Annexure to Government Order No: 47 - Ind of 1999 dated 10.02.1999

1. TITLE OF THE SCHEME
   
   The scheme shall be called package of incentives and concessions for Revival and Rehabilitation of sick units 1998.
   
   
2. SCOPE AND EXTENT
   
   The scheme shall be applicable to all the sick units tending towards sickness which are assessed as potentially viable as per norms and guidelines laid known for the purpose.
   
   
3. DEFINITIONS
   
   Unless the context otherwise provides, the terms and titles used in this Scheme shall have the same meaning and intention as assigned in this Scheme.
   
   
   1. Sick Industrial Unit:- A SSI unit should be considered "Sick" if it has (a) incurred cash loss in the previous accounting year and is likely to continue to incur cash loss in the current accounting year and has an erosion on account of cumulative cash losses to the extent of 50% or more of its net worth and /or (b) continuously defaulted in meeting four consecutive quarterly instalments of interest or two half yearly instalments of principle on term loans and there are persistent irregularities in the operation of its credit limits with the bank. While both the conditions (a) or (b) is satisfied in the case of tiny and decentralized units.
      
      
   2. "Industrial unit tending towards sickness" shall mean SSI unit not falling in the definition of "Sick units" which falls in generation of enough cash to meet its current liabilities and thereby its working capital account with its Bank becomes sticky and/or which is not in a position to liquidate its liabilities of repayment of term loan. This will not include failure to meet the current liabilities on account of willful diversion of cash assets in any other form or opportunities to another party/company or industrial unit whether related to the owners/directors of the unit under reference in any manner whatsoever or not, and shall however include a unit which has remained un-commissioned after availing term loan/assistance in part or full due to reasons beyond his control.
      
      Note: The financial statements required in respect of A or B above shall be prepared b a registered Chartered Accountant or an approved Consultant.
      
      EXPLANATION
      
      For the purpose of above clause:
      
      
      1. "Cash loss" means loss as computed without providing for depreciation".
      2. "Net worth" is the sum total of the paid-up capital and free reserves:
      3. "Free reserves" means all reserves credited out of the profits and share premium account but does not include reserves credited out of re-evaluation of assets. Write back of depreciation provision and amalgamation.
         
         
   3. "Financial Institution" shall mean the Financial Institution which has initially provided the term loan or where more than one institution has provided this facility to the unit by such Financial Institutions.
      
      
   4. "Commercial bank" shall mean a commercial bank or any other financial institution which might have given working capital to the unit or who has made commitment to provide working capital to the industrial units or in absence either, a commercial bank which is ready to participate in providing assistance to sick unit or unit tending towards sickness.
      
      
   5. "District Revival Committee" shall mean a Committee constituted by the Government at the district level for considering/sanctioning assistance to the sick units for revival under this scheme and shall here-in-after be referred to as "DRC".
      
      
   6. "State Revival committee" shall mean a committee constituted by the Government at the state level for considering/sanctioning assistance to the sick unit/units tending towards sickness etc. for their revival under this Scheme and shall hereinafter be referred to as "SRC".
      
      
4. CLASSIFICAAATION OF SICK
   
   Sick units may be classified into following broad categories:-
   
   
   1. Industry which remained closed because of the occupation the premises by the Security Forces.
      
      
   2. Industry which remained closed for a long period due to militancy or otherwise, but not because of occupation of the premises by the Security Forces.
      
      
   3. Industry not falling in categories A and B above, which functioned irregularly during the last few years and presently is not in a position to carry on its production at a commercially viable scale.
      
      
   4. Industry not falling in categories A, B and C above.
      
      
5. PROCEDURE
   
   The following procedure shall be followed to handle the problem of sickness in the industry:-
   
   
   1. Identification of sickness shall be done on the initiative of the concerned unit holder who shall approach the General Manager, DIC concerned with a rehabilitation plan giving out all the relevant information and balance sheets and trading and profit and loss account for the previous three years under an intimation to the concerned financial institutions and commercial bank in form A appended to this Scheme.
      
      
   2. A Sub-committee of the representatives from the concerned financing institution, commercial Bank, and the DIC shall examine the case and see that the entrepreneur has worked out some viable plans through which he intends to revive his sick unit including requirement of additional term loan, additional working capital, modernisation, diversification, improvement in the skills of management etc. The General Manager of the concerned DIC and in case of Jammu and Srinagar districts such other officer as may be notified for the purpose by the Director, Industries and Commerce shall act as convenor of the Sub-committee. The sub-committee shall also see whether the sick unit can be put back to rails only by certain waivers of penal and compound interest and re-schedulement of loan and sanction of additional loans within the competence of the financing institutions/commercial Government. If that may be possible, action may be taken accordingly.
      
