Board for Industrial and Financial Reconstruction (BIFR)

BIFR refers to Board for Industrial and Financial Reconstruction, which was established under SICA or Sick Industrial Companies (Special Provisions) Act, 1985.

• In India, the Industrial sickness had started right from the pre-Independence days. Government had earlier tried to counter the sickness with some ad-hoc measures and some measures including Nationalisation of Banks could provide temporary relief.
• In 1975, RBI had constituted a committee known as Tandon Committee. It was followed by HN Ray Committee in 1976. Both of them recommended some measures, but later it was the 1981 Tiwari Committee that suggested a comprehensive special legislation designed to deal with the problem of sickness laying down its basic objectives and parameters, remedies necessary for revival of sick Units. Thus the SICA came into existence in 1985 and BIFR started functioning from 1987.
• The Board for Industrial and Financial Reconstruction (BIFR) was set up in January, 1987. Then an Appellate Authority for Industrial and Financial Reconstruction (AAIRFR) was constituted in April 1987. Government companies were brought under the purview of SICA in 1991.
• Today, SICA covers both public and private companies that have industrial undertakings.

Comparing BIFR of India with Chapter 11 of US

Here we should note that on papers, objective of the BIFR is the same as that of the US Chapter 11 – to give insolvent companies breathing space to take tough decisions needed to effect a turnaround in their operations. But practically, BIFR proceedings meander endlessly. The combination of bureaucratic bank managements and political interference means endless delays as operating agencies struggle to arrive at a consensus that satisfies all parties to the deal. Given our bank-centric model of financing and the dominance of public sector banks, what this means is that the only real losers are the taxpayers. Promoters seldom suffer.

The situation can only change if the alternate remedy of a National Company Law Tribunal — a key provision in the proposed Companies Bill — slated to replace the BIFR becomes a reality.