SICA full form in English is the Sick Industrial Companies Act. It is an Indian law which was enacted in 1985 for detecting unviable or sick companies that could pose systematic financial risk owing to industrial undertakings and to provide aid with their revival if possible or with their closure if not. This was done to release investments locked up in unviable companies for productive use elsewhere. The full form of SICA in Hindi is बीमार औद्योगिक कंपनियों (विशेष प्रावधान) अधिनियम.
SICA defined a sick industrial unit as one which had existed for at least five years and incurred an accumulation of losses equal to or exceeding its total net worth at the end of any financial year cycle. In 2003, SICA was repealed and replaced with the Sick Industrial Companies (Special Provisions) Repeat Act of 2003. It helped water down some aspects of the original ACT and also helped in fixing some problematic factors. In 2016, SICA was fully repealed as some of its provisions overlapped with the provisions of a separate Act, which was the Companies Act of 2013.
The SICA has been enacted in the public’s interest to deal with problems relating to industrial sickness and rectify them. A body of experts took enforcement of preservative and remedial measures. The measures were mainly financial restructuring, legal and managerial. The genesis of SICA is described below :
- From the pre-independence days, Industrial sickness was present.
- The government had taken ad-hoc measures to counter the sickness.
- Nationalisation of banks and other measures provided temporary relief to the problem. The Reserve Bank of India (RBI) then monitored industrial sickness.
- In 1975, a study group, which came to be known as the Tandon Committee, was appointed by the RBI,
- H.N.Ray committee was appointed in 1976.
- The Tiwari Committee was appointed in 1981 to provide suggestions on comprehensive special legislation designed to deal with the problem of sickness and lay down the basic objectives and, parameters, remedies necessary for the revival of a sick unit.
- The committee submitted its report in September 1983 to the Government and suggested the need for special legislation and the need to set up an exclusive quasi-judicial body.
- In 1985 SICA came into existence, and BIFR-its quasi-judicial body started functioning in 1987.
The SICA identified several internal and external factors responsible for the condition. Internal factors inside the organisation included mismanagement, poor project implementation, overestimated demand, personal extravagance, wrong location, unwarranted expansion, poor labour management relationship etc. External factors included raw materials shortage, infrastructure bottlenecks, inadequate credit facilities, technological changes, global market forces etc.
Widespread industrial sickness can impact the economy in a number of ways. It can cause loss of government revenues, increased non-performing assets held by financial units and banks, tying up scarce resources in sick units, poor productivity and loss of production. As a means of rectifying these socio-economic consequences, SICA was implemented.
As a part of the SICA, two quasi-judicial bodies were established. These are the Appellate Authority for Industrial (AAIFR ) and Financial Reconstruction and the Board for Industrial and Financial Reconstruction( BIFR). Set up in January 1987, the main function of the BIFR was to spearhead the handling of the industrial sickness issue, including the rehabilitation and revival of potentially sick units and liquidation of non-viable companies. On the other hand, it became functional on 15th May 1987 AAIFR was constituted in April 1987 for hearing appeals against the BIFR orders.
SICA applies to companies both in the private and public sectors, owing to the below-mentioned industrial undertaking :
- For industries specified in the First Schedule to the Industries (Development and Regulation ) Act, 1985 ( IDR Act), excluding industries related to ships and other vessels of power
- Not being “Small scale industrial undertakings or ancillary industrial undertakings as is defined in the IDR Act, Section 3(i).
- The criteria for determining sickness in an industrial company are (i)The accumulated losses of the company should be equal to or more than its total net worth, that is its paid-up capital along with its free reserves. (ii)Completion of five years of the Companies ACt of 1956.(iii) It should have at least 50 workers on any day of the 12 months prior to the financial year in which sickness has been claimed. the ending of the financial year, with reference to which sickness is claimed. (iv) The company should have a factory licence.
Repeal of SICA
In 2003, SICA was repealed and replaced by the Sick Industrial Companies (Special Provisions) Repeal Act. It helped dilute some of SICA’s provisions and plugged certain loopholes. One of the main changes in the new act was that apart from dealing with industrial sickness, the
Sick Industrial Companies (Special Provisions) Repeal Act aimed to reduce its growth by ensuring that companies did not resort to a sickness declaration just to escape legal obligations and gain access to financial institutions’ concessions.
On December 1, 2016, the repeal of SICA came into full effect. It was fully repealed as some of its provisions overlapped with the Companies Act of 2013. The Companies Act included the creation of the NCLT ( National Company Law Tribunal) and the NCLAT ( National Company Appellate Tribunal). The NCLT can hear cases relating to the management of the company, rehabilitation of companies, and mergers, among other issues.
Faqs on SIFA
Here are a few commonly asked questions on SICA
Q.What is the full form of SICA?
A.The full form of SICA in English is the Sick Industrial Companies Act. It was established in 1985 for secure timely detection of sick and potentially sick companies and fast determination and enforcement of remedies by a body of experts. The full form of SICA in Hindi is बीमार औद्योगिक कंपनियों (विशेष प्रावधान) अधिनियम.
Q.Name any two criteria for determination of sickness under SICA?
A.Two criteria for determining industrial sickness under SICA 1985 are: (i)The accumulated losses of the company should be equal to or more than its total net worth, which means that its paid-up capital in addition to its free reserves. (ii)After incorporation under the Companies Act,1956, the company should have completed five years.
Q. What were the two bodies established under SICA
A. As a part of SICA, two quasi-judicial bodies were established. These are the AAIFR (Appellate Authority for Industrial and Financial Reconstruction) and the BIFR ( Board for Industrial and Financial Reconstruction). Both BIFR and AAIFR started functioning in 1987.
Q. When and why was SICA repealed?
A. In 2003, SICA was repealed and replaced by the Sick Industrial Companies (Special Provisions) Repeal Act. It helped dilute some of SICA’s provisions and plugged certain loopholes. Then in 2016, it was repealed as it had some of its provisions overlapped with the Companies Act of 2013.
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