SICK
INDUSTRIAL COMPANIES (SPECIAL PROVISIONS)
ACT, 1985
[1 of 1986]
An Act 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.
Be it enacted by Parliament in the Thirty-sixth
Year of the
1. Short
title, extent, commencement and application.
(1) This
Act may be called the Sick Industrial Companies (Special Provisions) Act, 1985.
(2) It extends to the whole of
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision of this Act to the commencement of this Act shall be construed as a reference to the commencement of that provision.
(4) It shall apply, in the first instance, to all the scheduled industries other than the scheduled industry relating to ships and other vessels drawn by power.
(5) The Central Government may, in consultation with the Reserve
Bank of
2. Declaration.
It
is hereby declared that this Act is for giving effect to the policy of the
State towards securing the principles specified in clauses (b) and (c) of
article 39 of the Constitution.
(1) In this Act, unless the context otherwise requires,—
(a) “Appellate Authority” means the Appellate Authority for
Industrial and Financial Reconstruction constituted under section 5;
(b) “Board” means the Board for Industrial and Financial
Reconstruction established under section 4;
(c) “Chairman” means the Chairman of the Board or, as the case
may be, the Appellate Authority;
(d) “company” means a company as defined
in section 3 of the Companies Act, 1956 (1 of 1996) [***];
[(da) “date of finalisation of the duly audited accounts” means the date on which the audited accounts of the company are adopted at the annual general meeting of the company;]
(e) “industrial company” means a company
which owns one or more industrial undertakings;
(f) “industrial undertakings” means any undertaking pertaining
to a scheduled industry carried on in one or more factories by any company but
does not include—
(i) an ancillary
industrial undertaking as defined in clause (aa) of
section 3 of the Industries (Development and Regulation) Act, 1951 (65 of
1951); and
(ii) a small scale industrial undertaking
as defined in clause (j) of the aforesaid section 3;
(g) “Member” means a Member of the Board or, as the case may be,
the Appellate Authority and includes the Chairman thereof;
[(ga“net worth” means the sum total
of the paid-up capital and free reserves.
Explanation.—For
the purposes of this clause, “free reserves” means all reserves credited out of
the profits and share premium account but does not include reserves credited
out of re-evaluation of assets, write back of depreciation provisions and
amalgamation;]
(h) “notification” means a notification published in the official Gazette;
[(i) “operating agency” means any public financial institution, State level institution, scheduled bank or any other person as may be specified by general or special order as its agency by the Board;]
(j) “prescribed” means prescribed by rules made under this Act;
(k) [***]
(l) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);
(m) “scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(n) “scheduled industry” means any of the industries specified for the time being in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951);
[(o) “sick industrial company” means an industrial company (being a
company registered for not less than five years) which has at the end of any
financial year accumulated losses equal to or exceeding its entire net worth.
Explanation.—For
the removal of doubts, it is hereby declared that an industrial company
existing immediately before the commencement of the Sick Industrial Companies
(Special Provisions) Amendment Act, 1993, registered for not less than five
years and having at the end of any financial year accumulated losses equal to
or exceeding its entire net worth, shall be deemed to be a sick industrial
company;]
(p) “State level institution” means any of the following
institutions, namely:—
(i) State Financial Corporations
established under section 3 or section 3A and institutions notified under
section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(ii) State Industrial Development Corporations registered under
the Companies Act, 1956 (1 of 1956);
(iii) such other institutions, being
companies and not being public financial institutions, engaged in the
development or financing of industrial undertakings, as the Central Government
may, by notification, specify:
Provided
that no institution shall be so specified unless not less than fifty-one per
cent of the paid-up share capital thereof is held by any State Government or
Governments or by any institution or institutions mentioned in sub-clauses (i) and (ii) or partly by one or more public financial
institutions or institutions mentioned in sub-clauses (i)
and (ii) and partly by one or more State Governments.
(2)(a) Words and expressions used and not defined in this Act shall have the meanings, if any, respectively assigned to them in the Companies Act, 1956 (1 of 1956).
(b) Words
and expressions used but not defined either in this Act or in the Companies
Act, 1956 (1 of 1956); shall have the meanings, if any, respectively assigned
to them in the Industries (Development and Regulation) Act, 1951 (65 of 1951).
(3) Any reference in this Act to any other enactment or any
provision thereof, shall, in relation to an area in which such enactment of
such provision is not in force, be construed as a reference to the
corresponding law or the relevant provision of the corresponding law, if any,
in force in that area.
Board
and appellate authority for industrial
and financial reconstruction
(1) With effect from such date as the Central Government may, by notifica-tion, 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.
(2) 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.
(3) 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.
5. Constitution
of Appellate Authority.
(1) The Central Government may, by notification, constitute, with
effect from such date as may be specified therein, an appellate authority to be
called the “Appellate Authority for Industrial and Financial Reconstruction”
consisting of a Chairman and not more than three other Members, to be appointed
by that Government, for hearing appeals against the orders of the Board under
this Act.
(2) The Chairman shall be a person who is or has been a Judge of the Supreme Court or who is or has been a Judge of a High Court for not less than five years.
(3) A member of the Appellate Authority shall be a person who is or has been a Judge of a High Court or who is or has been an officer not below the rank of a secretary to the Government of India or who is or has been a member of the Board for not less than three years.
6. Term
of office, conditions of service, etc., of Chairman and other Members.
(1) Before appointing any person as the Chairman or other Member,
the Central Government shall satisfy itself that the person does not and will
not, have any such financial or other interest as is likely to affect
prejudicially his functions as such Member.
(2) The Chairman and every other Member shall hold office for such period, not exceeding five years, as may be specified by the Central Government in the order of his appointment, but shall be eligible for re-appointment:
Provided
that no person shall hold office as the Chairman or other Member after he has
attained the age of sixty-five years.
