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Internship Experiences, The Law

Internship Experience at Praxis Counsel, New Delhi

By: Ananya Goswami, 4th Year, Fairfield Institute of Management and Technology, GGSIPU, New Delhi.

Name of Organisation, Location city, Team Strength

Praxis Counsel, Advocates and Solicitors, M-15, South Extension-II, New Delhi has two partners, Mr. Matrugupta Mishra and Ms. Shikha Ohri Vashishth along with three associates, Ms. Pratiksha Chaturvedi, Mr. Samyak Mishra and Mr. Aman Sheikh.

Application Process with contact details

I applied through a contact but you can also send your cv to the front desk.

Duration of internship and timings

May, 2020 to June, 2020

First impression, first day formalities, infrastructure

It was not really my first day at Praxis as I have previously interned with them back in June’19 and January 2020 respectively. Ordinarily, on the first day, you are introduced to the associates first and then the Partners. The office is very spacious and beautiful. Usually, there are 4-6 interns but this time due to COVID-19 I was the only intern. The office staff and the clerks are very friendly and helpful. The coffee from the pantry is amazing (Just putting it out there!). 

There are no formalities as such but you need to fill out a form usually in the first week of your internship in which you have to mention your details along with the period of internship. 

The office is as I said earlier very spacious. The locality in which it is located is very safe as it is a residential area. If you travel by metro then take the pink line and exit from gate no. 3, South ex metro, and from there it’s only a 5-minute walk.

Office Timings

The usual office timings are 10-7 but if one has some urgent work then one has to stay back.

Main tasks

Praxis Counsel is Electricity litigation based firm and that is why the main tasks revolve around Electricity laws. The interns are given research work on various central and state electricity rules and regulations. The research work also includes competition law, arbitration, and contract law at times.

Besides research work, interns are assigned the drafting of various legal documents and also assist the associates with the drafting of Petitions, Appeals, etc. The interns also accompany the Partners and the Associates to CERC, APTEL, High Court of Delhi, and Supreme Court of India.

Work environment and people

The working environment is one of the best things about this firm. The friendly environment and the welcoming approach of the Partners and Associates of the firm help the intern to learn better. The partners as well as the associates are extremely humble and are always there to help. The most important thing that I have learned there is that the atmosphere of the workplace really affects your productivity. The lively atmosphere at the office has helped me to grow and polish my skills. 

Best things

Again, the working environment and the friendly nature of everyone in the office. All the people at the firm are always ready to clear your doubts even if it is something very small. You can also ask the doubts n number of times and they will still explain to you with great enthusiasm. If you are a Bollywood fan then you must have a chat over coffee with Matru sir and Pratiksha ma’am. There is no dull day in the office! Matru sir is always ready for a great conversation and you never have to worry about the topic as he knows something about everything. My favorite time of the day would be lunch as everyone be it the Partners or the interns eat together in the conference room and talk about anything and everything. You will never feel left out of the conversation.

Bad things

There is nothing bad as such at Praxis.

Biggest Lessons

Active participation is the key to have a better learning experience. If you are eager to learn then, they are definitely ready to teach you, and if you still do not understand then do not hesitate to ask again.

Legislations, The Law

DSPE over the Years: peeping into the domains of the CBI While CBI remains as the centrally equipped, most reliable and efficient investigation agency, there is still a need to look into journey

Society runs on the fore-wheels of laws. The laws are defined as the rules that govern the society and it is equally clear that these rules are not self-enforceable. There has to be an enforcing body that governs, controls and maintains the follow-up pattern of these rules thus maintaining a sense of security. Since the monarchical times this function has been performed by police (although different rulers defined them with different terminology for eg. The Kotwals during Mughal Dynasty). Gradually with time the structure of society changed and that of the Police. Now, rather than having just one force, all states have their own Police Establishments, divided by jurisdictions and laws. While these were capable to tackle the problems in their local areas, there arose a need to establish a larger, potent, and single unit that could deal with ‘special cases’. Today, we call it the Delhi Special Police Establishment (DSPE).

By: Lalima Gupta

Background

The DSPE, traces its roots back to the British Era in India. It was a part of the then Ministry of Was and Supply Department of India in 1941.

