ROLE AND FUNCTIONS OF BIFR

NAME : NISHA.V
REG NO : HB20094
COURSE : B.COM LLB (HONS)
SECTION : B
SUBJECT : CORPORATE SECURITISATION

STUDENT SIGN TEACHER SIGN

TABLE
S.NO TOPIC PAGE NO
1. INTRODUCTION 3
2. DEFINITION AND 4
FEATURES
3. WHAT IS BIFR 5
4. WHO ESTABLISHED 6
BIFR
5. WHY BIFR 7
ESTABLISHED
6. ROLES OF BIFR 8
7. FUNCTIONS OF BIFR 9-10
8. MEMBERS OF BIFR 11
9. ACHIEVEMENT OF 12
BIFR
10. LIMITATION OF BIFR 13
11. CONCLUSION 14
12. REFERENCES 15
 ROLES AND FUNCTIONS OF BIFR

INTRODUCTION
You cannot have development in today’s world without partnering

with private sector” – Hillary Clinton. It is a known fact that the

private sector drives any nation’s economy and as a result every

developing and developed nation promotes business friendly

infrastructure and policies. The other side of the coin is that many

private sector companies fail to achieve their target and often go

bankrupt. This phenomenon is present in every industry of the world

and is known as industrial sickness and concerned companies are

known as sick companies. In India the government brought legislation

to regulate and to provide relief to sick companies and look for a

permanent solution, bank nationalisation in 1969 was one of such

measures to build confidence in the economy but it failed to keep its

charm and ultimately lost meaning in the ever changing business

landscape of the country. Over time the need for specialised

regulations were felt.

Definition
The word ‘sick industrial company’ finds its mention in Section
2(o) of the Act and it is defined as “an industrial company (being a
company registered for not less than five years) which has at the end
of any financial year accumulated losses equal to or exceeding its
entire net worth”.

Features

 The SICA Act, 1985 established two new bodies for handling
sick companies and helping in their rehabilitation. These
bodies are:

1. Board of Industrial and Financial Reconstruction (BIFR).

2. Appellate Authority for Industrial and Financial
Reconstruction (AAIFR)

 The BIFR was established with a sole objective of

rehabilitation and reconstruction of sick companies and
release of public funds sunk in those companies into the open
market. The Board consisted of a chairman and two to
fourteen other members. The Act placed an obligation on the
board of the sick industries to report its sickness to the BIFR
and the BIFR was given powers to investigate the correctness
of such claims.
 If the board found it to be sick it would have given the
concerned company a reasonable time to come up with a
rehabilitation plan and execute it or it could have taken other
measures such as taking over the management of the
company, merging sick units with a healthy one or if the
company is beyond saving, recommend it’s liquidation.

What is the Board for Industrial and Financial Reconstruction?

The Board for Industrial and Financial Reconstruction (BIFR) is a
statutory body set up under the Sick Industrial Companies (Special
Provisions) Act, 1985 in India. Its main function is to provide
financial and operational restructuring of sick industrial companies
and to revive and rehabilitate them. A sick industrial company is
defined as a company that has been unable to pay its debts as and
when they become due and payable and whose net worth has become
negative. The BIFR is responsible for declaring a company as a sick
industrial company and for issuing directions for the management of
such a company. It has the power to supersede the board of directors
of a sick industrial company and to appoint a new board to manage
the affairs of the company.

The BIFR is headquartered in New Delhi and is headed by a

Chairman, who is appointed by the Central Government of India. It
consists of a panel of experts in the fields of finance, industry, and
law, and is assisted by a Secretariat. The BIFR is empowered to pass
orders on various matters related to the financial and operational
restructuring of sick industrial companies, including the sale or
transfer of assets, the merger or amalgamation of companies, the
alteration of the memorandum and articles of association of a
company, and the closure or dissolution of a company. The BIFR's
orders are binding on the sick industrial company and all other parties
concerned.
Who established the Board for Industrial and Financial
Reconstruction?

