The Hindu Business Line : Rehab packages — No sops for companies with positive net worth: BIFR

COMPANIES under rehabilitation packages cannot avail themselves of any special concessions or relief from public institutions and banks once their net worth turns positive.

The Board for Industrial and Financial Reconstruction (BIFR) in a clarification to Recron Synthetics Ltd (RSL), formerly known as Raymond Synthetics Ltd, has stated that "the period of rehabilitation ends when a sick company's net worth becomes positive."

"Accumulated losses may take up to 10 years or even more to be fully wiped out. The once `sick' companies cannot be allowed to enjoy special concessions from public institutions or Government for prolonged periods even after their net worth has become positive," the order said.

A rehabilitation scheme envisaged the UP Power Corporation Ltd and the UP State Electricity Board exempting RSL from payment of minimum demand charges during the period of rehabilitation. However, RSL had first to seek permission from the BIFR before it could avail itself of the reliefs.

IDBI, the monitoring agency, in its letter dated July 5, 2004 had stated that the period of rehabilitation should be reckoned from September 1999 to December 31, 2013 and the cut-off date, September 30, 1999. The bench noted that IDBI has possibly indicated the rehabilitation period as 2013 since the projected profitability had been prepared and enclosed in the sanctioned scheme up to financial year 2013.

A revival scheme for the company sanctioned in 2003 stated that "based on the profitability position and relief and concessions, the company's net worth would become positive in the very first year of rehabilitation. However, accumulated losses would not be wiped out till the end of the rehabilitation period."

More Stories on : Regulatory Bodies & Rulings | Sick Units

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