UNIT III – Industrial Policy and Industrial Sickness

1. Industrial Policy2. Industrial Sickness3. Institutional Support –

Companies Act, IDRA, SICA (BIFR)

4. Current scenario

IntroductionThe Industrial Policy of the Government of India and the regulatory measures introduced to achieve the policy objectives have always been matters of severe controversy. While the industrialists and many others in India and abroad and many foreign governments and international development organizations regarded the policy as too restrictive and the regulations and procedures too cumbersome and perplexing, the leftists in India were demanding a more restrictive regime and are now opposing the liberalizations.

The industrial policy and regulation had grown more and more restrictive until about the mid Seventies. Having realized the deleterious effects of the restrictive regime, the 1980s saw a very slow process of liberalization.

Industrial Policy Resolution, 1948The Industrial policy Resolution of 1948

which envisaged that the "State must play a progressively active role in the development of industries" established exclusive monopoly of the Central Government in the case of

(i) manufacture of arms and ammunitions (ii) production and control of atomic

energy and (iii) ownership and control of railway

transport

Further, establishment of new undertakings in six other major industries (coal; iron and-steel; aircraft manufacture; ship building; manufacture of telephone, telegraph and wireless apparatus, excluding radio receiving sets; and mineral oils) was made the exclusive responsibility of the State, except where, in the national interest, the State itself found it necessary to secure the cooperation of private enterprise subject to such regulations and controls as the Central Government prescribed.

The Industrial Policy Resolution of 1948, thus, envisaged a mixed . economy and emphasized the entrepreneurial, promotional, regulatory and planning roles of the State in the industrialization of the country

Industrial Policy Resolution, 1956

In the light of certain important developments—the enactment of the Constitution of India which guarantees certain Fundamental Rights and enunciates the Directive Principles of State Policy, the constitution of the Planning Commission and the inauguration of development planning, and the adoption by Parliament of the socialist pattern of society as the objective of social and economic policy.

A new Industrial Policy Resolution was, therefore, announced on 30th April 1956 and this remained the basic plank of the industrial policy until 1991.

The Resolution of 1956 made the industrial policy more socialist-oriented, and widened the scope of the public sector. In order to realize the aims specified in the preamble to the Constitution and to give effect to the Directive Principles of State Policy as well as to achieve the object of socialist pattern of society, it was decided that "the state will progressively assume a predominant and direct responsibility for setting up new industrial undertakings and for developing transport facilities. It will also undertake state trading on an increasing scale.At the same time, as an agency for planned national development, in the context of the country's expanding economy, the private sector will have the opportunity to develop and expand.

The principle of co-operation should be applied wherever possible, and a steadily increasing proportion of the activities of the private sector be developed along co-operative lines." It was, thus, clear that the adoption of the principle of socialist pattern of society did not mean the end of the private sector. Instead, the private sector was assigned and expected to play an important role in the nation's economy. The Industrial Policy Resolution of 1956, thus, reiterated the resolve to foster national development through a system of mixed economy.

The Resolution classified industries into three categories, having regard to the role which the state would play in each of them.(i) The first category contained industries "the future development of which will be the exclusive responsibility of the state." Industries in this category were listed in Schedule A of the Resolution. Schedule A contained 17 industries. These 17 industries also included railways and air transport, arms' and ammunition, and atomic energy, which were to be developed as Central Government monopolies.

In the remaining industries in Schedule A, the expansion of the existing privately-owned units, or the possibility of the state securing the co operation of private enterprise in the establishment of new units when the national interest so required, was not precluded. However, it was made clear that "whenever co-operation with private enterprise is necessary, the state will ensure, either through majority participation in the capital or otherwise, that it has the requisite powers to guide the policy and control the operations of the undertaking."

(ii) In the second category were included industries "which will be progressively state-owned and in which the state will, therefore, generally take the initiative in establishing new undertakings, but in which private enterprise will also be expected to supplement the efforts of the state”. "With a view to accelerating their future development, the state will increasingly establish new undertakings in these industries. At the same time, private enterprise will have the opportunity to develop in this field, either on its own or with state participation." The industries included in the second category were listed in Schedule B of the Resolution. Schedule B contained 12 industries.

