SICA

By Snigdha Singh
DEFINITION
 Section 3(1)(o) : Defines sick
company as an industrial company
being registered for not less than 5
years, which has at the end of any
financial year accumulated losses
equal to or exceeding its entire net-
worth.
Scope

Public Private
companies companies
Determination of sick units
 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
 the company should have completed five years
after incorporation under the Companies Act, 1956
 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.
 it should have a factory license.
Causes

Internal factors. External factors

Internal Factors
 Mismanagement.
 Wrong location of a unit.
 Overestimation of demand.
 Poor inventory management
 Poor implementation of projects
 Poor labour-management relationship
 Unwarranted expansion and diversion
of resources
External Factors
 Energy crisis .
 Credit squeeze
 changes in technology
 Infrastructural problems
 Situations like market recession
 Failure to achieve optimum capacity
 International pressures or
circumstances
Objectives of SICA

expeditiou
Speedy Timely s
prevention detection enforceme
. of sick. nt of the
measures
Special Provision
 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.
Measures
 The financial reconstruction
 The proper management by change in or take over of
the management of the company;
 The amalgamation of the sick industrial company with
any other company
 The sale or lease of a part or whole of the sick
industrial company
 incidental, consequential or supplemental measures
as may be necessary or expedient
APPOINTMENTS
 With effect from such date as the Central Government may, by
notification, appoint, there shall be established a Board to be known as
the "Board for Industrial and   Financial Reconstruction" to exercise the
jurisdiction and powers and discharge the functions and duties conferred
or imposed on the Board by or under this Act.
 The Board shall consist of a Chairman and not less than two and not
more than fourteen other Members, to be appointed by the Central
Government.
 The Chairman and other Members of the Board shall be persons who
are or have been or are qualified to be High Court Judges, or persons of
ability, integrity and standing who have special knowledge of, and
professional experience of not less than fifteen years in science,
technology, economics, banking industry, law, labour matters, industrial
finance, industrial management, industrial reconstruction, administration,
investment, accountancy, marketing or any other matter, the special
knowledge of, or professional experience in which, would in the opinion
of the Central Government be useful to the Board.
Board for Industrial and Financial Reconstruction

GOVERNMENT OF INDIA, MINISTRY OF FINANCE,

DEPARTMENT OF ECONOMIC AFFAIRS  
JAWAHAR VYAPAR BHAWAN,
1, TOLSTOY MARG,
NEW DELHI, INDIA
INTRODUCTION
 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.
Continues
 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.
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.
 Continue…
 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.