      
   3. However, if such an arrangement is not arrived at in the sub-committee, the convenor may prepare a brief report and make recommendations for consideration by the concerned DRC/GRC as the case may be for determining such revival package as may be decided with participation of the Government, financing institution and the commercial bank. This report factor(s) have caused sickness to the unit:-
      
      
      1. Shortage of working capital/term loan.
      2. Non availability of raw material.
      3. Non availability of regular power supply.
      4. Mis-management including non-availability of market for end products/inefficiency in salesmanship.
      5. Technological obsolescence.
      6. Any other cause peculiar to a unit or class of units.
      
      
      
   4. Constitution of the Committees
      
      
      District level Revival Committee(DRC) shall consists of the following:-
      
      
      1. District Development Commissioner ... Chairman
      2. Joint Director Industries and Commerce ...Vice-Chairman Deptt. to be nominated by Director, I&C
      3. Lead Bank Officer …Member
      4. Senior Officer not below the rank of ...Member
         Deputy General Manager to be nomiinated by the Managing Director, S.F.C.
      5. Senior Manager of the concerned Bank ...Member
      6. General Manager, DIC ... Member Secretary
      7. One member representing sick ... Member Industries or district Association of SSI units to be nominated by the Chairman.
      
      
      Notes: In the absence of Chairman, Vice-Chairman will act as Chairman
      
      State level Revival committee (SRC) shall consist of the following:-
      
      1. Addl. Chief Secretary, I&C …………. Chairman
      
      2. Director, I&C …………. Member-Secretary
      
      3. Managing Director, SIDCO …………. Member
      
      4. Managing Director, SIDCO …………. Member
      
      5. Managing Director, SFC …………. Member
      
      6. Financial Adviser & Chief Accounts ………… Member
      Officer, I&C
      
      7. Officer I/C Local SIDBI office in the state………… Member
      
      8. A.G.M. I/C, SLIIC in local State Office or RBI…… Member
      
      9. Regional Manager of the concerned Bank ………... Member
      
      10. Sh. Abdul Majid Khan, President, Industrial ……… Member
      Reconstruction Forum, Kashmir.
      
      11. Sh. Satinder Gupta, President, Sick Industrial …….. Member
      Forum Phase IIIrd, Gangyal, Jammu
      
      
   5. The concerned revival committee will go through the Scheme alongwith recommendations of the Sub-committee, consider its pros and cons and then determine and declare the revival package for only potentially viable sick units.
      
      
   6. In respect of sick units where the premises had remained under occupation of the security forces, the Sub-committee will go into the statement prepared by the owner of the sock unit and after making such verification as may be prescribed by the Government may send a report to the Government in the Home Department for their consideration as per norms to be laid down by them separately. The amount of compensation which may be sanctioned or which may be due as per norms shall be taken into account for determining any other assistance from the Government under this packages for revival of sick units.
      
      
   7. Where the units have been closed otherwise i.e. not due to occupation by the security forces, the aforementioned Sub-committee shall verify whether the entrepreneur closed his operations for good and sufficient reasons. If the Sub-committee is satisfied about the intentions of the unit holder, it will consider the possibility of rehabilitating the unit.
      
      
   8. The amount of subsidies, financial assistance, claims on any account and other payments, if any, due from Government departments, Semi-government Organisations while formulating the revival package.
      
      
6. Item on which DRC/SRC shall make recommendations:
   
   
   1. Relief to be provided on interest including penal and compound interest as per general guidelines drawn up for the purpose.
      
      
   2. Re-schedulement of outstanding term loan with a moratorium to be decided on merits not exceeding two years.
      
      
   3. Conversion of working capital loan into term loan with a moratorium to be decided on merits not exceeding two years.
      
      
   4. Interest freeze on the outstanding amount of interest thus converted into term loan in accordance with RBI guidelines.
      
      
   5. Sanction of additional term loan and additional working capital as per requirement.
      
      
   6. The margin money for additional term loan/additional working capital and funding of interest arrears.
      
      
   7. Steps to be taken by the unit holder for modernisation/diversification.
      
      
   8. Any other recommendation considered necessary.
      
      
7. Items on which the DRC/SRC shall taken decisions:-
   
   (A)
   1. Amount of soft loan to be provided to the entrepreneur to meet the margin money required for raising additional loan from financial institution/banks both for term loan as well as working capital or for the purpose of entering into a settlement with a financial institution/bank.
      
