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, 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.
it shall. (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. it shall. 1956. by reason of any financial assistance or obligation rendered by it or undertaken by it. The proper management of the sick industrial company by change in or take over of the management of the company. order winding-up of the sick industrial company in accordance with the provisions of the Companies Act. by order in writing and subject to such restrictions or conditions as may be specified in the order. The Board may order any operating agency to enquire into the matter and complete the inquiry as expeditiously as possible. unless it had. The High Court shall. Such other preventive. or any other company with the sick industrial company (transferee company). . 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.(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. on the basis of the opinion of the Board. 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. Any special director so appointed shall :. 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. (iv) not be liable to be prosecuted under any law for anything. by order in writing. 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. after considering all the relevant facts and circumstances of the case. ameliorative and remedial measures as may be appropriate. The appointment of a special director shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act. the Board is satisfied that the company has become sick. The sale or lease of a part or whole of the sick industrial company. as soon as may be. it may record and forward its opinion to the concerned High Court. it may appoint one or more persons as special director(s) of the company for safeguarding the financial and other interests of the company. may take either of the following decisions: If the Board decides that it is practicable. interest in such a company. such a reference shall not be made in respect of any industrial company by :. it may. unless all or any of the industrial undertakings (belonging to such a company) were situated in that State. direct any operating agency specified in the order to prepare a scheme providing for such measures in relation to that company. give such time to the company as it may deem fit to make its net worth exceed the accumulated losses. The amalgamation of the sick industrial company with any other company (transferee company). If the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company. The measures may include:o o o o o o The financial reconstruction of the sick industrial company. Such incidental.However.(i) the Government of any State. (ii) a public financial institution or a State level institution or a scheduled bank. consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified above.
(IDR Act) except the industries relating to ships and other vessels drawn by power and. or any scheme referred is under preparation or consideration or a sanctioned scheme is under implementation. such declaration shall not be made for a period exceeding two years. The lenders i. shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine.e. Under the Act. shall remain suspended or that all or any of the rights. 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. agreements. 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. Also. However. . 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. (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. shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board. 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. obligations and liabilities accruing or arising there under before the said date. then no proceedings for the winding-up of the industrial company or for execution. found SICA to be the biggest obstacle on their road map to recovery of dues. privileges. 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. settlements. Following were the flaws in the present framework regarding sick industrial companies. which may be extended by one year at a time so that the total period shall not exceed seven years in the aggregate. awards. (b) Not being "small scale industrial undertakings or ancillary industrial undertakings" as defined in Section 3(j) of the IDR Act. or advance granted to the industrial company shall lie or be proceeded with further. whosoever violates its provisions or any scheme or any order of the Board or of the Appellate Authority. 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. assurances of property. standing orders or other instruments in force. Where in respect of an industrial company. 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. distress or the like against any of the properties of the industrial company shall be made. which may be rectified once the proposed amendments are notified in the Official Gazette. the banks and financial institutions. (iv) it should have a factory license. an inquiry is pending. except with the consent of the Board or. as the case may be. 1951. the Appellate Authority. its paid up capital plus its free reserves (ii) the company should have completed five years after incorporation under the Companies Act. The existing legal framework of corporate insolvency faced several follies.
By the time decisions are taken and communicated. a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for such misuse. a company can approach the BIFR for adopting steps for its revival. has lost its viability resulting in failure of revival schemes even after sanction. which should be demonstrably used to ensure that no entity attempts to misuse these provisions. this aspect and solution to this problem has to be found out in the proposed legislation. which had been conceived. There is no fear of reprisal or punitive action against the companies indulging in this malpractice. 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. This is the principal drawback of the existing legislation as this has led to BIFR becoming a haven for defaulting companies.5 Misuse of protection against recovery proceedings Under SICA. Lack of timely commencement of proceedings Under the existing law. The BIFR takes nearly one year to determine whether a company is sick. 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. an automatic stay operates against all kind of recovery and distress proceedings against all creditors once the reference filed by the company is registered.7 Lack of extra territorial jurisdiction . leading to avoidable delays. nor subject to judicial review. the plan. Thereafter. Erring debtors have misused SICA to seek protection and moratorium from recovery proceedings. Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting manipulations. However. The decisions by the banks are also neither transparent. it takes around one year to formulate revival strategy. If the reference is rejected. Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy in decision making. procedural and legal in proceedings before BIFR.4 Poor enforcement mechanism:The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law. 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. The provisions for suspension of legal proceedings are misused and perpetuated.Procedural delays There were inherent defects both. The companies are able to enter easily into the reference.