Facing a number of internal Corruption and bribery Issues during WW-II, the department was given the task to solve such ‘special issues’. It was then called the Special Police Establishment (SPE) under the DSPE Act under the Superintendence of Qurban Ali Kan. Though the war ended but not the corporality of the department. In 1946 it acquired the name of DSPE. On partition when Qurban Ali Khan opted for Pakistan, Rai Sahib Karam Chand Jain became the first legal advisor of the department. On Independence, there seemed to be a dire need to handle the rampant corruption in various States for which the department maintained its grip and extended its jurisdiction to the UTs as well.  CBI as acronym came later only in 1963 when the Ministry of Home Affairs declared it to be Central Bureau of Investigation on April 1st, 1963. Finally, the CBI brought in its ambit the investigation of more serious and heinous crimes like murder, money laundering, kidnapping, terrorism etc. due to growing reliability and efficiency. With greater number of cases being entrusted to the Bureau, the work categorised and put under three different divisions which are namely,

1. Anti-Corruption Division,

2. Special Crimes Division and

3. Economic Offences.

and an entire new Ministry under the leadership of Prmine Minister was assigned the DSPE work-load called Ministry of Personnel, Public Grievances and Pensions with three separate departments under it:

  1. Department of Personnel and Training (DOPT) (this also includes recruitment of officers through UPSC and SPSC)
  2. Department of Administrative Reforms and Public Grievances
  3. Department of Pensions and Pensioners’ Welfare.

1963: the establishment Year and the constitution process

Although formed in 1946, the established date of CBI is considered to be April 1, 1963 with D.P.Kohli as the founding director (1 April 1963 to 31 May 1968).The CBI Director is appointed, for not less than a term of 2 years, by the Appointment Committee on recommendation of Selection Committee as mentioned in DSPE Act 1946. The Appointment Committee (under section 4A of the SDPE Act) consists of:

·   Prime Minister – Chairperson

·   Leader of Opposition of Loksabha or the Leader of the single largest opposition party in the Lok Sabha, if the former is not present due to lack of mandated strength in the Lok Sabha – member

·   Chief Justice of India or a Supreme Court Judge recommended by the Chief Justice – member

When making recommendations, the committee considers the views of the outgoing director.

The Selection Committee( consisting of other members like Central Vigilance Commissioner, Vigilance Commissioners, Secretary to the Government of India in-charge of the Ministry of Home Affairs in the Central Government, Secretary, Co-ordination and Public Grievances, Cabinet Secretariat ) nominates a certain number of names to the Appointment Committee, and one among whom the Appointment Committee appoints as the CBI director.

Ambivalent Constitutional Validity of CBI

The constitutional validity of CBI went under spotlight when in 2013 Gauhati High Court’s Judge Justice (retd) Ansari  in 2013 stated in a judgment that

“The CBI was never constituted under any statute, but under an executive order of the Union Home Ministry in the year 1963, and that too, with no backing from the Constitution,

and asked the Supreme Court to clarify its status. “In India, police is, strictly speaking, a state subject under the Constitution. At best, the Centre, under our Constitution, has power to collect intelligence. But it cannot enter a state to investigate crimes unless Constitution so permits.”

In an impromtu action the  judgment was immediately stayed by then Chief Justice of India P. Sathasivam. According to Justice Ansari says it cannot be considered “settled in law” since the apex court has never really discussed or decided the matter.[1]

The Authority of CNI Vis-a-Vis the State Police

Deriving  its authority from the central government, the CBI follows the rules for investigation laid down in DSPE Act 1946.

Section 5-Extension of powers and jurisdiction of DSPE.

Accordingly, Scetions 6 and 6A clarify. The central government may extend its power to any area for investigation, subject to the consent of the government of the concerned state but not in cases investigating offences committed within union territories by state government employees acting in their official capacity.[2](Apex Court’s verdict as on April 25th,2020). Being the central investigating agency, the CBI can investigate union subjects like:

·   Offences against central-government employees, or concerning affairs of the central government and employees of central public-sector undertakings and public-sector banks

·   Cases involving the financial interests of the central government

·   Breaches of central laws enforceable by the Government of India

·   Major fraud or embezzlement; multi-state organised crime

·   Multi-agency or international cases

However, in order to conduct such investigations within a state, the CBI is required to take prior consent from the State Government. This consent can be in the form of a ‘general consent’ under Section 6 of the Delhi Special Police Establishment Act, or a ‘specific consent’ concerning individual cases. Almost every state in India has provided the CBI with a general consent to investigate within their borders but the contrary might fall in action at times.

