Sick Industrial Companies (Special Provisions) Act, 1985 - SICA BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR) AND ITS FUNCTIONING

1. SAIVA BHANU KSATRIYA COLLEGE, ARUPPUKOTTAI.
Department of Commerce,
Dr.K. SUDHAGARAN M.Com., M.Phil.,Ph.D., AssociateProfessor,
STUDY NOTES
Sick Industrial Companies (Special Provisions)Act, 1985 - SICA
BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR)
AND ITS FUNCTIONING
Introduction: 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 of1986) commonly known as the
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.
SICA applies to companies both in public and private sectors owning industrial undertakings:-

2. (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 the12 months preceding the end of the
financial year with reference to which sickness is claimed. (iv) it should have a factory license.
OBJECTIVES OF SICA
The objectives of this Act (SICA) emphasises the following points:
The SICA had been enacted in the public interest to deal with the problems of industrial sickness
with regard to the crucial sectors where public money is locked up.It contains special provisions
for timely detection of sick and potentially sick industrial companies, speedy determination and
enforcement of preventive, remedial and other measures with respect to such companies. Those
measures are to be taken by a body of experts.
The measures are mainly
(a) Legal
(b) Financial restructuring
(c) Managerial.
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
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.

3. 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.
IMPORTANT PROVISIONS OF SICA
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.
Provision for seeking information and giving information – Central Govt., RBI, FIs State
institutions and sick companies and in case of amalgamation, other companies.
Power to seek assistance of MMs & DMs u/s 29.
SICA has overriding provisions u/s 32 over other laws except the provisions of FERA, 1973 and
the ULCRA,1976.
Penalty u/s 33 for violation of the Act.