How is provision of Section 23 of SICA different from the provision of Section 15 of the same Act?

How is provision of Section 23 of SICA different from the provision of Section 15 of the same Act?

As quoted by Supreme Court in U.P. State Sugar Corpn. Ltd. Vs. U.P. State Sugar Corpn. Karamchari Assn. and Ors.[1]

“From a perusal of the aforesaid provisions of the Act it would appear that the Act makes a distinction between the role assigned to the Board in relation to a sick industrial company, provisions for which are contained in Sections 15 to 22A in Chapter III, and in respect of a potentially sick industrial company for which provisions are contained in Sections 23, 23A and 23B in Chapter IV.

In respect of a sick industrial company the Board has been assigned a more active role in the sense that on receipt of a reference under Section 15 or upon information received with respect to such a company or upon its own knowledge about the condition of the company, the Board is required to make such inquiry as it may deem fit for determining whether an industrial company has become a sick industrial company and under Sections 16 and 17 the Board makes suitable order after completion of the inquiry and a scheme may be prepared and sanctioned in relation to a sick industrial company under Section 18. There is provision for rehabilitation by way of financial assistance in Section 19 and express provision has been made in Section 22A empowering the Board to direct a sick industrial company not to dispose of any of its assets except with the consent of the Board during the period mentioned therein.

In respect of a potentially sick industrial company the Board has been assigned a more limited role of requiring such a company to furnish periodic information as to the steps taken by the company to make its net worth exceed its accumulated losses. The Board can also require an operating agency to inquire into and make a report with respect to the matters specified in the order and on the basis of such report the Board may form its opinion that the company is not likely to become viable in future and that it is just and equitable that it should be wound up. There is no provision similar to Section 22A whereby the Board may direct a potentially sick industrial company not to dispose its assets. Such a power conferred under Section 22A is restricted to a sick industrial company only.[2]”

“…the definition of the expression ‘sick industrial company’ contained in Section 3(o) of the Act which contemplates that in order that an industrial company is to be regarded as a sick industrial company if its accumulated losses at the end of any financial year are equal to or exceed its entire net worth. The High Court appears to have lost sight of the distinction between a sick industrial company and a potentially sick industrial company whose accumulated losses, as at the end of any financial year, have resulted in erosion of 50 per cent, or more of its peak net worth.”[3]

[1] AIR1995SC1484

[2] Ibid. Para 6

[3] Ibid. Para 28