BIFR Sec 22 SICA

Board for Industrial and Financial Reconstruction (BIFR)                

The Government of India, in order to tackle the problem of industrial sickness, had set up a Board for Industrial and Financial Reconstruction (BIFR), under the purview of Sick Industrial Companies (Special Provisions) Act,1985 (SICA). It had been established as a quasi-judicial body in the Department of Economic Affairs, Ministry of Finance, for revival and rehabilitation of potentially sick undertakings and for closure/liquidation of non-viable and sick industrial companies. The Industrial Finance Division of the ministry dealt with the appointment of the Chairman and the Members of BIFR and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) as well as with all the other matters relating to industrial sickness.

Under SICA, it is mandatory for the Board of Directors of a sick industrial company to make a reference and report to BIFR for formulation of revival and rehabilitation schemes and other remedial measures to be adopted with respect to such a company.

SICA has been repealed by NDA government and in place of BIFR, NCLT was to come into place.  But due to negligence of Central government, NCLT has not yet come into existence and as government has not yet notified the repealment of SICA, BIFR is still continuing as official body. 

A bare reading of Section 22 of the Act of 1985 makes the position clear that during pendency of an inquiry under section 16 or during the preparation of a scheme referred to under section 17 or during implementation of a sanctioned scheme or pendency of an appeal under section 25,there will be suspension of legal proceedings, execution and distress sale etc. against the assets of a sick company while Section 22A deals with power of the Board to issue directions restraining the disposal of assets of such companies. These two provisions primarily ensure that the scheme prepared by the BIFR does not get frustrated because of certain other legal proceedings and to prevent untimely and unwarranted disposal of the assets of the sick industrial company. These sections clearly state certain restrictions which will impact upon the implementation of the scheme as well as on the assets of the company. These sections operate at different stages and in different fields

Section 22 of SICA was held to be wide enough to cover a suit for enforcement of a guarantee in respect of a loan or advance to the industrial company.

 

However

1) Scope of Section 22 of the Act of 1985 was sought to be restricted only to the items which have been reckoned or included in the scheme for rehabilitation failing which the recovery or proceedings in relation to that particular liability would continue despite the provisions of the Act of 1985. In that case the Court was concerned with the recovery of sales tax dues, which the sick industrial company was unable to collect after the date of sanction of the scheme. The revenue was due to the department and the recovery of such amount was held to be beyond the purview of the Act of 1985.

2) The section only deals with proceedings for recovery of money or for enforcement of any security or a guarantee in respect of any loans or advance granted to the company and proceedings for winding up of the company. The section does not refer to any criminal proceeding.