"10 While drafting the substantive and procedural rules of bankruptcy. However. The recommendations of the Eradi Committee have been incorporated into the Companies (Amendment) Act.Insolvency laws do not have any extra-territorial jurisdiction. impede the protection of the assets of the insolvent debtor against dissipation.9 "The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and investment. which hamper the rescue of financially troubled businesses. 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. However. .8 Though tribunalisation of justice is now recognized trends. and hinder maximizations of the value of those assets. 2002 amended Article 323B of the Constitution of India and provisions of Part VII of the Companies Act. Double Window System . But India’s experience with Tribunals have nothing cheer. 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. 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. international standards for both national and cross-border insolvency should be taken into consideration which. They have largely unsuccessful to serve the purpose with which they are set up. should be suitably incorporated. 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. The Act repealed SICA and abolished Company Law Board. Therefore. are not conducive to fair and efficient administration of cross-border insolvencies. 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. This frequently results in inadequate and inharmonious legal approaches. based on Indian situation. nor do they recognize the jurisdiction of foreign courts in respect of branches of foreign banks operating in India. 2002 and the Sick Industrial Companies (Special Provisions) Repeal Act. The Companies (Amendment) Act. 2002 to mend these defects in the existing laws and the end result being tribunalisation of justice. if a foreign company is taken into liquidation outside India. 1956 for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. 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. this aspect and solution to this problem has to be found out in the proposed legislation. Lastly.
. it appointed Justice V Balakrishana Eradi to suggest remedial measures in this regard. 4.15 It suggested certain problems of SICA. be amended to include the provisions for setting up of a National Tribunal which will have. but also as a threat to force the pace of decision making and consensus among various parties. 3. not its future earning potential. The BIFR.getting SICA outside FERA will encourage foreign investors to takeover potentially viable sick companies and. 1956. They can be outlined as follows: 1. 5. In the year 1999. Making the reference voluntary would reduce the number of cases that get registered with BIFR and.A sick company’s own reference to BIFR should be voluntary. Balakrishna Eradi.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. This Committee believes that the barriers to industrial and corporate restructuring serve no economic goal. 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. not being a winding up authority under SICA and only being a recommendatory body. not mandatory. 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. when directs for the winding up of the non-viable sick companies. Omkar Goswami Committee Report It seems the problem of industrial sickness is a far fetching one. the Government of India set up a High Level Committee headed by Justice V. hence. and the workers. JUSTICE ERADI COMMITTEE REPORT ON INSOLVENCY It was long felt that the enacted of the SICA was a failure. the BIFR process is very time consuming because of the fact that it needs consensus at all stages. lessen the administrative burden.the definition as per SICA are backward looking and based on the historical book value of a firm’s assets.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. The jurisdiction and power presently exercised by Company Law Board under the Companies Act. not its current realizable market value. 1956.B. The Committee has recommended that the provisions of Part VIA of the Companies Act. Barriers to restructuring help inefficient capitalists maintain their stranglehold over the assets of a company. the government. if nothing else. financial institutions.1. So what the Government did was. and encourage them to renege on their obligations to banks. 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.