The CVC and the CBI: The Ruckus

The DOPT supervises and controls the following organizations, namely:

  1. Union Public Service Commission (supervises)
  2. Staff Selection Commission
  3. Public Enterprises Selection Board
  4. Lal Bahadur Shastri National Academy of Administration
  5. Institute of Secretariat Training and Management
  6. Central Vigilance Commission (CVC) (supervises)
  7. Central Bureau of Investigation
  8. Indian Institute of Public Administration
  9. Central Information Commission

Central Vigilance Commission (CVC) (not an investigating agency), is an apex Indian governmental body created in 1964 to address governmental corruption.

On the recommendations of the Committee on Prevention of Corruption, headed by Shri K. Santhanam Committee, who stated the need of  an autonomous body, free of control from any executive authority,

charged with monitoring all vigilance activity under the Central Government of India, advising various authorities in central Government organizations in planning, executing, reviewing and reforming their vigilance work, and to advise and guide Central Government agencies in the field of vigilance, CVC was set up by the Government of India Resolution on 11 February 1964. In 2003, the Parliament enacted a law conferring statutory status on the CVC.

The row between CVC and the CBI started when the Ministries and Departments in the Central Government issued a directive that required the CBI to seek approval of the Central Government before pursuing investigation against bureaucrats of the level of Joint Secretary.

But in  1997 Vineet Narain & Others vs. Union of India [3]the SC struck down the validity of a directive on grounds that it violated the independence of the investigative process. 

It was tried to be re-instated in 2003 by another directive however it was again struck down by the Supreme Court in the course of another judgment in 2014 on the basis that it violated the right to equality guaranteed by the Constitution. 

Looking towards the weakening power of CBI in the 1991 Jain Hawal Case failure, the SC decided to consider the and  take account of recommendations made by the Committee headed by N.N. Vohra constituted by Government in 1993, and by the Independent Review Committee (IRC) constituted by Government in 1997, the SC also stated some of the following worth mentioning measure to be taken by the government which are:

  1. The Central Vigilance Commission (CVC) shall be given statutory status.
  2. Selection for the post of Central Vigilance Commissioner shall be made by a Committee comprising the Prime Minister, Home Minister and the Leader of the Opposition from a panel of outstanding civil servants and others with impeccable integrity, to be furnished by the Cabinet Secretary. The President on the basis of the recommendations made by the Committee shall make the appointment. This shall be done immediately.
  3. The CVC shall be responsible for the efficient functioning of the CBI. While Government shall remain answerable for the CBI’s functioning, to introduce visible objectivity in the mechanism to be established for overviewing the CBI’s working, the CVC shall be entrusted with the responsibility of superintendence over the CBI’s functioning.
  4. Recommendations for appointment of the Director, CBI shall be made by a Committee headed by the Central Vigilance Commissioner with the Home Secretary and Secretary (Personnel) as members.

The views of the incumbent Director shall be considered by the Committee for making the best choice. The Committee shall draw up a panel of IPS officers on the basis of their seniority, integrity, experience in investigation and anticorruption work.

The final selection shall be made by the Appointments Committee of the Cabinet (ACC) from the panel recommended by the Selection Committee. If none among the panel is found suitable, the reasons thereof shall be recorded and the Committee asked to draw up a fresh panel.

