on a speedy basis. Further, it
enunciated that the rehabilitation by cess to be replaced by the ‘Insolvency Fund” with optional contribution by
companies. It also allowed the debtors to approach the Tribunal with the rehabilitation scheme. Power was also
given to the creditors to oppose the scheme of rehabilitation.
Companies Bill, 2009
Certain changes were proposed to be made for the rehabilitation and revival of the sick units as from the
proposed Companies Amendment Act, 1956.The criteria of sickness was changed to include ‘inability to pay debts’
due to secured creditors representing 50% or more of the outstanding debt.19 Further the scope of the filing for the
determination of sickness which was restricted to the Board now included the creditor or the company. Even powers
were granted to the creditors to decide on the issue of winding up or the revival of the company by passing a special
majority among the creditors.20 Moreover, the greater powers have been conferred on the creditors to supervise a
rescue plan and restrict the powers of management in the rehabilitation of a sick company.
SICK INDUSTRIAL COMPANIES (SPECIALPROVISIONS) REPEAL ACT, 2003SICA 1985 after being amended twice, first in 1991and later in 1998, was repealed and replaced by Sick Industrial Companies (Special Provisions) Repeal Act, 2003. The work of revival and rehabilitation was entrusted to National Company Law Tribunal (NCLT) constituted under the Companies Act, 1956. Many provisions of SICA have been incorporated in Chapter VI A(Section 424A-424L) in a considerably diluted form. Any appeal against the order of the NCLT will now be made tothe NCLAT instead of Appellate Authority for industrial and financial reconstruction.The basic premise of the provisions incorporated in Chapter VI A of the Companies Act is to plug the loopholesin the erstwhile SICA. The aim not only being to combat industrial sickness but also to reduce the same by ensuringthat companies do not view declaration of sickness as an escapist route from legal provisions after the project failureand gaining access of various benefits\ concessions from the financial institutions.
L
Major Changes
Section no.
Provision in SICA Provisions incorporated in the Companies Act
Remarks
2 The Act was for giving effect to the policy of the State towards securing the princi- ples specified in clauses (b) & (c) of article 39 of the
No corresponding protec- tion under the Act.
The earlier provision was intended to avoid possible challenge to constitu- tional validity of SICA. However, the non-inclusion of similar declaration under the Act does not provide insula- tion
3(1) (da) Date of finalisation of duly audited accounts means the date on which the audited accounts of the company are adopted at the
Omitted Making of reference has been practi- cally de-linked from the finalisation of accounts.
3(1) (ga) Net worth means sum total of paid up capital & free reserves
Net worth means sum total of paid up capital & free reserves less of provisions and expenses as may be prescribed - 2(29A)
Earlier companies were not deducting provisions & expenses for computing net worth. Similarly, no provisions were made by the company even when such provisions were required to be made under the Accounting Standards.
Now hopefully this loophole shall be plugged. If the expenses are shown in the balance sheet as assets and provi- sion (required but not made in accounts) are
Note: Department of Company Affairs, vide letter no.4/28/8/-CL-X dated 2.9.1981, has clarified that accumulated losses shall be arrived at only after calculating un-provided depreciation.
994
3(1) (i) Operating agency means public finan- cial institution, State level
institution, scheduled bank or any other person as may be
Operating agency is group of experts consisting of persons hav- ing special knowledge in banking& industry in which sick indus- trial company is engaged and includes public financial institution, State level institution, scheduled bank or any
The purview of the definition has been enlarged to include experts from the field of banking and finance as well. This will enable the NCLT to provide an effective revival scheme drafted by the experts in banking and industry to assist the sick company in rehabilitation
3(1)(o) Sick industrial com- pany
meansan
industrial company (being registered for not less than 5 years) which has at the end of the any financial year accu- mulated
losses
Sick industrial company means an industrial company, which has at the end of any financial year: 2(46AA)
● accumulated losses exceeding
50% of average net worth dur- ing 4 years; or
● has failed to repay debts to its creditor(s) in 3 consecutive quarters on demand made in
The impact of this considerably tight mod- ification can be summarized as under:i. No moratorium period.
The holi- day period of 5 years has been deleted.
ii. Accumulated losses should exceed
50% of the average net worth dur- ing the last 4 years.
iii. Inability to repay its creditors for 3 consecutive quarters on demand made by them in 4 to 14 Constitution
andprocedures of the BIFR and
Omitted BIFR and Appellate Authority replacedby NCLT and NCLAT respectively.
15Reference to theBoard
Sec 424A is parallel to Sec 15 ofSICA. Now the company is required to submit a scheme of revival & rehabilitation at the time of making reference to the NCLT.
Such reference has to be made within:● 180 days after the Board of
Directors came to know about
● 60 days of final adoption of accounts.
Further, it is also required
The responsibility for preparation ofrevival & rehabilitation scheme has now been casted on the company mak- ing the reference to NCLT. Thus, it is no longer the duty of the banks\finan- cial institutions to nurse a sick baby.
Thus adoption or even preparation of accounts is not the basic criteria. Reference has to be made even when banks\ Financial institutions take over the assets under Securitisation & Reconstruction of Financial Assets,
424A(5) provides that NCLT has to examine, as preliminary issue, whether the company is a sick industrial company u\s 2(46AA) even before considering
Principal jurisdictional provision in favour of NCLT, empowering it to examine the basis of such reference even before analyzing the viability of the revival scheme. Reference may be
Note 1: As regards making of reference to Board, an industrial company can now make reference to NCLT u\s 424A. But now Government companies have been excluded from the provision of Chapter VI A of the Companies Act. U\s 424A(1), a government company can make a reference under the Act to NCLT only with prior approval of Central or State government.
