INDUSTRIALSICKNESS

PROJECTREPORT
SWAPNILKANADE MMSB ROLLNO.123

TableofContents
INTRODUCTION.............................................................................................................................................3 HISTORICALBACKGROUDOFINDUSTRIALSICKNESS...................................................................................4 SYMPTOMSOFSICKNESS..............................................................................................................................5 DATAANALYSIS:............................................................................................................................................6 CAUSESOFSICKNESS....................................................................................................................................7 SICKINDUSTRIALCOMPANIES(SPECIALPROVISIONS)ACT,1985&BIFR....................................................8 OBJECTIVESOFSICA..................................................................................................................................8 BOARDOFINDUSTRIALANDFINANCIALRECONSTRUCTION(BIFR).........................................................8 REVIVALOFASICKUNIT...............................................................................................................................9 VIABILITYSTUDY:......................................................................................................................................9 REVIVALPROGRAMME:............................................................................................................................9 PREPARATIONANDSANCTIONOFSCHEMEFORREVIVAL.....................................................................11 REHABILITATIONBYGIVINGFINANCIALASSISTANCE.............................................................................11 SHORTCOMINGSOFSICA........................................................................................................................12 CASESTUDY:...............................................................................................................................................14 . CONCLUSIONANDSUGGESTIONS..............................................................................................................15 REFERENCES................................................................................................................................................15

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INDUSTRIALSICKNESS
INTRODUCTION AccordingtoRBI,Asickunitisonewhichincurscashlossesfor1year&which,inthejudgment ofthebank,islikelytoincurlossesforthecurrentyearaswellasthefollowingyear,&which hasimbalancesinitsfinancialstructure,likeworseningdebtequityratio. TheCompanies(SecondAmendment)Act,2002definesaSickCompanyasone: a) Whichhasaccumulatedlossesinanfinancialyearequalto50percentormoreosits averagenetworthduringfouryearsimmediatelyprecedingthefinancialyearin question,or b) Whichhasfailedtorepayitsdebtswithinanythreeconsecutivequartersondemandfor repaymentbyitscreditors. Industrialsicknessisaseriouscloginthesmoothfunctioningofthefinancialsystemasit impairstherepaymentcapacityofborrowersandtherebyimpedestherecyclingoffundslent bythefinancialsystem.Banksandotherfinancialintermediariesshowreluctanceinlendingto industrieswhicharegrippedbyactualorperceivedsickness.Itis,therefore,imperativethat suchunitsshouldbeidentifiedattheincipientstageitselfsothatpromptcorrectivemeasures maybetakenasearlyaspossibletominimizethedrainonnationalresources. TheRBIcollectsrelatedinformation,onanannualbasis,fromallscheduledcommercialbanks inrespectoftheirexposuretoNonSSIsick/weakindustrialcompanies/units.RBIbringsoutthe Reviewoftheseindustrialunitsfinancedbyscheduledcommercialbanksasattheendof Marcheveryyear,basedonthedatareceivedfromthesebanks.

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 HISTORICALBACKGROUDOFINDUSTRIALSICKNESS a.PreIndependencePosition Before1947,theIndianeconomywaspredominantlyagriculturalinnature.Thedevelopment of producers was almost negligibleand was inadequate tomeet the demands of the market. OnlythoseindustriessurvivedwhoservedtheinterestsoftheBritishers.Therewasdearthof privateplayersinthemarket.Themarketwasunorganizedbecauseofthereluctantattitudeof the Britishers and due to lack of proper communication facility as well as the shortage of power. This issue was further aggravated with the lack of any proper bank or financial institutions to finance the industrial projects. And, if at all, any help was available from the money lenders, they charged exorbitant rates of interest along with arbitrary terms and conditions. There was also minimal intervention of the Government in the promotion of the industries.Asaresult,itwasdifficultforanytradertosurviveinthemarketonalong terms basis.Alsotherewerenoproperimplementationofanypolicyinregardtotheeffortsofthe Governmentintherevivalandrehabilitationofsickindustries. b.PostIndependencePeriod: AftertheConstitutioncameintoforce,theprimaryaimwastoconvertIndiafromacolonial countrytoasocialistwelfaresociety,asenvisagedinthePreambleandtheDirectivePrinciples ofStatePolicy.TheGovernmentwaspromptedtogoforrapidindustrializationofbasicand heavyindustriestoconvertIndiafromagriculturaltoindustrialeconomy.Soon,the Governmentrealizedthatalargenumberofunitsareturningsick.Inordertocheckthegrowth ofthesickunits,theGovernmentadoptedstrategiestotakeoverofthesickindustrialunitsand restricttheproblemifunemployment,labourunrestandsocialunrest.TheGovernmentalso tooktheinitiativeoftakingoverthemanagementofsickindustrialundertakingsforabrief periodandreturningitbacktotheownersoncethesicknessisremoved.TheGovernmentinits aimofpreventingthegrowthofsicknesswasgivensupportbyvariousagenciessuchasRBI, IDBIetc.