It was then in year 2003 that the recommendations of the Hon’ble Court were adhered to and Central Vigilance Commission Act was enacted which provided CVC statutory status, and DSPE Act was amended so far as the CVC and the CBI is concerned, some of the provisions (of CVC Act, 2014) and amended provisions  (of DSPE Act, 1946) are:

  1. Section 8 of the CVC Act conferred on Central Vigilance Commission (CVC) the power of superintendence over the Delhi Special Police Establishment insofar as it relates to the investigation of offences under the Prevention of Corruption Act, 1988; or an offence under the Cr.PC for certain categories of public servants. Also, under the Section 8 CVC can review the progress of investigations conducted by the DSPE into offences alleged to have been committed under the Prevention of Corruption Act, 1988 or an offence under the Cr.PC, and review the progress of the applications pending with the competent authorities for sanction of prosecution under the Prevention of Corruption Act, 1988. Also under Section 4C of DSPE Act, 1946 The Central Government shall appoint officers to the posts of the level of Superintendent of Police and above except Director, and also recommend the extension or curtailment of the tenure of such officers in the Delhi Special Police Establishment, on the recommendation of a committee consisting of : – (a) The Central Vigilance Commissioner – Chairperson; (b) Vigilance Commissioners – Members; (c) Secretary to the Government of India in Charge of the Ministry of Home – Member; (d) Secretary to the Government of India in charge of the Department of Personnel – Member. Provided that the Committee shall consult the Director before submitting its recommendation to the Central Government.
  2. Section 4 of DSPE Act, vested the power of superintendence over the Delhi Special Police Establishment in Central Vigilance Commission.
  3. Section 4A (1) of DSPE Act, provided for Committee for appointment of Director of CBI – The Central Government shall appoint the Director of CBI on the recommendation of a committee consisting of the Central Vigilance commissioner as Chairperson, the Vigilance Commissioners, the Secretary to the Government of India in-charge of the Ministry of Home Affairs, and the Secreatary (coordination and public grievances) in the Cabinet Secretariat.
  4. Section 4B (1) provided that the Director shall, notwithstanding anything to the contrary contained in the rules relating to his conditions of service, continue to hold office for a period of not less than two years from the date on which he assumes office. (2) The Director shall not be transferred except with the previous consent of the Committee referred to in subsection (1) of section 4A.[4]

Conclusively it can be stated that despite going through crests and troughs like a challenge to its constitutionality, the CBI v. CBI row, the DSPE’s position as the most trusted investigating agency remains unshaken and affirmed. Hence, now is the peak time to provide it with a statutory authority of its own relying on its popularity an demand else in words of Joginder Singhv(former CBI director)

“The political class will never give independence to the CBI”.

End Notes:

[1] Constitutionality of CBI is questionable: Ex-HC judge who ruled CBI has no legal backing. The Print on August 20th , 2020 at 7 at https://theprint.in.

[2] CBI need not take state consent to probe offences within UTs by state employees. Hindustantimes on August 20th ,2020 at 7 at https://www.hindustantimes.com

[3] 1998 CRI LJ 1208.

[4] CBI feud: History of CBI and CVC. Clatpossible on August 20th ,2020 at 5 at https://www.clatpossible.com.

Legislations, The Law

The Transgender Persons (Protection of Rights) Bill, 2019

Protecting the interests of the marginalised should be the primary aim of social security laws. In situations where dialogue is not accepted by the oppressed, purely because of a very real danger to their lives and structural barriers in place to not only dissuade, but to discourage group members from occupying and engaging in political spaces, it is then incumbent on the state to effectively interact with those groups to create such a dialogue.

By: Harshal Kumar, Semester III, Year II B.A.L.L.B (Hons.), National Law University, Delhi.

Introduction:

The Transgender Persons (Protection of Rights) Bill, 2019 was introduced in Lok Sabha on July 19, 2019 by the Minister for Social Justice and Empowerment, Mr. Thaawarchand Gehlot. This Article will deal with the introduction of this Bill and will lay down the criticism faced by the same along with the suggestions in the conclusion.

 Transgender person is identified by the Bill as one whose gender does not match the gender assigned at birth. It comprises trans-men and trans-women, intersex variance individuals, gender queers, and socio-cultural identity individuals, such as kinnar and hijra.

Intersex variants are characterised to mean a person who exhibits variants from the normative pattern of the male or female body in his or her primary sexual characteristics, external organs, chromosomes, or hormones at birth.

The Bill allows for self-perception of gender identity. But it mandates that each person would have to be recognised as ‘transgender’ on the basis of a certificate of identity issued by a district magistrate. A recommendation from the 2016 Standing Committee to have a screening committee was rejected. Opposition MPs have raised concerns about certain provisions in the Bill. 

