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The
Sick Industrial Companies (Special
Provisions) Act, 1985 [Repealed]1
(Sick Industrial Companies (Special Provisions) Act, 1985
[Repealed])

[Act 1 of 1986]
[8th January, 1986]

CONTENTS

CHAPTER I

PRELIMINARY

1. Short title, extent, commencement and application

2. Declaration

3. Definitions

CHAPTER II

BOARD AND APPELLATE AUTHORITY FOR INDUSTRIALAND FINANCIAL

RECONSTRUCTION

4. Establishment of Board

5. Constitution of Appellate Authority

6. Term of office, conditions of service, etc. of Chairman and

other Members

7. Removal of Members from office in certain circumstances

8. Secretary, officers and other employees of Board or Appellate

Authority

9. Salaries, etc. be defrayed out of the Consolidated Fund of

India

10. Vacancies, etc. not to invalidate proceedings of Board and

Appellate Authority

11. Members and staff of Board and Appellate Authority to be

public servants
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12. Constitution of Benches of Board or Appellate Authority

13. Procedure of Board and Appellate Authority

14. Proceedings before Board or Appellate Authority to be

judicial proceedings

CHAPTER III

REFERENCES, INQUIRIES AND SCHEMES

15. Reference to Board

16. Inquiry into working of sick industrial companies

17. Powers of Board to make suitable order on the completion of

inquiry

18. Preparation and sanction of schemes

19. Rehabilitation by giving financial assistance

19-A. Arrangement for continuing operations, etc. during inquiry

20. Winding up of sick industrial company

21. Operating agency to prepare complete inventory, etc

22. Suspension of legal proceedings, contracts, etc

22-A. Direction not to dispose of assets

CHAPTER IV

PROCEEDINGS IN CASE OF POTENTIALLY SICK INDUSTRIAL

COMPANIES, MISFEASANCE PROCEEDINGS, APPEALSAND
MISCELLANEOUS

23. Loss of fifty per cent net worth by industrial companies

23-A. Proceedings on report, etc. of loss of fifty per cent net

worth

23-B. Power of Board to call for periodic information

24. Misfeasance proceedings

25. Appeal

26. Bar of jurisdiction

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27. Delegation of powers

28. Returns and information

29. Power to seek the assistance of Chief Metropolitan

Magistrate and District Magistrate

30. Protection of action taken in good faith

31. Saving of pending proceedings

32. Effect of the Act on other laws

33. Penalty for certain offences

34. Offences by companies

35. Power to remove difficulties

36. Power to make rules

THE SCHEDULE

———

Sick Industrial Companies (Special

1
Provisions) Act, 1985
[Act 1 of 1986]] [8th January,
1986]
[Repealed by Act 1 of 20042, S. 3, w.e.f. 1-12-2016]
An Act to make in the public interest, special provisions with a view to
securing the timely detection of sick and potentially sick companies
owning industrial undertakings, the speedy determination by a Board of
experts of thepreventive, ameliorative, remedial and other measures
which needto be taken with respect to such companies and the
expeditious enforcement of the measures so determined and formatters
connected therewith orincidental thereto
Be it enacted by Parliament in the Thirty-sixth Year of the Republic
of India as follows:—
Prefatory Note—Statement of Objects and Reasons.—The ill
effects of sickness in industrial companies such as loss of production,
loss of employment, loss of revenue to the Central and State
Governments and locking up of investible funds of banks and financial
institutions are of serious concern to the Government and the society at
large. The concern of the Government is accentuated by the alarming
increase in the incidence of sickness in industrial companies. It has
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been recognised that in order to fully utilise the productive industrial

assets; afford maximum protection of employment and optimize the
use of the funds of the banks and financial institutions, it would be
imperative to revive and rehabilitate the potentially viable sick
industrial companies as quickly as possible. It would also be equally
imperative to salvage the productive assets and realise the amounts
due to the banks and financial institutions, to the extent possible, from
the non-viable sick industrial companies through liquidation of those
companies.
2. It has been the experience that the existing institutional
arrangements and procedures for revival and rehabilitation of
potentially viable sick industrial companies are both inadequate and
time-consuming. A multiplicity of laws and agencies makes the
adoption of a co-ordinated approach for dealing with sick industrial
companies difficult. A need has, therefore, been felt to enact in public
interest a legislation to provide for timely detection of sickness in
industrial companies and for expeditious determination by a body of
experts of 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 despatch.
3. The salient features of the Bill are—
(i) application of the legislation to the industries specified in the First
Schedule to the Industries (Development and Regulation) Act,
1951, with the initial exception of the scheduled industry relating
to ships and other vessels drawn by power, which may however
be brought within the ambit of the legislation in due course;
(ii) identification of sickness in an industrial company, registered for
not less than seven years, on the basis of the symptomatic indices
of cash losses for two consecutive financial years and accumulated
losses equalling or exceeding the net worth of the company as at
the end of the second financial year;
(iii) the onus of reporting sickness and impending sickness at the
stage of erosion of fifty per cent or more of the net worth of an
industrial company is being laid on the Board of Directors of such
company; where the Central Government or the Reserve Bank is
satisfied that an industrial company has become sick, it may
make a reference to the Board; likewise if any State Government,
scheduled bank or public financial institution having an interest in
an industrial company is satisfied that the industrial company has
become sick, it may also make a reference to the Board;
(iv) establishment of a Board consisting of experts in various
relevant fields with powers to enquire into and determine the
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incidence of sickness in industrial companies and devise suitable

remedial measures through appropriate schemes or other
proposals and for proper implementation thereof;
(v) constitution of an Appellate Authority consisting of persons who
are or have been Supreme Court Judges, Senior High Court
Judges and Secretaries to the Government of India, etc., for
hearing appeals against the orders of the Board.
4. The notes on clauses appended to the Bill explain the various
provisions of the Bill.
Statement of Objects and Reasons of Amending Act 12 of
1994.—The Sick Industrial Companies (Special Provisions) Act, 1985
was enacted with a view to securing timely detection of sick and
potentially sick industrial companies. Accordingly, the Board for
Industrial and Financial Reconstruction (BIFR) was constituted and
vested with powers for speedy determination of preventive
ameliorative, remedial and other measures which need to be taken with
respect to such companies. An Appellate Authority for Industrial and
Financial Reconstruction (AAIFR) was also constituted.
2. Several issues have arisen in relation to different provisions of the
Act and the manner in which these provisions have facilitated the
rehabilitation or the winding up of sick industrial companies. Based on
a consideration of these issues, a need has been felt to make certain
amendments to the Act in order to quicken the process of revival of sick
industrial companies and facilitate the smooth working of BIFR.
3. The main features of the amendments proposed in the Bill are—
(a) jurisdictional amendments which redefine the category of the
companies coming within the purview of the Act, and the options
which are available for revival, rehabilitation or winding up of sick
industrial companies;
(b) amendments to enhance the effectiveness of BIFR;
(c) amendments which seek to remove certain ambiguities and
strengthen internal coherence of the Act by redefining certain
provisions which are clarificatory in nature.
4. The Bill seeks to achieve the aforesaid objects.
► The Act has been enacted in order to evolve a speedy and efficient
machinery so that a sick industry could be revived with utmost expedition,
production could be started, locked up funds could be utilised for furthering socio-
economic development and so that the unemployment of starving workers could be
ended before they are starved to death and they are provided with employment to
enable them to ‘live’ with dignity instead of ‘existing’ in humiliating conditions,
Navnit R. Kamani v. R.R. Kamani, (1988) 4 SCC 387.
► Provisions of the Act should be interpreted keeping in mind the object of the
Act as stated in its Preamble, KSL and Industries Ltd. v. Arihant Threads Ltd.,
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(2008) 9 SCC 763.

► SICA 1985 is a special law in contradistinction to other laws except laws
stated therein. It is a self-contained code and by virtue of non obstante provisions
contained therein it has overriding effect over other laws, Raheja Universal Ltd. v.
NRC Ltd., (2012) 4 SCC 148.
Chapter I
PRELIMINARY
1. Short title, extent, commencement and application.—(1) This Act
may be called the Sick Industrial Companies (Special Provisions) Act,
1985.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government
may, by notification in the Official Gazette, appoint and different dates
may be appointed for different provisions of this Act and any reference
in any provision of this Act to the commencement of this Act shall be
construed as a reference to the commencement of that provision.
(4) It shall apply, in the first instance, to all the scheduled industries
other than the scheduled industry relating to ships and other vessels
drawn by power.
(5) The Central Government may, in consultation with the Reserve
Bank of India, by notification, apply the provisions of this Act, on and
from such date as may be specified in the notification, to the scheduled
industry relating to ships and other vessels drawn by power.
Dates of Enforcement.—(1) All provisions of the Act, except
Sections 15 to 34, came into force on January 12, 1987 vide G.S.R. 24
(E), dated January 12, 1987.
(2) Sections 15 to 34 came into force on May 15, 1987 vide S.O. 444
(E), dated April 28, 1987.
► Provisions of this Act have an overriding effect on all State enactments,
Vadilal Dairy International Ltd. v. State of Maharashtra, (2009) 6 Mah LJ 108.
2. Declaration.—It is hereby declared that this Act is for giving effect
to the policy of the State towards securing the principles specified in
clauses (b) and (c) of Article 39 of the Constitution.
3. Definitions.—(1) In this Act, unless the context otherwise
requires,—
(a) “Appellate Authority” means the Appellate Authority for
Industrial and Financial Reconstruction constituted under
Section 5;
(b) “Board” means the Board for Industrial and Financial
Reconstruction established under Section 4;
(c) “Chairman” means the Chairman of the Board or, as the case
may be, the Appellate Authority;
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(d) “company” means a company as defined in Section 3 of the