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SYMPTOMSOFSICKNESS Timelyactionisrequiredforidentificationofsickness.Forthisweneedtoanalyzethe symptomswhichwouldhelpusidentifythesicknessoftheunit.Thiscanbetracedfromthe signalsthatgetdisplayedbythesickunits.Thesignalmaybeintheformoffinancialdistress startingwithshorttermliquidityproblems,revenuelosses,operatinglossesandmovinginthe directionofoveruseofexternalcredituntilitreachesastagewhereitisoverburdenedwith debtandnotbeingabletogeneratesufficientfundstomeetitsobligations.Incaseoflarge unitswhosesharesarequotedinstockexchanges,asignalofsicknessissentwhendividends areskippedandsharepricesharplydeclines.Thismeasure,therefore,willhavetobeusedvery cautiouslywithotheridentifiablesymptomstojudgewhetherskippingdividendsindicates sicknessorrepresentsatemporarydownwardslideinfinancialperformance.Theexistenceof thesesignalsandsymptomsprovidesagroundforsuspectingthattheindustrialunitconcerned ispronetosickness. Othersymptomsare: Delayordefaultinpaymenttosuppliers Irregularityinbankaccount Nonsubmissionofinformationtobanksandfinancialinstitutions Declineincapacityutilization Poormaintenanceofplantandmachinery Lowturnoverofassets Accumulationofinventories Inabilitytotaketradediscount Extensionofaccountingperiod Excessturnoverofpersonnel Declineinthepriceofequitysharesanddebentures
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DATAANALYSIS: ThetotalnumberofNonSSIsick/weakcompanies/unitsdeclinedfrom5,252asatendMarch 2005and4,540asatendMarch2006to3,967asatendMarch2007(Chart1).Also,the aggregateoutstandingbankcredittosuchunitsdeclinedfromRs.34,427croreasatendMarch 2005andRs.32,988croreasatendMarch2006toRs.25,066croreasatendMarch2007(Chart 2).

Thenumberofweakunitsincreasedfrom774atendMarch2005to1,132atendMarch2006 anddeclinedto1,010atendMarch2007.Ontheotherhand,thenumberofsickcompanies declinedovertheperiodandstoodat2,957asatendMarch2007,comparedwith3,408and 4,478asatendMarch2006and2005,respectively.InrespectofbankcredittoNonSSI sick/weakcompanies/units,theshareofsickcompaniesdeclinedovertheperiodand, correspondingly,theshareofweakunitsincreased.

