n this blog post, Tusharika Bhattacharya, a student, pursuing her Final Level of the Company Secretary Course from the Institute of Company Secretaries of India and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the Labour Law Compliances for Sick Industrial Companies (SICA).
What is SICA?
An act to make in public interest, special provisions to secure the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto.
Checklist
Applicability Of The Act:
(1) This Act may be called the Sick Industrial Companies (Special Provisions) Act, 1985.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision of this Act to the commencement of this Act shall be construed as a reference to the commencement of that provision.
(4) It shall apply, in the first instance, to all the scheduled industries other than the scheduled industry relating to ships and other vessels drawn by power.
(5) The Central Government may, in consultation with the Reserve Bank of India, by notification, apply the provisions of this Act, on and from such date as may be specified in the notification, to the scheduled industry relating to ships and other vessels drawn by power.
Section 4: Establishment Of Board
With effect from such date as the central government , by, notification , appoint, there shall be established a board to be known as the Board of Industrial and Financial Reconstruction” to exercise the jurisdiction and powers and discharge the functions and duties conferred or imposed on the Board by or under this Act.
(2) The Board shall consist of a Chairman and not less than two and not more than fourteen other Members, who are to be appointed by the Central Government.
(3) The Chairman and other Members of the Board shall be persons who are or have been or are qualified to be High Court Judges, or persons of ability, integrity and standing who have special knowledge of, and professional experience of not less than fifteen years in science, technology, economics, banking industry, law, labour matters, industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in which, would in the opinion of the Central Government be useful to the Board
Section 5: Constitution of Appellate Authority
(1) The Central Government may, by notification, constitute, with effect from such date as may be specified therein, an appellate authority to be called the “Appellate Authority for Industrial and Financial Reconstruction” consisting of a Chairman and not more than three other Members, to be appointed by that Government, for hearing appeals against the orders of the Board under this Act.
(2) The Chairman shall be a person who is or has been a Judge of the Supreme Court or who is or has been a Judge of a High Court for not less than five years.
(3) A Member of the Appellate Authority shall be a person who is or has been a Judge of a High Court or who is or has been an officer who is not below the rank of a Secretary to the Government of India or who is or has been a Member of the Board for not less than three years.
Section 6: Term Of Office, Conditions Of Service, Etc., Of Chairman And Other Members
(1) Before appointing any person as the Chairman or other member, the Central Government shall satisfy itself that the person does not and will not, have any such financial or other interest as is likely to affect prejudicially his functions as a member.
(2) The chairman and every other member shall hold office for such period, not exceeding five years, as may be specified by the Central Government in the order of his appointment, but shall be eligible for reappointment: Provided that no person shall hold office as the chairman or other member after he has attained the age of sixty-five years.
(3) Notwithstanding anything contained in sub-section (1) a Member may— (a) by writing under his hand and being addressed to the Central Government resign his office at any time; (b) may be removed from his office in accordance with the provisions of section 7.
(4) A vacancy which is caused by the resignation or removal of the Chairman or any other member under sub-section (3) or otherwise shall be filled by fresh appointment.
(5) In the event of an occurrence of a vacancy in the office of the chairman by reason of his death, resignation or otherwise, such one of the Members, as the Central Government may, by notification, authorise in this behalf shall act as the chairman till the date on which a new Chairman, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
The salaries and allowances payable to and the other terms and conditions of service of the chairman and other members shall be such as may be prescribed:
(8) The Chairman and every other Member shall before entering upon his office, make a declaration of fidelity and secrecy in the form set out in the Schedule.
(9) The Chairman or any other Member ceasing to hold office as such shall not hold any appointment or be connected with the management or administration in any company in relation to which any matter has been the subject-matter of consideration before the Board, or as the case may be, the Appellate Authority, for a period of five years from the date on which he ceased to hold such office.
Section 8: Secretary, Officers, And Other Employees Of ‘Board Or Appellate Authority
(1) The Central Government shall appoint a Secretary to the Board and a Secretary (by whatever name called) to the Appellate Authority to exercise and perform, under the control of the Chairman, such powers and duties as may be prescribed or as may be specified by the Chairman.
(2) The Central Government may provide the Board and the Appellate Authority with such other officers and employees as may be necessary for the efficient performance of the functions of the Board and the Appellate Authority.
(3) The salaries and allowances payable to and the conditions of service of the Secretary and other officers and employees of the Board and the Appellate Authority shall be such as may be prescribed :
Provided that such Secretary, officer or other employee shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Schedule.
Section 13: Procedure Of Board and Appellate Authority
1) Subject to the provisions of this Act, the Board, or, as the case may be, the Appellate Authority, shall have powers to regulate –
(a) the procedure and conduct of the business;
(b) the procedure of the Benches, including the places at which the sittings of the Benches shall be held;
(c) the delegation to one or more members of such powers or functions as the Board or, as the case may be, the Appellate Authority may specify.