3
Companies Act, 1956 (1 of 1956) [* * *] ;
4
[(da) “date of finalisation of the duly audited accounts” means
the date on which the audited accounts of the company are
adopted at the annual general meeting of the company;]
(e) “industrial company” means a company which owns one or
more industrial undertakings;
(f) “industrial undertakings” means any undertaking pertaining to
a scheduled industry carried on in one or more factories by any
company but does not include—
(i) an ancillary industrial undertaking as defined in clause (aa)
of Section 3 of the Industries (Development and Regulation)
Act, 1951 (65 of 1951); and
(ii) a small-scale industrial undertaking as defined in clause (j)
of the aforesaid Section 3;
(g) “Member” means a Member of the Board or, as the case may
be, the Appellate Authority and includes the Chairman thereof;
5
[(ga) “net worth” means the sum total of the paid-up capital and
free reserves.
Explanation.—For the purposes of this clause, “free reserves”
means all reserves credited out of the profits and share
premium account but does not include reserves credited out of
re-evaluation of assets, write back of depreciation provisions
and amalgamation;]
(h) “notification” means a notification published in the Official
Gazette;
6
[(i) “operating agency” means any public financial institution,
State-level institution, scheduled bank or any other person as
may be specified by general or special order as its agency by
the Board;]
(j) “prescribed” means prescribed by rules made under this Act;
7
(k) [* * *]
(l) “Reserve Bank” means the Reserve Bank of India constituted
under Section 3 of the Reserve Bank of India Act, 1934 (2 of
1934);
(m) “scheduled bank” means a bank for the time being included
in the Second Schedule to the Reserve Bank of India Act, 1934
(2 of 1934);
(n) “scheduled industry” means any of the industries specified for
the time being in the First Schedule to the Industries
(Development and Regulation) Act, 1951 (65 of 1951);
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8
[(o) “sick industrial company” means an industrial company
(being a company registered for not less than five years) which
has at the end of any financial year accumulated losses equal
to or exceeding its entire net worth.
Explanation.—For the removal of doubts, it is hereby declared that
an industrial company existing immediately before the
commencement of the Sick Industrial Companies (Special
Provisions) Amendment Act, 1993, 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,
shall be deemed to be a sick industrial company;]
(p) “State-level institution” means any of the following
institutions, namely:—
(i) State Financial Corporations established under Section 3 or
Section 3-A and institutions notified under Section 46 of the
State Financial Corporations Act, 1951 (63 of 1951);
(ii) State industrial development corporations registered under
the Companies Act, 1956 (1 of 1956);
(iii) such other institutions, being companies and not being
public financial institutions, engaged in the development or
financing of industrial undertakings, as the Central
Government may, by notification, specify:
Provided that no institution shall be so specified unless not less
than fifty-one per cent of the paid-up share capital thereof is
held by any State Government or Governments or by any
institution or institutions mentioned in sub-clauses (i) and (ii)
or partly by one or more public financial institutions or
institutions mentioned in sub-clauses (i) and (ii) and partly by
one or more State Governments.
(2) (a) Words and expressions used and not defined in this Act shall
have the meanings, if any, respectively assigned to them in the
Companies Act, 1956 (1 of 1956).
(b) Words and expressions used but not defined either in this Act or
in the Companies Act, 1956 (1 of 1956), shall have the meanings, if
any, respectively assigned to them in the Industries (Development and
Regulation) Act, 1951 (65 of 1951).
(3) Any reference in this Act to any other enactment or any provision
thereof, shall, in relation to an area in which such enactment or such
provision is not in force, be construed as a reference to the
corresponding law or the relevant provision of the corresponding law, if
any, in force in that area.
► Date of finalisation of the duly audited accounts is the date on which the
audited accounts are adopted at the annual general meeting of the company,
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Arambagh Paper Mills (P) Ltd. v. Board for Industrial and Financial
Reconstruction, (2004) 4 CHN 370.
Chapter II
BOARD AND APPELLATE AUTHORITY FOR INDUSTRIALAND FINANCIAL
RECONSTRUCTION
4. Establishment of Board.—(1) With effect from such date as the
Central Government may, by notification, appoint, there shall be
established a Board to be known as the “Board for Industrial and
Financial Reconstruction” to exercise the jurisdiction and powers and
discharge the functions and duties conferred or imposed on the Board
by or under this Act.
(2) The Board shall consist of a Chairman and not less than two and
not more than fourteen other Members, to be appointed by the Central
Government.
(3) The Chairman and other Members of the Board shall be persons
who are or have been or are qualified to be High Court Judges, or
persons of ability, integrity and standing who have special knowledge
of, and professional experience of not less than fifteen years in science,
technology, economics, banking, industry, law, labour matters,
industrial finance, industrial management, industrial reconstruction
administration, investment accountancy, marketing or any other
matter, the special knowledge of, or professional experience in which,
would be in the opinion of the Central Government be useful to the
Board.
5. Constitution of Appellate Authority.—(1) The Central Government
may, by notification, constitute, with effect from such date as may be
specified therein, an appellate authority to be called the “Appellate
Authority for Industrial and Financial Reconstruction” consisting of a
Chairman and not more than three other Members, to be appointed by
that Government, for hearing appeals against the orders of the Board
under this Act.
(2) The Chairman shall be a person who is or has been a Judge of
the Supreme Court or who is or has been a Judge of a High Court for
not less than five years.
(3) A member of the Appellate Authority shall be a person who is or
has been a Judge of a High Court or who is or has been an officer not
below the rank of a Secretary to the Government of India or who is or
has been a Member of the Board for not less than three years.
► While exercising its power under Section 22(3) of SICA, BIFR cannot
ignore an order passed by a superior court. It may be bound by the doctrine of
judicial discipline, Morgan Securities & Credit (P) Ltd. v. Modi Rubber Ltd.,
(2006) 12 SCC 642.
6. Term of office, conditions of service, etc. of Chairman and other
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Members.—(1) Before appointing any person as the Chairman or other

Member, the Central Government shall satisfy itself that the person
does not and will not, have any such financial or other interest as is
likely to affect prejudicially his functions as such Member.
(2) The Chairman and every other Member shall hold office for such
period, not exceeding five years, as may be specified by the Central
Government in the order of his appointment, but shall be eligible for
reappointment:
Provided that no person shall hold office as the Chairman or other
Member after he has attained the age of sixty-five years.
(3) Notwithstanding anything contained in sub-section (1), a
Member may—
(a) by writing under his hand and addressed to the Central
Government resign his office at any time;
(b) be removed from his office in accordance with the provisions
of Section 7.
(4) A vacancy caused by the resignation or removal of the Chairman
or any other Member under sub-section (3) or otherwise shall be filled
by fresh appointment.
(5) In the event of the occurrence of a vacancy in the office of the
Chairman by reason of his death, resignation or otherwise, such one of
the Members as the Central Government may, by notification, authorise
in this behalf shall act as the Chairman till the date on which a new
Chairman, appointed in accordance with the provisions of this Act to fill
such vacancy, enters upon his office.
(6) When the Chairman is unable to discharge his functions owing to
absence, illness or any other cause, such one of the Members as the
Chairman may authorise in writing in this behalf, shall discharge the
functions of the Chairman, till the date on which the Chairman resumes
his duties.
(7) The salaries and allowances payable to and the other terms and
conditions of service of the Chairman and other Members shall be such
as may be prescribed:
Provided that neither the salary and allowances nor the other terms
and conditions of service of the Chairman or any other Member shall be
varied to his disadvantage after his appointment.
(8) The Chairman and every other Member shall, before entering
upon his office, make a declaration of fidelity and secrecy in the form
set out in the Schedule.
(9) The Chairman or any other Member ceasing to hold office as such
shall not hold any appointment or be connected with the management
or administration in any company in relation to which any matter has
been the subject-matter of consideration before the Board or, as the
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case may be, the Appellate Authority, for a period of five years from the
date on which he ceases to hold such office.
7. Removal of Members from office in certain circumstances.—(1)
The Central Government may remove from office any Member, who—
(a) has been adjudged as insolvent, or
(b) has been convicted of an offence which, in the opinion of the
Central Government, involves moral turpitude, or
(c) has become physically or mentally incapable of acting as a
Member, or
(d) has acquired such financial or other interest as is likely to
affect prejudicially his functions as a Member, or
(e) has so abused his position as to render his continuance in
office prejudicial to the public interest.
(2) Notwithstanding anything contained in sub-section (1), no
Member shall be removed from his office on the ground specified in
clause (d) or clause (e) of that sub-section unless the Supreme Court
on a reference being made to it in this behalf by the Central
Government, has, on an inquiry held by it in accordance with such
procedure as it may specify in this behalf, reported that the Member
ought, on such grounds, to be removed.
8. Secretary, officers and other employees of Board or Appellate
Authority.—(1) The Central Government shall appoint a Secretary to the
Board and a Secretary (by whatever name called) to the Appellate
Authority to exercise and perform, under the control of the Chairman,
such powers and duties as may be prescribed or as may be specified by
the Chairman.
9
[(2) The Central Government may provide the Board and the
Appellate Authority with such other officers and employees as may be
necessary for the efficient performance of the functions of the Board
and the Appellate Authority.]
(3) The salaries and allowances payable to and the conditions of
service of the Secretary and other officers and employees of the Board
and the Appellate Authority shall be such as may be prescribed:
Provided that such Secretary, officer or other employee shall, before
entering upon his duties, make a declaration of fidelity and secrecy in
the form set out in the Schedule.
9. Salaries, etc. be defrayed out of the Consolidated Fund of India.—
The salaries and allowances payable to the Members and the
administrative expenses, including salaries, allowances and pension,
payable to or in respect of the officers and other employees of the
Board and the Appellate Authority shall be defrayed out of the
Consolidated Fund of India.
10. Vacancies, etc. not to invalidate proceedings of Board and
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Appellate Authority.—No act or proceeding of the Board or, as the case