(iii) The third category contained all the remaining industries and it was expected that "their development will be undertaken ordinarily through the initiative and enterprise of the private sector, though it will be open to the state to start any industry even in this category. It will be the policy of the state to facilitate and encourage and the development of these industries in the private sector, in accordance with the programmes formulated in successive five year plans, by ensuring the development of transport, power and other services, and by appropriate fiscal and other measures." It was also made very clear that "the division of industries into separate categories does not imply that they are being placed in watertight compartments.

Inevitably, there will not only be an area of overlapping but also a great deal of dovetailing between industries in the private and public sectors. It will be open to the state to start any industry not included in Schedule A and Schedule B when the needs of planning so require or there are other important reasons for it.The Industrial Policy Resolution of 1956 reiterated Government's determination to provide all sorts of possible assistance for the accelerated development of small and cottage industries in view of the distinct advantages they possess in respect of generation of large-scale employment by utilizing locally available resources, wider dispersal of industrial activities and a more equitable distribution of income and wealth.

Another important objective spelt out by the Resolution was the removal of regional disparities in development through the accelerated development of the regions lagging behind industrially. The need for proper infrastructural facilities for industrial development in the backward regions was emphasized by the Policy Resolution.The Industrial Policy Resolution of 1956 has, thus, reiterated the faith in the virtues of a "mixed economy." While it clearly demarcated the areas of public and private sectors, it was at the same time sufficiently flexible to make the required adjustment and modifications in the national interest.

Policy Development in 1970sAccordingly, an Industrial Licensing Policy

was announced on 18th February 1970.

This policy classified industries into: (i) the Core Sector consisting of the

basic, critical and strategic industries(ii) the Heavy Investment Sector

consisting of projects with investment of over Rs. 5 crores

(iii) the Middle Sector consisting of projects involving investment of Rs. 1 crore to Rs. 5 crores

(iv) the De-licensed sector where investment was less than Rs. 1 crore and was exempted from licensing.

The Industrial Licensing Policy of 1970, thus, restricted the role of large industrial houses and foreign concerns to the core, heavy and export-oriented sectors. The main purpose was the promotion of new and small and medium entrepreneurs and the prevention of the concentration of economic power in a few hands.

The main thrust of the new policy was on effective promotion of cottage and small industries widely dispersed in rural areas and small towns. It was decided that "whatever can be produced by small and cottage industries must only be so produced"

Industrial LicensingAn industrial license was mandatory for

investments above certain specified limit. This limit which was Rs. 5 crores was raised for non-MRTP /non-FERA companies to Rs. 15 crores in case of projects in non-backward areas and to Rs. 50 crores in backward areas, subject to certain conditions, in June 1988.

A license was required not only for establishment of a new undertaking but also for substantial expansion of capacity of existing undertakings, manufacture of new items, continuation of business in certain cases and change of location of an industrial undertaking.

Review of the Industrial Licensing SystemSome of the important disclosures made

by the reports of the above inquiries are given below:

1. The working of the planned economy had contributed to the growth of big companies.

2. The working of the industrial licensing enabled the large industrial houses to obtain a disproportionately large share of the licenses issued.

3. Some of the large industrial houses were guilty of non-implementation of licenses and preemption or foreclosure of capacity.

4. The operation of the industrial licensing was not successful in achieving the objective of regional dispersal of industries.

5. The large industrial houses were the major beneficiaries of the public financial institutions.

Industrial Policy on 23rd July, 1980.The socio-economic objectives of the Industrial Policy Statement of 1980 were optimum utilization of the installed capacity; maximizing production and achieving higher productivity; higher employment generation; correction of regional imbalance through a preferential development of industrially backward areas; strengthening of the agricultural base by according a preferential treatment to agro-based industries, and promoting optimum inter-sectoral relationships;

Industrial Policy Statement, Industrial Policy Statement, 19801980

faster promotion of export oriented and import substituting industries; promotion of economic federalism with an equitable spread of investment and dispersal of returns amongst widely spread small but growing units in rural as well as urban areas; and consumer protection against high prices and bad quality.Small doses of liberalizations with a view to accelerating domestic economic development and export growth were introduced following the Industrial Policy Statement of 1980

These liberalization measures were introduced with the following objectives:(i) acceleration of industrial development;(ii) better capacity utilization;(iii) achieving economies of scale;(iv)removing / reducing procedural impediments;(v) development of backward areas;(vi) export promotion and import substitution; and (vii)increasing competitiveness and competition

Policy Liberalizations in the Policy Liberalizations in the EightiesEighties

Public Sector Policy

In view of the development the nation has achieved by now and the unsatisfactory performance of the public sector, the new policy has redefined the role of the public sector. Accordingly, the number of industries reserved for the public sector was pruned down to eight. This was further pruned to four. These four industries are defence products, atomic energy, railway transport and minerals specified in the schedule to the Atomic Energy Order, -1953.