The religious footing for transgender rights:

The Hindu idea of ‘Ardhanarishwara’-an androgynous deity containing the combined aspects of the destroyer Shiva and his female consort is the religious basis for India ‘s recognition of transgender persons.

Yet transgender leaders argue that this pious underpinning of the lives of transgender people has subsumed their claims to be treated as full members of western society.

The first bill on transgender rights presented by Tiruchi Siva of the Dravida Munnetra Kazhagam in the Rajya Sabha in 2014 was “a perfect bill” in accordance with the Supreme Court’s judgement of the National Legal Services Authority (NALSA) that year, said Ashok Row Kavi, member and chairman of the Humsafar Trust and advocacy.

The measure, approved and passed in the upper house in April 2015, was a private member’s measure.

When the government next presented the transgender bill in the Lok Sabha on August 2, 2016, as the Transgender Persons (Protection of Rights) Bill, 2016, on several counts it was opposed, including the demand for “screening boards” to determine who was a transgender and who was not, and the criminalization of begging, a hallmark for a majority of transgender Indians. Transgender members said they introduced over 100 changes, but there were 27 changes to the bill that was first enacted on December 17, 2018. It concluded with the dissolution of the house due to the 2019 general election. Those 27 amendments persisted in the most current edition, which transgender groups argue annuls the advances of the five-year – old order of the Supreme Court.

 Criticism faced by the Bill:

In an effort to attract mainstream recognition, the transgender people, along with its supporters, took to Twitter. Initially, some attempted to convince the MPs to send the Bill to a select committee when the Bill was brought up for consideration at the Rajya Sabha in November. However, they are now directing their tweets to the President now that it has been signed, asking him to withdraw his assent, and give the Bill back to the Rajya Sabha.

To receive a certificate claiming that they are transgender, it requires a transgender citizen to contact a District Magistrate. It is only after a government issued identification cards that they will be able to change their sex to either Male or Female.

India’s transgender persons now have to agree to a licencing scheme involving a government officer and a doctor, rather than the right to assess their identity.

If transgender people are sexually abused, their assailants face a statutory sentence of incarceration of two years compared with a minimum of seven years for women who have been attacked. They will no longer represent the trans community if young trans adults choose to leave home because of stigma to adapt to the body they were born as. Instead, they must go to a judge that will commit them to a’ rehabilitation facility.’

Protecting the interests of the marginalised should be the primary aim of social security laws. In situations where dialogue is not accepted by the oppressed, purely because of a very real danger to their lives and structural barriers in place to not only dissuade, but to discourage group members from occupying and engaging in political spaces, it is then incumbent on the state to effectively interact with those groups to create such a dialogue.

But a crystal-clear retraction of the statements raised and guarantees offered was what followed. A variety of bills starting with the 2016 bill followed by the 2018 bill is but a death knell on the culmination of the community’s aspirations. Several definitions that the Bill prescribes are rather redundant in relation to the community ‘s problems. The definition of “family” in particular. Where the present act blindly borrows its meaning from prior laws in effect, without the use of mind as to the status or distinctions identified with the transgender community. After numerous clarifications made by members of the group about the need to broaden the scope of ‘family’. Because of the prejudice and abuse they face from their birth families and their extended society; most people do not live with their biological family. Therefore, it is important to include the preferred family within the ‘family’ framework and meaning. Since it is through the selected family that most transpersons gain assistance and can locate their kith and kin.

Implications:

While for ‘intersex people’ there is a separate standard, that appears to have been undertaken primarily to satisfy foreign organisations calling for a separate standard for intersex persons. Since it was conflated with the concept of ‘transgender male’ in the very next paragraph. There is not only a horrific misrepresentation of intersex people and their concerns, but also an invisibility. In the field of health, this is of particular concern when there are a number of common challenges encountered by intersex individuals. From compulsory ‘corrective’ activities on intersex children through chronic health conditions that the treatment system is both unfit through cope with and inaccessible to a significant percentage of intersex people.