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CAUSESOFSICKNESS Someindustriesarebornsick;sicknessisthrustuponsome,whileothersbecomesickduetoa numberofcauses.Thegeneralbeliefisthattheincidenceofsicknessresultsfromthechanging economicfactorsandtheexternalinfluence,whichtilttheeconomicviability.Thecausesof sicknessmayvaryfromoneunittoanother.Butthemostcommoncausesofsicknesscanbe groupedundertwoheadsinternalandexternal.InIndia,theTiwariCommitteeinitsreport outlinedthecausesofsicknessintoseveralheads.Theycanbeclassifiedas: A.InternalCausesThesearethosefactorswhicharewithintheinternalcontrolofthe management.Sicknessarisesbecauseofthedisorderofthefollowingconcerns: 1.Planning a.Technicalfeasibility:Inadequatetechnicalknowhow,locationaldisadvantage,outdated productionprocess. b.EconomicViability:HighCostofInputs,uneconomicsizeofproject,underestimationof financialrequirements,undulylargeinvestmentinfixedassets,overestimationofdemand. 2.Implementation: a.Costoverrunsresultingfromdelaysingettinglicences/sanctionsetc.,inadequate mobilizationoffinance. 3.Production a.Productionmanagement:Inappropriateproductmix,poorqualitycontrol,highcostof production,lackofadequatetimelyandadequatemodernization,highwastage,poorcapacity utilization. b.Labourmanagement:Excessivehighwagestructure,inefficienthandlingoflabourproblems, excessivemanpower,lackoftrained/skilledcomponentpersonnel. c.Marketingmanagement:Dependenceonlimitednumberofcustomers,poorsales realization,defectivepricingpolicy,weakmarketorganization,lackofmarketfeedbackand marketresearch,lackofknowledgeofmarketingtechniques. d.FinancialManagement:Poorresourcemanagementandfinancialplanning,liberaldividend policy,applicationoffundsforunauthorizedpurposes,deficiencyoffunds,overtrading, inadequateworkingcapital,lackofeffectivecollectionmachinery. e.AdministrativeManagement:Overcentralization,lackofprofessionalism,lackoffeedbackto management(managementinformationsystem),lackofadequatecontrols,lackoftimely diversification,excessiveexpenditureonR&D,incompetentanddishonestmanagement. B.ExternalCauses: a.InfrastructuralbottlenecksNonavailability/irregularsupplyofcriticalrawmaterialsor otherinputs,chronicpowershortage,transportbottlenecks. b.FinanceConstraints:AnotherexternalcauseforthesicknessofSSIsislackoffinance.This arisesduetocreditrestrainspolicy,delayindisbursementofloanbygovt.,unfavorable investments,fearofnationalization. c.Governmentcontrol,policies,etc.Governmentpricecontrols,fiscalduties,abruptchanges
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inGovernmentpolicies,proceduraldelaysonthepartofthefinancial/licensing/other controllingorregulatingauthorities(banks,RBI,financialinstitutions,Government departments,licensingauthorities,MRTPBoard). d.MarketingConstraints:Thesicknessarrivesduetoliberallicensingpolicies,restrainof purchasebybulkpurchasers,changesinglobalmarketingscenario,excessivetaxpoliciesby govt.andmarketrecession. e.Extraneousfactors:Naturalcalamities,politicalsituation(domesticaswellasinternational), war,sympatheticstrike,multiplicityoflabourunions. TheGovernmenttakingintoconsiderationallthefactorsresultingintoindustrialsickness, acceptedtherecommendationsoftheTiwariCommitteewithsomemodification,andthus,the SickIndustrialCompanies(SpecialProvisions)Act,1985was,accordinglyenacted. SICKINDUSTRIALCOMPANIES(SPECIALPROVISIONS)ACT,1985&BIFR FollowingtheTiwariCommitteerecommendations(1981),theSickIndustrialCompanies (SpecialProvisions)Act,1985(SICA)waspassedandtheBoardforIndustrialandFinancial Reconstruction(BIFR)wasestablishedin1987fordeterminingthepreventive,ameliorative, remedialandothermeasureswhichneedtobetakeninrespectofNonSSIsickindustrial companiesandtheexpeditiousenforcementofthemeasuressodetermined.However,no specialActhasbeenenactedinrespectofrevivalofsickSSIunits. OBJECTIVESOFSICA 1.Toevaluatethetechnoeconomicviabilityofsickindustrialcompanieswithaviewtoeither torehabilitatethem,ifthepublicinterestsodemandedandtheirrehabilitationwaspossible,or toclosethemdown,ifcontinuingthemwouldbeimpossible. 2.Tostopcontinueddrainofpublicandprivateresourcesfortheoveralleconomyofthe country. 3.Toprotectemploymentasfaraspossible. InthecaseofTesteelsLimited&ArvindbhaiN.Taltivs.RadhabenRanchhodlalCharitableTrust &TesteelsLimited,itwasheldthatSICAhadbeenenactedtosafeguardtheeconomyofthe countryandprotecttheviablesickunits. BOARDOFINDUSTRIALANDFINANCIALRECONSTRUCTION(BIFR) BoardofindustrialandFinancialReconstruction(BIFR)wasestablishedbytheCentral Government,undersection3oftheSickIndustrialCompanies(Specialprovisions)Act,1985 anditbecamefullyoperationalinMay,1987.BIFRdealswithissueslikerevivaland rehabilitationonsickcompanies,windingupofsickcompanies,institutionalfinancetosick companies,amalgamationofcompaniesetc.BIFRisaquasijudicialbody. TheroleofBIFRasenvisagedintheSICA(SickIndustrialCompaniesAct)is: (a)Securingthetimelydetectionofsickandpotentiallysickcompanies
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(b)Speedydeterminationbyagroupofexpertsofthevariousmeasurestobetakeninrespect ofthesickcompany (c)Expeditiousenforcementofsuchmeasures BIFRhasachairmanandmayhaveamaximumof14members,drawnfromvariousfields includingbanking,labour,accountancy,economicsetc.Itfunctionslikeacourtandhas constitutedfourbenches. REVIVALOFASICKUNIT Therevivalpackagemayvaryfromcasetocasedependingonthenatureoftheproblemand mayincludeadditionalfinancialassistance,postponementofrecoveryofloanalreadylentby banksandfinancialinstitutions,changeinmanagement,amalgamation,saleofredundant assets,leaseofassetsoranyothersuitablemeasure.Therevivalpackageshouldbesubmitted totheBIFRwithinatimelimitof90daysorsuchextendedperiodasmaybegrantedbythe BIFR. VIABILITYSTUDY: Areasonablycomprehensiveassessmentofthevariousaspectsoftheworkingofaunit,a viabilitystudyshouldcoverthefollowing: Market Operations Finance Humanresources Environment

