BIFR sees no rise in sick firms.

Despite economic slowdown only 46 cos move the board till Oct, '09 against 57 in 2008

DUE to the slowdown faced by the economy over the last 12 months, the number of sick companies seeking protection under the Board for Industrial and Financial Reconstruction ( BIFR) should have gone up. But that was not the case, if one were to go by the number of companies approaching BIFR during 2009.

" We expected a lot of bigger companies to get registered with us in the wake of the slowdown. But more or less the trend this year remains the same as last year," said K. Cherian Varghese, chairman of BIFR, talking to M AIL T ODAY . In 2009, 46 companies had registered by October- end, against 57 in the whole of 2008.

BIFR is an organisation of experts formed by the Centre that seeks to find ways out for the revival of sick industrial units. The protection it provides is akin to Chapter 11 protection in the US, but is confined to manufacturing companies, unlike the former which is applicable to even individuals.

" That shows that the economic downturn had not hit our country so much, compared to some developed countries," he added.

Restructuring of bank loans during the last 12 months is being cited as the reason for the lower number of companies reporting sick. Though that could be judged only after some time, Varghese, a veteran banker before retiring about three years back, feels it could not be reason enough, given that " banks would restructure loans of only viable companies, not the hopeless ones". The 23- year- old BIFR had been suffering from delays in clearing schemes, because parties wantonly try to subvert the process by seeking extensions.

But the organisation is getting nimble footed to an extent, said Varghese, who had been elevated to head the board a couple of months back. Varghese served as the chairman and managing director of two leading public sector banks -- Corporation Bank and Union Bank of India.

To clear schemes for expeditious revival, recently the body added a third and new bench to the existing two. Each bench consists of two members / experts appointed by the government.

In 2009 so far, BIFR had discharged about 30 companies after they regained health. It still has over 1,250 sick companies registered with it, seeking revival.

To curtail delays in getting all the parties involved ( banks, financial institutions, state governments and the company promoters) to the table to find a suitable solution for revival of the company, BIFR has also introduced a system where the case can get automatically registered for hearing on the sixth day of filing the petition. However, petitions relating to such urgent obligations should have reached all the concerned parties prior to filing of papers.

Often banks, financial institutions ( FIs) and govt institutions come without a brief on the matter, adding to the delays. " They come here and seek time for preparation. The other day I wrote to all chairmen of banks and all chief secretaries of states, giving a check list that the persons representing them should have been briefed about, so that delays can be curtailed," BIFR chairman said.

" The primary objective of BIFR is to protect jobs and put the manufacturing assets to productive use," Varghese explained crisply. The number of employees working in companies registered with BIFR ranges from 100- 8,000, he added.

Though the prominence of BIFR is said to be falling in the wake of other means coming into being, it has not seen any change in the trend over the last three years. Companies undertake corporate debt restructuring ( CDR) for negotiating with banks, while banks can approach the debt recovery tribunals ( DRTs) or resort to Sarfaesi Act for recovery of loans.

Copyright 2009 India Today Group. All Rights Reserved.

Provided by Syndigate.info an Albawaba.com company