Other Important Changes

• 1956 – life insurance business was nationalized

• 1969 – most large commercial banks were nationalized

• 1973 – public sector acquired the insurance business

• 1985 - government abolished some of its licensing regulations and other competition-inhibiting controls.

Industrial subsidies were given. Public sectors was given the

commanding heights of the economy.

A regulatory system consisting of IDRA, MRTP and FERA was introduced.

Results: Oligopolistic economy. High tariff walls curtailed foreign

competition. Misuse of industrial licensing.

In order to redress the situation Government of India announced a New Industrial Policy on July 24,1991.

The major objectives of the new industrial policy package are:

To build on the gains already made ; To correct the distortions or

weakness that have crept in; To maintain a sustained growth in

Productivity and gainful employment and ;

To attain international competitiveness

Analysis of the NIP

Certain economists praised the NIP because:

It will releases competitive forces internally . It will help in increasing industrial efficiency and productivity since private sector will be more active and public sector will be competitive

It will help in promoting entrepreneurial energies and releasing market forces to determine allocation of resources because most of the tedious controls and regulations have been removed. It will infuse cost and quality consciousness among entrepreneurs.

In NIP the role of public sector has been reduced, so it will improve allocative efficiency. Opening up of a number of areas reserved for public sector to private sector will promote economic efficiency and growth. Closure or rehabilitation of sick or weak public sector units will free resources for more productive use. Similarly, privatisation of the public sector may help improving its productivity.

Greater stress on controlling monopolistic, restrictive and unfair trade practices and strengthening the MRTP commission will curb the anti-competitive conduct of companies. Removing the threshold limits will result in expanding the implementation of investment decisions.

In NIP foreign investment and technology are being invited ,so there would be a flow of foreign capital, technology and managerial expertise from abroad . This will improve the supply of scarce resources in the country and also improve the balance of payments situation.

Critics of the NIP NIP might in misallocation and

wastage of scarce resources. The fact that no restriction are imposed on the entry, over-zealous entrepreneurs may create excessive capacities.

The scrapping of a large portion MRTP Act has also been criticised. Ii is argued that even in advance economies, business activities are closely scrutinised for protecting the interest of consumers and public at a large.

Free technology import may result in import of second-hand technology or creation of multiple technology.

Unrestricted import of foreign technology may destroy the indigenous industry and technology.

Market driven policies may disturb industrial peace as there could be large scale displacement and retrenchment of labour.

2. Industrial Sickness• A Sick Industrial Company implies the following:

1. It must be an industrial company which is as specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (IDRA) but does not include an ancillary industrial undertaking or a small scale industrial undertaking as defined under IDRA.

2. The company should have been in an existence for at least 5 years since the date of incorporation.

3. The company should have accumulated losses equal to or exceeding its net worth at the end of any financial year.

• 'Net Worth' means the sum total of paid-up capital and free reserves

What does Sickness imply???

• Empty Treasury

• Inability to repay debt installments from loans and statutory liabilities like Provident Fund etc.

• Mounting Losses, High Rejection Rate of Goods, Piling Inventory

• Inability to do Business competitively, Industrial Disputes, Low Capacity Utilization.

• Worse than Bankruptcy (which implies a debt default), as it implies an erosion of the net worth of the company

ie. The company is Insolvent or Financially Ruined for all practical purposes.

What are the reasons of becoming sick ?

• Losses are due to drainage of resources on wasteful or unnecessary expenditure. Sickness is caused by prolonged periods of losses sustained by the company.