(2) In particular and without prejudice to the generality of the foregoing provisions, the powers of the Board, or, as the case may be, the Appellate Authority, shall include the power to determine the extent to which persons interested or claiming to be interested in the subject-matter of any proceeding before it may be allowed to be present or to be heard, either by themselves or by their representatives or to cross-examine witnesses or otherwise to take part in the proceedings.
(3) The Board or the Appellate Authority shall, for the purposes of any inquiry or for any other purpose under this Act, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying suits in respect of the following matters, namely :-
(a) the summoning and enforcing the attendance of any witness and examining him on oath;
(b) the discovery and production of document or other material object producible as evidence;
(c) the reception of evidence on affidavit;
(d) the requisitioning of any public record from any court or office;
(e) the issuing of any commission for the examination of witnesses;
(f) any other matter which may be prescribed.
Section 15: Reference to Board
(1) Where an industrial company has become a sick industrial company, the Board of Directors of the Company, shall, within sixty days from the date of finalization of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company :
Provided that if the Board of Directors had sufficient reasons even before such finalization to form the opinion that the company had become a sick industrial company, the Board of Directors shall, within sixty days after it has formed such opinion, make a reference to the Board for the determination of the measures which shall be adopted with respect to the company.
(2) Without prejudice to the provisions of sub-section (1), the Central Government or the Reserve Bank or a State Government or a public financial institution or a State level institution or a scheduled bank may, if it has sufficient reasons to believe that any industrial company has become, for the purposes of this Act, a sick industrial company, make a reference in respect of such company to the Board for determination of the measures which may be adopted with respect to such company
Provided that a reference shall not be made under this sub-section in respect of any industrial company by –
(a) the government of any State unless all or any of the industrial undertakings belonging to such company are situated in such State;
(b) a public financial institution or a State level institution or a scheduled bank unless it has, by reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to, such company, an interest in such company.
Section 16: Inquiry Into Working OF Sick Industrial Companies
(1) The Board may make such inquiry as it may deem fit for determining whether any industrial company has become a sick industrial company –
(a) upon receipt of a reference with respect to such company under section 15; or
(b) upon information received with respect to such company or upon its own knowledge as to the financial condition of the company.
(2) The Board may, if it deems necessary or expedient so to do for the expeditious disposal of an inquiry under sub-section (1), require by order any operating agency to enquire into and make a report with respect to such matter as may be specified in the order.
(3) The Board or, as the case may be the operating agency shall complete its inquiry as expeditiously as possible and endeavor shall be made to complete the inquiry within sixty days from the commencement of the inquiry.
Explanation : For the purposes of this sub section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board.
(4) Where the Board deems it fit to make an inquiry or to cause an inquiry to be made into any industrial company under sub-section (1) or, as the case may be, under sub-section (2), it may appoint one or more persons to be a special director or special directors of the company for safeguarding the financial and other interests of the company or in the public interest.
(4A) The Board may issue such directions to a special director appointed under sub-section (4) as it may deem necessary or expedient for proper discharge of his duties.
(5) The appointment of a special director referred to in sub-section (4) shall be valid and effective notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force or in the memorandum and articles of association or any other instrument relating to the industrial company, and any provision regarding share qualification, age limit, number of directorships, removal from office of directors and such like conditions contained in any such law or instrument aforesaid, shall not apply to any director appointed by the Board.
(6) Any special director appointed under sub-section (4) shall –
(a) hold office during, the pleasure of the Board and shall be removed or substituted by any person by order in writing by the Board;
(b) not incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto;
(c) not be liable to retirement by rotation and shall not be taken into account for computing, the number of directors liable to such retirement;
(d) not be liable to be prosecuted under any law for anything, done or omitted to be done in good faith in the discharge of his duties in relation to the sick industrial company
Section 18: Preparation and Sanction of Schemes
(1) Where an order is made under sub-section (3) of section 17 in relation to any sick industrial company, the operating agency specified in the order shall prepare, as expeditiously as possible and ordinarily within a period of ninety days from the date of such order, a scheme with respect to such company providing for any one or more of the following measures, namely :-
(a) the financial reconstruction of the sick industrial company;
(b) the proper management of the sick industrial company by change in or take over of, management of the sick industrial company;
(c) the amalgamation of –
- the sick industrial company with any other company, or
- any other company with the sick industrial company (hereafter in this section, in the case of sub-clause (i), the other company, and in the case of sub-clause (ii), the sick industrial company, referred to as ‘transferee company’);
(d) the sale or lease of a part or whole of any industrial undertaking of the sick industrial company;
(da) the rationalization of managerial personnel, supervisory staff and workmen in accordance with law;
(e) such other preventive, ameliorative and remedial measures as may be appropriate;
(f) such incidental, consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified in clauses (a) to (e).