(3) Notwithstanding anything contained in sub-section (1), a
Member may—
(a) by writing under his hand and
addressed to the Central Government resign his office at any time;
(b) be removed from his office in
accordance with the provisions of section 7.
(4) A vacancy caused by the resignation or removal of the Chairman or any other Member under sub-section (3) or otherwise shall be filled by fresh appointment.
(5) In the event of the occurrence of a vacancy in the office of the Chairman by reason of his death, resignation or otherwise, such one of the Members as the Central Government may, by notification, authorise in this behalf shall act as the Chairman till the date on which a new Chairman, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
(6) When the Chairman is unable to discharge his functions owing to absence, illness or any other cause, such one of the Members as the Chairman may authorise in writing in this behalf, shall discharge the functions of the Chairman, till the date on which the Chairman resumes his duties.
(7) The salaries and allowances payable to and the other terms and conditions of service of the Chairman and other Members shall be such as may be prescribed:
Provided
that neither the salary and allowances nor the other terms and conditions of
service of the Chairman or any other Member shall be varied to his disadvantage
after his appointment.
(8) The Chairman and every other Member shall, before entering upon his office, make a declaration of fidelity and secrecy in the form set out in the Schedule.
(9) The Chairman or any other Member ceasing to hold office as such shall not hold any appointment or be connected with the management or administration in any company in relation to which any matter has been the subject-matter of consideration before the Board or, as the case may be, the Appellate Authority, for a period of five years from the date on which he ceases to hold such office.
7. Removal of Members from office in
certain circumstances.
(1) The
Central Government may remove from office any Member, who—
(a) has been adjudged as insolvent, or
(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude, or
(c) has become physically or mentally
incapable of acting as a Member, or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member, or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest.
(2) Notwithstanding anything contained in sub-section (1), no Member shall be removed from his office on the ground specified in clause (d) or clause (e) of that sub-section unless the Supreme Court on a reference being made to it in this behalf by the Central Government, has, on an inquiry held by it in accordance with such procedure as it may specify in this behalf, reported that the Member ought, on such grounds, to be removed.
8. Secretary,
officers and other employees of Board or Appellate Authority.
(1) The Central Government shall appoint a Secretary to the Board
and a Secretary (by whatever name called) to the Appellate Authority to exercise
and perform, under the control of the Chairman, such powers and duties as may
be prescribed or as may be specified by the Chairman.
[(2) The Central Government may provide the Board and the Appellate
Authority with such other officers and employees as may be necessary for the
efficient performance of the functions of the Board and the Appellate
Authority.]
(3) The salaries and allowances payable to and the conditions of
service of the Secretary and other officers and employees of the Board and the
Appellate Authority shall be such as may be prescribed :
Provided
that such Secretary, officer or other employee shall, before entering upon his
duties, make a declaration of fidelity and secrecy in the form set out in the
Schedule.
9. Salaries, etc., to be defrayed out of
the Consolidated Fund of
The
salaries and allowances payable to the Members and the administrative expenses,
including salaries, allowances and pension, payable to or in respect of the
officers and other employees of the Board and the Appellate Authority shall be
defrayed out of the Consolidated Fund of India.
10. Vacancies, etc., not to invalidate
proceedings of Board and Appellate Authority.
No
act or proceeding of the Board or, as the case may be, the Appellate Authority shall
be questioned on the ground merely of the existence of any vacancy or defect in
the constitution of the Board or the Appellate Authority or any defect in the
appointment of a person acting as a Member of the Board or the Appellate
Authority.
11. Members and staff of Board and
Appellate Authority to be public servants.
The
Chairman and other Members and the officers and other employees of the Board
and the Appellate Authority shall be deemed to be public servants within the
meaning of section 21 of the Indian Penal Code (45 of 1860).
12. Constitution
of Benches of Board or Appellate Authority.
(1) The jurisdiction, powers and authority of the Board or the Appellate Authority
may be exercised by Benches thereof.
(2) The benches shall be constituted by the Chairman and each
Bench shall consist of not less than two Members.
[(3) If the Members of a Bench differ in opinion on any point, the
point shall be decided according to the opinion of the majority, if there is a
majority, but if the Members are equally divided, they shall state the point or
points on which they differ, and make a reference to the Chairman of the Board
or, as the case may be, the Appellate Authority who shall either hear the point
or points himself or refer the case for hearing on such point or points by one
or more of the other Members and such point or points shall be decided
according to the opinion of the majority of the Members who have heard the case
including those who first heard it.]
13. Procedure of Board and Appellate Authority.
(1) Subject to the provisions of this Act, the Board or, as the
case may be, the
Appellate Authority, shall have powers to regulate—
(a) the procedure and conduct of the
business;
(b) the procedure of the Benches, including the places at which the sittings of the Benches shall be held;
(c) the delegation to one or more Members of such powers or functions as the Board or, as the case may be, the Appellate Authority may specify.
(2) In particular and without prejudice to the generality of the
foregoing provisions, the powers of the Board or, as the case may be, the
Appellate Authority, shall include the power to determine the extent to which
persons interested or claiming to be interested in the subject-matter of any
proceeding before it may be allowed to be present or to be heard, either by
themselves or by their representatives or to cross-examine witnesses or
otherwise to take part in the proceedings.
(3) The Board or the Appellate Authority shall, for the purposes
of any inquiry or for any other purpose under this Act, have the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908 (5 of
1908), while trying suits in respect of the following matters, namely:—
(a) the summoning and enforcing the
attendance of any witness and examining him on oath;
(b) the discovery and production of
document or other material object producible as evidence;
(c) the reception of evidence on
affidavit;
(d) the requisitioning of any public
record from any court or office;
(e) the issuing of any commission for
the examination of witnesses;
(f) any other matter which may be
prescribed.
14. Proceedings
before Board or Appellate Authority to be judicial proceedings.
