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New Delhi , Dec. 11

THE process of closing down the Board for Industrial and Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) took a major step forward on Thursday, with the Lok Sabha giving its nod for the Sick Industrial Companies (Special Provisions) (SICA) Repeal Bill. The Bill envisaged dissolution of BIFR and AAIFR.

SICA was enacted in 1985 to tackle the problem of industrial sickness. However, in view of the problems noticed in the BIFR mechanism, the Government had been considering various alternatives, including repealing SICA and enacting a separate legislation, to address the problems of industrial sickness more effectively.

The Bill outlined some of the deficiencies noticed in the operation of SICA as excessive protection to sick industries under Section 22 of SICA, providing for automatic stay of all proceedings; necessity of consensus amongst secured creditors before finalising the scheme; lack of monitoring of sanctioned revival scheme; and delays in winding up. In order to overcome the deficiencies in the SICA, the Government came out with amendments to the Companies Act, 1956, establishing the National Company Law Tribunal (NCLT).

The task of rehabilitating sick industrial units would now be vested with the NCLT. The NCLT with several benches, and appeal on its judgment lying before the National Company Law Appellate Tribunal, would take over the jurisdiction of High Courts in the matters of liquidation of sick companies, abrogation of the Company Law Board, and rehabilitation of companies. Besides, it also provides that both rehabilitation and winding-up of sick companies will take place within a timeframe of a maximum of two years as against the existing system taking about 18 to 20 years.

Cases pending with BIFR were those in which 100 per cent net worth of the companies had eroded. While under NCLT, companies with erosion of 50 per cent of net worth would be automatically referred to the Tribunal. Further, under NCLT, a special provision has been included to protect workers' dues and interests, which was lacking under SICA, the Finance Minister, Mr Jaswant Singh, said.

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