In view of above recommendations Article 323B16 of the Constitution should be amended to set up National Tribunal. this dream got materialized in 2003 but still the NCLT working is not been notified.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. 1985. The Committee completed its work and submitted its report to the Central Government in the year 2000. commercial and technical characteristics of insolvency law. The jurisdiction and power relating to winding up of companies presently vested in the High Courts. The Bills. 2003 This Act repeals the working of Sick Industries Company (special provision) Act. Sick Industrial Companies (Special Provisions) Repeal Act. 1956. Moreover. By this Act the BIFR and AAIFR stands dissolved. The power to consider rehabilitation and revival of companies – a mandate presently entrusted to BIFR/AAFIR under SICA .2. the Companies (Amendment) Bill. Further. It also recommended the establishment of the National Company Law Tribunal on a speedy basis. 1985 and will restructure the Companies Act. if passed in their present form will bring the curtains down on the Sick Industrial Companies (Special Provisions) Act. Power was also given to the creditors to oppose the scheme of rehabilitation.19 Further the scope of the filing for the . 2001 were introduced in the Parliament of India. It also allowed the debtors to approach the Tribunal with the rehabilitation scheme. 2009 Certain changes were proposed to be made for the rehabilitation and revival of the sick units as from the proposed Companies Amendment Act. 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. 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. 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill. labour and shareholders. 3.The criteria of sickness was changed to include ‘inability to pay debts’ due to secured creditors representing 50% or more of the outstanding debt. In August 2001. creditors. it enunciated that the rehabilitation by cess to be replaced by the ‘Insolvency Fund” with optional contribution by companies. SICA should be repealed and the Companies Act. 1956 be amended accordingly. Indian Government was unsatisfied with the working of BIFR after so many committee recommended for abolishing SICA. 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. Companies Bill.
The work of revival and rehabilitation was entrusted to National Company Law Tribunal (NCLT) constituted under the Companies Act. L A W . Many provisions of SICA have been incorporated in Chapter VI A (Section 424A-424L) in a considerably diluted form. The aim not only being to combat industrial sickness but also to reduce the same by ensuring that companies do not view declaration of sickness as an escapist route from legal provisions after the project failure and gaining access of various benefits\ concessions from the financial institutions. was repealed and replaced by Sick Industrial Companies (Special Provisions) Repeal Act.determination of sickness which was restricted to the Board now included the creditor or the company. 2003. The basic premise of the provisions incorporated in Chapter VI A of the Companies Act is to plug the loopholes in the erstwhile SICA. 2003 SICA 1985 after being amended twice. 1956. 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. first in 1991and later in 1998.20 Moreover. SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) REPEAL ACT. 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. Any appeal against the order of the NCLT will now be made to the NCLAT instead of Appellate Authority for industrial and financial reconstruction.
2(29A) Earlier companies were not deducting provisions & expenses for computing net worth. and hence a sick industrial company can be detected much sooner. gets considerably reduced. avoid possible challenge to constitutowards securing the princitional validity of SICA. has clarified that accumulated losses shall be arrived at only after calculating un-provided depreciation. accounts of the company are adopted at the annual general meeting of the company Net worth means sum total Net worth means sum total of paid up capital & free of paid up capital & free reserves reserves less of provisions and expenses as may be prescribed .9.1981. no provisions were made by the company even when such provisions were required to be made under the Accounting Standards. the net worth. Similarly. therefore. tion from challenges under article 14 & 19 in view of article 31C.4/28/8/-CL-X dated 2. Date of finalisation of duly Omitted Making of reference has been practiaudited accounts means the cally de-linked from the finalisation of date on which the audited accounts. Now hopefully this loophole shall be plugged. the ples specified in clauses (b) & non-inclusion of similar declaration (c) of article 39 of the under the Act does not provide insulaConstitution.The earlier provision was intended to to the policy of the State tion under the Act. Note: Department of Company Affairs. 3(1) (da) 3(1) (ga) 994 . vide letter no. If the expenses are shown in the balance sheet as assets and provision (required but not made in accounts) are deducted.Major Changes Section no. Provision in SICA 2 Provisions incorporated Remarks in the Companies Act The Act was for giving effect No corresponding protec. However.