The
Board or the Appellate Authority shall be deemed to be a civil court for the
purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure,
1973 (2 of 1974), and every proceeding before the Board or the Appellate
Authority shall be deemed to be a judicial proceeding within the meaning of
sections 193 and 228 and for the purposes of section 196 of the Indian Penal
Code (45 of 1860).
References,
inquiries and schemes
15. Reference to Board.
(1) Where
an industrial company has become a sick industrial company, the Board of
Directors of the company, shall, within sixty days from the date of finalisation 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 :
Provided that if the Board of Directors had sufficient reasons even before such finalisation to form the opinion that the company had become
a sick industrial company, the Board of Directors shall, within sixty days
after it has formed such opinion, make a reference to the Board for the
determination of the measures which shall be adopted with respect to the
company:
[Provided further that no reference shall be made to the Board
for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, where financial assets have been acquired
by any securitisation company or reconstruction
company under sub-section (1) of section 5 of that Act :
Provided also that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, where a reference is pending before
the Board for Industrial and Financial Reconstruction, such reference shall
abate if the secured creditors, representing not less than three-fourth in
value of the amount outstanding against financial assistance disbursed to the
borrower of such secured creditors, have taken any measures to recover their
secured debt under sub-section (4) of section 13 of that Act.]
(2) Without prejudice to the provisions of sub-section (1), the
Central Government or the Reserve Bank or a State Government or a public
financial institution or a State level institution or a scheduled bank may, if
it has sufficient reasons to believe that any industrial company has become,
for the purposes of this Act, a sick industrial company, make a reference in
respect of such company to the Board for determination of the measures which
may be adopted with respect to such company:
Provided that a reference shall not be made under this
sub-section in respect of any industrial company by—
(a) the Government of any State unless
all or any of the industrial undertakings belonging to such company are
situated in such State;
(b) a public financial institution or a State level institution
or a scheduled bank unless it has, by reason of any financial assistance or
obligation rendered by it, or undertaken by it, with respect to, such company,
an interest in such company.
16. Inquiry into working of sick industrial
companies.
(1) The Board may make such inquiry as it may deem fit for
determining whether any industrial company has become a sick industrial
company—
(a) upon receipt of a reference with
respect to such company under section 15; or
(b) upon information received with respect to such company or upon its own knowledge as to the financial condition of the company.
(2) The Board may, if it deems necessary or
expedient so to do for the expeditious disposal of an inquiry under sub-section
(1), require by order any operating agency to enquire into and make a report
with respect to such matters as may be specified in the order.
(3) The Board or, as the case may be, the operating agency shall
complete its inquiry as expeditiously as possible and endeavour
shall be made to complete the inquiry within sixty days from the commencement
of the inquiry.
[Explanation.—For the purposes of this
sub-section, an inquiry shall be deemed to have commenced upon the receipt by
the Board of any reference or information or upon its own knowledge reduced to
writing by the Board.]
(4) Where the Board deems it fit to make an inquiry or to cause an
inquiry to be made into any industrial company under sub-section (1) or, as the
case may be, under sub-section (2), it [may] appoint one or more persons to be
a special director or special directors of the company for safeguarding the
financial and other interests of the company [or in the public interest].
[(4A) The Board may issue such directions to special director appointed
under sub-section (4) as it may deem necessary or expedient for proper
discharge of his duties.]
(5) The appointment of a special director referred to in
sub-section (4) shall be valid and effective notwithstanding anything to the
contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law
for the time being in force or in the memorandum and articles of association or
any other instrument relating to the industrial company, and any provision
regarding share qualification, age limit, number of directorships, removal from
office of directors and such like conditions contained in any such law or
instrument aforesaid, shall not apply to any director appointed by the Board.
(6) Any special director appointed under sub-section (4) shall—
(a) hold office during the pleasure of
the Board and may be removed or substituted by any person by order in writing
by the Board;
(b) not incur any obligation or
liability by reason only of his being a director or for anything done or
omitted to be done in good faith in the discharge of his duties as a director
or anything in relation thereto;
(c) not be liable to retirement by
rotation and shall not be taken into account for computing the number of
directors liable to such retirement;
[(d) not be liable to be prosecuted under
any law for anything done or omitted to be done in good faith in the discharge
of his duties in relation to the sick industrial company.]
17. Powers of Board to make suitable order
on the completion of inquiry.
(1) If after making an inquiry under section 16, the Board is
satisfied that a company has become a sick industrial company, the Board shall,
after considering all the relevant facts and circumstances of the case, decide,
as soon as may be by order in writing, whether it is practicable for the
company to [make its net worth exceed the accumulated losses] within a
reasonable time.
(2) If the Board decides under sub-section (1) that it is
practicable for a sick industrial company to [make its net worth exceed the
accumulated losses] within a reasonable time, the Board, shall, by order in
writing and subject to such restrictions or conditions as may be specified in
the order, give such time to the company as it may deem fit to [make its net
worth exceed the accumulated losses]
(3) If the Board decides under sub-section (1) that it is not
practicable for a sick industrial company to [make its net worth exceed the
accumulated losses] within a reasonable time and that it is necessary or
expedient in the public interest to adopt all or any of the measures specified
in section 18 in relation to the said company it may, as soon as may be, by
order in writing, direct any operating agency specified in the order to
prepare, having regard to such guidelines as may be specified in the order, a
scheme providing for such measures in relation to such company.
(4) The Board may,—
(a) if any of the restrictions or conditions specified in an
order made under sub-section (2) are not complied with by the company
concerned, [or if the company fails to revive in pursuance of the said order,]
review such order on a reference in that behalf from any agency referred to in
sub-section (2) of section 15 or on its own motion and pass a fresh order in
respect of such company under sub-section (3);
(b) if the operating agency specified in
an order made under sub-section (3) makes a submission in that behalf, review
such order and modify the order in such manner as it may deem appropriate.
