Singer India no longer sick company under BIFR; stock rallies

ECONOMICTIMES.COM Mar 12, 2013, 02.12PM IST

MUMBAI: Shares of Singer India surged higher in a weak market on Tuesday after the Board for Industrial & Financial Reconstruction ( BIFR) announced that the company has ceased to be a sick industrial company. The bench observed that the scheme sanctioned for revival of the sick company has been substantially implemented, all secured creditors have been settled, all statutory dues paid by the company and the net worth of the company has turned positive by Rs 14.50 crore. At 01:50 pm, the stock was at Rs 92, up 4.19 per cent, on the BSE. It touched a high of Rs 96.15 and a low of Rs 91 in trade today. ____________________________________________________
Sick industrial company according to the provisions of section 3(1)(o) along with provisions of sections 3 (1) (e), 3(1) (f) and 3 (1)(n) of the SICA is one which (i) (ii) Owns one or more industrial undertakings The industrial undertaking should be an industry falling in the First Schedule to the Industries (Development & Regulation) Act. 1951 and should not be an ancillary industrial undertaking or a small scale industrial undertaking The business of the industrial undertaking(s) could be carried on in one or more factories and The company should be registered or not less than five years and has at the end on any financial year and its accumulated losses should be equal to or exceeding its entire net worth. The said conditions are cumulative.

(iii) (iv)

(v)

Under the provisions of section 23 of SICA, potential sickness is reached when at the end of a given financial year of a company, 50% or more of the companys peak net worth during the immediately preceding four financial years gets eroded.

It is mandatory for the Board of Directors of the sick company to file reference under Section 15 of SICA on erosion of entire net worth of the company. Once a reference is filed, the Board for Industrial and Financial Reconstruction (BIFR / Board) is empowered to make enquiry to examine the sickness status of the company. The Board is empowered, if it so desires, to appoint one or more persons as a special director(s). Upon inquiry once the BIFR comes to the conclusion that the referrer is a sick Industrial company, the Board has to take a view as to whether it is practicable for the sick industrial company to make its net worth exceed its accumulated losses within a reasonable time on its own or, if it is, not so or it is of the opinion that it is expedient in public interest to adopt all or any of the measures provided in section 18 of the SICA, it can appoint an operating agency to formulate a scheme for revival of the company (reference, section 17, sub-sections (2) and (3)). In the wake of sickness in the countrys industrial climate prevailing in the eighties, the Government of India set up in 1981, a Committee of Experts under the Chairmanship of Shri T. Tiwari to examine the matter and recommend suitable remedies therefore. Based on the recommendations of the Committee, the Government of India enacted a special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) commonly known as the SICA. The main objective of SICA is to determine sickness and expedite the revival of potentially viable units or closure of unviable units (unit here in refers to a Sick Industrial Company). It was expected that by revival, idle investments in sick units will become productive and by closure, the locked up investments in unviable units would get released for productive use elsewhere. The Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter called the Act) was enacted with a view to securing the timely detection of sick and potential sick companies owning industrial undertakings, the speedy determination by a body of experts of the preventive, ameliorative, remedial and other measure 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.

The Board of experts named the Board for Industrial and Financial Reconstruction

(BIFR) was set up in January, 1987 and functional with effect from 15 th May 1987. The Appellate Authority for Industrial and Financial Reconstruction (AAIRFR) was constituted in April 1987. Government companies were brought under the purview of SICA in 1991 when extensive changes were made in the Act including, inter-alia, changes in the criteria for determining industrial sickness. SICA applies to companies both in public and private sectors owning industrial undertakings:-

(a) pertaining to industries specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, (IDR Act) except the industries relating to ships and other vessels drawn by power and; (b) not being "small scale industrial undertakings or ancillary industrial undertakings" as defined in Section 3(j) of the IDR Act. (c) The criteria to determine sickness in an industrial company are (i) the accumulated losses of the company to be equal to or more than its net worth i.e. its paid up capital plus its free reserves (ii) the company should have completed five years after incorporation under the Companies Act, 1956 (iii) it should have 50 or more workers on any day of the 12 months preceding the end of the financial year with reference to which sickness is claimed. (iv) it should have a factory license.