NEW DELHI, May 16: The government has introduced the Sick Industrial Companies (Special Provisions) Bill 1997 seeking to revamp the Board for Industrial and Financial Reconstruction (BIFR) and also change the definition of sickness.

As per the Bill, a company will be treated as sick if it fails to honour debt commitments for four quarters in two years. It also proposes to abolish Appellate Authority for Industrial and Finance Reconstruction (AAIFR) and establish a system of time-bound rehabilitation programme.

According to the Bill, sick industrial company would mean an company (registered for not less than five years) which has defaulted in payment or repayment, on due dates, of interest or principal or any other amount or any other combination thereof to any secured creditor; or been irregular on any cash credit, working capital or like account to any scheduled bank or any other secured creditor. The default period could mean any four or more quarters, continuous or not, in a block of two successive financial years.

The reference to the Board is proposed to be made optional. However, it will be mandatory, in case the sick industrial company has accumulated losses equal to 50 % or more of its net worth.

Where a company has become sick, the board of directors may at their discretion, made a reference to the Board for determination of the measures to be adopted.

However, if the accumulated losses of any sick company at the end of any financial year have resulted in erosion of 50 %, or more of its peak net worth during the immediately preceding four financial years, the board of directors of the companies shall within a period of 60 days from the date of finalisation of the duly audited accounts of the company make a reference to the Board for determination of the rehabilitation measures.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.