Financial Daily from THE HINDU group of publications
Saturday, Oct 09, 2004
Financial Daily from THE HINDU group of publications Saturday, Oct 09, 2004 |
||
|
|
||
|
Corporate
-
Sick Units A case for strengthening SICA Richa Mishra
New Delhi , Oct. 8 THE debate on the issue whether the Sick Industrial Companies (Special Provisions) Act, governing the Board for Industrial and Financial Reconstruction (BIFR), should be revived or done away with seems to be far from over. Even as the Government is taking initiatives to clear all legal hurdles coming on the way for setting up of the National Company Law Tribunal (NCLT), a body to replace BIFR, a section of corporate India held that "it would be advisable to revive and strengthen SICA by inducting in it business-oriented people and legal experts." Pointing towards the definition of industrial undertaking and sick industrial company as now defined in the Concept Paper circulated by the Ministry of Company Affairs to rationalise the existing company law, corporate experts, said that "The way it has been defined, it will encompass all companies other than small-scale industries within the purview of Sick Industrial Companies Act." As proposed in the Concept Paper a `sick industrial company' means one, which has accumulated losses in any financial year equal to 50 per cent or more of its average net worth during four years immediately after preceding such financial year; and has failed to repay its debts within three consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company. "It may thus be seen that what is currently prescribed under SICA for a potentially sick company is now being converted into sickness of the company," the Federation of Indian Chambers of Commerce and Industry (FICCI) said. In other words, the erosion of the net worth from 100 per cent is brought down to 50 per cent. Corporates argue that once a company is categorised as sick, its day-to-day working will come to a sudden halt because it will be denied suppliers credit and the banks freeze its accounts. Besides, it will trigger off the immediate repayment of all borrowings as provided in the various loan agreements with banks, financial institutions and others, thereby inflicting further damage on the company. "The erosion limit of net worth should continue to be 100 per cent and not 50 per cent as proposed," the corporates said. As for the non-payment of debts on demand, a suitable threshold limit should be prescribed. "A company may fall within the purview of sickness only where it fails to repay the debt beyond that amount. In fact, the period of non-payment and the quantum of threshold should be prescribed from time-to-time through rules," they advocated. The industry also wanted the definition of industrial undertaking to be de-linked from the Industrial Development Regulation Act and its scope suitably widened. Definition of industrial undertaking should include service sector within its purview as it is well recognised that an industrial undertaking is not merely a manufacturing company, corporate experts said. It is also for consideration whether the provisions pertaining to revival and rehabilitation of sick companies should at all form part of the Companies Act, they argued. Brushing aside the apprehensions expressed by industry, the Minster of State (Independent Charge) for Company Affairs, Mr Prem Chand Gupta, said, "The Government was going ahead with NCLT. The industry has nothing to worry about."
More Stories on : Sick Units | Regulatory Bodies & Rulings
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|