The Board for Industrial and Financial Reconstruction (BIFR) was

established under the Sick Industrial Companies (Special Provisions)
Act, 1985 in India. The Act was enacted by the Parliament of India
with the objective of providing for the rehabilitation and revival of
sick industrial companies and for matters connected therewith or
incidental thereto. The Act provides for the setting up of the BIFR and
empowers it to take various measures to financially and operationally
restructure sick industrial companies and to revive and rehabilitate
them. The BIFR is a statutory body, which means that it has been
established by an act of Parliament and its powers and functions are
prescribed by law.
Why was the Board for Industrial and Financial Reconstruction
established?

The Board for Industrial and Financial Reconstruction (BIFR) was

established under the Sick Industrial Companies (Special Provisions)
Act, 1985 in India with the objective of providing for the
rehabilitation and revival of sick industrial companies and for matters
connected therewith or incidental thereto. The Act was enacted by the
Parliament of India in response to the increasing number of industrial
companies facing financial difficulties and unable to pay their debts as
and when they became due and payable. The BIFR was set up to
provide a mechanism for the financial and operational restructuring of
such companies and to revive and rehabilitate them.

The main reasons for the establishment of the BIFR were to:

1. Help sick industrial companies overcome their financial

difficulties and become viable and sustainable.
2. Protect the interests of workers and other stakeholders of sick
industrial companies.
3. Promote the orderly and healthy development of industry in the
country.
 4. Contribute to the economic development of the country by
revitalizing sick industrial companies and helping them to
contribute to the national economy.

Roles of Board for Industrial and Financial Reconstruction

The objectives of the Board for Industrial and Financial

Reconstruction (BIFR) are:

1. To provide financial and operational restructuring of sick

industrial companies and to revive and rehabilitate them.
2. To protect the interests of workers and other stakeholders of sick
industrial companies.
3. To promote the orderly and healthy development of industry in
the country.
4. To contribute to the economic development of the country by
revitalizing sick industrial companies and helping them to
contribute to the national economy.
5. To ensure that the assets of sick industrial companies are
utilized in the most efficient and optimal manner.
6. To provide a mechanism for the resolution of disputes between
the management and the workers of sick industrial companies.
7. To provide guidance and assistance to sick industrial companies
in the preparation and implementation of rehabilitation schemes.
8. To coordinate with other agencies and organizations, such as
banks and financial institutions, for the rehabilitation of sick
industrial companies.
 9. To provide information and assistance to the Central
Government of India on matters related to the rehabilitation and
revival of sick industrial companies.

Functions of Board for Industrial and Financial Reconstruction

The main functions of the Board for Industrial and Financial

Reconstruction (BIFR) are:

1. To declare a company as a sick industrial company:

The BIFR has the power to declare a company as a sick

industrial company if it is unable to pay its debts as and when
they become due and payable and its net worth has become
negative.

2. To issue directions for the management of a sick industrial

company:

The BIFR can issue directions to the management of a sick

industrial company regarding the management and
administration of the company, including the appointment of
new directors and the sale or transfer of assets.

3. To provide financial and operational restructuring:

The BIFR can provide financial and operational restructuring of

sick industrial companies and can take various measures to
revive and rehabilitate them.
4. To pass orders on various matters:

The BIFR has the power to pass orders on various matters

related to the financial and operational restructuring of sick
industrial companies, including the sale or transfer of assets, the
merger or amalgamation of companies, the alteration of the
memorandum and articles of association of a company, and the
closure or dissolution of a company.

5. To monitor the implementation of orders:

The BIFR is responsible for monitoring the implementation of

the orders passed by it and can take necessary action in case of
non-compliance.

6. To provide assistance and guidance:

The BIFR can provide assistance and guidance to sick industrial

companies in the preparation and implementation of
rehabilitation schemes.

7. To coordinate with other agencies:

The BIFR can coordinate with other agencies and organizations,

such as banks and financial institutions, for the rehabilitation of
sick industrial companies.

8. To provide information and assistance:

 The BIFR can provide information and assistance to the Central
Government of India on matters related to the rehabilitation and
revival of sick industrial companies.