may be, the Appellate Authority shall be questioned on the ground
merely of the existence of any vacancy or defect in the constitution of
the Board or the Appellate Authority or any defect in the appointment
of a person acting as a Member of the Board or the Appellate Authority.
11. Members and staff of Board and Appellate Authority to be public
servants.—The Chairman and other Members and the officers and other
employees of the Board and the Appellate Authority shall be deemed to
be public servants within the meaning of Section 21 of the Indian Penal
Code (45 of 1860).
12. Constitution of Benches of Board or Appellate Authority.—(1) The
jurisdiction, powers and authority of the Board or the Appellate
Authority may be exercised by Benches thereof.
(2) The Benches shall be constituted by the Chairman and each
Bench shall consist of not less than two Members.
10
[(3) If the Members of a Bench differ in opinion on any point, the
point shall be decided according to the opinion of the majority, if there
is a majority, but if the Members are equally divided, they shall state
the point or points on which they differ, and make a reference to the
Chairman of the Board or, as the case may be, the Appellate Authority
who shall either hear the point or points himself or refer the case for
hearing on such point or points by one or more of the other Members
and such point or points shall be decided according to the opinion of
the majority of the Members who have heard the case including those
who first heard it.]
13. Procedure of Board and Appellate Authority.—(1) Subject to the
provisions of this Act, the Board or, as the case may be, the Appellate
Authority, shall have powers to regulate—
(a) the procedure and conduct of the business;
(b) the procedure of the Benches, including the places at which
the sittings of the Benches shall be held;
(c) the delegation to one or more Members of such powers or
functions as the Board or, as the case may be, the Appellate
Authority may specify.
(2) In particular and without prejudice to the generality of the
foregoing provisions, the powers of the Board or, as the case may be,
the Appellate Authority, shall include the power to determine the extent
to which persons interested or claiming to be interested in the subject-
matter of any proceeding before it may be allowed to be present or to
be heard, either by themselves or by their representatives or to cross-
examine witnesses or otherwise to take part in the proceedings.
(3) The Board or the Appellate Authority shall, for the purposes of
any inquiry or for any other purpose under this Act, have the same
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powers as are vested in a civil court under the Code of Civil Procedure,
1908 (5 of 1908), while trying suits in respect of the following matters,
namely:—
(a) the summoning and enforcing the attendance of any witness
and examining him on oath;
(b) the discovery and production of document or other material
object producible as evidence;
(c) the reception of evidence on affidavit;
(d) the requisitioning of any public record from any court or
office;
(e) the issuing of any commission for the examination of
witnesses;
(f) any other matter which may be prescribed.
14. Proceedings before Board or Appellate Authority to be judicial
proceedings.—The Board or the Appellate Authority shall be deemed to
be a civil court for the purposes of Section 195 and Chapter XXVI of the
Code of Criminal Procedure, 1973 (2 of 1974), and every proceeding
before the Board or the Appellate Authority shall be deemed to be a
judicial proceeding within the meaning of Sections 193 and 228 and for
the purposes of Section 196 of the Indian Penal Code (45 of 1860).
► Under S. 14, the Board or the appellate authority shall be deemed to be a
civil court for the purpose of S. 195 of Ch. 26 of the Criminal Procedure Code,
1973 and every proceeding before the Board or the appellate authority shall be
deemed to be a judicial proceeding within the meaning of Ss. 193 and 228 and for
the purposes of S. 196 of the Penal Code, Hindoostan Spg. and Wvg. Mills Ltd.
v. Hindustan Crown Mills Siddhivinayak Kamgar Karmachari Sangharsha
Sanghatana, (2007) 5 Mah LJ 801.
Chapter III
REFERENCES, INQUIRIES AND SCHEMES
► Powers and Jurisdiction of BIFR — Scope and ambit.—Once a
company has been registered as sick under SICA, jurisdiction to decide if net
worth has become positive, as a result of which BIFR would lose jurisdiction, held,
is also in the exclusive jurisdiction of BIFR. SICA is a self-contained code and has
conferred upon BIFR complete supervisory control over a sick industrial company
to adopt such methodology as provided in Ch. III for detecting, reviving or winding
up such sick company. Authority to determine the existence and extent of
sickness of such company and to adopt methodology for its revival are in the
exclusive domain of BIFR. Further, by virtue of S. 26 there is an express exclusion
of the jurisdiction of the civil court in that behalf, Ghanshyam Sarda v. Shiv
Shankar Trading Co., (2015) 1 SCC 298.
15. Reference to Board.—(1) Where an industrial company has
become a sick industrial company, the Board of Directors of the
company, shall, within sixty days from the date of finalisation of the
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duly audited accounts of the company for the financial year as at the
end of which the company has become a sick industrial company, make
a reference to the Board for determination of the measures which shall
be adopted with respect to the company:
Provided that if the Board of Directors had sufficient reasons even
before such finalisation to form the opinion that the company had
become a sick industrial company, the Board of Directors shall, within
sixty days after it has formed such opinion, make a reference to the
Board for the determination of the measures which shall be adopted
with respect to the company:
11
[Provided further that no reference shall be made to the Board for
Industrial and Financial Reconstruction after the commencement of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002, where financial assets have been
acquired by any securitisation company or reconstruction company
under sub-section (1) of Section 5 of that Act:
Provided also that on or after the commencement of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002, where a reference is pending before the
Board for Industrial and Financial Reconstruction, such reference shall
abate if the secured creditors, representing not less than three-fourth in
value of the amount outstanding against financial assistance disbursed
to the borrower of such secured creditors, have taken any measures to
recover their secured debt under sub-section (4) of Section 13 of that
Act.]
(2) Without prejudice to the provisions of sub-section (1), the
Central Government or the Reserve Bank or a State Government or a
public financial institution or a State-level institution or a scheduled
bank may, if it has sufficient reasons to believe that any industrial
company has become, for the purposes of this Act, a sick industrial
company, make a reference in respect of such company to the Board for
determination of the measures which may be adopted with respect to
such company:
Provided that a reference shall not be made under this sub-section in
respect of any industrial company by—
(a) the Government of any State unless all or any of the industrial
undertakings belonging to such company are situated in such
State;
(b) a public financial institution or a State-level institution or a
scheduled bank unless it has, by reason of any financial
assistance or obligation rendered by it, or undertaken by it,
with respect to, such company, an interest in such Company.
► Jurisdiction of the Board of Directors to move BIFR under this section is not
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ipso facto barred merely on passing of order of winding up or on appointment of

Liquidator, Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., (2000) 5
SCC 515.
► Board and appellate authority authorised to take into consideration the facts
and circumstances of each case and then to decide whether any reference under
S. 15(1) is necessary or not and to pass any appropriate order meeting the ends
of justice in each case, Crescent Iron and Steel Corpn. Ltd. v. Union of India,
(1992) 4 SCC 680.
► Section 15 of the Sick Industrial Companies (Special Provisions) Act casts
a duty on the Board within 60 days from the date of finalisation of the duly audited
accounts of the company for the financial year at the end of which the company
has become a sick industrial company, to make a reference to the Board for
Industrial and Financial Reconstruction for determination of the measures which
shall be adopted with respect to the company. On failure to do so by virtue of
Section 33 the Board of Directors or whoever violates the provision is liable to be
punished with simple imprisonment for a term which may extend to three years
and shall also be liable to fine. As there are residuary powers in the Board after
appointment of the liquidator it will be the Board who will have to act under Section
15, Chemox Chemical Industries Ltd., In Re, (1999) 2 Mah LJ 18.
► Section 15(1) of the Sick Industrial Companies (Special Provisions) Act
does not lay down a period of limitation but it creates a mandatory obligation on
the part of the Board of Directors to approach the Board for Industrial and
Financial Reconstruction within the period stipulated by the section, Garware
Chemicals Ltd. v. Board for Industrial and Financial Reconstruction, (2004) 2
Mah LJ 707.
► Expression “where a reference is pending” — Import of.—“Reference
is pending” before BIFR means not only when an inquiry is instituted, but also
after preparation and sanction of a scheme right till the stage the scheme has
worked out successfully or till BIFR gives its opinion to wind up the sick company
concerned, Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1.
► Expression “such reference shall abate” scope and meaning.—
Expression “such reference shall abate” seeks to strike a balance between getting
a sick industrial company rehabilitated and secured creditors being able to
recover debt owed to them by such company, Madras Petrochem Ltd. v. BIFR,
(2016) 4 SCC 1.
16. Inquiry into working of sick industrial companies.—(1) The Board
may make such inquiry as it may deem fit for determining whether any
industrial company has become a sick industrial company—
(a) upon receipt of a reference with respect to such company
under Section 15; or
(b) upon information received with respect to such company or
upon its own knowledge as to the financial condition of the
company.
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(2) The Board may, if it deems necessary or expedient so to do for

the expeditious disposal of an inquiry under sub-section (1), require by
order any operating agency to enquire into and make a report with
respect to such matters as may be specified in the order.
(3) The Board or as the case may be, the operating agency shall
complete its inquiry as expeditiously as possible and endeavour shall be
made to complete the inquiry within sixty days from the
commencement of the inquiry.
12
[Explanation.—For the purposes of this sub-section, an inquiry
shall be deemed to have commenced upon the receipt by the Board of
any reference or information or upon its own knowledge reduced to
writing by the Board.]
(4) Where the Board deems it fit to make an inquiry or to cause an
inquiry to be made into any industrial company under sub-section (1)
or, as the case may be, under sub-section (2), it [may]13 appoint one
or more persons to be a special director or special directors of the
company for safeguarding the financial and other interests of the
14
company [or in the public interest].
15
[(4-A) The Board may issue such directions to a special director
appointed under sub-section (4) as it may deem necessary or
expedient for proper discharge of his duties.]
(5) The appointment of a special director referred to in sub-section
(4) shall be valid and effective notwithstanding anything to the
contrary contained in the Companies Act, 1956 (1 of 1956), or in any
other law for the time being in force or in the memorandum and articles
of association or any other instrument relating to the industrial
company, and any provision, regarding share qualification, age limit,
number of directorships, removal from office of directors and such like
conditions contained in any such law or instrument aforesaid, shall not
apply to any director appointed by the Board.
(6) Any special director appointed under sub-section (4) shall—
(a) hold office during the pleasure of the Board and may be
removed or substituted by any person by order in writing by
the Board;
(b) not incur any obligation or liability by reason only of his being
a director or for anything done or omitted to be done in good
faith in the discharge of his duties as a director or anything in
relation thereto;
(c) not be liable to retirement by rotation and shall not be taken
into account for computing the number of directors liable to
such retirement.
16
[(d) not be liable to be prosecuted under any law for anything
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done or omitted to be done in good faith in the discharge of his

duties in relation to the sick industrial company.]
► Upon receipt of reference, BIFR has no other option but to make an inquiry,
provided the reference has been registered upon scrutiny thereof. The imperative
character of an inquiry at the hands of BIFR is inherent in the scheme of the Act,
Morgan Securities & Credit (P) Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642.
► Inquiry by BIFR under S. 16 commences as soon as registration of
reference is completed after scrutiny. From that time proceedings against
Company's assets shall remain suspended under S. 22 till final orders of BIFR,
Real Value Appliances Ltd. v. Canara Bank, (1998) 5 SCC 554.
► When Section 16(1) says that the BIFR can conduct the inquiry “in such
manner as it may deem fit”, the said words are intended only to convey that a
wide discretion is vested in the BIFR in regards to the procedure it may follow for
conducting an inquiry under S. 16(1) and nothing more. In fact, once the
reference is registered after scrutiny, it is, mandatory for the BIFR to conduct an
inquiry. The Act is intended to revive and rehabilitate sick industries before they
can be wound up under the Companies Act, 1956. Whether the Company seeks a
declaration that it is sick or some other body seeks to have it declared as a sick
company, it is necessary that the Company be heard before any final decision is
taken under the Act, Real Value Appliances Ltd. v. Canara Bank, (1998) 5 SCC
554.
► Proceedings for revival of sick company should be disposed of
expeditiously within the time-frame or at least within a reasonable time. Attempt to
prolong the proceedings by a trade rival, claiming to be a person interested, on
ground of failure to give notice to it cannot be allowed, S.R.F. v. Garware Plastics
and Polyesters Ltd., (1995) 3 SCC 465.
► Sick company is not barred from taking steps for realisation of its legal
dues, Duke Offshore Ltd. v. Burns Standard Co. Ltd., (1999) 1 Mah LJ 428.
► The order of registration of a reference under Section 16 of the Act which
is challenged must be shown to be not merely an erroneous order but an order
passed with inherent lack of jurisdiction. If the party successfully establishes that
Board of Industrial and Financial Reconstruction (BIFR) lacked inherent
jurisdiction to register a reference under Section 16, then Court can ignore said
order which is a nullity and proceed with winding up petition without any bar under
Section 22 of the Act, Apple Finance Ltd. v. Mantri Housing and Constructions
Ltd., (2002) 2 Mah LJ 911.
► In respect of a sick Industrial company when an enquiry under S. 16 is
pending or any scheme under S. 17 is under consideration no proceeding for
distress or the like against any of the properties of the industrial company is
maintainable except with the consent of the BIFR, DCL Finance Ltd. v. Satya
Steel Strips (P) Ltd., (1990) 2 AP LJ 62 (SN).
17. Powers of Board to make suitable order on the completion of
inquiry.—(1) If after making an inquiry under Section 16, the Board is
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satisfied that a company has become a sick industrial company, the