State level institution. Reference has to be made even when banks\ Financial institutions take over the assets under Securitisation & Reconstruction of Financial Assets. 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. it is no longer the duty of the banks\financial institutions to nurse a sick baby.Sick industrial company means an pany means an industrial company. Accumulated losses should exceed 50% of the average net worth during the last 4 years. The auditor has on the panel approved by NCLT in this regards. 2002. Inability to repay its creditors for 3 consecutive quarters on demand made by them in writing indicates weak liquidity status of the company. iv. No moratorium period. iii. This is a new provision. Now the company is required to submit a scheme of revival & rehabilitation at the time of making reference to the NCLT. which has at the industrial company end of any financial year: 2(46AA) (being registered for ● accumulated losses exceeding not less than 5 50% of average net worth duryears) which has at ing 4 years. Auditor’s certificate adds to the authenticity of such reference. . Reference to the Sec 424A is parallel to Sec 15 of Board SICA. scheduled bank or any other person as may be specified by general or special order as its agency by the Board. 4 to 14 15 Constitution and Omitted procedures of the BIFR and Appellate Authority. scheduled bank or any other any other person as may be specified by general or special order as its agency by the Board The purview of the definition has been enlarged to include experts from the field of banking and finance as well. Any one of the two conditions is sufficient to make the company sick. it is also required to furnish a certificate from auditor on the panel approved by NCLT giving reasons for such reference. State level institution. ing its entire net worth. Thus. The holiday period of 5 years has been deleted. ii. Further. The responsibility for preparation of revival & rehabilitation scheme has now been casted on the company making the reference to NCLT. 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. Enforcement & Security Act. Operating agency is group of experts consisting of persons having special knowledge in banking & industry in which sick industrial company is engaged and includes public financial institution. hence potentially sick.● has failed to repay debts to its creditor(s) in 3 consecutive mulated losses quarters on demand made in equal to or exceedwriting for such repayment. or the end of the any financial year accu. BIFR and Appellate Authority replaced by NCLT and NCLAT respectively. Thus adoption or even preparation of accounts is not the basic criteria. The impact of this considerably tight modification can be summarized as under: i.3(1) (i) Operating agency means public financial institution.
but shall not retire by rotation or be liable for prosecution etc. whether the company is a sick industrial company u\s 2(46AA) even before considering the viability of the scheme of revival & rehabilitation. He shall have the same powers as that of a director of a company. 996 16 . Principal jurisdictional provision in favour of NCLT. For expedi. an industrial company can now make reference to NCLT u\s 424A. now special director will submit report to Tribunal within 60 days. only in cases where viability of the scheme and to assess of the Board. Now. Board may appoint one or more person to be the special director\s to the company to safeguarding the financial and other interests of the company or in public interest. tious disposal of the case the matter could Thus.revive on its own. hence can make a reference without the prior consent of the Central or State government. extendable upto 90 days by the Tribunal for the reasons to be recorded in writing. the preparation of scheme u\s 424D. “Deemed government company” u\s 619B of the Companies Act. a government company can make a reference under the Act to NCLT only with prior approval of Central or State government. as preliminary issue. U\s 424A(1). NCLT can check the genBoard. can not be regarded as a government company. But now Government companies have been excluded from the provision of Chapter VI A of the Companies Act. Reference may be rejected at this stage itself.whether the company has the ability to agency was required ward the matter for inquiry to oper. Note 2: No change in the provisions relating to the appointment of special directors. Further. The NCLT may consider necessary.trial company u\s 2(46AA). Note 1: As regards making of reference to Board. 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. However. first the operating agency shall submit its report to NCLT within 21 days (extendable upto 40 days by the Tribunal). Else it would direct to furnish a report to ating agency.the company. Inquiry into the work.424A(5) provides that NCLT has to examine.Sec 424A(5) empowers NCLT to Thus even before examining the viabiling of the sick indus. for. empowering it to examine the basis of such reference even before analyzing the viability of the revival scheme.examine as preliminary issue ity of the scheme of revival proposed by trial company by the whether the company is a sick indus. the Board on completion of its inquiry into the matter. inquiry by operating agency will be referred to operatonly be to enable NCLT to decide the ing agency by an order Thereafter. The Tribunal shall conclude its inquiry within 60 days from the commencement of the inquiry. uineness of the reference made to it. Note 1: Earlier BIFR was required to pass the final orders within 60 days from the commencement of inquiry.
