Guidelines for Declaring an Industry Sick

Topics: Mortgage loan, The Unit, The Units Pages: 27 (6875 words) Published: April 12, 2011
Government of Rajasthan
Industries (Group-I) Department

No. F. 15 (IPP) Ind./I/2004 Jaipur, Dated : August 31, 2004.

Guidelines for
Identification/Revival of Running/Closed Sick Industrial Units under Rajasthan Investment Promotion Scheme, 2003

Pursuant to order No.F.4(18)FD/Tax Div./2001-L dated 4.8.2004 (Annexure-I), issued by the Finance Department (Tax Division)), Government of Rajasthan (copy enclosed) amending the Rajasthan Investment Promotion Policy-2003 (hereinafter referred to as ‘the Scheme’) and in order to identify the sick industrial units under clause 4(tt), revive sick industrial units under clause 4(rr) and to determine the eligibility in cases of sick industrial unit for grant of benefit under clause 5A of the scheme, the following guidelines and procedures are being prescribed :

1.Publicity & Time Frame

It is enjoined upon all concerned departments/agencies that wide publicity is to be given to the order dated 4.8.2004 of the Finance Department, through various industries associations and media. It has to be amply clarified that all such industrial units which qualify to be declared sick under clause 4(tt)(i) of the Scheme should submit their application in the prescribed format, appended hereto at Annexure-II positively on or before 30.9.2004, failing which their applications will not be entertained.

2.Competent Authority for Declaring Unit Sick

The authority to decide whether the units are covered under clause 4(tt) of the Scheme shall be the appropriate screening committee mentioned under clause 6 of the scheme. After seeking approval of the appropriate screening committee the Member Secretary shall declare the unit sick.

3.Qualifications for Sickness

Under clause 4(tt)(i), the following RBI guidelines should be considered as basis for declaring units sick:

a)any of the borrowal accounts of the unit remains substandard for more than six months i.e. principal or interest, in respect of any of its borrowal accounts has remained overdue for a period exceeding one year. The requirement of overdue period exceeding one year will remain unchanged even if the present period for classification of an account as sub-standard, is reduced in due course,


b)there is erosion in the net worth due to accumulated cash losses to the extent of 50 per cent of its net worth during the previous accounting year,


c)the unit has been in commercial production for at least two years.

Information in Proof of Sickness

The above criteria should have been fulfilled by the industrial units eligible to be declared sick before 1.4.2004. For determining the fulfillment of criteria listed at (a) & (b) above, the following information would be required:

(A)For units preparing Balance Sheet—Audited Balance Sheet/Profit & Loss Account for the years during which the borrowal accounts of the unit became and remained sub-standard for more than 6 months or the cash losses started accumulating, leading to erosion of the net worth to the extent of 50% in the preceding accounting year. The previous accounting year as per point (b) of the above guidelines 2002-03.

(B)For units not preparing Balance Sheet—In case the units are unable to furnish the Audited Balance Sheet/Profit & Loss Account, a certificate from the Chartered Accountant, duly certifying sickness as per the above RBI guidelines is to be obtained from the applicant.

(C)For determination of the status of Borrowal Account—In addition to above, to determine the status of borrowal accounts as being sub-standard from more than 6 months, or erosion in the net worth to the extent of 50%, the following information is to be obtained/verified and analyzed by the authority declaring the unit sick under Clause 4(tt)(i) of the scheme :

• Name of the Financial Institutions with address and telephone number : • The date of sanction of loan....
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