Theviabilitystudymaysuggestoneofthefollowing: a) Theunitcanberevivedbyadoptingoneormoreofthefollowingmeasures:debt restructuring,infusionoffunds,correctionoffunctionaldeficiencies,grantingofspecial reliefsandconcessionsbythegovernment,replacementofexistingmanagement becauseofitsincompetenceand/ordishonesty. b) TheunitisnotpotentiallyviableThisessentiallyimpliesthatthebenefitsexpected fromremedialmeasuresarelessthanthecostofsuchremedialmeasures. REVIVALPROGRAMME: Therevivalprogrammeusuallyinvolvesthefollowing: SettlementwithCreditors:Asickunitisnormallyinstraitenedfinancialcircumstancesandis notabletohonouritscommitmentstoitscreditors(financialinstitutions,debentureholders, commercialbanks,suppliers,andgovernmentalauthorities).Toalleviateitsfinancialdistress,a settlementschemehastobeworkedoutwhichmayinvolveoneormoreofthefollowing: reschedulingofprincipalandinterestpayment;waiverofinterest;conversionofdebtinto equity;paymentofarrearsininstallments. ProvisionofAdditionalCapital:Typically,arevivalprogrammeentailsprovisionofadditional capital.Thismayberequiredformodernizationandrepairofplantandmachinery,forpurchase
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ofbalancingequipment,forsustaininganewmarketingdrive,andforenhancedworkingcapital neededtosupportahigherlevelofoperations.Theadditionalcapitalhastobeprovidedon concessionalterms,atleastfortheinitialyears,sothatthefinancialburdenontheunitisnot high. DivestmentandDisposal:Therevivalprogrammemayinvolvedivestmentofunprofitable plantsandoperationsanddisposalofslowmovingandobsoletestocks.Thethrustofthese actionsshouldbetostrengthentheliquidityoftheunitandfacilitatereallocationofresources forenhancingtheprofitabilityoftheunit. ReformulationofProductmarketstrategy:Manyabusinessfailurescanbetracedtoanill conceivedproductmarketstrategy.Forrevivingasickunit,itsproductmarketstrategymay havetobesignificantlyreformulatedtoimprovetheprospectsofitsprofitablerecovery.This, ofcourse,callsforagreatdealofimaginationandpenetratinganalysis. ModernizationofPlantandMachinery:Inordertoimprovemanufacturingefficiency,plant andmachinerymayhavetobemodernized,renovated,andrepaired.Thismaybeessentialfor attainingcertaincoststandardsandqualitynormsforcompetingeffectivelyinthemarket place. ReductioninManpower:Generally,sickfirmstendtobeoverstaffed.Therevivalprogramme mustseektoreducesuperfluousmanpower. Strictcontrolovercosts:Aprofitableorganizationcanaffordwastefulnessandlaxityinits expenditures.Atotteringfirm,seekingtoregainitshealthandvigour,hastoexercisestrict controloveritscosts,particularlyoveritsdiscretionaryexpenses.Azerobasereviewofallthe discretionaryexpensesmaybeundertakentoeliminateprogrammesandactivitieswhicharea drainonthefinancesofthefirm. StreamingofOperations:Manufacturing,purchasing,andsellingoperationshavetobe meticulouslyexaminedsothattheycanbestreamlines.Valueengineering,standardization, simplification,costbenefitanalysis,andotherapproachedshouldbeexploitedfullytoimprove theefficiencyoftheoperations. ImprovementinManagerialSystems:Themanagerialsystemsintheunitmustbe strengthened.Inthisexercise,greaterattentionmayhavetobepaidtothefollowing: Environmentalmonitoring Organizationalstructure Responsibilityaccounting Managementinformationsystem Budgetarycontrol