18. Preparation
and sanction of schemes.
(1) Where an order is made under sub-section (3) of section 17 in
relation to any sick industrial company, the operating agency specified in the
order shall prepare, as expeditiously as possible and ordinarily within a
period of ninety days from the date of such order, a scheme with respect to
such company providing for any one or more of the following measures, namely:—
[(a) the financial reconstruction of the sick industrial company;]
(b) the proper management of the sick
industrial company by change in, or take over of, the management of the sick
industrial company;
[(c) the amalgamation of—
(i) the sick industrial company with any other company, or
(ii) any other
company with the sick industrial company; (hereafter in this section, in the case
of sub-clause (i), the other
company, and in the
case of sub-clause (ii), the sick industrial company, referred to as
“transferee company”);]
(d) the sale or lease of a part or whole
of any industrial undertaking of the sick industrial company;
[(da) the rationalisation of managerial personnel, supervisory staff and workmen in accordance with law;]
(e) such other preventive, ameliorative
and remedial measures as may be appropriate;
(f) such incidental, consequential or
supplemental measures as may be necessary or expedient in connection with or
for the purposes of the measures specified in clauses (a) to (e).
(2) The scheme referred to in sub-section (1) may provide for any
one or more of the following, namely:—
(a) the constitution, name and registered office, the capital,
assets, powers, rights, interests, authorities and privileges, duties and
obligations of the sick industrial company or, as the case may be, of the
[transferee company];
(b) the transfer to the [transferee
company] of the business, properties, assets and liabilities of the sick
industrial company on such terms and conditions as may be specified in the
scheme;
(c) any change in the Board of Directors, or the appointment of a
new Board of Directors, of the sick industrial company and the authority by
whom, the manner in which and the other terms and conditions on which, such
change or appointment shall be made and in the case of appointment of a new
Board of Directors or of any director, the period for which such appointment
shall be made;
(d) the alteration of the memorandum or articles of association
of the sick industrial company or, as the case may be, of the [transferee
company] for the purpose of altering the capital structure thereof or for such
other purposes as may be necessary to give effect to the reconstruction or
amalgamation;
(e) the continuation by, or against, the sick industrial company
or, as the case may be, the [transferee company] of any action or other legal
proceeding pending against the sick industrial company immediately before the
date of the order made under sub-section (3) of section 17;
(f) the reduction of the interest or rights which the
shareholders have in the sick industrial company to such extent as the Board
considers necessary in the interests of the reconstruction, revival or
rehabilitation of the sick industrial company or for the maintenance of the business
of the sick industrial company;
(g) the allotment to the shareholders of the sick industrial
company of shares in the sick industrial
in cash and not allotment of shares, or where it is not possible to
allot shares to any shareholder, the payment of cash to those shareholders in
full satisfaction of their claims—
(i) in respect of
their interest in shares in the sick industrial company before its
reconstruction or amalgamation; or
(ii) where such interest has been reduced
under clause (f) in respect of their interest in shares as so reduced;
(h) any other terms and conditions for
the reconstruction or amalgamation of the sick industrial company;
(i) sale of the industrial undertaking of
the sick industrial company free from all encumbrances and all liabilities of
the company or other such encumbrances and liabilities as may be specified, to
any person, including a co-operative society formed by the employees of such
undertaking and fixing of reserve price for such sale;
(j) lease of the industrial undertaking of the sick industrial company to any person, including a co-operative society formed by the employees of such undertaking;
(k) method of sale of the assets of the
industrial undertaking of the sick industrial company such as by public auction
or by inviting tenders or in any other manner as may be specified and for the
manner of publicity therefor;
(l) transfer or issue of the shares in the sick industrial
company at the face value or at the intrinsic value which may be at discount
value or such other value as may be specified to any industrial company or any
person including the executives and employees of the sick industrial company;
(m) such incidental, consequential and
supplemental matters as may be necessary to secure that the reconstruction or
amalgamation or other measures mentioned in the scheme are fully and
effectively carried out.
(3) [(a) The scheme prepared by
the operating agency shall be examined by the Board and a copy of the scheme
with modification, if any, made by the Board shall be sent, in draft, to the
sick industrial company and the operating agency and in the case of
amalgamation, also to any other company concerned, and the Board shall publish
or cause to be published the draft scheme in brief in such daily newspapers as
the Board may consider necessary, for suggestions and objections, if any,
within such period as the Board may specify;]
(b) The Board may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the sick industrial company and the operating agency and also from the [transferee company] and any other [***] company concerned in the amal-gamation and from any shareholder or any creditors or employees of such [***] companies:
Provided that where the scheme relates to amalgamation
[***], the said scheme shall be laid before [the company other than the sick
industrial company] in the general meeting for the approval of the scheme by
its shareholders and no such scheme shall be proceeded with unless it has been
approved, with or without modification, by a special resolution passed by the
shareholders of the [transferee company].
(4) The scheme shall thereafter be sanctioned, as soon as may be,
by the board (hereinafter referred to as the “sanctioned scheme”) and shall
come into force on such date as the Board may specify in this behalf:
Provided
that different dates may be specified for different provisions of the scheme.
(5) The Board may on the recommendations of
the operating agency or otherwise, review any sanctioned scheme and make such
modifications as it may deem fit or may by order in writing direct any
operating agency specified in the order, having regard to such guidelines as
may be specified in the order, to prepare a fresh scheme providing for such
measures as the operating agency may consider necessary. (6) When a fresh
scheme is prepared under sub-section (5), the provisions of sub-sections (3)
and (4) shall apply in relation thereto as they apply to in relation to a
scheme prepared under sub-section (1).
