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HISTORY OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT 1985

Corporate Laws / Banking / SEBI - By: - Mr. M. GOVINDARAJAN - Dated:- 7-11-2016 - The Government found the ill effects of sickness in industrial companies such as loss production, loss of employment, loss of revenue to the Central and State Governments and locking up of investible funds of financial institutions as a serious concern to the Government and the society at large. There was also an increase in the incidences of sickness in industrial companies. In order to fully utilize the productiv .....

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industrial companies through liquidation of those companies. In view of all these facts, the Government felt the need to enact in public interest, a legislation to provide for timely determination, by a body of experts, the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable dispatch. Keeping these objects in mind Sick Industrial Companies (Special Pr .....

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hemes for the reconstruction and for proper management of the company or for the winding up, if the sickness was found to be irreversible. Since the object of this Act was to turn sick industrial companies into healthy ones, perhaps by waving a magic wand this Act also granted immunity in terms of Section 22, against any kind of proceedings for the recovery of dues, during the pendency of an inquiry of the preparation or operation of a scheme. Since the Government felt that BIFR and AAIFR have n .....

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Relating to Insolvency and Winding up of Companies . The Committee, after hearing all the parties and analyzing the statistical data made available to it, opined that the facts and figures spoke for themselves and they placed a big question mark on the utility of the institution of BIFR and SICA. The problem of endemic delays inherent in SICA procedures of revival and reconstruction was a to a great extent exacerbated by the large scale abuse of the provisions relating to suspension of legal pro .....

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l and rehabilitation should be telescoped into the structure of the Companies Act, 1956 itself. The second, the Advisory Group on Bankruptcy Laws, headed by N.L.Mitra, went one step further in 2001, recommending the disbanding of the BIFR / AAIFR and the consolidation of insolvency laws into a separate comprehensive bankruptcy code to govern corporate insolvencies. In response, the Government appeared to have accepted the former suggestion of the Advisory Group (though not the latter) - with the .....

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t) Act, 2002 vide Part VI under the topic Revival and Rehabilitation of Sick Industrial Companies from Section 424A to 424L. But the sections have not been notified till the lapse of Companies Act, 1956. However, these changes did not come into effect for two reasons: the constitutionality of the provisions in the Companies (Second Amendment) Act, 2002 creating the NCLT / NCLAT were challenged on the ground of excessive judicial delegation - a petition not disposed by the Supreme Court until 201 .....

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