The Board for Industrial and Financial Reconstruction, often referred to as the BIFR, was a prominent financial institution in India. It was directly under the control of the Ministry of Finance, a part of the Indian government. The Ministry of Finance, in turn, falls under the Department of Financial Services.
This organization was brought into existence in January 1987. The initiative was taken by the government led by then-Prime Minister, Rajiv Gandhi. The main aim of BIFR was to gauge the financial health of industrial companies in the country and provide assistance where needed.
The role of BIFR was quite significant as it aimed to determine whether financially distressed companies could be revived, making them viable again. If revival seemed unlikely, the aim was to assist in the orderly closure of such entities. This process was critical in boosting industrial growth and productivity in India.
BIFR's Dissolvement and the Emergence of New channels
However, on December 1, 2016, the BIFR was discontinued by the government headed by Prime Minister Narendra Modi. The dissolution of BIFR led to the referral of all proceedings to two other prominent Indian legal bodies, namely the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
This institutional restructuring was done in accordance with the provisions of the Insolvency and Bankruptcy Code. This is a law in India that provides a consolidated framework for insolvency of corporates, partnership firms, and individuals, aiming at reorganization and insolvency resolution in a time-bound manner.
Importance of NCLT and NCLAT in the Indian Economy
NCLT and NCLAT have now inherited the responsibilities of BIFR in handling cases of distressed companies. While NCLT is a quasi-judicial body in India that adjudicates issues relating to Indian companies, NCLAT is a higher authority that hears appeals against the decisions of NCLT.
NCLT and NCLAT have emerged as the major legal channels to deal with corporate insolvencies, liquidation proceedings, and bankruptcy issues in the country. By doing so, these entities have assumed a key position in maintaining the economic stability of the Indian corporate sector. Therefore, even after the dissolution of BIFR, its essence and objectives continue to remain alive within these new institutions.