Board shall, after considering all the relevant facts and circumstances of
the case, decide, as soon as may be by order in writing, whether it is
practicable for the company to 17[make its net worth exceed the
accumulated losses] within a reasonable time.
(2) If the Board decides under sub-section (1) that it is practicable
for a sick industrial company to 18[make its net worth exceed the
accumulated losses] within a reasonable time, the Board, shall, by
order in writing and subject to such restrictions or conditions as may be
specified in the order, give such time to the company as it may deem
19
fit to [make its net worth exceed the accumulated losses].
(3) If the Board decides under sub-section (1) that it is not
practicable for a sick industrial company to 20[make its net worth
exceed the accumulated losses] within a reasonable time and that it is
necessary or expedient in the public interest to adopt all or any of the
measures specified in Section 18 in relation to the said company it
may, as soon as may be, by order in writing, direct any operating
agency specified in the order to prepare, having regard to such
guidelines as may be specified in the order, a scheme providing for
such measures in relation to such company.
(4) The Board may,—
(a) if any of the restrictions or conditions specified in an order
made under sub-section (2) are not complied with by the
21
company concerned, [or if the company fails to revive in
pursuance of the said order] review such order on a reference
in that behalf from any agency referred to in sub-section (2) of
Section 15 or on its own motion and pass a fresh order in
respect of such company under sub-section (3).
(b) if the operating agency specified in an order made under sub-
section (3) makes a submission in that behalf, review such
order and modify the order in such manner as it may deem
appropriate.
► Decisions of BIFR binds the parties, Diamond Plastic Industries v. Govt. of
A.P., (1998) 9 SCC 121.
► In respect of a sick industrial company where an enquiry under S. 16 is
pending or any scheme under S. 17 is under preparation or consideration S. 22
of the Act of erases as a bar and no proceedings for the winding up of the sick
industrial company shall lie or be proceeded further except with the consent of the
Board, Hightemp Chemical Pvt. Ltd. v. Satya Steel Strips (P) Ltd., (1990) 2 AP
LJ 493 (HC).
18. Preparation and sanction of schemes.—(1) Where an order is
made under sub-section (3) of Section 17 in relation to any sick
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industrial company, the operating agency specified in the order shall

prepare, as expeditiously as possible and ordinarily within a period of
ninety days from the date of such order, a scheme with respect to such
company providing for any one or more of the following measures,
namely:—
22
[(a) the financial reconstruction of the sick industrial company;]
(b) the proper management of the sick industrial company by
change in, or take over of, management of the sick industrial
company;
23
[(c) the amalgamation of—
(i) the sick industrial company with any other company; or
(ii) any other company with the sick industrial company;
(hereafter in this section, in the case of sub-clause (i), the
other company, and in the case of sub-clause (ii), the sick
industrial company, referred to as “transferee company”;]
(d) the sale or lease of a part or whole of any industrial
undertaking of the sick industrial company;
24
[(da) the rationalisation of managerial personnel, supervisory
staff and workmen in accordance with law;]
(e) such other preventive, ameliorative and remedial measures as
may be appropriate;
(f) such incidental, consequential or supplemental measures as
may be necessary or expedient in connection with or for the
purposes of the measures specified in clauses (a) to (e).
(2) The scheme referred to in sub-section (1) may provide for any
one or more of the following, namely:—
(a) the constitution, name and registered office, the capital,
assets, powers, rights, interest, authorities and privileges,
duties and obligations of the sick industrial company or, as the
25
case may be, of the [transferee company];
(b) the transfer to the 26[transferee company] of the business,
properties, assets, and liabilities of the sick industrial company
on such terms and conditions as may be specified in the
scheme;
(c) any change in the Board of Directors, or the appointment of a
new Board of Directors, of the sick industrial company and the
authority by whom, the manner in which and the other terms
and conditions on which, such change or appointment shall be
made and in the case of appointment of a new Board of
Directors or of any director, the period for which such
appointment shall be made;
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(d) the alteration of the memorandum or articles of association of

27
the sick industrial company or as the case may be, of the
[transferee company] for the purpose of altering the capital
structure thereof or for such other purposes as may be
necessary to give effect to the reconstruction or amalgamation;
(e) the continuation by, or against, the sick industrial company or,
as the case may be, the 28[transferee company] of any action
or other legal proceeding pending against the sick industrial
company immediately before the date of the order made under
sub-section (3) of Section 17;
(f) the reduction of the interest or rights which the shareholders
have in the sick industrial company to such extent as the Board
considers necessary in the interests of the reconstruction,
revival or rehabilitation of the sick industrial company or for the
maintenance of the business of the sick industrial company;
(g) the allotment to the shareholders of the sick industrial
company of shares in the sick industrial company or, as the
29
case may be, in the [transferee company] and where any
shareholder claims payment in cash and not allotment of
shares, or where it is not possible to allot shares to any
shareholder the payment of cash to those shareholders in full
satisfaction of their claims—
(i) in respect of their interest in shares in the sick industrial
company before its reconstruction or amalgamation; or
(ii) where such interest has been reduced under clause (f) in
respect of their interest in shares as so reduced;
(h) any other terms and conditions for the reconstruction or
amalgamation of the sick industrial company;
(i) sale of the industrial undertaking of the sick industrial
company free from all encumbrances and all liabilities of the
company or other such encumbrances and liabilities as may be
specified, to any person, including a cooperative society formed
by the employees of such undertaking and fixing of reserve
price for such sale;
(j) lease of the industrial undertaking of the sick industrial
company to any person, including a cooperative society formed
by the employees of such undertaking;
(k) method of sale of the assets of the industrial undertaking of
the sick industrial company such as by public auction or by
inviting tenders or in any other manner as may be specified
and for the manner of publicity therefor;
(l) transfer or issue of the shares in the sick industrial company at
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the face value or at the intrinsic value which may be at

discount value or such other value as may be specified to any
industrial company or any person including the executives and
employees of the sick industrial company;
(m) such incidental, consequential and supplemental matters as
may be necessary to secure that the reconstruction or
amalgamation or other measures mentioned in the scheme are
fully and effectively carried out.
(3) [30(a) The scheme prepared by the operating agency shall be
examined by the Board and a copy of the scheme with modification, if
any, made by the Board shall be sent, in draft, to the sick industrial
company and the operating agency and in the case of amalgamation,
also to any other company concerned, and the Board shall publish or
cause to be published the draft scheme in brief in such daily
newspapers as the Board may consider necessary, for suggestions and
objections, if any, within such period as the Board may specify.]
(b) The Board may make such modifications, if any, in the draft
scheme as it may consider necessary in the light of the suggestions and
objections received from the sick industrial company and the operating
agency and also from the transferee industrial company and any other
31
[company] concerned in the amalgamation and from any shareholder
32
or any creditors or employees of such [companies]:
Provided that where the scheme relates to amalgamation 33[* * *]
the said scheme shall be laid before [the company other than the sick
34
industrial company] in the general meeting for the approval of the
scheme by its shareholders and no such scheme shall be proceeded
with unless it has been approved, with or without modification, by a
special resolution passed by the shareholders of [the company other
than the sick industrial company]35.
(4) The scheme shall thereafter be sanctioned as soon as may be, by
the Board (hereinafter referred to as the ‘sanctioned scheme’) and shall
come into force on such date as the Board may specify in this behalf:
Provided that different dates may be specified for different provisions
of the scheme.
(5) The Board may on the recommendations of the operating agency
or otherwise, review any sanctioned scheme and make such
modifications as it may deem fit or may by order in writing direct any
operating agency specified in the order, having regard to such
guidelines as may be specified in the order, to prepare a fresh scheme
providing for such measures as the operating agency may consider
necessary.
(6) When a fresh scheme is prepared under sub-section (5), the
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provisions of sub-sections (3) and (4) shall apply in relation thereto as

they apply to in relation to a scheme prepared under sub-section (1).
36
[(6-A) Where a sanctioned scheme provides for the transfer of any
property or liability of the sick industrial company in favour of any other
company or person or where such scheme provides for the transfer of
any property or liability of any other company or person in favour of the
sick industrial company, then, by virtue of, and to the extent provided
in the scheme, on and from the date of coming into operation of the
sanctioned scheme or any provision thereof, the property shall be
transferred to, and vest in, and the liability shall become the liability of,
such other company or person or, as the case may be, the sick
industrial company.]
(7) The sanction accorded by the Board under sub-section (4) shall
be conclusive evidence that all the requirements of this scheme relating
to the reconstruction or amalgamation, or any other measure specified
therein have been complied with and a copy of the sanctioned scheme
certified in writing by an officer of the Board to be a true copy thereof,
shall, in all legal proceedings (whether in appeal or otherwise) be
admitted as evidence.
37
[(8) On and from the date of the coming into operation of the
sanctioned scheme or any provision thereof, the scheme or such
provision shall be binding on the sick industrial company and the
transferee company or, as the case may be, the other company and
also on the shareholders, creditors and guarantors and employees of
the said companies.]
(9) If any difficulty arises in giving effect to the provisions of the
sanctioned scheme, the Board may, on the recommendation of the
38
operating agency [or otherwise], by order do anything, not
inconsistent with such provisions, which appears to it to be necessary
or expedient for the purpose of removing the difficulty.
(10) The Board may, if it deems necessary or expedient so to do, by
order in writing, direct any operating agency specified in the order to
implement a sanctioned scheme with such terms and conditions and in
relation to such sick industrial company as may be specified in the
order.
(11) Where the whole of the undertaking of the sick industrial
company is sold under a sanctioned scheme, the Board may distribute
the sale proceeds to the parties entitled thereto in accordance with the
provisions of Section 529-A and other provisions of the Companies Act,
1956 (1 of 1956).
39
[(12) The Board may monitor periodically the implementation of
the sanctioned scheme.]
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► If once the Scheme for amalgamation of sick industrial company with

another company is sanctioned by BIFR under S. 18, the BIFR cannot refuse to
make declaration and grant benefit to the amalgamated company of loss or, as the
case may be, allowance for deprecation of the amalgamating company under S.
72-A of Income Tax Act, 1961, Indian Shaving Products Ltd. v. Board for
Industrial and Financial Reconstruction, (1996) 1 SCC 683.
► Legislative intention of the provision for transferring shares to employees
under this section is to encourage the employees to take over the sick units and to
clothe the competent authority with power to direct the transfer of the shares to the
employees in this behalf, Navnit R. Kamani v. R.R. Kamani, (1988) 4 SCC 387.
► Scheme for running sick company as sanctioned by BIFR and as approved
by Supreme Court, is binding and would not detract from the obligation incurred
by guarantors towards banks in respect of the debts of the sick company, Navnit
R. Kamani v. R.R. Kamani, (1988) 4 SCC 387.
► BIFR is not a town planner. It is not a development authority. It has noting to
do with town planning or development schemes or maintenance of ecological
balance. BIFR is concerned only with how sick undertakings should be made to
revive, obtaining maximum amount by way of sale of assets (lands of sick cotton
mills) of the undertakings concerned, for which it followed the procedure required
and head all the parties required to be heard, Bombay Dyeing & Mfg. Co. Ltd. (3)
v. Bombay Environmental Action Group, (2006) 3 SCC 434.
19. Rehabilitation by giving financial assistance.—(1) Where the
scheme relates to preventive, ameliorative, remedial and other
measures with respect to any sick industrial company, the scheme may
provide for financial assistance by way of loans, advances or guarantees
or reliefs or concessions or sacrifices from the Central Government, a
State Government, any scheduled bank or other bank, a public financial
institution or State-level institution or any institution or other authority
(any Government, bank, institution or other authority required by a
scheme to provide for such financial assistance being hereafter in this
section referred to as the person required by the scheme to provide
financial assistance) to the sick industrial company.
(2) Every scheme referred to in sub-section (1) shall be circulated to
every person required by the scheme to provide financial assistance for
his consent within a period of sixty days from the date of such
circulation 40[or within such further period, not exceeding sixty days, as
may be allowed by the Board, and if no consent is received within such
period or further period, it shall be deemed that consent has been
given].
(3) Where in respect of any scheme the consent referred to in sub-
section (2) is given by every person required by the scheme to provide
financial assistance, the Board may, as soon as may be, sanction the
scheme and on and from the date of such sanction the scheme shall be
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binding on all concerned.