WorkersParticipation:Ingeneral,workersparticipationinmanagementenhancesemployee commitment,motivation,andmorale.Further,thesuggestionsofferedbytheworkersresultin improvementsthatleadtohighermanufacturingefficiencyandproductivity.Asick organization,whichisbeingrevived,canperhapsbenefitevenmorefromworkers participationinmanagement.Duringtherevivalphase,thededication,commitment,and supportofworkersisindispensableandmeaningfulworkersparticipationandinvolvement goesalongwayinensuringthis.

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ChangeinManagement:Achangeinmanagementmaybenecessarywherethepresent managementisdishonestand/orincompetent.Ithasbeenobservedthatanewchiefexecutive, whoisincompetent,committed,anduprighteous,canoftenbringaboutdramaticresults. MergerwithaHealthyCompany:Ifasickfirmcannotpullitselfbyitsownbootstraps,the optionofmergerwithahealthyfirmmustbeseriouslyexplored.Thehealthyfirmcanleverage itsresourcestorevivethesickfirm. PREPARATIONANDSANCTIONOFSCHEMEFORREVIVAL Onceacompanyhasbeenfoundsick,theBIFRmaygranttimetothesickcompanytoenableit tomakeitsnetworthpositiveandbringthecompanyoutofsickness,withoutanyexternal financialassistance.Ifitisfoundinfeasibleforcompanytomakeitsnetworthpositivewithout anyexternalfinancialassistance,oriftheBIFRdecidesthatthecompanycannotmakeitsnet worthpositivewithinareasonabletime,thentheBoardappointsanoperatingagencyunder section17(3)oftheAct,thentheoperatingagencyisrequiredtoprepareandsubmita scheduleinrespectofthereferredcompanybyprovidinganyormoreofthefollowing measures: i.FinancialReconstructionofthesickindustrialcompany; ii.Thepropermanagementofthesickindustrialcompanybychangein,ortakeoverof,the managementofthesickindustrialcompany; iii.Amalgamationwithanothercompanyorviceversa; iv.Saleorleaseofitsundertaking; v.Rationalizationofitsstaff; vi.Anyotherpreventiveorremedialmeasures;and vii.Incidentalorconsequentialmeasures. REHABILITATIONBYGIVINGFINANCIALASSISTANCE Whenanindustrialunitisidentifiedassick,aviabilitystudyshouldbeconductedtoassess whethertheunitcanberevived/rehabilitatedwithinareasonableperiod.Iftheviabilitystudy suggeststhattheunitcanberehabilitated,asuitableplanforrehabilitationmustbe formulated.Iftheviabilitystudyindicatedthattheunitisbetterdeadthanalive,stepsmust betakentoliquidateitexpeditiously Onsubmissionoftherevivalpackagebytheoperatingagency,theBIFRsendstherevival packageinadraftformtoalltheinterestedparties(i.e.,thesickindustrialcompany,thebanks/ financialinstitutionswhohavegivenfinancialassistancetothesickcompany,theoperating agency,thetransfereecompany(ifthereisarecommendationintherevivalpackagefor amalgamation)etc.,elicitingtheirviews/suggestionsontherevivalpackage.TheBIFRwillalso publishparticularsofthedraftrevivalpackageinnewspapersinvitingsuggestions/objections,if any,fromtheshareholdersofthesickcompany,creditorsandemployeesofthesickcompany, transfereecompanyandanyotherinterestedparty.Onreceiptofviews/suggestions/objections onthedraftrevivalscheme,theBIFRmay,ifdeemedfit;affordanopportunitytotheinterested partiestobeheard.Aftercarefulexaminationofalltheaspects,theBIFRwillsanctionthe
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revivalschemewithorwithoutanymodifications. MeasuresTakenbyGovernmentforRevival TakeoveroftheManagement AmalgamationwithHealthyUnits ExciseLoans SettingupofIndustrialInvestmentBankofIndia(IIBI) MarginMoneyScheme:InJune1987,governmentintroducedaschemeknownas MarginMoneyScheme.Underthisscheme,liberalfinancialassistancewasgrantedto smallsickindustrialunits,atlowrateofinterestandatlessersecurity. EstablishmentofNationalCompanyLawTribunal

