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The Tax Publishers SICA Legality of Reference filed Before BIFR by a Sick Company After its Secured Creditor Assigns its Debt to ARC Government of India enacted Sick Industrial Companies (Special Provisions) Act, 1985, to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures 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 said Act came into with effect from 8-1-1986. S.S. Agrawal 1. Introduction When a company starts incurring losses because of its inability to sell its products at competitive rates due to recession and/or mismanagement and cannot correct that situation, it starts its journey of closing down of company, which ends in complete closure of company, thereby causing heavy cost to society in the form of loss of jobs of all employees working therein, loss to creditors because they do not get repayment of their loan in full or part and loss of revenue to government. This issue was examined by various committees and it was felt that if sickness of a company can be detected in early stage, efforts can be made to prevent such sickness and thereafter it can be brought back as profit-making company. To that end in view, the government enacted a special enactment i.e. Sick Industrial Companies (Special Provisions) Act, 1985 (SICA Act), to examine, through expert body, if that company can be saved from becoming sick and what is required to be done for the same. 2. Relevant Provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (a) Objective of this Act is to make, in the public interest, special provisions with a view to secure timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. (b) The act provides for formulating an expert Board, which is named as Board for Industrial and Financial Reconstruction (BIFR) and an appellate authority to hear appeal against orders of Board. When an industrial company has become a sick company, the Board of Directors of the Company, shall, within sixty days from the date of finalization of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

SICA

Legality of Reference filed Before BIFR by a Sick Company After its Secured Creditor Assigns its Debt to ARC

Government of India enacted Sick Industrial Companies (Special Provisions) Act, 1985, to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures 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 said Act came into with effect from 8-1-1986.

S.S. Agrawal

1. Introduction

When a company starts incurring losses because of its inability to sell its products at competitive rates due to recession and/or mismanagement and cannot correct that situation, it starts its journey of closing down of company, which ends in complete closure of company, thereby causing heavy cost to society in the form of loss of jobs of all employees working therein, loss to creditors because they do not get repayment of their loan in full or part and loss of revenue to government. This issue was examined by various committees and it was felt that if sickness of a company can be detected in early stage, efforts can be made to prevent such sickness and thereafter it can be brought back as profit-making company. To that end in view, the government enacted a special enactment i.e. Sick Industrial Companies (Special Provisions) Act, 1985 (SICA Act), to examine, through expert body, if that company can be saved from becoming sick and what is required to be done for the same.

2. Relevant Provisions of Sick Industrial Companies (Special Provisions) Act, 1985

(a) Objective of this Act is to make, in the public interest, special provisions with a view to secure timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.

(b) The act provides for formulating an expert Board, which is named as Board for Industrial and Financial Reconstruction (BIFR) and an appellate authority to hear appeal against orders of Board. When an industrial company has become a sick company, the Board of Directors of the Company, shall, within sixty days from the date of finalization of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company.