Members of Board for Industrial and Financial Reconstruction

The Board for Industrial and Financial Reconstruction (BIFR)

consists of a panel of experts in the fields of finance, industry, and
law. The members of the BIFR are appointed by the Central
Government of India. The BIFR is headed by a Chairman, who is
appointed by the Central Government. The other members of the
BIFR include:

1. One member from the Ministry of Finance, Government of

India.
2. One member from the Ministry of Law and Justice, Government
of India.
3. One member from the Ministry of Industry, Government of
India.
4. One member from the Reserve Bank of India.
5. One member from the Securities and Exchange Board of India.
6. One member from the Department of Public Enterprises,
Government of India.
7. Two members from the public sector banks.
8. Two members from the public sector financial institutions.
 9. One member from the Insurance Regulatory and Development
Authority of India.
10. One member from the Employees' Provident Fund
Organization.
11. Two members from the public sector undertakings.
12. Two members from the private sector.

Achievements of Board for Industrial and Financial

Reconstruction

Some of the achievements of the BIFR are:

 The BIFR has played a significant role in the financial and

operational restructuring of sick industrial companies and in
their revival and rehabilitation. It has provided a mechanism for
the resolution of disputes between the management and the
workers of sick industrial companies and has helped to protect
the interests of workers and other stakeholders.
 The BIFR has contributed to the orderly and healthy
development of industry in the country and has helped to
revitalize sick industrial companies, which have contributed to
the national economy.
 The BIFR has coordinated with other agencies and
organizations, such as banks and financial institutions, for the
 rehabilitation of sick industrial companies and has provided
guidance and assistance to such companies in the preparation
and implementation of rehabilitation schemes.
 The BIFR has provided information and assistance to the
Central Government of India on matters related to the
rehabilitation and revival of sick industrial companies.

Limitations of Board for Industrial and Financial Reconstruction

The BIFR has certain limitations, which are:

1. Limited jurisdiction: The BIFR has jurisdiction only over sick

industrial companies, which are defined as companies that are
unable to pay their debts as and when they become due and
payable and whose net worth has become negative. It does not
have jurisdiction over healthy companies or over companies that
are in financial difficulties but do not meet the definition of a
sick industrial company.
2. Dependence on other agencies: The BIFR depends on other
agencies and organizations, such as banks and financial
institutions, for the implementation of its orders and for the
rehabilitation of sick industrial companies. The BIFR's
effectiveness is therefore limited by the cooperation and support
of such agencies.
 3. Limited powers: The BIFR has limited powers to enforce its
orders and to ensure compliance with its directions. It can take
action against the management of a sick industrial company for
non-compliance with its orders, but it does not have the power
to impose penalties or fines.
4. Limited resources: The BIFR has limited resources and
manpower, which can affect its ability to effectively deal with
the large number of sick industrial companies that come under
its jurisdiction.

CONCLUSION :

Under the SICA, the Board of a sick industrial organization was

constitutionally compelled to report it to the BIFR, and the BIFR could
make whatever petitions were expected to decide, whether the
organization was sick or not. Among various targets, the policy was to
give an approach, to bring back to life sick industrial organizations
and discharge public assets. If an organization was seen as to be
confined, the BIFR could give the organization justifiable time to
recover wellbeing, or it could suggest various other measures. The
board could take different activities to perform, including changes to
the authorities, the amalgamation of the confined unit with a sound
one, market or financial remaking. The board could suggest the
organization to shut down. The BIFR was proposed to connect the
constitutional break among sickness and restoration. It would force-
time plans for recovery related exercises to be finished, administer
their usage and lead occasional audits of sick records. The BIFR would
call a conference for sharing perspectives, planning work and building
up a consolidated resolution for dealing with sick organizations,
accelerating the beginning of reconstructing activities. The BIFR was
intended to turn sick organizations into profitable organisations in a
half year or to request winding-up of the organisations.

REFERENCES

 www.blog.ipleaders.com
 www.vedantu.com
 www.owlgen.com
 www.legalservice.com
 www.linkedin.com
 www.byjus.com