Undeserving cos misusing SICA 8212; BIFR

August 3: The Board for Industrial and Financial Reconstruction BIFR has informed the Delhi High Court that it is facing difficulty in i...

August 3: The Board for Industrial and Financial Reconstruction BIFR has informed the Delhi High Court that it is facing difficulty in implementing the provisions of the Sick Industrial Company Act as it is being misused by undeserving parties.

quot;Difficulties are being faced in the implementation as some unconcerned parties have misused the provisions of the Act to take undeserved benefits to which they were not entitled,quot; BIFR in its affidavit in reply to a public interest litigation PIL challenging extending of the quot;undue benefitsquot; to sick industries, said.

The Board said in most cases the promoters of the industry were found to be quot;engineering delaysquot; as they would like to perpetuate their hold over the company even when the revival was beyond their capacity. quot;There have also been instances of promoters siphoning off funds or misutilising the assets of a sick company,quot; the Board said adding quot;unscrupulous promoters have utilised the BIFR process to stall the creditors from taking recourse to legal remedies for recovery of their dues.quot;

Though the Act provides for cent per cent consent of banks, financial institutions, government and other concerned parties before a scheme could be sanctioned for revival of a sick industry, the companies were found to be stalling the decision making process, the affidavit said.

It also pointed out that guidelines issued by Reserve Bank of India in 1995 for banks on revival of sick companies, were quot;impracticalquot; keeping in view the liberalisation process.

quot;Even for one time settlement, there is no broad policy and decisions are being taken by banks on case-to-case basis which takes a long time in evaluating the position of the company,quot; it said. In the event a winding up order against a company, no litigation or recovery proceedings could be initiated against it without the consent of the High Court, the affidavit said.

Expressing grave concern over the sharp increase of sick industries in the country during the past decade, BIFR said as many as 2867 cases were referred to it between 1987 and 1999, of which 525 were dismissed and 419 units were revived.

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The BIFR said it was not satisfied with efforts to put sick industries on the revival path and infusing life into dead companies as most of the cases came before it when companies had already been wound up.

Regarding allegations of delay in decision-making and spreading the benefit for a longer period than warranted, the BIFR said the main reason for it was the government not filling all the posts of its members. quot;During the 15 years of its existence, the requisite strength 15 members including chairman of the Bureau has never been filled by the government. During 1998-99 the Bureau for a larger part functioned with only three members,quot; the affidavit said.