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Cabinet to take up insolvency law today

Our Bureau

NEW DELHI, Aug. 15

THE period of uncertainty might just get over for the doctors for sick companies, the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), with the proposed law for inso lvency expected to come up in the Cabinet on Thursday.

The Government has decided to introduce a Companies (Amendment) Bill to provide for a new Insolvency Law broadly based on the recommendations of the Mr Justice V. Balakrishna Eradi Committee on Insolvency Law.

Consequently, the BIFR which was set up under the Sick Industrial Companies Act (SICA), to preside over the revival, restructuring or winding up of sick companies 15 years ago, is to be finally liquidated. Along with it, Appellate Authority for Industria l and Financial Reconstruction (AAIFR) will also be wound up.

It is understood that the Bill has proposed the setting up of a National Company Law Tribunal (NCLT) which among other things, would handle matters relating to insolvency and sickness, according to sources. The setting up of the NCLT was suggested by the Eradi Committee.

The Committee, which had proposed the repeal of SICA, had not only suggested that matters pending before BIFR be brought under the NCLT, but also that all matters pending with the Company Law Board (CLB) and the various company law benches of High Courts be transferred to the Tribunal.

On objections raised by the Ministries of Labour and Industry, the Law Ministry is confident of all doubts being cleared. The Labour Ministry wanted provisions to the effect that the workers' dues be settled immediately after the unit is declared insolve nt and not after the case is settled.

The Industries Ministry has been objecting to all companies being forced to contribute 0.1 per cent of the annual turnover towards reviving and rehabilitating the sick companies. In fact, the Chambers of Commerce have also been stating that ``This may no t be desirable. The charge is not against profits but against turnover which will put an extra burden for newly set up companies.''

According to Law Ministry sources the Ministry is open to further diluting the provisions.