40
[(3-A) On the sanction of the scheme under sub-section (3), the
financial institutions and the banks required to provide financial
assistance shall designate by mutual agreement a financial institution
and a bank from amongst themselves which shall be responsible to
disburse financial assistance by way of loans or advances or guarantees
or reliefs or concessions or sacrifices agreed to be provided or granted
under the scheme on behalf of all financial institutions and banks
concerned.
(3-B) The financial institution and the bank designated under sub-
section (3-A) shall forthwith proceed to release the financial assistance
to the sick industrial company in fulfilment of the requirement in this
regard.]
(4) Where in respect of any scheme consent under sub-section (2) is
not given by any person required by the scheme to provide financial
assistance, the Board may adopt such other measures, including the
winding up of the sick industrial company, as it may deem fit.
► This Act is basically and predominantly remedial and ameliorative since it
empowers BIFR and AAIFR to determine sick industry and take appropriate
measures for revival and rehabilitation of such company. These authorities are
assigned more active role to evolve sanctioned scheme. While exercising powers
to sanction scheme under S. 19 granting consent for disposal of assets of sick
company, failure to keep track of this object of legislation and principles laid down
would render action taken under this Act infructuous and result in miscarriage of
justice, Binny Ltd. v. Appellate Authority for Industrial and Financial
Reconstruction, (2003) 4 CTC 733.
41
[19-A. Arrangement for continuing operations, etc. during inquiry.
—(1) At any time before completion of the inquiry under Section 16,
the sick industrial company or the Central Government or the Reserve
Bank or a State Government or a public financial institution or a State-
level institution or a scheduled bank or any other institution, bank or
authority providing or intending to provide any financial assistance by
way of loans or advances or guarantees or reliefs or concessions to the
sick industrial company may make an application to the Board—
(a) agreeing to an arrangement for continuing the operations of
the sick industrial company; or
(b) suggesting a scheme for the financial reconstruction of the
sick industrial company.
(2) The Board may, within sixty days of the receipt of the application
under sub-section (1), pass such orders thereon as it may deem fit.]
42
20. Winding up of sick industrial company.— [(1) Where the Board,
after making inquiry under Section 16 and after consideration of all the
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relevant facts and circumstances and after giving an opportunity of

being heard to all concerned parties, is of opinion that the sick
industrial company is not likely to make its net worth exceed the
accumulated losses within a reasonable time while meeting all its
financial obligations and that the company as a result thereof is not
likely to become viable in future and that it is just and equitable that
the company should be wound up, it may record and forward its opinion
to the concerned High Court.]
(2) The High Court shall, on the basis of the opinion of the Board,
order winding up of the sick industrial company and may proceed and
cause to proceed with the winding up of the sick industrial company in
accordance with the provisions of the Companies Act, 1956 (1 of 1956).
(3) For the purpose of winding up of the sick industrial company, the
High Court may appoint any officer of the operating agency, if the
operating agency gives its consent, as the liquidator of the sick
industrial company and the officer so appointed shall for the purposes
of the winding up of the sick industrial company be deemed to be, and
have all the powers of, the official liquidator under the Companies Act,
1956 (1 of 1956).
(4) Notwithstanding anything contained in sub-section (2) or sub-
section (3), the Board may cause to be sold the assets of the sick
industrial company in such manner as it may deem fit and forward the
sale proceeds to the High Court for orders for distribution in accordance
with the provisions of Section 529-A, and other provisions of the
Companies Act, 1956 (1 of 1956).
► Before BIFR or AAIFR, as the case may be, makes a recommendation for
winding up of the Company, an enquiry is made in terms of Section 16 SICA
wherefor all relevant facts and circumstances are required to be taken into
consideration. Before an opinion is arrived at in that behalf, the parties are given
an opportunity of hearing. The satisfaction arrived at by BIFR that the Company is
not likely to become viable in future and it is just and equitable that the Company
should be wound up, must be based on objective criteria, NGEF Ltd. v. Chandra
Developers (P) Ltd., (2005) 8 SCC 219.
► Jurisdiction of Company Court in relation to sick company arises only when
BIFR or AAIFR has exercised its jurisdiction under S. 20 SICA, recommending
winding up of the company, NGEF Ltd. v. Chandra Developers (P) Ltd., (2005) 8
SCC 219.
► Once approval/confirmation of ASC is obtained, sale of surplus assets of
sick company/undertaking are to be treated as confirmed, Bombay Dyeing & Mfg.
Co. Ltd. (3) v. Bombay Environmental Action Group, (2006) 3 SCC 434.
► Section 20(2) has to be construed to mean that the High Court in deciding
the question of winding up of the company has to take into account the opinion of
the Board forwarded to it under S. 20(1) and is not to abdicate its own function of
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determining the question of winding up, V.R. Ramaraju v. Union of India, (1997)
89 Comp Cas 609.

21. Operating agency to prepare complete inventory, etc.—Where, 43

[for the proper discharge of the functions of the Board under this Act],
the circumstances so require, the Board may, through any operating
agency, cause to be prepared—
(a) with respect to [a company]44, a complete inventory of—
(i) all assets and liabilities of whatever nature;
(ii) all books of account, registers, maps, plans, records,
documents of title or ownership of property and all other
documents of whatever nature relating thereto;
(b) a list of shareholders and a list of creditors showing separately
in the list of creditors, the secured creditors and the unsecured
creditors;
(c) a valuation report in respect of the shares and assets in order
to arrive at the reserve price for the sale of a part or whole of
the industrial undertaking of the company or for fixation of the
lease rent or share exchange ratio;
(d) an estimate of reserve price, lease rent or share exchange
ratio; and
(e) pro forma accounts where no up-to-date audited accounts, are
available.
22. Suspension of legal proceedings, contracts, etc.—(1) Where in
respect of an industrial company, an inquiry under Section 16 is
pending or any scheme referred to under Section 17 is under
preparation or consideration or a sanctioned scheme is under
implementation or where an appeal under Section 25 relating to an
industrial company is pending, then, notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956), or any other law or
the memorandum and articles of association of the industrial company
or any other instrument having effect under the said Act or other law,
no proceedings for the winding up of the industrial company or for
execution, distress or the like against any of the properties of the
industrial company or for the appointment of a receiver in respect
45
thereof [and no suit for the recovery of money or for the enforcement
of any security against the industrial company or of any guarantee in
respect of any loans or advance granted to the industrial company]
shall lie or be proceeded with further, except with the consent of the
Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company is taken
46
over or changed [in pursuance of any scheme sanctioned under
Section 18] notwithstanding anything contained in the Companies Act,
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1956 (1 of 1956), or any other law or in the memorandum and articles

of association of such company or any instrument having effect under
the said Act or other law—
(a) it shall not be lawful for the shareholders of such company or
any other person to nominate or appoint any person to be a
director of the company;
(b) no resolution passed at any meeting of the shareholders of
such company shall be given effect to unless approved by the
Board.
(3) 47[Where an inquiry under Section 16 is pending or any scheme
referred to in Section 17 is under preparation or during the period] of
consideration of any scheme under Section 18 or where any such
scheme is sanctioned thereunder, for due implementation of the
scheme, the Board may by order declare with respect to the sick
industrial company concerned that the operation of all or any of the
contracts, assurances of property, agreements, settlements, awards,
standing orders or other instruments in force, to which such sick
industrial company is a party or which may be applicable to such sick
industrial company immediately before the date of such order, shall
remain suspended or that all or any of the rights, privileges, obligations
and liabilities accruing or arising thereunder before the said date, shall
remain suspended or shall be enforceable with such adaptations and in
such manner as may be specified by the Board:
Provided that such declaration shall not be made for a period
exceeding two years which may be extended by one year at a time so,
however, that the total period shall not exceed seven years in the
aggregate.
(4) Any declaration made under sub-section (3) with respect to a
sick industrial company shall have effect notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956), or any other law,
the memorandum and articles of association of the company or any
instrument having effect under the said Act or other law or any
agreement or any decree or order of a court, tribunal, officer or other
authority or of any submission, settlement or standing order and
accordingly,—
(a) any remedy for the enforcement of any right, privilege,
obligation and liability suspended or modified by such
declaration, and all proceedings relating thereto pending before
any court, tribunal, officer or other authority shall remain
stayed or be continued subject to such declaration; and
(b) on the declaration ceasing to have effect—
(i) any right, privilege, obligation or liability so remaining
suspended or modified, shall become revived and
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enforceable as if the declaration had never been made; and