[(6A) Where a sanctioned scheme provides for the transfer of any
property or liability of the sick industrial company in favour
of any other company or person or where such scheme provides for the transfer of
any property or liability of any other company or person in favour
of the sick industrial company, then, by virtue of, and to the extent provided
in, the scheme, on and from the date of coming into operation of the sanctioned
scheme or any provision thereof, the property shall be transferred to, and vest
in, and the liability shall become the liability of, such other company or
person or, as the case may be, the sick industrial company.]
(7) The sanction accorded by the Board under sub-section (4) shall
be conclusive evidence that all the requirements of this scheme relating to the
reconstruction or amalgamation, or any other measure specified therein have
been complied with and a copy of the sanctioned scheme certified in writing by
an officer of the Board to be a true copy thereof, shall, in all legal
proceedings (whether in appeal or otherwise) be admitted as evidence.
[(8) On and from the date of the coming into operation of the
sanctioned scheme or any provision thereof, the scheme or such provision shall
be binding on the sick industrial company and the transferee company or, as the
case may be, the other company and also on the shareholders, creditors and
guarantors and employees of the said companies.]
(9) If any difficulty arises in giving effect to the provisions of
the sanctioned scheme, the Board may, on the recommendation of the operating
agency [or otherwise], by order do anything, not inconsistent with such
provisions, which appears to it to be necessary or expedient for the purpose of
removing the difficulty.
(10) The Board may, if it deems necessary or expedient so to do, by
order in writing, direct any operating agency specified in the order to
implement a sanctioned scheme with such terms and conditions and in relation to
such sick industrial company as may be specified in the order.
(11) Where the whole of the undertaking of the sick industrial
company is sold under a sanctioned scheme, the Board may distribute the sale
proceeds to the parties entitled thereto in accordance with the provisions of
section 529A and other provisions of the Companies Act, 1956 (1 of 1956).
[(12) The Board may monitor
periodically the implementation of the sanctioned scheme.]
19. Rehabilitation by giving financial
assistance.
(1) Where the scheme relates to preventive, ameliorative, remedial
and other measures with respect to any sick industrial company, the scheme may
provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central
Government, a State Government, any scheduled bank or other bank, a public
financial institution or State level institution or any institution or other
authority (any Government, bank, institution or other authority required by a
scheme to provide for such financial assistance being hereafter in this section
referred to as the person required by the scheme to provide financial
assistance) to the sick industrial company.
(2) Every
scheme referred to in sub-section (1) shall be circulated to every person
required by the scheme to provide financial assistance for his consent within a
period of sixty days from the date of such circulation [or within such further
period, not exceeding sixty days, as may be allowed by the Board, and if no
consent is received within such period or further period, it shall be deemed
that consent has been given.]
(3) Where
in respect of any scheme the consent referred to in sub-section (2) is given by
every person required by the scheme to provide financial assistance, the Board
may, as soon as may be, sanction the scheme and on and from the date of such
sanction the scheme shall be binding on all concerned.
[(3A) On the sanction of the scheme under sub-section (3), the financial
institutions and the banks required to provide financial assistance shall
designate by mutual agreement a financial institution and a bank from amongst
themselves which shall be responsible to disburse financial assistance by way
of loans or advances or guarantees or reliefs or
concessions or sacrifices agreed to be provided or granted under the scheme on
behalf of all financial institutions and banks concerned.
(3B) The financial institution and the bank
designated under sub-section (3A) shall forthwith proceed to release the
financial assistance to the sick industrial company in fulfilment
of the requirement in this regard.]
(4) Where in respect of any scheme consent under sub-section (2)
is not given by any person required by the scheme to provide financial
assistance, the Board may adopt such other measures, including the winding up
of the sick industrial company, as it may deem fit.
19A. Arrangement for continuing operations,
etc., during inquiry.
(1) At
any time before completion of the inquiry under section 16, the sick industrial
company or the Central Government or the Reserve Bank or a State Government or
a public financial institution or a State level institution or a scheduled bank
or any other institution, bank or authority providing or intending to provide
any financial assistance by way of loans or advances or guarantees or reliefs or concessions to the sick industrial company may
make an application to the Board—
(a) agreeing to an
arrangement for continuing the operations of the sick industrial company; or
(b) suggesting a
scheme for the financial reconstruction of the sick industrial company.
(2) The Board may, within sixty days of the receipt of the
application under sub-section (1), pass such orders thereon as it may deem
fit.]
20. Winding up of sick industrial company.
[(1) Where
the Board, after making inquiry under section 16 and after consideration of all
the relevant facts and circumstances and after giving an opportunity of being
heard to all concerned parties, is of opinion that the sick industrial company
is not likely to make its net worth exceed the accumulated losses within a
reasonable time while meeting all its financial obligations and that the
company as a result thereof is not likely to become viable in future and that
it is just and equitable that the company should be wound up, it may record and
forward its opinion to the concerned High Court.]
(2) The High Court shall, on the basis of the opinion of the
Board, order winding up of the sick industrial company and may proceed and
cause to proceed with the winding up of the sick industrial company in
accordance with the provisions of the Companies Act, 1956 (1 of 1956).
(3) For the purpose of winding up of the sick industrial company,
the High Court may appoint any officer of the operating agency, if the
operating agency gives its consent, as the liquidator of the sick industrial
company and the officer so appointed shall for the purpose of the winding up of
the sick industrial company be deemed to be, and have all the powers of, the
official liquidator under the Companies Act, 1956 (1 of 1956).
(4) Notwithstanding anything contained in sub-section (2) or
sub-section (3), the Board may cause to be sold the assets of the sick
industrial company in such manner as it may deem fit and forward the sale
proceeds to the High Court for orders for distribution in accordance with the
provisions of section 529A, and other provisions of the Companies Act, 1956 (1
of 1956).
21. Operating
agency to prepare complete inventory, etc.