Rehabilitation by giv. the guidelines of RBI.Similar provisions incorporated in No change pany\bank\FI\Go Section 424F vernment can apply to Board to continue the operations of the said company . if necessary -424D(5) should provide for. not decided what should be the range of reasonable time. But seems to be a and all concerned -424D(13) duplication of Section 424D(10). if agreed to by 75 % of creditors 424D(11) New Provision. NCLT has. Earlier “shall” was used. Preparation and u\s 424D Operating agency to pre. Under SICA.424D(4) Earlier. which provides that the scheme shall be binding on the company and others. making Tribunal to be circulated. bilitation. Copy of the sanctioned scheme to New Provision be filed with the Registrar-424D(9) Scheme may also be prepared by the creditors of the sick company.Scheme to be prepared within 60 days sanction of scheme pare the scheme for revival & reha. 18 No change. Section 424E Sick Industrial com. but definitely in the present standards 7-10 years is too long to be considered reasonable.r. Alternatively.bilitation with specific regards to earlier provision of 90 days. there was no time limit. “shall” was used making it compulsory for BIFR to sanction the scheme. till now. Draft scheme may be sanctioned within 60 days from the date of advertisement\ circulation.424D(3) publication of advertisement compulsory. Provisions i. u\s 424C NCLT has to consider and decide whether it is practicable for the company to revive on its own within a reasonable time. NCLT may review and modify the No change in what the revival scheme scheme.17 A W Powers of Board to make suitable orders on the completion of inquiry.o. (consequential to the change in definition of sick industrial company) The draft scheme as vetted by Brief particulars of draft scheme may be published. it may direct any operating agency to prepare such scheme in accordance with the guidelines prescribed by it in this behalf. extendable upto 90 days. except that the words “make repayment of loan” have been inserted corresponding to the change made in the definition of “sick industrial company”. except that now it may provide for measures for repayment of debts. 7-10 years was considered to be a reasonable time for the company to make its net worth exceed the accumulated losses.Similar provisions incorporated in No change ing financial assistance.(extendable upto 90 days) as against for revival & reha. Further. preparation and sanction of scheme will also apply to the scheme prepared by the creditors-424D(12) 19 19A Scheme shall be binding on creditors New Provision.
Suspensions of legal proceedings. tribute the proceeds in accordance with section 529A. recovery proceedings and winding up petitions made during the inquiry and implementation of the scheme.SICA.. . 25 Now appeal against the order of NCLT has to be made to NCLAT. Section 20(2) of SICA becomes redundant as Tribunal can itself order winding up instead of merely forwarding its opinion to the High Court. and to collect from and furnish certain information to various authorities. However. Further.20 Board was required to record and forward its opinion for winding up of the sick industrial company to the High Court. Tribunal can also sell off This power was with BIFR under assets of the sick company and dis. This power was earlier vested with the Tribunal can appoint any officer of the High Court. if it is of the opinion that the sick company is not likely to revive. list of creditors. Recovery proceedings and suits against the sick industrial company can continue even if enquiry is pending with NCLT or revival & rehabilitation scheme is pending for preparation or implementation. Appeal to AAIFR against the order of BIFR Similar provisions incorporated u\s No change 424H No parallel provision in the new law. operating agency to act as the liquidator. contracts etc. No protection to sick industrial company against suits or legal proceedings for recovery of money or execution against property. 21 Operating agency to prepare inventory. furnish information and return to Central\ State Govt. thus providing complete immunity from legal suits. Note: Significant provision incorporated u\s 424G(4). Proceedings in case of potentially sick industrial companies. directing that the winding up should be completed within one year from the order of winding up. valuation etc. winding up proceedings may be kept as these are with the same Tribunal. 22 23 and 23A No parallel provisions in the Act. Tribunal can itself order the winding up of the company. 28 BIFR required to No corresponding provision.
making ● “tamper records of reference or false statements or giving false eviappeal”. except.recognised as a punishdence or attempt to tamper records able offence. 34 35 . lation of orders of Tribunal. Various legal provisions under different enactments have to be complied with to make the sanctioned scheme effective. 33 Penalty for certain Penalty of imprisonment upto 3 Following changes incorporated: offences years and fine upto Rs.10 lacs for vio.● Limit of fine fixed upto Rs.10 lacs.No parallel provision under the Act panies Central Govt. Overriding over all other laws impact done away with. No parallel provision under the Act empowered to remove difficulties for the first 3 years. of reference or appeal. Offences by com.32(1) Overriding impact No parallel provision. FEMA and Urban Land (Ceiling & Regulation) Act and also the Memorandum and articles of association of the company.
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