(ii) any proceeding so remaining stayed shall be proceeded
with subject to the provisions of any law which may then be
in force, from the stage which had been reached when the
proceedings became stayed.
(5) In computing the period of limitation for the enforcement of any
right, privilege, obligation or liability, the period during which it or the
remedy for the enforcement thereof remains suspended under this
section shall be excluded.
► The effect of Section 22 of the 1985 Act is to be considered only when
there is a demand for recovery. The question of recovery would arise only when
there is a quantified demand on assessment, Eagle Flask Industries Ltd. v.
Talegaon Dabhade Municipal Council, (2004) 8 SCC 640.
► This section does not bar criminal proceedings against the company or its
directions for dishonour of cheque drawn by the company towards payment of
dues by the company, Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities
Ltd., (2000) 2 SCC 745 : 2000 SCC (Cri) 546.
► Filing of an eviction petition on the ground of non-payment of rent, not akin
to filing of a suit for recovery of money, which under S. 22 does not lie nor can be
proceeded with except with the consent of the Board for Industrial and Financial
Reconstruction, Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah, (1999) 8
SCC 11.
► The opening words of Section 34(1) of the Recovery of Debts Due to Banks
Act clearly make the provisions thereof subject to the provisions of Section 34(2)
which in unambiguous term provides that the provisions of the Act or the Rules
made thereunder would be in addition to and not in derogation of, certain statues
indicated therein, including the Sick Industrial Companies (Special Provisions)
Act, 1985. It is, therefore, clear that while the Recovery of Debts Due to Banks
Act would have an overriding effect over other enactments, its provisions would
only be supplemental to those of Sick Industrial Companies (Special Provisions)
Act and consequently the provisions of Sick Industrial Companies (Special
Provisions) Act would prevail over the provisions of the Recovery of Debts Due to
Banks Act, KSL and Industries Ltd. v. Arihant Threads Ltd., (2008) 9 SCC 763 :
(2008) 153 DLT 27.
► The object of Section 22 SICA in protecting guarantors from legal
proceedings pending a reference to BIFR of the principal debtor, is to ensure that
a scheme for rehabilitation would not be defeated by isolated proceedings adopted
against the guarantors of a sick company. To achieve that purpose, it is
imperative that the expression ‘suit’ in Section 22 be given its plain meaning,
namely, any proceedings adopted for realisation of a right vested in a party by
law. This would clearly include arbitration proceedings, Paramjeet Singh Patheja
v. ICDS Ltd., (2006) 13 SCC 322.
► Sections 22(1) and 22(3) would be applicable where an inquiry under
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Section 16 is pending. Whereas under Section 22(1) no specific order is required

to be passed by BIFR, it is necessary in respect of the matters enumerated under
Section 22(3). The provisions contained in Section 22(1) appear to be clear and
unambiguous. Section 22(3), on the other hand, does not speak of automatic
suspension of the proceedings or bar to the jurisdiction of the court in entertaining
any application. The provision empowers BIFR to make a declaration in terms
whereof, inter alia, operation of a settlement or award, not only where the
industrial company is a party, but also where the same would be applicable
thereto, would remain suspended. It envisages suspension of not only operation of
any contract, assurances of property, agreement, settlement, award, standing
orders, etc., but also the rights, privileges, obligations and liabilities accruing or
arising thereunder. The result of such declaration is not far to seek. Such
declaration, however, either for suspension or operation of the contract or award,
etc. for the rights, privileges, obligations and liabilities or all or any of the rights,
privileges, obligations and liabilities accruing or arising thereunder is to be made
specifically. BIFR may choose to make either of the declarations, as provided for
thereunder. The period for such suspension, however, is controlled by the proviso
appended to Section 22(3). A statutory distinction has, thus, been made by the
legislature as regards initiation and/or continuance of a proceeding, on the one
hand, and suspension thereof, on the other. Whereas in the former case the
statutory impact would be automatic, in the latter the court is required to apply its
mind having regard to facts and circumstances of each case, Morgan Securities
& Credit (P) Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642.
► Bar of suit under S. 22(1) [as amended in (1994)] against guarantors of the
sick company for recovery of money does not extend to recovery proceedings
against the guarantors under S. 3, U.P. Public Moneys (Recovery of Dues) Act,
1972, Kailash Nath Agarwal v. Pradeshiya Industrial & Investment Corpn. of
U.P. Ltd., (2003) 4 SCC 305.
► The following proceedings only are automatically suspended under S. 22(1)
of the Act:
(1) Proceedings for winding up of the industrial company;
(2) Proceedings for execution, distress or the like against the properties of the
sick industrial company; and
(3) Proceedings for the appointment of receiver.
► The words ‘or the like’ in the second category have to be construed with
reference to the preceding words, namely, ‘for execution, distress’ which means
that the proceedings which are contemplated in this category are proceedings
whereby recovery of dues is sought to be made by way of execution, distress or
similar proceedings against the property of the company. Proceedings for eviction
instituted by a landlord against a tenant who happens to be a sick industrial
company, cannot, be regarded as falling in this category, Shree Chamundi
Mopeds Ltd. v. Church of South India Trust Assn., (1992) 3 SCC 1.
► Principles specified in Art. 39 of the Constitution must be considered while
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making the construction under this section, Morgan Securities & Credit (P) Ltd. v.
Modi Rubber Ltd., (2006) 12 SCC 642.
► Words “any other law”, occurring in S. 22(1), cover even laws made under
the State List, Tata Davy Ltd. v. State of Orissa, (1997) 6 SCC 669.
► Necessity of passing of order only in terms of scheme is not imperative but,
application of mind on the part of BIFR in relation thereto is necessary, Morgan
Securities & Credit (P) Ltd. v. Modi Rubber Ltd., (2006) 12 SCC 642.
► Taking into consideration object, purpose and nature of SICA 1985 and its
provisions, matters connected with sanctioning and implementation of
rehabilitation/restructuring scheme from date of its presentation or date of its
coming into effect, whichever is earlier, fall exclusively within jurisdiction of BIFR.
In such case, creditor's demand ever if not made part of scheme, would not
merely for that reason stand excluded from BIFR's jurisdiction, which extends to
making changes in instruments, documents, etc. which create rights and liabilities
vis-a-vis sick industrial company and its properties. Any other view, would defeat
the very purpose of SICA 1985, Raheja Universal Ltd. v. NRC Ltd., (2012) 4
SCC 148.
► SICA 1985 is a special law vis-a-vis Transfer of Property Act, 1882, which
is general law and provisions of the former shall prevail over the provisions of the
latter, Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148.
► Sections 22 and 22-A of SICA 1985 primarily ensure that the scheme
prepared by BIFR does not get frustrated because of certain other legal
proceedings and to prevent untimely and unwarranted disposal of the assets of the
sick industrial company. These sections clearly state certain restrictions which will
impact upon the implementation of the scheme as well as on the assets of the
company. These sections operate at different stages and in different fields.
Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148.
► Bar under S. 22(1) is applicable to proceedings which fall under any class
stated in S. 22(1), and have impact of interfering with formulation, consideration,
finalisation or implementation of the scheme, Raheja Universal Ltd. v. NRC Ltd.,
(2012) 4 SCC 148.
► Expression “the like” has to be read “ejusdem generis” to the term
“proceedings”, Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148.
► Power of BIFR under this section extends to making changes in instruments
and documents creating rights and liabilities vis-a-vis Sick Industrial Company,
Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148.
► S. 22(1), SICA does not cover proceedings instituted by landlord of a sick
industrial company for eviction of company premises let out it, Dunlop India Ltd. v.
A.A. Rahna, (2011) 5 SCC 778 : (2011) 3 SCC (Civ) 148.
► Board for Industrial and Financial Reconstruction (BIFR) is a body of
experts. Scheme under Ss. 22 and 22-A empowers the Board to take all such
measures, which are necessary to bring the company out of its sickness and
make it viable on implementation of the scheme framed by the operating agency,
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Nrc Ltd. v. Appellate Authority for Industrial and Financial Reconstruction,

(2011) 6 Mah LJ 873 (Bom).
► Aim of the Board is to make the Company operations viable, Nrc Ltd. v.
Appellate Authority for Industrial and Financial Reconstruction, (2011) 6 Mah LJ
873 (Bom).
► BIFR's jurisdiction to restrain transfer of sick industrial company's
property.—Taking into consideration object, purpose and nature of SICA, 1985
and its provisions, held, matters connected with sanctioning and implementation of
rehabilitation/restructuring scheme from date of its presentation or date of its
coming into effect, whichever is earlier, fall exclusively within jurisdiction of BIFR.
In such case, creditor's demand even if not made part of scheme, held, would not
merely for that reason stand excluded from BIFR's jurisdiction, which extends to
making changes in instruments, documents, etc. which create rights and liabilities
vis-a-vis sick industrial company and its properties. Any other view, held, would
defeat the very purpose of SICA, 1985. Further held, SICA, 1985 is a special law
vis-a-vis TPA, 1882, which is the general law. Hence, provisions of SICA, 1985
shall prevail over provisions of TPA, 1882, Raheja Universal Ltd. v. NRC Ltd.,
(2012) 4 SCC 148 : (2012) 2 SCC (Civ) 339.
► Bar under S. 22(1) — Applicability.—Bar under S. 22(1) is applicable to
proceedings which fall under any class stated in S. 22(1), and have impact of
interfering with formulation, consideration, finalisation or implementation of the
scheme, Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148 : (2012) 2 SCC
(Civ) 339.
► Expression “the like”.—Expression “the like” has to be read “ejusdem
generis” to the term “proceedings”, Raheja Universal Ltd. v. NRC Ltd., (2012) 4
SCC 148 : (2012) 2 SCC (Civ) 339.
► Power of BIFR under — Scope.—Power of BIFR under extends to making
changes in instruments and documents creating rights and liabilities vis-a-vis sick
industrial company, Raheja Universal Ltd. v. NRC Ltd., (2012) 4 SCC 148 :
(2012) 2 SCC (Civ) 339.
► Bar under — Period for which applicable.—Bar under S. 22 is applicable
to the entirety of the period beginning from the inquiry under S. 16 till the
implementation of sanctioned scheme for revival or until BIFR adjudges that net
worth of company has otherwise become positive. During the entirety of that
period SICA grants protection to the company and leaves it to the discretion of
BIFR whether to permit filing and maintaining of suit or other proceedings,
Ghanshyam Sarda v. Shiv Shankar Trading Co., (2015) 1 SCC 298.
► S. 22 — Immunity under.—Immunity under S. 22 is not absolute, KSL &
Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 : (2015) 1 SCC (Civ)
462.
► Debt Recovery and Relief — Recovery of Debts Due to Banks and
Financial Institutions Act, 1993.—Provisions of S. 22 SICA, held, applicable to
Recovery proceedings under Recovery of Debts Due to Banks and Financial
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Institutions Act, 1993. Though proceedings by way of application for recovery

under RDDB Act, 1993 cannot be described as proceedings for execution,
distress or like against properties of industrial company as contemplated under S.
22 SICA, but proceedings under RDDB Act are certainly proceedings which result
in execution and distress against property of industrial company. Therefore, such
proceedings under RDDB Act, 1993 are liable to be construed as proceedings for
execution, distress or like against properties of industrial company attracting
provisions of S. 22 SICA. Non-mention of these recovery proceedings under S.
22 SICA which was enacted in 1985 is simply because RDDB Act, 1993 was not
enacted then, KSL & Industries Ltd. v. Arihant Threads Ltd., (2015) 1 SCC 166 :
(2015) 1 SCC (Civ) 462.
► Debt Recovery and Relief.—Protection under S. 22(1) is available only
against action that comes within ambit of term “suit” as used under S. 22(1).
Proceedings before DRT, held, do not fall within ambit of “suit” as used under S.
22(1). Action if does not fall within ambit of term “suit”, no protection would be
available under S. 22(1). Thus, protection under S. 22(1), held, not available to
Directors and guarantors of sick company against whom recovery proceedings
were filed by Bank before Debts Recovery Tribunal (DRT). Term “suit” in S. 22(1)
applies only to proceedings in civil court and not actions or recovery proceedings
filed by banks and financial institutions before a tribunal such as DRT, Inderjeet
Arya v. ICICI Bank Ltd., (2014) 2 SCC 229.
► Reference made before BIFR.—Winding-up order passed under
Companies Act is not the culmination of winding-up proceedings before Company
Court but is in effect commencement of the process which ultimately would result
in dissolution of company in terms of S. 481, Companies Act. Thus, held,
whenever a reference is made to BIFR under Ss. 15 and 16 of SICA, provisions
of SICA would come into play and they would prevail over provisions of
Companies Act and proceedings under Companies Act must give way to
proceedings under SICA, Madura Coats Ltd. v. Modi Rubber Ltd., (2016) 7 SCC
603.
48
[22-A. Direction not to dispose of assets.—The Board may, if it is of
opinion that any direction is necessary in the interest of the sick
industrial company or creditors or shareholders or in the public interest,
by order in writing, direct the sick industrial company not to dispose of,
except with the consent of the Board, any of its assets—
(a) during the period of preparation or consideration of the
scheme under Section 18; and
(b) during the period beginning with the recording of opinion by
the Board for winding up of the company under sub-section (1)
of Section 20 and up to commencement of the proceedings
relating to the winding up before the concerned High Court.]
► The making of a reference under Section 15 does not ipso facto attract the
restriction on the right of a sick industrial company to dispose of its assets. Such
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a restriction has to be imposed by the Board by a specific order passed under

