The government is planning to amend the Sick Industrial Companies Repeal Act to enable revival as well as liquidation of sick units easy. The move aims at bringing an alternative system for restructuring of ailing companies after the proposal for setting up of a tribunal could not take off.
Under the proposed system, the Board for Industrial and Financial Reconstruction (BIFR), the body that presides over corporate revival, will be wound up and the power would shift to the Company Law Board (CLB), a judicial body. CLB resolves disputes between corporates and promoters involving cases of mismanagement and oppression.
The government will also set up more benches of CLB at different cities. The ministry of corporate affairs will also empower itself with the freedom to appoint new members. The power to hear appeals of CLBs decisions on reconstruction and liquidation will rest with various high courts under the new system.
At present, this power is vested with the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). Under the transitional system, high courts will continue to preside over mergers and acquisitions, while the central government will exercise this power in the case of public sector companies.
The government had earlier enacted the Sick Industrial Companies Repeal Act of 2003 to wind up BIFR and replace it with the National Company Law Tribunal (NCLT). However, this has not been notified because setting up NCLT was getting delayed due to litigation. Now, to bring in the interim arrangement, this Act will again be amended.
The new system will remain in place till the time the government sets up the NCLT and an appellate body to deal with all corporate processes like mergers, acquisitions, restructure and liquidation. That will not happen immediately as the government has to wait till the Supreme Court decides on a petition challenging the constitutional validity of these two proposed entities.
A constitutional bench of the apex court is examining the case. NCLT and its appellate tribunal would be designed as sophisticated platforms where corporate houses could get swift time-bound approvals for various activities.