Lok Sabha clears Sick Cos Repeal Bill

NEW DELHI: The Lok Sabha on Thursday passed the Sick Industrial Companies (Special Provisions) Repeal Bill, ’03, paving the way for the government to implement the amendments to the Companies Act, 1956, pertaining to insolvency of companies, that had been cleared by the Parliament during the ’02 winter session.
The repeal of the Act will result in the scrapping of the Board for Industrial and Financial Reconstruction and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), and in the creation of National Company Law Tribunal and National Company Law Appellate Tribunal as envisaged in the Companies (Second Amendment) Bill ’02.
The department of company affairs (DCA) has already set up a search panel to identify the members to be nominated to the tribunal. The NCLT is to be set up with a maximum of 62 members and a president, who is qualified to be a judge. The NCLT will subsume the jurisdiction of the Company Law Board and the BIFR. The jurisdiction of High Courts to approve mergers and acquisitions of companies would also be transferred to the new tribunal. The NCLT shall comprise of judicial and technical members.
Replying to a debate on the SICA Repeal Bill, finance minister Jaswant Singh said that the move would help in the expeditious rehabilitation of sick companies, which was not possible under the BIFR regime.
Cases pending with the BIFR were those where 100% net worth of the companies had eroded, Mr Singh said, adding that under the Companies Act, companies with erosion of 50% of its net worth would automatically be referred to the Tribunal.
The company concerned and its board of directors would then have to furnish information and the scheme for rehabilitation.
The minister informed the House that the Companies Act has special provisions to protect workers interests.