Section 22-A of the Act and such an order can be passed only after the Board
has considered the matter in accordance with the provisions of Sections 16 and
17 of the Act and passed an order for framing a scheme under Section 18 of the
Act, U.P. State Sugar Corpn. Ltd. v. Karamchari Assn., (1995) 4 SCC 276.
Chapter IV
PROCEEDINGS IN CASE OF POTENTIALLY SICK INDUSTRIAL
COMPANIES, MISFEASANCE PROCEEDINGS, APPEALSAND
MISCELLANEOUS
23. Loss of fifty per cent net worth by industrial companies.—(1) If
the accumulated losses of an industrial company, as at the end of any
financial year (hereinafter referred to as the relevant financial year,
have resulted in erosion of fifty per cent, or more of its peak net worth
49
during the immediately preceding [four] financial years,—
(a) the company shall, within a period of sixty days from the date
(hereinafter referred to as the relevant date) of finalisation of
the duly audited accounts of the company for the relevant
financial year—
(i) report the fact of such erosion to the Board; and
(ii) hold a general meeting of the shareholders of the company
for considering such erosion;
(b) the Board of Directors shall, at least twenty-one days before
the date on which the meeting under sub-clause (ii) of clause
(a) is held, forward to every member of the company a report
as to such erosion and the causes for such erosion;
(c) the company may, by ordinary resolution passed at the
meeting held under clause (a) remove a director (being a
director appointed by the members of the company) and fill the
vacancy created by such removal, so far as may be, in
accordance with the procedure provided in sub-sections (2) to
(6) of Section 284 of the Companies Act, 1956 (1 of 1956).
(2) A director removed under sub-section (1) shall not be entitled to
any compensation or damages for termination of his appointment as
director or of any appointment terminating with that as director.
(3) If default is made in complying with the provisions of this
section, every director or other officer of the company who is in default
shall be punishable with imprisonment which shall not be less than six
months but which may extend to two years and with fine.
► Potentially sick industrial undertaking submitting report to the Board under
S. 23 cannot be restrained by the Board from selling its assets, U.P. State Sugar
Corpn. Ltd. v. Karamchari Assn., (1995) 4 SCC 276.
50
[23-A. Proceedings on report, etc. of loss of fifty per cent net
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worth.—(1) Without prejudice to the provisions of clause (a) of sub-

section (1) of Section 23, the Central Government or the Reserve Bank
or a State Government or a public financial institution or a State-level
institution or a scheduled bank may, if it has sufficient reasons to
believe that the accumulated losses of any industrial company have
resulted in erosion of fifty per cent or more of its peak net worth during
the immediately preceding four financial years, report the fact of such
erosion to the Board.
(2) If the Board has, upon information received or upon its own
knowledge, reason to believe that the accumulated losses of any
industrial company have resulted in erosion of fifty per cent or more of
its peak net worth during the immediately preceding four financial
years, it may call for such information from that company as it may
deem fit.
(3) Where the Board is of the opinion that an industrial company
referred to in sub-section (1) is not likely to make its net worth exceed
its accumulated losses within a reasonable time while meeting all its
financial obligations and that the company as a result thereof is not
likely to become viable in future, it may require by order an operating
agency to inquire into and make a report with respect to such matters
as may be specified in the order.
(4) After consideration of the report of the operating agency, the
Board may publish or cause to be published a notice in such daily
newspapers as the Board may consider necessary, for suggestions and
objections, if any, within such period as the Board may specify, as to
why the company should not be wound up.
(5) Where the Board, after consideration of the relevant facts and
circumstances and after giving an opportunity of being heard to all
concerned parties, is of the opinion that the industrial company is not
likely to make its net worth exceed the accumulated losses within a
reasonable time while meeting all its financial obligations and that the
company as a result thereof, is not likely to become viable in future and
that it is just and equitable that the company should be wound up, the
Board may record and forward its opinion to the concerned High Court
in relation to the company as if it were a sick industrial company and
the provisions of sub-sections (2), (3) and (4) of Section 20 shall apply
accordingly.
23-B. Power of Board to call for periodic information.—On receipt of a
report under sub-clause (i) of clause (a) of sub-section (1) of Section
23 or under sub-section (1) of Section 23-A or upon information or its
own knowledge under sub-section (2) of Section 23-A, the Board may
call for any periodic information from the company as to the steps
taken by the company to make its net worth exceed the accumulated
losses and the company shall furnish such information.]
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24. Misfeasance proceedings.—(1) If, in the course of scrutiny or

implementation of any scheme or proposal, it appears to the Board that
any person who has taken part in the promotion, formation or
management of the sick industrial company or its undertaking,
including any past or present director, manager or officer or employee
of the sick industrial company—
(a) has misapplied or retained, or become liable or accountable
for, any money or property of the sick industrial company; or
(b) has been guilty of any misfeasance, malfeasance or non-
feasance or breach of trust in relation to the sick industrial
company,
the Board may, by order, direct him to repay or restore the money or
property or any part thereof, with or without interest, as it thinks just,
or to contribute such sum to the assets of the sick industrial company
or the other person entitled thereto by way of compensation in respect
of the misapplication, retainer, misfeasance or breach of trust, as the
Board thinks just and also report the matter to the Central Government
for any other action which that Government may deem fit.
(2) If the Board is satisfied on the basis of the information and
evidence in its possession with respect to any person who is or was a
director or an officer or other employee of the sick industrial company,
that such person by himself or along with others had diverted the funds
or other property of such company for any purpose other than a bona
fide purpose of the company or had managed the affairs of the
company in a manner highly detrimental to the interests of the
company, the Board shall, by order, direct the public financial
institutions, scheduled banks and State-level institutions not to
provide, during a period of ten years from the date of the order, any
financial assistance to such person or any firm of which such person is a
partner or any company or other body corporate of which such person is
a director (by whatever name called).
(3) No order shall be made by the Board under this section against
any person unless such person has been given an opportunity for
making his submissions.
(4) This section shall apply notwithstanding that the matter is one
for which the person may be criminally liable.
25. Appeal.—(1) Any person aggrieved by an order of the Board
made under this Act may, within forty-five days from the date on which
a copy of the order is issued to him, prefer an appeal to the Appellate
Authority:
Provided that the Appellate Authority may entertain any appeal after
the said period of forty-five days but not after sixty days from the date
aforesaid if it is satisfied that the appellant was prevented by sufficient
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cause from filing the appeal in time.

(2) On receipt of an appeal under sub-section (1), the Appellate
Authority may, after giving an opportunity to the appellant to be heard,
if he so desires, and after making such further inquiry as it deems fit,
51
confirm, modify or set aside the order appealed against [or remand
the matter to the Board for fresh consideration].
► Once an appeal is filed against rejection of reference under S. 15 by BIFR
and is pending under the Sick Industrial Companies (Special Provisions) Act, the
bar under S. 22 of the Sick Industrial Companies (Special Provisions) Act is
attracted, Cmm Ltd. v. Municipal Corpn. of Greater Bombay, (2005) 1 Mah LJ
224.
26. Bar of jurisdiction.—No order passed or proposal made under this
Act shall be appealable except as provided therein and no civil court
shall have jurisdiction in respect of any matter which the Appellate
Authority or the Board is empowered by, or under, this Act to
determine and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in pursuance of
any power conferred by or under this Act.
► SICA being a special statute and a subsequent legislation, it will override the
earlier general statute i.e. Companies Act, 1956 and will prevail over the same in
case of any inconsistency between the two Acts. SICA was enacted to secure the
principles specified in Art. 39 of the Constitution, hence, it should be given
primacy because of its higher public purpose. Thus, the jurisdiction of a Company
Judge of High Court in a case where reference had been made to BIFR would be
subject to the provisions of SICA. Under S. 26 of SICA, jurisdiction of civil court is
barred in respect of any matter for which BIFR/AAIFR is empowered. Although
High Court may not be a civil court, its jurisdiction in a case of this nature is
limited, Tata Motors Ltd. v. Pharmaceutical Products of India Ltd., (2008) 7 SCC
619.
27. Delegation of powers.—The Board may, by general or special
order, delegate, subject to such conditions and limitations, if any, as
may be specified in the order, to any Member or Secretary or other
officer or employee of the Board or other person authorised by the
Board to manage any industrial company or industrial undertaking or
any operating agency, such powers and duties [except the powers and
duties under sub-sections (2) and (4) of Section 16, Section 17, sub-
sections (3) and (4) of Section 19, sub-sections (1) and (4) of Section
20, sub-section (3) of Section 22 and Section 24] under this Act as it
may deem necessary.
28. Returns and information.—(1) The Board shall furnish from time
to time to the Central Government such returns as the Central
Government may require.
(2) The Board may, for the purpose of efficient discharge of its
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functions under this Act, collect from, or furnish to,—

(a) the Central Government,
(b) the Reserve Bank,
(c) the scheduled bank or any other bank,
52
(d) the public financial institution, [* * *]
53
(e) the State-level institution, [or]
54
[(f) the sick industrial company and, in case of amalgamation,
the other company,]
such information as it may consider useful for the purpose in such
manner and within such time as it may think fit.
29. Power to seek the assistance of Chief Metropolitan Magistrate and
District Magistrate.—(1) The Board or any operating agency, on being
directed by the Board may, in order to take into custody or under its
control all property, effects and actionable claims to which a sick
industrial company is or appears to be entitled, request, in writing, the
Chief Metropolitan Magistrate or the District Magistrate within whose
jurisdiction any property, books of account or any other documents of
such sick industrial company be situate or be found, to take possession
thereof, and the Chief Metropolitan Magistrate, or the District
Magistrate, as the case may be, shall, on such request being made to
him,—
(i) take possession of such property, books of account or other
documents; and
(ii) cause the same to be entrusted to the Board or the operating
agency.
(2) For the purpose of securing compliance with the provisions of
sub-section (1), the Chief Metropolitan Magistrate or the District
Magistrate may take or cause to be taken such steps and use or cause
to be used such force as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District
Magistrate done in pursuance of this section shall be called in question
in any court or before any authority on any ground whatsoever.
30. Protection of action taken in good faith.—No suit or other legal
proceeding shall lie against the Board or the Appellate Authority or the
Chairman or any other Member, officer or other employee of the Board
or the Appellate Authority, or operating agency or any other person
authorised by the Board or the Appellate Authority to discharge any
function under this Act for any loss or damage caused or likely to be
caused by any action which is in good faith done or intended to be done
in pursuance of this Act.
NOTES
Good faith.—The term ‘good faith’ has been defined differently in
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different enactments. In Section 3(22) of the General Clauses Act,