Where
[for the proper discharge of the functions of the Board under this Act], the
circumstances so require, the Board may, through any operating agency, cause to
be prepared—
(a) with respect to
[a company], a complete inventory of—
(i) all assets and liabilities of whatever nature;
(ii) all books of account, registers, maps, plans, records,
documents of title or ownership of property and all other documents of whatever
nature relating thereto;
(b) a list of shareholders and a list of creditors showing separately in the list of creditors, the secured creditors and the unsecured creditors;
(c) a valuation report in respect of the
shares and assets in order to arrive at the reserve price for the sale of a
part or whole of the industrial undertaking of the company or for fixation of
the lease rent or share exchange ratio;
(d) an estimate of reserve price, lease rent or share exchange
ratio; and
(e) proforma accounts, where no up to
date audited accounts are available.
22. Suspension of
legal proceedings, contracts, etc.
(1) Where in respect of an industrial company, an inquiry under
section 16 is pending or any scheme referred to under section 17 is under
preparation or consideration or a sanctioned scheme is under implementation or
where an appeal under section 25 relating to an industrial company is pending,
then, notwithstanding anything contained in the Companies Act, 1956 (1 of
1956), or any other law or the memorandum and articles of association of the
industrial company or any other instrument having effect under the said Act or
other law, no proceedings for the winding up of the industrial company or for
execution, distress or the like against any of the properties of the industrial
company or for the appointment of a receiver in respect thereof [and no suit
for the recovery of money or for the enforcement of any security against the
industrial company or of any guarantee in respect of any loans or advance
granted to the industrial company] shall lie or be proceeded with further,
except with the consent of the Board or, as the case may be, the Appellate
Authority.
(2) Where the management of the sick industrial company is taken
over or changed [in pursuance of any scheme other law or in the memorandum and
articles of association of such company or any instrument having effect under
the said Act or other law—
(a) it shall not be lawful for the
shareholders of such company or any other person to nominate or appoint any
person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such
company shall be given effect to unless approved by the Board.
(3) [Where an inquiry under section 16 is pending or any scheme
referred to in section 17 is under preparation or during the period] of
consideration of any scheme under section 18 or where any such scheme is
sanctioned thereunder, for due implementation of the
scheme, the Board may by order declare with respect to the sick industrial
company concerned that the operation of all or any of the contracts, assurances
of property, agreements, settlements, awards, standing orders or other
instruments in force, to which such sick industrial company is a party or which
may be applicable to such sick industrial company immediately before the date
of such order, shall remain suspended or that all or any of the rights,
privileges, obligations and liabilities accruing or arising thereunder
before the said date, shall remain suspended or shall be enforceable with such
adaptations and in such manner as may be specified by the Board :
Provided
that such declaration shall not be made for a period exceeding two years which
may be extended by one year at a time so, however, that the total period shall
not exceed seven years in the aggregate.
(4) Any declaration made under sub-section (3) with respect to a sick
industrial company shall have effect notwithstanding anything contained in the
Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles
of association of the company or any instrument having effect under the said
Act or other law or any agreement or any decree or order of a court, Tribunal,
officer or other authority or of any submission, settlement or standing order
and accordingly,—
(a) any remedy for the enforcement of any right, privilege,
obligation and liability suspended or modified by such declaration, and all
proceedings relating thereto pending before any court, tribunal, officer or
other authority shall remain stayed or be continued subject to such
declaration; and
(b) on the declaration ceasing to have
effect—
(i) any right, privilege, obligation or
liability so remaining suspended or modified, shall become revived and
enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed
shall be proceeded with, subject to the provisions of any law which may then be
in force, from the stage which had been reached when the proceedings became
stayed.
(5) In computing the period of limitation for the enforcement of
any right, privilege, obligation or liability, the period during which it or
the remedy for the enforcement thereof remains suspended under this section
shall be excluded.
22A. Direction
not to dispose of assets.
The
Board may, if it is of opinion that any direction is necessary in the interest of
the sick industrial company or creditors or shareholders or in the public
interest, by order in writing, direct the sick industrial company not to
dispose of, except with the consent of the Board, any of its assets—
(a) during the period of preparation or
consideration of the scheme under section 18; and
(b) during the period beginning with the recording of opinion by the Board for winding up of the company under sub-section (1) of section 20 and up to commencement of the proceedings relating to the winding up before the concerned High Court.]
Proceedings
in case of potentially sick industrial
companies misfeasance proceedings, appeals
and miscellaneous
23. Loss
of fifty per cent net worth by industrial companies.
(1) If the accumulated losses of an industrial company, as at the
end of any financial year (hereinafter referred to as the relevant financial
year) have resulted in erosion of fifty per cent, or more of its peak net worth
during the immediately preceding [four] financial years,—
(a) the company shall, within a period
of sixty days from the date (hereinafter referred to as the relevant date) of finalisation of the duly audited accounts of the company
for the relevant financial year—
(i) report the
fact of such erosion to the Board; and
(ii) hold a general meeting of the
shareholders of the company for considering such erosion;
(b) the Board of directors shall, at least twenty-one days before the date on which the meeting under sub-clause (ii) of clause (a) is held, forward to every member of the company a report as to such erosion and the causes for such erosion;
(c) the company may, by ordinary resolution passed at the meeting held under clause (a) remove a director (being a director appointed by the members of the company) and fill the vacancy created by such removal, so far as may be, in accordance with the procedure provided in sub-sections (2) to (6) of section 284 of the Companies Act, 1956 (1 of 1956).
(2) A director removed under sub-section (1) shall not be entitled
to any compensation or damages for termination of his appointment as director
or of any appointment terminating with that as director.
(3) If default is made in complying with the provisions of this
section, every director or other officer of the company who is in default shall
be punishable with imprisonment which shall not be less than six months but
which may extend to two years and with fine.
23A. Proceedings
on report, etc., of loss of fifty per cent net worth.