According to the activists, this new bill would not go into matters of livelihood, starting from education. Although the current law allows the government to “formulate livelihood assistance welfare schemes and services” for transgender people, including “technical preparation and self-employment,” it lacks a main demand public-sector work reservation, such as those for people of differing skills. 

Suggestions and Conclusion: 

Critically, for transgender persons, the Bill seems to continue mandating sex reassignment surgery.

The Supreme Court’s judgement in National Legal Services Authority (NALSA) v Union of India (UOI), which grants the right to self-identification without the need for medical intervention, will contravene the provision. Activists and transgender community members have managed to lift their doubts on new digital platforms and otherwise about the latest iteration of the law.

Furthermore, it was pointed out that all federal law adopted to protect the interests of transgender people should take place in consultation with community members. The disavowal of the right to gender self-determination and the pathologizing of transgender identities remain violative of the human rights responsibilities of the government.

Legislations, The Law

The Companies (Amendment) Bill, 2020

The existing companies Act of 2013 hasn’t allowed for the effective implementation of many of the practices of business which not only discourage entrepreneur’s morale while running their enterprises; but also delays the proceedings of the court by criminalising the offences of minor nature. Contrary to this, The Companies (Amendment) bill of 2020 eliminates the shortcomings mentioned under the prevailing Act.

By: Rushil Midha, BBA.LLB, 3rd year, Geeta Institute of Law, Panipat.

Introduction

The Companies (Amendment) Bill, 2020 was introduced in Lok Sabha by the Minister for Corporate Affairs, Ms. Nirmala Sitharaman, on March 17, 2020. The bill seeks to amend the Companies Act, 2013. The bill focuses on decriminalising various offences mentioned under the Act and also aims to reduce the burden on the National Company Law Tribunal.

Amendments

The proposed bill deals with the following changes as to the Companies Act, 2013:

  • Producer Companies:

Some of the provisions regarding producer companies covered under the Companies Act, 1956 have had continued to exist in the Act of 2013. While the bill seeks to repeal such provisions by adding on a new chapter similar to the earlier provisions.

  • Direct Listing in Foreign Jurisdictions:

The bill by authorising the central government, allows certain classes of public companies to list classes of securities of a foreign jurisdiction. This provision will help the companies in raising their capital, which further helps in setting-up the start-up companies or businesses.

  • Remuneration to Non-Executive Directors:

With respect to the provisions for payment of remuneration to the executive directors of the company as provided by the Act, now, will extend to the non-executive directors also; as proposed by the bill. This likely will boost the morale of the non-executive directors by securing their payment of remuneration which directly results in increasing their potential.

  • Corporate Social Responsibility (CSR):

With reference to Section 135 of the Act, companies with net worth, turnover, or profits above a specified amount are required to constitute CSR committees and spend 2% of their average net profits in the last three financial years, towards its CSR policy.

While the bill exempts the companies with a CSR liability of up to 50 lakhs a year from setting up CSR committees. In addition to this, it allows eligible companies to set-off the excess amount towards their CSR obligations in the subsequent financial years.

  • Decriminalisation:

The bill proposed 72 amendments to the Companies Act, 2013 to decriminalise various offences by making three major changes as follows:

  1. By removing the penalty for certain offences.
  2. By removing imprisonment in certain offences.
  3. By reducing the amount of fine payable in certain offences.

The changes to offences will lead to emphasis more on the major offences and help in disposing of the cases without much delay. Hence, enhancing the overall productivity of employees.

  • Benches of NCLAT:

The bill aims to establish benches of the National Company Law Appellate Tribunal, which ordinarily sit in New Delhi or such other place as may be notified.

  • Auditing of Unlisted Companies:

The unlisted companies according to the proposed bill, have to prepare and file their financial reports periodically along with the completion of their audit or review of such reviews. The objective of the said provision is to bring transparency in the governance of such companies.

  • Beneficial Shareholding:

A person is required to make a declaration of his interest to the company if he holds a beneficial interest of at least 10% shares in a company or exercises significant influence or control over the company; which has to register separately. It also empowers the central government to exempt any class of persons from complying with these requirements if it’s not in the public interest.

  • Exemptions from filing resolution:

The Companies Act, 2013 requires companies to file certain resolutions with the registrar of companies that exempts banking companies from filing the same. While the bill now extends the exemption to non-banking and house finance companies too.

