BIFR seeks changes in SICA

After 18 months of such protection, the BIFR is proposing that the full board may be empowered to take a decision on an application made by the sick company or even a suo-moto decision may be taken by the board. However, in case a rehabilitation scheme is sanctioned, the protection would be available for entire revival period.

The BIFR has also proposed to simplify the procedures for monitoring the implementation of sanctioned schemes which is currently bogged down by heavy backlog and ineffectiveness.

These proposals form part of the ongoing consultations on amending the SICA, initiated by the finance ministry, in the top echelons of BIFR. The board is against suggesting an amendment to SICA on the proposal that auditors qualifications should invariably be taken into account while determining sickness of a company, sources in BIFR said. The SICA need not be changed since BIFR anyway takes into account the auditors8217; qualifications whenever unprovided expenses like depreciation crop up surprisingly in the balance sheets of the company claiming sickness, they added.

The board, meanwhile, has asked its legal advisor P S Kaicker to suggest ways of monitoring medium and large scale companies whose net worth is partially eroded, say 50 per cent. The legal advisor has also been asked to look into securing timely detection of sick and potential sick companies and to speedily determine prevention, amelioration and renewal and other measures.

The BIFR is planning to suggest that a company8217;s net worth when eroded by accumulated losses by even 50 per cent should be declared sick rather than wait for erosion of its entire net worth as is the case now.It is already laid down in the SICA, from where BIFR draws its powers and functions, that the board would have potentially sick companies under its purview. However, quot;owing to lack of infrastructure and inadequate board members, the BIFR8217;s functioning over determining the fate of potential sick companies has been to say the least, lacklustre,quot; the sources said.

BIFR has mooted that monitoring cases with less than net worth of Rs 1 crore would be dealt at the BIFR secretary level itself. A two-member regular bench would deal with cases with value over Rs 1 crore but less than Rs 2 crore. However, any monitoring case with a net worth of Rs 2 crore may continue to be decided by the two-member benches.