The Sick Industrial Companies (Special Provisions) Repeal Bill was passed by the Lok Sabha on Thursday.

This will clear the way for setting up of the National Company Law Tribunal, with the government stating that the move will help in rehabilitating companies better than was possible with the Board for Industrial and Financial Reconstruction.

The Bill envisages dissolution of the BIFR and the Appellate Authority for Industrial and Financial Reconstruction.

Finance Minister Jaswant Singh told the Lok Sabha that the National Company Law Tribunal would have one main Bench and 10 others in various parts of the country.

While companies were referred to the BIFR if their net worth was completely eroded, Singh said companies whose net worth had halved would be automatically referred to the tribunal.

The BIFR has over 1,000 cases pending, involving an amount of Rs 2,018.54 crore (Rs 20.185 billion) in March 2003.

The ailing company and its board of directors will have to furnish the tribunal with information and a scheme for rehabilitation.

The minister informed the House that the new legislation included a special provision to protect workers' interests. This was lacking under the Sick Industrial Companies Act.

Though the Lok Sabha has cleared the Bill, the National Company Law Tribunal faces an uncertain future because the Madras High Court has issued a stay against it.

The court has objected to the need for such a tribunal. The tribunal is to be headed by a qualified high court judge and will have 13 judicial members along with 16 technical members.

Fresh momentum

• Companies with 50% net worth erosion to be automatically referred to the tribunal.
• Appellate Authority for Industrial and Financial Reconstruction to be scrapped.
• Special provision to protect workers' dues and interests included.