Brief Introduction of BIFR and its functioning

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 of 1986) 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:-

(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 the 12 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) as incorporated in its preamble, 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.
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.