Conclusion

The bill, if passed by the parliament, would help in speedy trial and proceedings of the court in respect to major offences; the efficiency and productivity of employees would help the business to attain great opportunities ahead. Hence, increasing GDP along with the social welfare on the part of entrepreneurs.

Legislations, The Law

Sick Industrial Companies Act (SICA), 1986: A Critical Analysis

The Sick Industrial Companies (Special Provision) Act, 1985 was enacted by the Government of India on the recommendations given by the T. Tiwari Committee Report (1981) to deal with the issue of widespread industrial sickness in India which created a methodical financial risk.

By: Anushka Tyagi, 3rd Year, National Law University, Jodhpur.

The Sick Industrial Companies (Special Provision) Act, 1985 was enacted with a view to secure timely detection of sick or potentially sick companies owning industrial undertakings, to take speedy action by Board of experts to take steps with respect to these companies and to the enforcement of the measures so determined. The act aimed to help revive these sick companies or help in their closure, if not so that the investment locked with these companies could be used somewhere productive.

Defining Industrial Sickness

The Act defined a sick industrial as one which had existed for 5 years and had incurred accumulated losses equal to or more than its entire net worth at the end of any financial year.

This sickness could be caused by various internal (mismanagement, overestimation of demand, wrong location, poor project implementation etc.) and external factors (energy crisis, raw materials shortage, infrastructure bottlenecks, inadequate credit facilities etc.)

Industrial Sickness, especially one which is widespread, impacts economy by causing the government loss of revenue, increasing non-performing assets with the financial institutions, unemployment increase, loss of production and lacking productivity among other adverse problems which are of socio-economic nature.

Important Features of the Act:

The Act established through its provisions two quasi-judicial body who were responsible for dealing with the cases brought under this Act. These two quasi-judicial bodies included — 

  1. The Board for Industrial and Financial Reconstruction (BIFR) which was equivalent to an apex boards responsible with dealing with the issue of industrial sickness. The duties of the board included reviving the potentially sick industrial units and rehabilitating them, and also, to liquidate non-viable companies.
  2. The Appellate Authority for Industrial and Financial Reconstruction (AAIFR) was set up to hear the appeals brought up against the orders of the BIFR.

Why was the Act not successful?

The functioning of the Act was not found to be satisfactory and a lot of issues were found during the period of its implementation. The definition of ‘sickness’ was termed to be deficient and restrictive under the act and belatedly it was recognised by the BIFR as well.

Nirmala Ganapathy said: “One look at the track record of BIFR, and it doesn’t take a whiz  to conclude that it is nothing but a graveyard of companies. A tiny fraction comes out healthy — only if the promoter is interested in putting it back up on its feet”

The Act fell short in a lot of aspects, Section 22 being the most problematic of them. Section 22 dealt with moratorium and granted immunity against any kind of proceedings for the recovery of dues, during the pendency of an inquiry of the preparation or operation of a scheme. The Government felt that the two quasi-judicial bodies were not able to fulfil their purpose as envisaged under the Act of providing schemes and plans which were viable for reviving sick companies in a reasonable time frame.

Apart from the above issues, it was found that the decisions of the BIFR and the AAIFR were frequently appealed to the High Court which created more issues by the disposal of the cases being delayed for a long time.

There were also procedural as well as legal defects with the BIFR. The BIFR took a substantial time in determining whether a company was ‘sick’ and then only were the revival proceedings formulated. Consideration of the same also takes substantial time since banks and  financial institutions  have  their  own  hierarchy  in  decision  making,  leading  to  avoidable  delays.  The decisions  by  the  banks  are  also  neither  transparent,  nor  subject  to  judicial  review.  By  the  time decisions  are  taken  and  communicated,  the  plan,  which  had  been  conceived,  loses  its  viability resulting in failure of revival schemes even after sanction.

Amendment and Repeal of the Act

  1. Justice V. Balakrishna Eradi Committee, 1999

The Government in 1999 constituted a Committee under Justice V. Balakrishna Eradi, to review the law regarding the Insolvency and Winding of Companies. The Committee presented a report titled, ‘Report of the High Level Committee on Law Relating to Insolvency and Winding up of Companies’. After hearing all parties and analysing statistical data presented to it, opined that the facts and figures indicated that the utility of SICA and the institutions established under it were in question.