(1) Without prejudice to the provisions of clause (a) of
sub-section (1) of section 23, the Central Governmentor
the Reserve Bank or a State Government or a public financial institution or a
State level institution or a scheduled bank may, if it has sufficient reasons
to believe that the accumulated losses of any industrial company have resulted
in erosion of fifty per cent or more of its peak net worth during the
immediately preceding four financial years, report the fact of such erosion to
the Board.
(2) If the Board has, upon information received or upon its own
knowledge, reason to believe that the accumulated losses of any industrial
company have resulted in erosion of fifty per cent or more of its peak net
worth during the immediately preceding four financial years, it may call for
such information from that company as it may deem fit.
(3) Where the Board is of the opinion that an industrial company
referred to in sub-section (1) is not likely to make its net worth exceed its
accumulated losses within a reasonable time while meeting all its financial
obligations and that the company as a result thereof is not likely to become
viable in future, it may require by order an operating agency to enquire into
and make a report with respect to such matters as may be specified in the
order.
(4) After consideration of the report of the operating agency, the
Board may publish or cause to be published a notice in such daily newspapers as
the Board may consider necessary for suggestions and objections, if any, within
such period as the Board may specify, as to why the company should not be wound
up.
(5) Where the Board, after consideration of the relevant facts and
circumstances and after giving an opportunity of being heard to all concerned
parties, is of the opinion that the industrial company is not likely to make
its net worth exceed the accumulated losses within a reasonable time while
meeting all its financial obligations and that the company as a result thereof,
is not likely to become viable in future and that it is just and equitable that
the company should be wound up, the Board may record and forward its opinion to
the concerned High Court in relation to the company as if it were a sick
industrial company and the provisions of sub-sections (2), (3) and (4) of
section 20 shall apply accordingly.
23B. Power
of Board to call for periodic information.
On
receipt of a report under sub-clause (i) of clause
(a) of sub-section (1) of section 23 or under sub-section (1) of section 23A or
upon information or its own knowledge under sub-section (2) of section 23A, the
Board may call for any periodic information from the company as to the steps
taken by the company to make its net worth exceed the accumulated losses and
the company shall furnish such information.]
24. Misfeasance proceedings.
(1) If,
in the course of scrutiny or implementation of any scheme or proposal, it
appears to the Board that any person who has taken part in the promotion,
formation or management of the sick industrial company or its undertaking,
including any past or present director, manager or officer or employee of the
sick industrial company—
(a) has misapplied or retained, or
become liable or accountable for, any money or property of the sick industrial
company; or
(b) has been guilty of any misfeasance, malfeasance or non-feasance or breach of trust in relation to the sick
industrial company,the Board may, by order, direct
him to repay or restore the money or property or any part thereof, with or
without interest, as it thinks just, or to contribute such sum to the assets of
the sick industrial company or the other person entitled thereto by way of
compensation in respect of the misapplication, retainer, misfeasance or breach
of trust, as the Board thinks just, and also report the matter to the Central
Government for any other action which that Government may deem fit.
(2) If the Board is satisfied on the basis of the information and
evidence in its possession with respect to any person who is or was a director or
an officer or other employee of the sick industrial company, that such person
by himself or along with others had diverted the funds or other property of such company for any purpose other than a
bona fide purpose of the company or had managed the affairs of the company in a
manner highly detrimental to the interests of the company, the Board shall, by
order, direct the public financial institutions, scheduled banks and State
level institutions not to provide, during a period of ten years from the date of
the order, any financial assistance to such person or any firm of which such
person is a partner or any company or other body corporate of which such person
is a director (by whatever name called).
(3) No order shall be made by the Board under this section against
any person unless such person has been given an opportunity for making his
submissions.
(4) This section shall apply notwithstanding that the matter is
one for which the person may be criminally liable.
(1) Any person aggrieved by an order of the Board made under this
Act may, within forty-five days from the date on which a copy of the order is
issued to him, prefer an appeal to the Appellate Authority:
Provided
that the Appellate Authority may entertain any appeal after the said period of
forty-five days but not after sixty days from the date aforesaid if it is
satisfied that the appellant was prevented by sufficient cause from filing the
appeal in time.
(2) On receipt of an appeal under sub-section (1), the Appellate
Authority may, after giving an opportunity to the appellant to be heard, if he
so desires, and after making such further inquiry as it deems fit, confirm,
modify or set aside the order appealed against [or remand the matter to the
Board for fresh consideration].
26. Bar of jurisdiction.
No
order passed or proposal made under this Act shall be appealable
except as provided therein and no by, or under, this Act to determine
and no injunction shall be granted by any court or other authority in respect
of any action taken or to be taken in pursuance of any power conferred by or
under this Act.
27. Delegation of powers.
The
Board may, by general or special order, delegate, subject to such conditions
and limitations, if any, as may be specified in the order, to any Member or
Secretary or other officer or employee of the Board or other person authorised by the Board to manage any industrial company or
industrial undertaking or any operating agency, such powers and duties [except
the powers and duties under sub-sections (2) and (4) of section 16, section 17,
sub-sections (3) and (4) of section 19, sub-sections (1) and (4) of section 20,
sub-section (3) of section 22, and section 24] under this Act as it may deem
necessary.
(1) The Board shall furnish from time to time to the Central
Government such returns as the Central Government may require.
(2) The Board may, for the purpose of efficient discharge of its
functions under this Act, collect from, or furnish to,—
(a) the Central Government,
(b) the Reserve Bank,
(c) the scheduled bank or any other
bank,
(d) the public financial institution,
[***]
(e) the State-level institution, [or]
[(f) the sick industrial company and, in
case of amalgamation, the other company,]such information as it may consider
useful for the purpose in such manner and within such time as it may think fit.
29. Power
to seek the assistance of Chief Metropolitan Magistrate and District
Magistrate.