• There are two main categories:

1. Internal Reasons

2. External Reasons

Internal reasons(which can be controlled by

company)• Mismanagement• Underestimation of the cost of the

project • Delay in the implementation of the

project• Increase in cost due to delay in

implementation of project• Under Utilisation of Resources• Diversion of Funds• Lack of Management depth• Bad Industrial Relations• Bureaucratic management• Inadequate working capital• Heavy Expenditure in Advertisements

External reasons(which cannot be controlled by

the company)• Adverse government rules and

regulations• Adverse Price Control Policy• Recession Trend/economic conditions• Tough Competition• Shortage of Manpower, Raw Materials

etc.• Changes in Technology• Changes in Consumer Behaviour• Shortage of Power Supply

• Delay in getting any financial assistance.

Types of Sick Units

Industrial units

Born SickAchieved Sickness Sickness Thrust

1. Born sick• These units were not financially

viable from the out start and were undertaken due to lack of foresight and business acumen.

• Characterized by:1. Lack of experience of the promoters,

wrong selection of the project.2. Faulty project planning 3. Paucity of funds and faulty financial

management4. Time and cost over-runs.5. Location related problems.

(Continued….)

6. Technological factors

7. Wrong assessment of the market potential

8. Faulty demand forecasting 9. Change in the market conditions

including the change in the customer tastes and preferences

10. Competitive situation, etc.

2. Achieved Sickness

• These units had a viable business cycle and became sick due to mismanagement or external reasons.

Characterized by:1. Bad management2. Unwarranted expansion and diversion of

resources3. Inability to modernize resulting in low

efficiency4. Too much competition by larger players,

especially from overseas5. Product becomes obsolete6. Changes in Government rules and

regulations

3. Sickness Thrust• These units are not yet classified as sick but

are rapidly losing profits and market share to competitors

Characterized by:1. Increased Competition2. Move towards Sickness3. Inability to modernize resulting in low

efficiency4. Other factors are similar to Achieved

Sickness5. There is a scope to control the factors

before achieving sickness6. These units are weak or potentially sick

Weak or Potentially Sick Companies

• A Potentially Sick Industrial Company implies the following:

1. The company should be in an existence for at least 4 years since the date of incorporation.

2. The company should have an accumulated losses equal to or exceeding 50% of its net worth during the immediately preceding 4 years.

• 'Net Worth' means the sum total of paid-up capital and free reserves.

• These companies are at the stage of 50 percent erosion of their Net Worth

Consequences of Sickness

• The Sickness of a company has an immediate impact on all the entities related to it.

Chiefly:1. The Labor or Workforce of the Company

faces unemployment2. The Creditors of the Company (to which

it owes money) face bad loans and losses3. Loss of production4. Loss of revenue to the exchequer

• Sick companies must either face Restructuring or Closure

Corporate RestructuringRestructuring is an attempt to revive a sick

unit by reversing negative trends through Turnaround Management.

It Involves:• Financial Reconstruction• Change in Management• Amalgamation into a larger entity• Sale or lease of a part or whole of any

industrial undertaking of such company• Rationalization and streamlining of

personnel

Restructuring often generates bureaucratic tangles and losses of money and time.

Closure

• The Closure of a company involves:1. Sale of assets to pay off creditors2. Issue of Compensation, if any to laid

off workers• Closure may seem a drastic option

but makes good economic sense in many cases.

• This is because Restructuring is not a panacea. It involves pumping more money into a company that may not have the potential to return to profitability.

3. INSTITUTIONAL SUPPORT

Companies Act•Companies Act,1956 , is the successor to the Indian Companies Act of 1913.•This Act empowers the government to regulate the formation of companies and to control the management of companies.

Principle Objectives

• To promote the healthy development of the corporate sector.

• To lay down certain standards and criteria for formation of companies.

• To provide for good corporate governance.

• To protect the interest of share holders and creditors.

• To prevent mismanagement of companies.

Salient Features of Companies Act

• The Act recognizes following three categories

1. Companies limited by shares.2. Companies limited by guarantee.3. Companies with unlimited liabilities.

• The Companies Act, 1956, empowers the govt to collect information from the companies which would enable it to assess the state of affairs of the companies and to take certain measures to prevent mismanagement.

• Empowers Govt. to investigate in the internal affairs.

WINDING UP OF COMPANIES

The company registered under the Companies Act can cease to exist by any one of the following legal methods:

1. If the company transfer its undertaking(s) to another company under a scheme of reconstruction or amalgamation.

2. The name of a defunct company may be removed from the Registration of Companies by the Registrar.

3. A company may be wound up under Part VII of the Companies Act.

According to Companies Act, there are three methods of winding up, viz.,

1. Winding up by court.2. Voluntary winding up.3. Winding up subject to the supervision of the court.

INDUSTRIES (DEVELOPMENT AND REGULATION) ACTPassed to empower the government to implement its policies relating to industry.