The problem was caused mainly by the delays which were inherent in the procedures under the Act concerning revival and reconstruction. These delays were further intensified by large scale misuse of provisions contained in Section 22 which allowed suspension of legal proceedings, suits and enforcement of contracts and other remedies.

The Committee pointed out that the relative effectiveness of the ACT was compromised by the delays caused by the BIFR in disposal of cases. The success rate of the provisions enshrined in the act had hence fallen short of what it was expected to be.

The Committee concluded this report by recommending that the Act should be repealed and the provisions which were contained therein concerning the rehabilitation and revival of the company should be modified and brought under the Companies Act, 1956.

2. Advisory Group on Bankruptcy Laws, 2001

The Advisory Group was headed by N.L. Mitra who recommended that the BIFR as well as the AAIFR should be disbanded and the insolvency laws should be made into a separate and comprehensive bankruptcy code to govern insolvencies which were Corporate in nature.

The Government accepted the suggestion given by the Group regarding the Companies Act for creating a consolidated tribunal  in the form of the National Company Law Tribunal (NCLT) and the appellate authority, the National Company Law Appellate Tribunal (NCLAT)  who were to take over the functions which were earlier under the BIFR and the AAIFR and also the High Courts as concerning insolvency.

The decision was taken to incorporate the provisions relating to sick Industries in the Companies (Second Amendment) Act, 2002 by adding Part VI under the topic of ‘Revival and Rehabilitation of Sick Industrial Companies” from Section 424A to 424L and thereby it was decided that the act would be repealed by bringing the SICA (Special Provisions) Repeal Act, 2003.

However these changes did not come into effect for 2 primary reasons —

(a) the constitutionality of creating the NCLT and the NCLAT was challenged on the grounds of excessive delegation of judicial functions—a petition in the Supreme Court was not disposed until 2010 when the constitutionality was upheld but there were changes recommended with respect to specifics as to the appointment criteria to such bodies.

(b) other provisions in the Companies (Second Amendment) Act, 2002 and the SICA (Special Provisions) Repeal Act, 2003, were not notified, and therefore not brought into effect by the Government through publication in the Official Gazette.

Hence, both laws continued to prevail at that time and the BIFR and the AAIFR continued to function.

3. J Irani Committee Report, 2005

The Committee formulated to review the laws concerning liquidation and restructuring of the companies recommended several revisions to the Companies Act, more particularly for a transparent and globally acceptable insolvency and restructuring procedures, in short.

According to the report, “it is important that the basic principles guiding the operation of corporate entities from registration to winding up or liquidation should be available in a single, comprehensive, centrally administered framework”.

  • The Companies Act, 2013.

Chapter XIX (sections 253 to 269) of the Companies Act, 2013, i.e. the successor legislation of the Companies Act, 1956 deal with revival and rehabilitation of sick companies. Section 255 of the Code read with 11th schedule provides for amendments in the Companies Act, 2013.

  • Insolvency and Bankruptcy Code, 2016 

Section 252 of the Insolvency and Bankruptcy Code, 2016 provides for amendment of the SICA Repeal Act in the manner provided under read with the 8th schedule of section 252. 8th schedule provides for substitution in section 4 (b) of the SICA Repeal Act. The section provides that any reference made to BIFR, or any enquiry before BIFR or any appeal pending before the AAIFR would automatically stand abated from 01.12.2016. Furthermore the proviso of section 4(b) of the Repeal Act, 2003 provides the companies, who have made any reference made to BIFR, any inquiry pending before BIFR, any appeal preferred to AAIFR, or any proceedings pending before BIFR/AAIFR to make a reference to the NCLT under the Code within 180 days from the commencement of the provisions of the Code i.e., 01.12.2016. The enactment of the SICA Repeal Act, 2003 has allowed for cases to be dealt with in a better manner than before by consolidating sections of the SICA, 1986 in the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.

This would help in solving the problems caused by the sick industries to be dealt in a better manner than the one which they were facing before the BIFR and the AAIFR.

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