“Deemed government company” u\s 619B of the Companies Act, can not be regarded as a government company, hence can make a reference without the prior consent of Note 2: All healthy companies are now required to pay a cess towards the “Rehabilitation & Revival Fund” for sick industrial companies that will be at the disposal of NCLT.16 Inquiry into the
work- ing of the sick indus- trial company by the Board. For expedi- tious disposal of the case the matter could be referred to operat- ing agency by an order of the Board. The agency was required to furnish a report to the Board on comple- tion of its inquiry into the matter.Further, Board may appoint
Sec 424A(5) empowers NCLT to examine as
preliminaryissue whether the
company is a sick indus- trial company u\s 2(46AA).
Thereafter, only in cases where NCLT may consider necessary, for- ward the matter for inquiry to oper- ating agency.
Thus even before examining the viabil- ity of the scheme of revival proposed by the company, NCLT can check the gen- uineness of the reference made to it.
Thus, inquiry by operating agency will only be to enable NCLT to decide the viability of the scheme and to assess whether the company has the ability to revive on its own. Else it would direct the preparation of scheme u\s 424D.
Note 1: Earlier BIFR was required to pass the final orders within 60 days from the commencement of inquiry. Now,first the operating agency shall submit its report to NCLT within 21 days (extendable upto 40 days by the Tribunal). The Tribunal shall conclude its inquiry within 60 days from the commencement of the inquiry, extendable upto 90 days by the Tribunal for the reasons to be recorded in writing.
Note 2: No change in the provisions relating to the appointment of special directors.
996
A17 Powers of
Board to make
suitable orders on the com- pletion of inquiry.
u\s 424C NCLT has to consider and decide whether it is practicable for the company to revive on its own within a
reasonabletime. Alternatively,
it may direct any oper- ating agency to prepare such scheme in accordance with the guidelines prescribed by it
No change, except that the words “make repayment of loan” have been inserted corresponding to the change made in the definition of “sick industrial company”. Under SICA, 7-10 years was considered to be a reasonable time for the company to make its net worth exceed the accu- mulated losses. NCLT has,
18 Preparation
andsanction of scheme for revival & reha- bilitation.
u\s 424D Operating agency to pre-pare the scheme for revival & reha- bilitation with specific regards to the guidelines of RBI.
NCLT may review and modify the scheme, if necessary -424D(5)
The draft scheme as vetted byTribunal to be circulated- 424D(3)
Draft scheme may be sanctioned within 60 days from the date of advertisement\ circulation, extend- able upto 90 days- 424D(4)
Copy of the sanctioned scheme to be filed with the Registrar-424D(9)
Scheme may also be
Scheme to be prepared within 60 days(extendable upto 90 days) as against earlier provision of 90 days.
No change in what the revival scheme should provide for, except that now it may provide for measures for repayment of debts. (consequential to the change in definition of sick industrial company)
Brief particulars of draft scheme may be published. Earlier “shall” was used, making publication of advertisement compulsory.
Earlier, there was no time limit. Further, “shall” was used making it compulsory for BIFR to sanction the scheme.
New Provision
19 Rehabilitation by giv-ing financial
Similar provisions incorporated inSection 424E
No change
19A Sick Industrial com- pany\bank\FI\Go vernment can apply to Board to con- tinue
Similar provisions incorporated inSection 424F
No change
20 Board was required to record and for- ward its opinion for winding up of the sick industrial com- pany to the High Court.
Tribunal can itself order the winding up of the company, if it is of the opinion that the sick company is not likely to revive.
Tribunal can appoint any officer of the operating agency to act as the liquidator.
Section 20(2) of SICA becomes redun- dant as Tribunal can itself order wind- ing up instead of merely forwarding its opinion to the High Court.This power was earlier vested with theHigh Court.
Note: Significant provision incorporated u\s 424G(4), directing that the winding up should be completed within one year from the order of winding up.
21 Operating agency to prepare inven- tory, list of
Similar provisions incorporated u\s424H
No change
22 Suspensions of legal proceedings, con- tracts etc., thus pro- viding
complete immunity
from legal suits, recovery proceedings
and
No parallel provision in the new law. Recovery proceedings and suits against the sick industrial company can continue even if enquiry is pend- ing with NCLT or revival & rehabili- tation scheme is pending for prepa- ration or implementation.
No protection to sick industrial com- pany against suits or legal proceedings for recovery of money or execution against property.However, winding up proceedings may be kept as these are with the same Tribunal.
23 and 23A
Proceedings in case of potentially sick industrial
No parallel provisions in the Act.
25 Appeal to AAIFR against the order of BIFR
Now appeal against the order ofNCLT has to be made to NCLAT.
28 BIFR required to furnish information and return to Central\ State Govt. and to collect from and furnish certain
No corresponding provision.
32(1) Overriding impact over all other laws except, FEMA and Urban
Land (Ceiling & Regulation) Act and also
theMemo-
No parallel provision. Overriding impact done away with.
Various legal provisions under differ- ent enactments have to be complied with to make the sanctioned scheme effective.
33 Penalty for certain offences
Penalty of imprisonment upto 3 years and fine upto Rs.10 lacs for vio- lation of orders of Tribunal, making false statements or giving false evi- dence or attempt to tamper records of
Following changes incorporated:● Limit of fine fixed upto Rs.10 lacs.
● “tamper records of reference or appeal”-
34 Offences by com- panies
No parallel provision under the Act
35 Central
Govt. empowered
to
No parallel provision under the Act