Allowed Govt. control over industries and made provisions for intervention.

It introduced industrial licensing for proper industrial growth.

This Act, amended from time to time is one of the most effective weapons the Government possesses.

Brought under Central control, the development and regulation of the influential industries pertaining to economic growth

OBJECTIVES

Provides Central Government with the means to implement Industrial Policy

The principal objectives are:• To take necessary steps for the development of

industries.• To regulate the pattern and direction of industrial

development.• To control the activities, performance and results

of industries undertakings in the public interest.

PURPOSE: Envisages balanced growth all over India. Optimum use of available resources and

infrastructure.Ensures industries don’t suffer from financial

mismanagement, technical inefficiency and/or operational defects.

Need for new act• In the past, the govt. took over the

management of a number of sick undertakings under IDRA, with the objectives of reviving them by providing management support and financial assistance through banks and financial institutions

• However in due course the govt. felt that it was a mistake to have gone on taking over the sick units and that the govt. should not be burdened with the mounting losses of the sick units.

• While some units were nursed back to health ,a number of others continued to suffer huge losses.

• Takeover of sick units is not favorable for the government.

• Only such units which are found to be potentially viable need to be taken up for formulation of rehabilitation packages to restore them back to health.

The Solution -- SICA• In the wake of sickness in the country’s

industrial climate prevailing in the eighties, the Government of India set up in 1981, a Committee 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.

Sick industrial companies act(1985)

The Act & its objective For Industrial Companies becoming sick

in India, the Government formulated the ‘Sick Industrial Companies (Special Provisions) Act, 1985’ (or SICA) which got amended in the year 1993, with the following prime objectives:

• To timely detect the sick and potentially sick industrial companies,

• To speedily take preventive, ameliorative, remedial & other measures and

• To enforce the measures so determined

The objectives of this Act (SICA) as incorporated in its preamble, emphasizes the following points:

• SICA had been enacted in the public interest to deal with the problems of industrial sickness with regard to the crucial sectors where public money is locked up.

• It contains special provisions for timely detection of sick and potentially sick industrial companies, speedy determination and enforcement of preventive, remedial and other measures with respect to such companies.

• Those measures are to be taken by a body of experts.

• The measures are mainly (a) Legal (b) Financial restructuring (c) Managerial

The 1993 Amendment to the Act lays down that an inquiry shall be deemed to have commenced upon receipt by the Board of any reference of information or upon its own knowledge reduced to writing by the Board

Sick Industrial Company: • An industrial company (being a company

registered for not less than five years) and having at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

• It must be an industrial company which is as specified in the First Schedule but does not include an ancillary industrial undertaking or a small scale industrial undertaking as defined under IDRA.

• The company should be in an existence for at least 5 years since the date of incorporation.

Potentially Sick Industrial Company’ • It means an industrial company whose

accumulated losses is more than fifty percent or more of its peak net worth during the immediately preceding four financial years.

Important Provisions of SICA

• Constitution of two quasi-judicial bodies – BIFR and AAIFR and their Benches.

• Procedure of the Board and the Appellate Authority.

• Filing of references and criteria of sickness. • Provision of enquiry into company’s health. • Appointment of Special Directors and OAs.• Preparation of sanctioned scheme.• Provision for monitoring of schemes.• Rehabilitation by giving financial assistance. • Winding up of sick industrial companies. • Protection to safeguard the interests of the

sick companies.• Provisions for dealing with potential sickness.• Provision for seeking information and giving

information – Central Govt., RBI, FIs State institutions and sick companies and in case of amalgamation other companies.

Important Provisions of SICA

• The implementation of SICA involved setting up of two bodies:

1. BIFR – The Board for Industrial and Financial Reconstruction

2. AAIFR – The Appellate Authority for Industrial and Financial Reconstruction

BIFR under SICA

• The SICA provides for the establishment by the Central Government of a Board and Financial Reconstruction (BIFR) to exercise the jurisdiction and powers and discharge the functions and duties conferred or imposed on the Board by the Act.

