RBI wants Sica and BIFR revoked
Mumbai: The Reserve Bank of India’s advisory group has called for setting up of bankruptcy institutions, repeal of the Sick Industrial Company (Special Provisions) Act (Sica) and abolition of the Board for Industrial & Financial Reconstruction (BIFR).

The group while reevaluating bankruptcy laws has suggested that if a company fails to pay debt of not less than Rs 1 lakh, on the claim being due, as soon as the payment is asked for - the bankruptcy proceedings will immediately be operative.
The group says that the cases pending before BIFR should be transferred to the bankruptcy court.

The group’s other suggestions are that the bankruptcy court should appoint the trustee from professional bodies like chartered accountant firms, law firms, cost accountants, etc.

The role of the trustee (bankruptcy institution) will be as administrator and regulator to the bankrupt entity. It also said that office of the official liquidator should be closed and the trustee should exercise all powers and functions.

Further there should be special provisions for bank and financial institutions providing for a compulsory moratorium system, appointment of trustee on the advice of the RBI and special winding provisions for liquidation as stipulated in the Banking Regulation Act.

In case of institutions with special significance— insurance companies, NBFCs, telecommunication companies— the group suggested that the trustee has to be appointed on the advice of the respective regulatory bodies.

However no different procedure is required for public sector undertakings and government companies.

The corporate bankruptcy code should incorporate provisions relating to reorganisation on renegotiations, corporate insolvency leading to winding up and liquidation and settlement of all other related issues, including cross-border and counter-claim settlement and cross-border corporate insolvency.

At the same time, the panel also recommends that bankruptcy applications can be filed by the borrower or the creditor and the setting up of a comprehensive bankruptcy code on the lines of the US bankruptcy code.

The group, chaired by NL Mitra, director, Centre for Business Law Studies, today submitted its report to YV Reddy, chairman, standing committee on international financial standards and codes and deputy governor, RBI.
Back to News Review index page