SICK INDUSTRIAL COMPANIES SPECIAL PROVISIONS ACT, 1985
(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 date1 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
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."
(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;
(d) “Company” means a company as defined in section 3 of the Companies Act, 1956 (1 of 1956), 1[***];
2[(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;]
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(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
(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.
(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
(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 claus
(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."
1[(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,
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.
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."
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)."
(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.
1[(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
(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
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)."
(1) When 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 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:
1[Provided further that no reference shall be made to the
(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.
(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 inquir
(1) If after making an inquiry under section 16, the Board is 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 1[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 1[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 company as it may deem fit to 1[make its net worth exceed the accumulated losses.]
(3) If the Board decides under sub-section (1) that it is not practicabl
(1) Where an order is made under sub-section (3) of section 17 in relation to any sick 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:—
1[(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;
2[(c) the amalgamation of—
(i) the sick industrial company with any other company, or
(ii) any other company with the sick industria
(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 therein as
(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
1[(1) Where the Board, after making inquiry under section 16 and after consideration of all the 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).
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Where 2[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 2[a company], 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 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.]
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1. Ins. by Act 12 of 1994, sec.
(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 thereof 2[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
Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) provides a statutory mechanism to suspend legal proceedings against a sick industrial company registered before the Board for Industrial and Financial Reconstruction (BIFR). Its primary purpose is to facilitate the rehabilitation process by preventing coercive measures that could hinder revival efforts.
Section 22 of the SICA plays a crucial role in balancing the interests of creditors and the revival of sick companies by suspending coercive legal proceedings during the rehabilitation process. While it provides broad protection, its scope is subject to procedural compliance and judicial interpretation to prevent misuse and ensure that legitimate claims are not unduly delayed. The overriding intent is to facilitate industrial revival while safeguarding statutory and contractual rights within the framework of the law.
Note: This commentary synthesizes multiple judicial pronouncements and authoritative interpretations to provide a comprehensive understanding of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.
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 23A or upon information or its own knowledge under sub-section (2) of section 23A, 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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1. Ins. by Act 12 of 1994, sec. 15 (w.e.f. 1-2-1994).
(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 the company as it may deem fit.
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(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 during the immediately 1[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
(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 pass 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 industria
(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 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, confirm, modify or set aside the order appealed against 1[or remand the matter to the Board for fresh consideration].
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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.
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.
(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 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,
(d) the public financial institution, 1[***]
(e) the State-level institution, 2[or]
3[(f) the sick industrial company and in case of amalgamation, the other company,]
such information as it may consider useful for the pur
(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 accounts or other documents; and
(ii) cause the same to be entrusted to the Board or the operating agency.
(2) For the purpose of securi
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.
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 1[and no proceeding in respect of such industrial company shall lie or be proceeded with further before the Board].
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1. Added by Act 12 of 1994, sec. 18 (w.e.f. 1-2-1994).
(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 72A 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 the Central Government under that section may be exercised by the
(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."
1[(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.]
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1. Subs. by Act 12 of 1994, sec. 20, for sub-section (2) (w.e.f. 1-2-19
(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 co
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.
(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 sectio
THE SCHEDULE
[See sections 6(8) and 8(3) ]
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 ha
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