Winding up of CLB, BIFR, AAIFR questioned

NEW DELHI: Members of a Parliamentary committee have questioned the move to wind up the Company Law Board, Board for Industrial and Financial Reconstruction, and Appellate Authority for Industrial and Financial Reconstruction and replace them with two tribunals.
Noting that interests of 15 lakh workers were at stake in 1,306 cases relating to sick companies pending at various stages in these bodies, some members of the committee expressed the view that it was desirable to give more teeth to these institutions instead of replacing them by two tribunals.
"The Committee is not convinced with the government''s explanation that BIFR and AAIFR were not effective," the report headed by Pranab Mukherjee said, adding the aim and objective of the Companies (Amendment) Bill 2001 is different from that of Sick Industrial Companies (Special Provisions) Act 1985.
The Companies (Amendment) Bill 2001 proposes to put in place the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) so as to take over the functions that are hitherto performed by the CLB, BIFR, AAIFR and the high courts/district courts in winding up of companies.
Referring to the fallout of winding up of the BIFR, in particular, a section of members of the committee said: "BIFR should be provided with more teeth as cases pending with it would be abated leading to serious socio-economic problems".
Responding to the issue, the government stated that corporate restructuring, including insolvency and winding up, and dispute resolution for the companies were being handled by many bodies and hence the proposal to have one body (NCLT) that would replace both the BIFR and the CLB.
The government said, referring all matters to one single body would have the advantage of that body being able to give focussed attention to company matters. Besides the body could become a repository of expertise in the area of company law.
The committee noted that a section of members was not satisfied with the stand taken by the ministry and reiterated that status quo in regard to SICA might be maintained and the BIFR/AAFIR might be strengthened by plugging the loopholes.
"However, provisions may be made in the present Bill to transfer cases to NCLT for winding up only from BIFR and AAFIR," these members said.
Amongst its other recommendations, the report, tabled in Parliament, said the committee was strongly in favour of devising a mechanism to detect sickness of industries at an early stage.
The government said the Bill would take care of these problems.
On the suggestions to make it obligatory on the part of financial institutions and banks to inform the NCLT about detection of sickness in companies, the government said that might burden the NCLT with a deluge of letters.