MeasuresTakenbyBanksforRevival Recoveryofinterestatreducedrates. Grantofadditionalworkingcapitaltoovercometheshortageofworkingcapital. Writingoffthewholeorthepartofaccruedinterest. SettingupaSickIndustrialUndertakingsCellinReserveBankofIndiatoobtaintimely informationregardingsickunits. SettingupaspecialcellinIndustrialDevelopmentBankofIndia(IDBI)toidentifyand solvetheproblemareasofsickunits. ReserveBankissuedguidelinestothebankswithaviewtoensurethatthepotentially viablesickunitsinsmallscaleindustriessectorgetdueattentionandtimelysupport.

SHORTCOMINGSOFSICA ThefunctioningofSICAprovedinadequatetocatertotheneedsofthesickunits.The reasonsofsicknesscanbeoutlinedaspoorandslowfunctioningofBIFR,abuseof Section22,delayinWindingupProcedureanddefectivePolicyandinadequatestrength ofBIFR.

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COMPANIESBILL,2009 Certainchangeswereproposedtobemadefortherehabilitationandrevivalofthesick unitsasfromtheproposedCompaniesAmendmentAct,1956.Thecriteriaofsickness waschangedtoincludeinabilitytopaydebtsduetosecuredcreditorsrepresenting 50%ormoreoftheoutstandingdebt.Furtherthescopeofthefilingforthe determinationofsicknesswhichwasrestrictedtotheBoardnowincludedthecreditor orthecompany.Evenpowersweregrantedtothecreditorstodecideontheissueof windinguportherevivalofthecompanybypassingaspecialmajorityamongthe creditors.Moreover,thegreaterpowershavebeenconferredonthecreditorsto supervisearescueplanandrestrictthepowersofmanagementintherehabilitationofa sickcompany. RECOMMENDATIONSOFTHEJJIRANICOMMITTEEONCOMPANYLAW(2005) JJIraniCommitteewantedtoomitthetermsickindustrialcompanyandreplaceitwith insolventcompanyandtherebyerasethesicknesstestonthebasisoferosionofnetworth withthatoftheliquiditytest.Moreover,itrecommendedthatCA/CS/CWA/lawprofessionals shouldplayanactiveroleintheinsolvencyprocesssothattherewouldbeexpertisepersons dealingwiththespecialized,commercialandtechnicalcharacteristicsofinsolvencylaw.Italso recommendedtheestablishmentoftheNationalCompanyLawTribunalonaspeedybasis. Further,itenunciatedthattherehabilitationbycesstobereplacedbytheInsolvencyFund withoptionalcontributionbycompanies.ItalsoallowedthedebtorstoapproachtheTribunal withtherehabilitationscheme.Powerwasalsogiventothecreditorstoopposetheschemeof rehabilitation