      
   2. Soft loan to be provided to meet the liabilities of Government Departments such as Power Development Department, Sales Tax Department etc. to the extent of 100% of such liability.
      
      
   3. Financial assistance not exceeding Rs. 10,000/- for meeting the cost of getting feasibility studies/reports on revival prepared form recognised consultancy agencies:
      
      
   B. The total amount of soft loan sanctioned in favour of the unit shall not exceed:-
   
   
   1. 30% of the total additional loan requirement of the sick unit.
      
      
   2. 30% of the capital cost of the project worked out after conversion of any outstanding liabilities of financial institutions into term loan; and
      
      
   3. Rs. 30.0 lakhs in any case whichever is least.
      
      
   C. If the requirement of the unit in terms of margin money requirement and/or liabilities of the Government Departments exceeds the above limit such amount shall be brought in by the unit holder from his own resources.
   
   D. Nothing in this clause shall prevent the DRC/SRC to prescribe contribution form the entrepreneur even if the total amount of soft loan is less than or up to the limits indicated above.
   
   
8. Modalities of Providing Soft loan/Financial Assistance
   
   
   1. The recommendations of the DRC/SRC for grant of assistance in the form of Soft loan as indicated above shall be communicated by the Director, Industries and Commerce alongwith rehabilitation plan and shall thereafter be disbursed by the J&K SIDCO out of the line of credit from IDBI/SIDBI on the normal terms and conditions applicable to loans under the said line of credit. The unit holder shall enter into an agreement with the J&K SIDCO for the purpose in a format as may be prescribed by J&K SIDCO.
      
      
   2. In order to reduce the liability of the unit holder in regard to the interest, the Government shall pay interest subsidy to the extent of the difference between the rate of interest as may be prescribed by J&K SIDCO and 1%.
      
      
   3. Government shall constitute a fund to be called "Fund for revival of Sick units". Financial assistance in the form of interest subsidy, financial assistance for feasibility studies to be got conducted through recognised constancy agencies etc. shall be made out of this fund in accordance with rules to be formulated for the operation of the fund and as per delegation of powers as indicated below:-
      
      
   DRC
   
   Total assistance not exceeding Rs. 5 lakhs in each case.
   
   SRC
   
   Total assistance not exceeding Rs. 30 lakhs in each case.
   
   
9. General
   
   
   1. Any facility sanctioned by BIFR under the Sick Industrial Companies Act, 1985 (SICA) shall be dealt with under the provisions of that Act, and shall be outside the purview of DRC/SRC. However, the Government may refer any case pending before BIFR for consideration and advice of SRC for taking an appropriate stand before BIFR.
      
      
   2. Units which had become sick and which had entered into a one time settlement with financial institutions/banks before the operation of this Scheme shall also be eligible for financial assistance under the above package if such assistance is required for their continued viable operation or for the purpose of preventing them from going into sickness on account of such, liabilities as they have not already discharged.
      
      
   3. Where assistance in the form of soft loan is sanctioned in favour of a sick unit on account of liabilities towards the Government Department the same shall not be paid to the unit holder in cash but shall be paid directly to the concerned Government Department.
      
      
   4. In those cases where soft loan is sanctioned for meeting the margin money requirements the amount shall be disbursed through the concerned financial institutions/commercial banks.
      
      
   5. The J&K SIDCO shall raise a claim on quarterly basis in resp0ect of interest subsidy payable to them on behalf of the unit holder in whose favour soft loan has been sanctioned/disbursed. The J&K SIDCO shall also send a quarterly utilisation certificate in respect of amounts of interest subsidy received from the Government during the previous quarter.
      
      
   6. Unit holder shall be required to execute an agreement with the General Manager, DIC concerned in such a form as may be prescribed, binding the unit holder to adhere to the conditions based on which the rehabilitation package is sanctioned. Any violation of these conditions will render the unit holder liable to recall of the soft loan as well as recovery of amount of interest subsidy paid on this account in lump. In addition to the financial institution/commercial bank, it shall be the duty of the concerned General Manager, DIC to oversee the proper utilisation of the assistance provided under the Scheme.
      
      
   7. SRC, either on their own motion, or on the directions of the Government, may deliberate upon the cases of revival of sick units where the nature and extent of soft loan or assistance in any other form is beyond the scope of this scheme and may make appropriate recommendations for consideration of the Government.
      
      

Sd/-
(K.R. Padha)
Additional Secretary to Government,
Industries and Commerce Department,
Jammu and Kashmir Government, Jammu.