• It consists of a chairman and not less than two and not more than fourteen members appointed by the Central Government.

• The Board of experts named the Board for Industrial and Financial Reconstruction (BIFR) was set up in January, 1987 and functional with effect from 15th May 1987.

Reference to the BIFR under the SICA

Under the Act, other than the Board of Directors of the Company,the following authorities/institutions may refer a sick company to the BIFR:

• The Central Government• The Reserve Bank of India • State Government (where all or any of the undertakings

belonging to such company are situated in such State) • Public financial institution (where it has an interest in the

Company by any financial assistance or obligation, rendered by it or undertaken by it)

• A State level Institution (where it has an interest in the Company by any financial assistance or obligation, rendered by it or undertaken by it)

• A Scheduled bank (where it has an interest in the Company by any financial assistance or obligation, rendered by it or undertaken by it)

BIFR Procedure

• On the receipt of a reference or on receipt of information or kits own knowledge as to the financial condition of the company, the Board is authorized to make an inquiry for determining whether the industrial company has become sick.

• The Board also has the power to require any operating agency to inquire into and make a report on such matter as the BIFR may specify.

BIFR Procedure (contd)• If after such enquiry the BIFR is

satisfied that the company has become a sick industrial company, it may decide:

1. If it is practical for the company to make its net worth exceed the accumulated losses within a reasonable time, it may give the company such time as it deems fit to make its net worth exceed the accumulated losses. A Rehab scheme may also be sanctioned

2. If it is necessary in public interest to close the company, it is recommended for closure, provided it is not practicable to turnaround the company from Industrial Sickness.

Measures Taken By BIFR

The measures that are prescribed for rehabilitation under Section 18 of the Act are

• financial reconstruction of the sick industrial company

• the proper management of the sick industrial company by change in or take over of the management of the sick industrial company

• the amalgamation of the sick industrial company with any other company or vice versa

• the sale or lease of part/whole of any industrial undertaking of the sick industrial company

• rationalization of managerial personnel, supervisory staff and workmen in accordance with law

• Other measures as may be necessary in connection with the measures specified above.

Inquiry

References received

Monitoring

Failed & reopened

Discharged onRevival

Registered Reg. declined

BIFR PROCEDURE

Recommended for closure

Rehab scheme

sanctionedDismissed

AAIFR

• The SICA also provides for the establishment of an appellate authority called the The Appellate Authority for Industrial and Financial Reconstruction consisting of a chairman and not more than three members.

• The AAIFR was setup for hearing appeals against the orders of the BIFR.

BIFR--- Problems

• BIFR either identifies extremely sick firms or mistakenly declares non-sick companies as sick

• Asymmetry between lender and borrower -- at the expense of lender– Lender: NPA after 180-days default– Borrower: NPA after net worth 0

SICA definition – Problems for BIFR

•Either SICA catches it too late…

Default starts here

SICA catches here

Net worth

Years

• Or, companies fudge accounts to get shelter under BIFR

BIFR delays: Jan 97 to Mar 98

14681664

0

365

730

1095

1460

1825

Sanctioned Winding-up

Day

s lo

st

Jul 87 to Jul 92:- Mean delay: 851 days

Jan 97 to Mar 98:- Mean delay : 1664 days

Pending cases at BIFR

332510

2720914111015

166

020406080

100120140160180

Where does BIFR stand?

• No. of references to BIFR shooting up since 1996

97

400370

233

050

100150200250300350400450

1996 1997 1998 1999Years

Ref

erec

es

Reasons For Delays

• There are a number of reasons why the process of restructuring and liquidation of sick firms is not only slow, but extremely difficult.1) At every level of mediation and decision-making, BIFR uses a consensus approach implying thereby that all parties i.e., the management, workers, creditors, and shareholders must agree to a restructuring plan before any restructuring or liquidation can begin.2) Hostile trade unions with strong union practices have systematically opposed restructuring in various degrees.

Reasons For Delays contd…

3) State governments have followed very rigid practices 4) The slow moving judicial process have all created strong barriers to restructuring and liquidation.

Current Scenario

• SICA repealed in 2003 by the Sick Industrial Companies (Special Provisions) Repeal Act. Most provisions have been incorporated in Ch VI A (Sec 424A – 424L) of Companies Act with explanatory remarks.