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SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985

Ministry of Law and Justice

Act nº 1 of 1986


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Schedules
  • Amending Acts
  • Act nº 1 of 1986

Preamble

THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985

[Act, No. 1 of 1986]

[8th January, 1986]

PREAMBLE

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 Republic of India as follows:--

Chapter I

Section 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 India.

(3) It shall come into force on such date1as 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 India, by notification, apply the provisions of this Act, on and from such date as may be specified in the notification, to the scheduled industry relating to ships and other vessels drawn by power.

1. Came into force on 12-1-1987 (except sections 15 to 34), vide G.S.R. 24 (E), dated 12th January, 1987 and sections 15 to 34 came into force on 15-5-1987, vide S.O. 444 (E), dated 28th April, 1987.


Section 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.

Section 3. Definitions

(1) In this Act, unless thecontext otherwise requires,--

(a) "Appellate Authority" means theAppellate Authority for Industrial and Financial Reconstruction constitutedunder section 5;

(b) "Board" means the Board forIndustrial and Financial Reconstruction established under section 4;

(c) "Chairman" means the Chairman of theBoard, or as the case may be, the Appellate Authority;

(d) "Company" means a company as definedin section 3 of the Companies Act, 1956 (1 of 1956), 1 [***];

2 [(da) "date of finalisation of the duly auditedaccounts" means the date on which the audited accounts of the company areadopted at the annual general meeting of the company;]

(e) "industrial company" means a companywhich owns one or moreindustrial undertakings;

(f) "industrial undertaking" means anyundertaking pertaining to a scheduled industry carried on in one or morefactories by any company but does not include--

(i) an ancillary industrial undertaking as definedin clause (aa) of section 3 of the Industries (Development and Regulation) Act,1951 (65 of 1951); and

(ii) a small scale industrial undertaking asdefined in clause (j) of the aforesaid section 3;

(g) "Member" means a Member of the Boardor, as the case may be, the Appellate Authority and includes the Chairmanthereof;

2 [(ga) "net worth" means the sum total of thepaid-up capital and free reserves.

Explanation.--For the purposes of thisclause, "free reserves" means all reserves credited out of theprofits and share premium account but does not include reserves credited out ofre-evalutation of assets, write back of depreciation provisions andamalgamation;]

(h) "notification" means a notificationpublished in the Official Gazette;

3 [(i) "operating agency" means any public financialinstitution, State level institution, scheduled bank or any other person as maybe specified by general or special order as its agency by the Board;]

(j) "prescribed" means prescribed byrules made under this Act;

4 [***]

(l) "Reserve Bank" means the Reserve Bankof India constituted under section 3 of the Reserve Bank of India Act, 1934 (2of 1934);

(m) "scheduled bank" means a bank for thetime being included in the Second Schedule to the Reserve Bank of India Act, 1934(2 of 1934);

(n) "scheduled industry" means any of theindustries specified for the time being in the First Schedule to the Industries(Development and Regulation) Act, 1951 (65 of 1951);

5 [(o) "sick industrial company" means anindustrial 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 exceedingits entire net worth.

Explanation.--For the removal ofdoubts, it is hereby declared that an industrial company existing immediatelybefore the commencement6 of the Sick Industrial Companies (Special Provisions)Amendment Act, 1993, registered for not less than five years and having at theend of any financial year accumulated losses equal to or exceeding its entirenet worth, shall be deemed to be a sick industrial company;]

(p) "State level institution" means anyof the following institutions, namely:--

(i) State Financial Corporations established undersection 3 or section 3A and institutions notified under section 46 of the StateFinancial Corporations Act, 1951 (63 of 1951);

(ii) State industrial development corporationsregistered under the Companies Act, 1956 (1 of 1956);

(iii) Such other institutions, being companies andnot being public financial institutions, engaged in the development orfinancing of industrial undertakings, as the Central Government may, bynotification, specify:

Provided that no institution shall be so specifiedunless not less than fifty-one per cent, of the paid-up share capital thereofis held by any State Government or Governments or by any institution orinstitutions mentioned in sub-clauses (i) and (ii) or partly by one or morepublic 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 definedin this Act shall have the meanings, if any, respectively assigned to them inthe Companies Act, 1956 (1 of 1956).

(b) Words and expressions used but not definedeither in this Act or in the Companies Act, 1956 (1 of 1956), shall have themeanings, if any, respectively assigned to them in the Industries (Developmentand Regulation) Act, 1951 (65 of 1951).

(3) Any reference in this Act to any otherenactment or any provision thereof, shall, in relation to an area in which suchenactment or such provision is not in force, be construed as a reference to thecorresponding law or the relevant provision of the corresponding law, if any,in force in that area.

1. The words and figures ", but does notinclude a Government Company as defined in section 617 of that Act"omitted by Act 57 of 1991, sec. 2 (w.e.f. 28-12-1991).

2.Inserted by Act 12 of 1994, sec. 2 (w.e.f. 1-2-1994).

3.Substituted by Act 12 of 1994, sec. 2, for cluse (i) (w.e.f. 1-2-1994).

4. Clause (k) omitted by Act 12 of 1994, sec. 2(w.e.f. 1-2-1994).

5.Substituted by Act 12 of 1994, sec. 2, for clause (o)(w.e.f. 1-2-1994).

6. 1st February, 1994.


Chapter II

Section 4. Establishment of Board

(1) 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.

(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.

Section 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.

Section 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 reappointment:

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.

Section 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.

Section 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.

1[(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.

1. Substituted by Act 12 of 1994, sec. 3, for sub-section (2) (w.e.f. 1-2-1994).


Section 9. Salaries, etc., be defrayed out of the Consolidated Fund of India

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.

Section 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.

Section 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).

Section 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.

1[(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.]

1. Substituted by Act 12 of 1994, sec. 4.