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The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
The Provisions Of SICA &BIFR
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The Provisions Of SICA &BIFR

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OVERVIEW OF SICA

OVERVIEW OF SICA

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  • 1. The Provisions of SICA By B.K.VASHISHTHA
  • 2. INTRODUCTION <ul><li>sick Industrial Companies (Special Provisions) Act, 1985, as indicated by its title and preamble, was a special legislation enacted in public interest with the twin objects of </li></ul><ul><li>➢ securing the timely detection of sick and potentially sick companies </li></ul><ul><li>➢ speedy determination and enforcement of remedial measures i.r.o. such companies. </li></ul><ul><li>SICA was basically and predominantly a remedial and ameliorative, in so far as it empowered a quasi judicial body-Board for Industrial and Financial Reconstruction (BIFR), to take appropriate measures for revival and rehabilitation of potentially sick industrialundertakings and for liquidation of non-viable companies </li></ul>
  • 3. SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) REPEAL ACT, 2003 <ul><li>SICA 1985 after being amended twice, first in 1991and later in 1998, was repealed and replaced by Sick Industrial Companies (Special Provisions) Repeal Act, 2003.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 to the 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 loopholes in the erstwhile SICA. 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. </li></ul>
  • 4. E X E C U T I V E S U M M A R Y <ul><li>SICA 1985 was a special legislation enacted in public interest with the twin objects of securing the timely detection of sick and potentially sick companies and speedy determination and enforcement of remedial measures. But some companies perceived SICA as an official exit route, thereby resulting into losses to creditors and increased NPA’s in the banking sector SICA, 1985, was repealed by sick industrial companies (special provisions) Repeal Act, 2003. Many processions of SICA have been incorporated in chapter VIA (Section 424A-424L) is a considerably diluted form. The article below is a section wise Comparison between old provisions of SICA, 1985 and new provisions in Companies Act, 1956 with explanatory remarks on it, which indicates that the new Act has made an attempt to remove the bottlenecks and curb the practice of turning an operationally fit company into a sick unit. </li></ul>
  • 5. FAILURE OF SICA, 1985 <ul><li>SICA, a well conceived concept, proved to be a major failure. The regulatory mechanism of SICA was effective only to a limited extent. Some companies perceived SICA as an official exit route. It not only saved them from the harsh legal proceedings but also gave access to various relief and concessions from the financial institutions. Section 22 of SICA created havoc in the banking sector and the quantum of non-performing assets increased at an alarming rate. </li></ul>
  • 6. Brief Introduction of BIFR and its functioning <ul><li>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. </li></ul>
  • 7. <ul><li>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. </li></ul><ul><li>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. </li></ul>
  • 8. <ul><li>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. </li></ul>
  • 9. <ul><li>SICA applies to companies both in public and private sectors owning industrial undertakings:- </li></ul><ul><li>(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; </li></ul><ul><li>(b) not being &amp;quot;small scale industrial undertakings or ancillary industrial undertakings&amp;quot; as defined in Section 3(j) of the IDR Act. </li></ul><ul><li>(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. </li></ul><ul><li>  </li></ul>
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