1897 ‘good faith’ is defined thus:“a thing shall be deemed to be done
in ‘good faith’ where it is in fact done honestly, whether it is done
negligently or not.” In Section 52, IPC, ‘good faith’ is defined
thus:“Nothing is said to be done or believed in good faith which is done
or believed without due care and attention.”
31. Saving of pending proceedings.—Where a receiver or an official
liquidator has been appointed in any proceeding pending immediately
before the commencement of this Act, in any High Court for winding up
of an industrial company such proceeding shall not abate but continue
in that High Court 55[and no proceeding in respect of such industrial
company shall lie or be proceeded with further before the Board].
32. Effect of the Act on other laws.—(1) The provisions of this Act
and of any rules or schemes made thereunder shall have effect
notwithstanding anything inconsistent therewith contained in any other
law except the provisions of the Foreign Exchange Regulation Act, 1973
(46 of 1973), and the Urban Land (Ceiling and Regulation) Act, 1976
(33 of 1976), for the time being in force or in the Memorandum or
Articles of Association of an industrial company or in any other
instrument having effect by virtue of any law other than this Act.
(2) Where there has been under any scheme under this Act an
amalgamation of a sick industrial company with another company, the
provisions of Section 72-A of the Income Tax Act, 1961 (43 of 1961),
shall, subject to the modifications that the power of the Central
Government under that section may be exercised by the Board without
any recommendation, by the specified authority referred to in that
section, apply in relation to such amalgamation as they apply in
relation to the amalgamation of a company owning an industrial
undertaking with another company.
56
(3) [* * *]
► Provisions of the Act should be interpreted keeping in mind the object of the
Act as stated in its Preamble, KSL and Industries Ltd. v. Arihant Threads Ltd.,
(2008) 9 SCC 763.
► Special Court (Trial of Offences Relating to Transactions in Securities) Act,
1922, Section 13 will prevail over Sick Industrial Companies (Special Provisions)
Act, 1985, Section 32, Solidaire India Ltd. v. Fairgrowth Financial Services Ltd.,
(2001) 3 SCC 71.
33. Penalty for certain offences.—(1) Whoever violates the provisions
of this Act or any scheme, or any order of the Board, or the Appellate
Authority and whoever makes a false statement or gives false evidence
to the Board or the Appellate Authority, shall be punishable with simple
imprisonment for a term which may extend to three years and shall
also be liable to fine.
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57
[(2) No court shall take cognizance of any offence under sub-
section (1) except on a complaint in writing of the Secretary or any
such other officer of the Board or the Appellate Authority or any such
officer of an operating agency as may be authorised in this behalf by
the Board or the Appellate Authority.]
34. Offences by companies.—(1) Where any offence, punishable
under this Act has been committed by a company, every person who, at
the time the offence was committed was in charge of, and was
responsible to, the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly:
Provided that nothing contained in this sub-section shall render any
such person liable to any punishment, if he proves that the offence was
committed without his knowledge or that he had exercised all due
diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where
any offence punishable under this Act has been committed by a
company and it is proved that the offence has been committed with the
consent or connivance of, or is attributable to any neglect on the part
of, any director, manager, secretary or other officer of the company,
such director, manager, secretary or other officer shall also be deemed
to be guilty of that offence and shall be liable to be proceeded against
and punished accordingly.
Explanation.—For the purposes of this section,—
(a) “company” means any body corporate and includes a firm or
other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.
► Natural persons are made vicariously liable for an offence when it is
established that the offence was committed by a company and these persons had
some means with the crime either because of their connivance with or due to their
criminal negligence which had resulted in its commission, Municipal Corporation,
Delhi v. Bhagwan Dass, 1972 Cri LJ 1433. See also Municipal Corporation, Delhi
v. Deepak Kumar, 1974 FAC 496.
► Every person in charge of conducting the affairs of the company at the time
of offence under Prevention of Food Adulteration Act, 1954, was committed will be
liable and it is not incumbent that the company and the partners should be
prosecuted as a condition precedent to the prosecution of the person in charge,
Public Prosecutor v. Boggarapu Pullaiah, 1974 Cri LJ 155. A different view was
taken by the Madras High Court in B.K. Verma v. Corporation of Madras, AIR
1971 Mad 40 : 1971 Cri LJ 60.
► Where a company has been acquitted whatever the reasons for the
acquittal may be, it is not possible to deem any person to be guilty of the offence
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because of his being in charge of the business of the company, Municipal

Corporation, Delhi v. Krishan Chand, 1975 FAC 347.
35. Power to remove difficulties.—If any difficulty arises in giving
effect to the provisions of this Act or the rules, schemes or orders made
thereunder, the Central Government may, by notification, remove the
difficulty:
Provided that no such notification shall be made by the Central
Government after the expiry of a period of three years from the date on
which this Act receives the assent of the President.
36. Power to make rules.—(1) The Central Government may, by
notification, make rules for carrying out the provisions of this Act.
(2) In particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the following
matters, namely:—
(a) the salaries and allowances payable to and other terms and
conditions of service of the Chairman and other Members under
sub-section (7) of Section 6;
(b) the powers which may be exercised and the duties which may
be performed by the Secretary to the Board or the Appellate
Authority under sub-section (1) of Section 8;
(c) the restrictions and conditions subject to which officers and
employees may be appointed to the Board or the Appellate
Authority under sub-section (2) of Section 8;
(d) the salaries and allowances and other conditions of service of
the Secretary and other officers and employees of the Board or
the Appellate Authority under sub-section (3) of Section 8;
(e) the additional matters referred to in sub-section (3) of Section
13;
(f) any other matter which is required to be, or may be
prescribed.
(3) Every rule made under this Act shall be laid, as soon as may be
after it is made, before each House of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session
or in two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive sessions
aforesaid, both Houses agree in making any modification in the rule or
both Houses agree that the rule should not be made, the rule shall
thereafter have effect only in such modified form or be of no effect, as
the case may be; so, however, that any such modification or annulment
shall be without prejudice to the validity of anything previously done
under that rule.
THE SCHEDULE
[See Sections 6(8) and 8(3)]
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Declaration of Fidelity and Secrecy

I, ………………, do hereby declare that I will faithfully, truly and to the
best of my skill and ability, execute and perform the duties required of
me as the Chairman/Member Secretary/other officer or employee of the
Board for the Industrial and Financial Reconstruction/the Appellate
Authority for Industrial and Financial Reconstruction and which properly
relate to the office or position held by me in or in relation to the said
Board/Appellate Authority.
I further declare that I will not communicate or allow to be
communicated to any person not legally entitled thereto any
information relating to the affairs of the Board/Appellate Authority, nor
will I allow any such person to inspect or have access to any books or
documents belonging to or in possession of the Board/Appellate
Authority or the business of any person having any dealing with the
said Board/Appellate Authority.
Signed before me.
Signature
———
1.
Received the assent of the President on January 8, 1986 and published in the Gaz. of India,
Extra., Pt. II, S. 1, dt. 9th Jan., 1986, pp. 1-21.

2.
Given below at p. 3258.

3.
Words “, but does not include a Government company as defined in Section 617 of that
Act” omitted by Act 57 of 1991, S. 2.

4.
Ins. by Act 12 of 1994, S. 2.

5.
Ins. by Act 12 of 1994, S. 2.

6.
Subs. by Act 12 of 1994, S. 2.

7.
Clause (k) omitted by Act 12 of 1994, S. 2.

8.
Subs. by Act 12 of 1994, S. 2.

9.
Subs. by Act 12 of 1994, S. 3.

10.
Subs. by Act 12 of 1994, S. 4.

11.
Ins. by Act 54 of 2002, S. 41 and Sch. (w.e.f. 21-6-2002).

12.
Ins. by Act 12 of 1994, S. 5.

13.
Subs. for “shall” by Act 12 of 1994, S. 5.
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14.
Ins. by Act 12 of 1994, S. 5.

15.
Ins. by Act 12 of 1994, S. 5.

16.
Ins. by Act 12 of 1994, S. 5.

17.
Subs. by Act 12 of 1994, S. 6.

18.
Subs. by Act 12 of 1994, S. 6.

19.
Subs. by Act 12 of 1994, S. 6.

20.
Subs. by Act 12 of 1994, S. 6.

21.
Ins. by Act 12 of 1994, S. 6.

22.
Subs. by Act 12 of 1994, S. 7.

23.
Subs. by Act 12 of 1994, S. 7.

24.
Ins. by Act 12 of 1994, S. 7.

25.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

26.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

27.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

28.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

29.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

30.
Subs. by Act 12 of 1994, S. 7.

31.
Subs. for “industrial company” by Act 12 of 1994, S. 7.

32.
Subs. for “industrial companies” by Act 12 of 1994, S. 7.

33.
‘The words “of the sick industrial company” omitted by Act 12 of 1994, S. 7.

34.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

35.
Subs. for “transferee industrial company” by Act 12 of 1994, S. 7.

36.
Ins. by Act 12 of 1994, S. 7.

37.
Subs. by Act 12 of 1994, S. 7.

38.
Ins. by Act 12 of 1994, S. 7.
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39.
Ins. by Act 12 of 1994, S. 7.

40.
Ins. by Act 12 of 1994, S. 8.

41.
Ins. by Act 12 of 1994, S. 9.

42.
Subs. by Act 12 of 1994, S. 10.

43.
Subs. by Act 12 of 1994, S. 11.

44.
Subs. for “an industrial company” by Act 12 of 1994, S. 11.

45.
Ins. by Act 12 of 1994, S. 12.

46.
Ins. by Act 12 of 1994, S. 12.

47.
Subs. by Act 12 of 1994, S. 12.

48.
Ins. by Act 12 of 1994, S. 13.

49.
Subs. for “five” by Act 12 of 1994, S. 14.

50.
Ins. by Act 12 of 1994, S. 15.

51.
Added by Act 12 of 1994, S. 16.

52.
The word “or” omitted by Act 12 of 1994, S. 17.

53.
Ins. by Act 12 of 1994, S. 17.

54.
Ibid.

55.
Added by Act 12 of 1994, S. 18.

56.
Omitted by Act 12 of 1994, S. 19.

57.
Subs. by Act 12 of 1994, S. 20.

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