MPs panel buying time to keep SICA alive

NEW DELHI: There''s no such thing as smooth sailing for lender''s rights. Even while banks and financial institutions have been slapping notices by the truckload on recalcitrant borrowers under the provisions of the securitisation ordinance in the hope of recovering their dues quickly, parliamentarians have been trying to see how the Sick Industries Companies Act (SICA) can be kept alive.
In the last two days, the standing committee on finance has quizzed officials, bankers and heads of FIs on the need to repeal SICA.
The committee is presently examining the SICA repeal bill, which would pave way for the scrapping of the BIFR as well as allow the introduction of a new insolvency law and the setting up of a dedicated company’s court called the National Company Law Tribunal through the Companies Amendment Bill.
Predictably, the committee seems to be split on party lines, with Congress members favouring the continuation of SICA, while the BJP and BJP coalition members trying to push for its repeal. According to sources present at the meeting, Congress members feel there’s no need to repeal SICA, “since it’s a bill introduced by us and is working fine.�
The NDA members, on the contrary would like SICA to go, now that the more tougher securitisation law is in place through the Ordinance.
The division on party lines apart, a sound reason put forth by the Congress for the retention of SICA seems to be that the statutes should have an enabling provision, in case there’s a change in approach and the government wants to revert back to revival of units.
The problem with this course is that with the retention of SICA, BIFR cannot be scrapped. Also, the new insolvency legislation and the proposed National Company Law Tribunal would become redundant.
Under the new dispensation under consideration, BIFR, CLB and MRTPC would be subsumed into the NCLT, making it a dedicated company’s court.
The main difference between SICA and the securitisation Ordinance is that while the former requires corporate restructuring to precede winding up and recovery of the lender''s dues, the latter empowers lender to start recovery process on default of loans repayments, without winding the company up.
Central to SICA is the philosophy that units cannot be permitted to die without making an attempt at revival.