The finance ministry is reconsidering the `far-reaching' changes in the amendments in the Sick Industries Companies Act (Sica), including the change to declare as sick firms with 50 per cent erosion in their net worth.
Officials said the Bill to amend Sica was unlikely to be tabled in the current session of Parliament. This could delay plans to overhaul the legal system in banks, proposed to have begun with the Sica amendments.
"There are some far-reaching changes recommended in the Bill. We do not want to rush it. The finance ministry is taking a relook at some of the measures," an official said.
The Sica Bill envisaged restructuring the Board for Industrial and Financial Reconstruction (BIFR), with plans to remove provisions in BIFR that provided shelter to companies referred to it from creditors and tax authorities.
Bankers have long been demanding a BIFR recast.
"The BIFR route is followed by companies to take shelter from tax authorities and creditor banks. As soon as a sick company is referred to the BIFR, it ceases to have any tax liability. Similarly, loans by commercial banks get stuck, as the banks are unable to recover their money," one bank official said.
Bankers said they also detected unfair practices by companies referred to the BIFR. The firms have been found undercutting prices on account of lower expense burden, since they do not pay tax or interest to banks as a BIFR case. Loans involving BIFR cases are estimated to be Rs 10,000 crore.
"We have found that a few defaulter comp