(1) The Board or any operating agency, on being directed by the
Board, may, in order to take into
custody or under its control all property, effects and actionable claims to
which a sick industrial company is or appears to be entitled, request, in
writing, the Chief Metropolitan Magistrate or the District Magistrate within
whose jurisdiction any property, books of account or any other documents of
such sick industrial company be situate or be found, to take possession
thereof, and the Chief Metropolitan Magistrate, or the District Magistrate, as
the case may be, shall, on such request being made to him,—
(i) take
possession of such property, books of account or other documents; and
(ii) cause the same to be entrusted to
the Board or the operating agency.
(2) For the purpose of securing compliance with the provisions of
sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate
may take or cause to be taken such steps and use or cause to be used such force
as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District
Magistrate done in pursuance of this section shall be called in question in any
court or before any authority on any ground whatsoever.
30. Protection
of action taken in good faith.
No suit
or other legal proceeding shall lie against the Board or the Appellate
Authority or the Chairman or any other Member, officer or other employee of the
Board or the Appellate Authority, or operating agency or any other person authorised by the Board or the Appellate Authority to
discharge any function under this Act for any loss or damage caused for likely
to be caused by any action which is in good faith done or intended to be done
in pursuance of this Act.
31. Saving
of pending proceedings.
Where
a receiver or an official liquidator has been appointed in any proceeding
pending immediately before the commencement of this Act, in any High Court for
winding up of an industrial company such proceeding shall not abate but
continue in that High Court [and no proceeding in respect of such industrial
company shall lie or be proceeded with further before the Board.]
32. Effect
of the Act on other laws.
(1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent
therewith contained in any other law except the provisions of the Foreign
Exchange Regulation Act, 1973 (46 of 1973), and the Urban Land (Ceiling and
Regulation) Act, 1976 (33 of 1976), for the time being in force or in the
Memorandum or Articles of Association of an industrial company or in another
instrument having effect by virtue of any law other than this Act.
(2) Where there has been under any scheme under this Act an
amalgamation of a sick industrial company with modifications that the power of the
Central Government under that section may be exercised by the Board without any
recommendation by the specified authority referred to in that section, apply in
relation to such amalgamation as they apply in relation to the amalgamation of
a company owning an industrial undertaking with another company.
33. Penalty for certain offences.
(1) Whoever
violates the provisions of this Act or any scheme, or any order of the Board,
or the Appellate Authority and whoever makes a false statement or gives false
evidence to the board or the Appellate Authority, shall be punishable with
simple imprisonment for a term which may extend to three years and shall also
be liable to fine.
[(2) No court shall take cognizance of any offence under sub-section
(1) except on a complaint in writing of the Secretary or any such other officer
of the Board or the Appellate Authority or any such officer of an operating
agency as may be authorised in this behalf by the
Board or the Appellate Authority.]
[***]
(1) Where any offence, punishable under this Act has been
committed by a company, every person who, at the time the offence was committed
was in charge of, and was responsible to, the company or the conduct of the
business of the company, as well as the company, shall be deemed to be guilty
of the offence and shall be liable to be proceeded against and punished
accordingly:
Provided
that nothing contained in this sub-section shall render any such person liable
to any punishment, if he proves that the offence was committed without his
knowledge or that he had exercised all due diligence to prevent the commission
of such offence.
(2) Notwithstanding anything contained in sub-section (1) where
any offence punishable under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or connivance of,
or is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager, secretary or
other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.
Explanation : For the purposes of this section,—
(a) “company” means any body corporate
and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm,
means a partner in the firm.
35. Power
to remove difficulties.
If
any difficulty arises in giving effect to the provisions of this Act or the rules,
schemes or orders made thereunder, the Central
Government may, by notification, remove the difficulty:
Provided that no such notification shall be made by the Central Government after
the expiry of a period of three years from the date on which this Act receives
the assent of the President.
(1) The Central Government may, by notification, make rules for
carrying out the provisions of this Act.
(2) In particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the following
matters, namely:—
(a) the salaries and allowances payable
to and other terms and conditions of service of the Chairman and other Members
under sub-section (7) of section 6;
(b) the powers may be exercised and the
duties which may be performed by the Secretary to the Board or the Appellate
Authority under sub-section (1) of section 8;
(c) the restrictions and conditions
subject to which officers and employees may be appointed to the Board or the
Appellate Authority under sub-section (2) of section 8;
(d) the salaries and allowances and
other conditions of service of the Secretary and other officers and employees
of the Board or the Appellate Authority under sub-section (3) of section 8;
(e) the additional matters referred to
in sub-section (3) of section 13;
(f) any other matter which is required
to be, or may be, prescribed.
(3) Every rule made under this Act shall be laid, as soon as may
be after it is made, before each House of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the session
immediately following the session of the successive sessions aforesaid, both
Houses agree in making any modification in the rule or both Houses agree that
the rule should not be made, the rule shall thereafter have effect only in such
modified form or be of no effect, as the case may be; so, however, that any
such modification or annulment shall be without prejudice to the validity of
anything previously done under that rule.
[See sections 6(8) and 8(3)]
I,.........., do hereby declare that I will faithfully,
truly and to the best of my skill and ability, execute and perform the duties
required of me as the Chairman/Member/Secretary/other officer or employee of
the Board for the Industrial and Financial Reconstruction/the Appellate
Authority for the Industrial and Financial Reconstruction and which properly
relate to the office or position held by me in or in relation to the said
Board/Appellate Authority.
I further declare that I will not communicate
or allow to be communicated to any person not legally entitled thereto any
information relating to the affairs of the Board/Appellate Authority, nor will
I allow any such person to inspect or have access to any books or documents
belonging to or in possession of the Board/Appellate Authority or the business
of any person having any dealing with the said Board/Appellate Authority.
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Signed before me. |
Signature. |