Sick Industrial Companies

Sick Industrial Company means an Industrial company which has –

1) The accumulated losses in any financial year equal to 50% or more of its average net worth during four years immediately preceding such financial year, so

2) Failed to repay its debt within any three consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company.

Net worth means the sum total of the paid capital and free reserves after deducting to provisions or expenses as may be provided. Free reserve created out of the profits and share premium account but does not include reserves created out if revaluation of assets, write back of depreciation provisions and amalgamation.

Industrial company means a company which owns one or more industrial undertakings. Industrial undertaking means any undertaking, pertaining to any industry carried on in one or more factories or units by any company, but does not include a small scale industrial undertaking

Sections 424A to 424L provide for revival and rehabilitation of sick industrial companies by making a reference to the Tribunal. Tribunal is vested with the powers to make suitable orders on completion of inquiry as provided. If the tribunal is satisfied that it is practicable for the company to make its net worth exceed the accumulated losses or make repayment of debts, the Tribunal shall give such time to the company as it deems fit to make its net worth exceed accumulated losses or make repayment of the debts.

Scheme is prepared by operating agency and sanctioned by the Tribunal. Rehabilitation is by giving financial assistance from the Central Government, State government bank, public financial institutions or any institution or other authority. Operating agency means any group of experts consisting of persons having special knowledge of business or industry in which the sick industrial company is engaged and includes public financial institution. State level institution scheduled bank or any other person as may be specified as the operating agency by the Tribunal.

If the Tribunal is of the opinion that the company is not likely to become viable and that it is just and equitable that the company should be wound up, it may record is findings and order winding up of the company.


The company Law has been enacted to consolidate and amend the law relating to companies and certain other associations. It seeks to achieve the following objects:

1) to encourage investments;
2) to ensure proper administration
3) to prevent mal practices and
4) to allow for investigations

Company: What is it?

A company is a form of business organization in which the funds of a large number of investors are managed by a very few persons for the purposes of earning profits which are shared by all the investors. In common usage, a company means an association of persons associated for some common purpose. It is, therefore defined as an association of persons united for a common object.

Section 3 (1) (i) of the company act, 1956 defines a company as:

A company means a company formed and registered under this Act or an existing company.

This definition in on way helps one to know what a company is? Section 566 of the Act defines a Joint Stock company as:

A Joint stock Company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares also of fixed amount, or held and transferable as stock or divided and held partly in one way and partly in the other. Such a company when registered with limited liability under this Act shall be deemed to be a company limited by shares.