CHAP PROCEEDINGS IN CASE OF POTENTIALLY SICK INDUSTRIAL COMPANIES,MISFEASANCE PROCEEDINGS, APPEALS AND MISCELLANEOUS

CHAPTER IV PROCEEDINGS IN CASE OF POTENTIALLY SICK INDUSTRIAL COMPANIES, MISFEASANCE PROCEEDINGS, APPEALS AND MISCELLANEOUS

23. Loss of fifty per cent. net worth by industrial companies.

23. Loss of fifty per cent. net worth by industrial companies. (1) If the accumulated losses of an industrial company, as at the end of any financial year (hereinafter referred to as the relevant financial year) have resulted in erosion of fifty per cent., or more of its peak net worth during the immediately 2*[preceding four financial years],-- (a) the company shall, within a period of sixty days from the date (hereinafter referred to as the relevant date) of finalisation of --------------------------------------------------------------------- 1 Ins. by Act 12 of 1994, s. 13. 2 Subs. by s. 14, ibid. 18 the duly audited accounts of the company for the relevant financial year-- (i) report the fact of such erosion to the Board; and (ii) hold a general meeting of the shareholders of the company for considering such erosion; (b) the Board of directors shall, at least twenty-one days before the date on which the meeting under sub-clause (ii) of clause (a) is held, forward to every member of the company a report as to such erosion and the causes for such erosion; (c) the company may, by ordinary resolution passed at the meeting held under clause (a) remove a director (being a director appointed by the members of the company) and fill the vacancy created by such removal, so far as may be, in accordance with the procedure provided in sub-sections (2) to (6) of section 284 of the Companies Act, 1956 (1 of 1956). (2) A director removed under sub-section (1) shall not be entitled to any compensation or damages for termination of his appointment as director or of any appointment terminating with that as director. (3) If default is made in complying with the provisions of this section, every director or other officer of the company who is in default shall be punishable with imprisonment which shall not be less than six months but which may extend to two years and with fine.

23A Proceedings on report, etc., of loss of fifty per cent. net worth.

1*[23A. Proceedings on report, etc., of loss of fifty per cent. net worth. (1) Without prejudice to the provisions of clause (a) of sub- section (1) of section 23, 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 the accumulated losses of any industrial company have resulted in erosion of fifty per cent. or more of its peak net worth during the immediately preceding four financial years, report the fact of such erosion to the Board. (2) If the Board has, upon information received or upon its own knowledge, reason to believe that the accumulated losses of any indu- strial company have resulted in erosion of fifty per cent. or more of its peak net worth during the immediately preceding four financial years, it may call for such information from that company as it may deem fit. (3) Where the Board is of the opinion that an industrial company referred to in sub-section (1) is not likely to make its net worth exceed its accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future, it may require by order an operating agency to inquire into and make a report with respect to such matters as may by specified in the order. (4) After consideration of the report of the operating agency the Board may publish or cause to be published a notice in such daily newspapers as the Board may consider neccessary, for suggestions and objections, if any, within such period as the Board may specify, as to why the company should not be wound up. (5) Where the Board, after consideration of the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of the opinion that the industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof, is not likely to become viable in future and that it is just and equitable that the company should be wound up, the Board may record and forward its opinion to the concerned High Court in relation to the company as if it were a sick industrial company and the provisions of sub-sections (2), (3) and (4) of section 20 shall apply accordingly.

23B. Power of Board to call for periodic information. On receipt of a report under sub-clause (i) of clause (a) of sub-section (1) of section 23 or under sub-section (1) of section 23A or upon information or its own knowledge under sub-section (2) of section 23A, the Board may call for any periodic information from the company as to the steps taken by the company to make its net worth exceed the accumulated losses and the company shall furnish such information.]

24. Misfeasance proceedings. (1) If, in the course of scrutiny or implementation of any scheme or proposal, it appears to the Board that any person who has taken part in the promotion, formation or management of the sick industrial company or its undertaking, including any past or present director, manager or officer or employee of the sick industrial company-- (a) has misapplied or retained, or become liable or accountable for, any money or property of the sick industrial company; or (b) has been guilty of any misfeasance, malfeasance or non- feasance or breach of trust in relation to the sick industrial company, the Board may, by order, direct him to repay or restore the money or property or any part thereof, with or without interest, as it thinks just, or to contribute such sum to the assets of the sick industrial company or the other person entitled thereto by way of compensation in respect of the misapplication, retainer misfeasance or breach of trust, as the Board thinks just, and also report the matter to the Central Government for any other action which that Government may deem fit. (2) If the Board is satisfied on the basis of the information and evidence in its possession with respect to any person who is or was a director or an officer or other employee of the sick industrial company, that such person by himself or along with other had diverted the funds or other property of such company for any purpose other than a bona fide purpose of the company or had managed the affairs of the company in a manner highly detrimental to the interests of the company, the Board shall, by order, direct the public financial institutions, scheduled banks and State level institutions not to provide, during a --------------------------------------------------------------------- 1 Ins. by Act 12 of 1994, s. 15. 19 period of ten years from the date of the order, any financial assistance to such person or any firm of which such person is a partner or any company or other body corporate of which such person is a director (by whatever name called). (3) No order shall be made by the Board under this section against any person unless such person has been given an opportunity for making his submissions. (4) This section shall apply notwithstanding that the matter is one for which the person may be criminally liable.