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CASESTUDY: ANDHRAPRADESHPAPERMILLS Inthelate1980s,AndhraPradeshPapermillswasinstraitenedcircumstances.Thankstopower cutsandothersproblems,itsproductionwaslowanditwasincurringlossesofnearlyRs.5 millioneverymonthin1988. Somanis,thecontrollinggroup,broughtM.V.G.RaowhohadasuccessfulstintwithTamilNadu Newsprint.Reputedforhisturnaroundskills,M.V.G,Raotookaseriesofstepstorehabilitate thecompany.Thekeyelementsoftheturnaroundstrategywereasfollows: AccumulatedinventoriesweredisposedtogenerateRs.30million. Twomoredieselgenerators,eachhavingacapacityof1000KVA,werepurchased.This helpedinraisingproductionfrom3,000tonnesto7,500tonnespermonth. Bamboo,anexpensiverawmaterial,wassubstantiallyreplacedbyhardwood,acheaper rawmaterial. AnumberofhighlyskilledemployeeswereinductedfromTamilNaduNewsprint Project. Theworkersunionwastakenintoconfidencebyopenandplainspeaking.

Theseactionspaidoff.AndhraPradeshPaperMills,regardedbymanyobserversasahopeless case,emergedfromtheshadowsofbankruptcy.By199091thecompanywasturnedaround. Aturnaroundsituationrepresentsanunusualphaseinthelifehistoryofafirmandrequiresa verydifferentapproachtomanagementascomparedtoanormalsituation. Thekeyelementsfoundcommonlyinturnaroundsare:

Achangeintopmanagement Asubstantialinvolvementoftopmanagementinthedaytodayoperations Anemphasisonprojectsthathaveaquickpayoff. Opportunisticaction,improvisation,crisismanagement,andshorttermexpediency.

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CONCLUSIONANDSUGGESTIONS Industrialsicknessisaproblemalleconomiesbigandsmallhavetoface.Whatisimportantisto evolveaproperregulatoryandinstitutionalmechanismtodealwiththesituation.Whilethere shouldbeamechanismtosafeguardtheinterestsofworkers,asuitableexitpolicyforthenon viableunitsshouldformanintegralpartofthenewapproach.Astringentmechanismshould alsobedevisedsothatthedirectorsofthecompanyshouldnotplayfraudontheunittobring itwithinthepurviewofsickness.NCLTshouldalsobemadetocomeintoforcetoensure speedydisposalofcaseslookingintothesluggishnessofthedisposalofcasesbyBIFR. Theapproachofthegovernmenttowardsrehabilitationofasickunitbeingveryselective,the governmentisnowconvincedthatthereisnopointinthrowingawayfurtherresourcesin supportoftheunitswhichareirretrievablysick.Onlysuchunitswhicharefoundtobe potentiallyviableneedtobetakenupforformulationofrehabilitationpackagestorestore themtohealth.Packageconsistingofconcessionsfrombanks,financialinstitutions, government(Central/State),governmentagencies,shareholders,labour,andsuppliersofgoods shouldbeprovidedtothoseunitswherechancesaresubsistingfortherevivalofthesickunit. Theenactmentinsteadoffruitfulitprovedburdensomeonthehealthycompanies.The rehabilitationfundarecreatedbyimposingtaxonthegoodworkingcompanieswhichputs additionalburdenonthemwithouttheirownfault. TheParliamentitselfisnotsurewhetherrehabilitationshouldbegiventothesickcompany whichisevidentfromtheactoftheparliamentitself.Parliamentrepealedtheveryfirst enactmentofSICAafterseventeenyearsjustbecauseitdidnotconfirmedthepurposessetout intheenactmentandinsertedfewsectionsinthecompaniesAct,1956. Sickindustrialcompanyshouldbeleftontheirownconditionandletthemarketforcesto decidethefateofthecompany.Governmentshouldrefrainitselffromintervention.Ifatall governmentwantstodofruitfulhelpfortheindustrialcompany,itshouldhelptakingthe affairsoftheindustrialcompanyinitsownhandforaparticularperiodoftime. REFERENCES 1. FinancialManagementbyPrasannaChandraChap.38 2. http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=10523 3. http://www.taxmann.com

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