25. Appeal. (1) Any person aggrieved by an order of the Board made under this Act may, within forty-five days from the date on which a copy of the order is issued to him, prefer an appeal to the Appellate Authority: Provided that the Appellate Authority may entertain any appeal after the said period of forty-five days but not after sixty days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time. (2) On receipt of an appeal under sub-section (1), the Appellate Authority may, after giving an opportunity to the appellant to be heard, if he so desires, and after making such further inquiry as it deems fit, confirm, modify or set aside the order appealed against 1*[or remand the matter to the Board for fresh consideration.]

26. Bar of jurisdiction. No order passed or proposal made under this Act shall be appealable except as provided therein and no civil court shall have jurisdiction in respect of any matter which the Appellate Authority or the Board is empowered by, or under, this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

27. Delegation of powers. The Board may, by general or special order, delegate, subject to such conditions and limitations, if any, as may be specified in the order, to any Member or Secretary or other officer or employee of the Board or other person authorised by the Board to manage any industrial company or industrial undertaking or any operating agency, such powers and duties [except the powers and duties under sub-section (2) and (4) of section 16, section 17, sub- sections (3) and (4) of section 19, sub-section (1) and (4) of section 20, sub-section (3) of section 22 and section 24] under this Act as it may deem necessary.

28. Returns and information. (1) The Board shall furnish from time to time to the Central Government such returns as the Central Government may require. (2) The Board may, for the purpose of efficient discharge of its functions under this Act, collect from, or furnish to-- (a) the Central Government, (b) the Reserve Bank, (c) the scheduled bank or any other bank, (d) the public financial institution, 2*** (e) the State-level institution, 3*[or (f) the sick industrial company and, in case of amalgamation, the other company,] --------------------------------------------------------------------- 1 Added by Act 12 of 1994, s. 16. 2 Omitted by s. 17, ibid. 3 Ins. by s. 17, ibid. 20 such information as it may consider useful for the purpose in such manner and within such time as it may think fit.

29. Power to seek the assistance of Chief Metropolitan Magistrate andDistrict Magistrate.

29. Power to seek the assistance of Chief Metropolitan Magistrate and District Magistrate. (1) The Board or any operating agency, on being directed by the Board, may, in order to take into custody or under its control all property, effects and actionable claims to which a sick industrial company is or appears to be entitled, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any property, books of account or any other documents of such sick industrial company be situate or be found, to take possession thereof, and the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, shall, on such request being made to him,-- (i) take possession of such property, books of account or other documents; and (ii) cause the same to be entrusted to the Board or the operating agency. (2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority on any ground whatsoever.

30. Protection of action taken in good faith. No suit or other legal proceeding shall lie against the Board or the Appellate Authority or the Chairman or any other Member, officer or other employee of the Board or the Appellate Authority, or operating agency or any other person authorised by the Board or the Appellate Authority to discharge any function under this Act for any loss or damage caused or likely to be caused by any action which is in good faith done or intended to be done in pursuance of this Act.

31. Saving of pending proceedings. Where a receiver or an official liquidator has been appointed in any proceeding pending immediately before the commencement of this Act, in any High Court for winding up of an industrial company such proceeding shall not abate but continue in that High Court 1*[and no proceeding in respect of such industrial company shall lie or be proceeded with further before the Board.]

32. Effect of the Act on other laws. (1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act. (2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company. --------------------------------------------------------------------- 1 Added by Act 12 of 1994, s. 18.

33. Penalty for certain offences. (1) Whoever violates the provisions of this Act or any scheme, or any order of the Board, or the Appellate Authority and whoever makes a false statement or gives false evidence to the Board or the Appellate Authority, shall be punishable with simple imprisonment for a term which may extend to three years and shall also be liable to fine. 2*[(2) No court shall take cognizance of any offence under sub- section (1) except on a complaint in writing of the Secretary or any such other officer of the Board or the Appellate Authority or any such officer of an operating agency as may be authorised in this behalf by the Board or the Appellate Authority.]

34. Offences by companies. (1) Where any offence, punishable under this Act has been committed by a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where any offence punishable under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.--For the purposes of this section,-- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.

35. Power to remove difficulties. If any difficulty arises in giving effect to the provisions of this Act or the rules, schemes or orders made thereunder, the Central Government may, by notification, remove the difficulty: Provided that no such notification shall be made by the Central Government after the expiry of a period of three years from the date on which this Act receives the assent of the President.

36. Power to make rules. (1) The Central Government may, by notification, make rules for carrying out the provisions of this Act. --------------------------------------------------------------------- 1 Omitted by Act 12 of 1994, s. 19. 2 Subs. by s. 20, ibid. 22 (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-- (a) the salaries and allowances payable to and other terms and conditions of service of the Chairman and other Members under sub-section (7) of section 6; (b) the powers which may be exercised and the duties which may be performed by the Secretary to the Board or the Appellate Authority under sub-section (1) of section 8; (c) the restrictions and conditions subject to which officers and employees may be appointed to the Board or the Appellate Authority under sub-section (2) of section 8; (d) the salaries and allowances and other conditions of service of the Secretary and other officers and employees of the Board or the Appellate Authority under sub-section (3) of section 8; (e) the additional matters referred to in sub-section (3) of section 13; (f) any other matter which is required to be, or may be, prescribed. (3) Every rule made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.