Financial Institutions, Banks or other investors with investment exposure in sick/ financailly weak companies/ units carry these investments in their respective books of account at balance outstanding net ofprovisions created if any. The proposal of revival of these units/companies necessarily involves capital restructuring which generally involves recognition of loss in value of assets. The existing investors are required to acknowledge any erosion in value of assets held by invested unit/company by recognising financial loss in their books of account. Investors including Banks/FIs are least interested in acknowledging such financial loss as such exercise adversely affects their financial position in books of account. Therefore, till such time stringent provisioning norms are enforced whereby actual erosion in value of investment equals provision created, this problem will continue to discourage banks/FIs from considering any revival proposal which adversely affects disclosure of their financial health.

In many cases involving sick and potentially weak companies/units, legal proceedings are in process for quite some time. There may be considerable time delays in finally sorting the matters through Court.Therefore, there is a need to create framework for settling the legal matters involving sick/financially weak companies and Banks/FIs, without time delays and difficult procedural formalities.

The statutory provisions for transfer of units located in the Industrial Development estates/areas restict transfer of units at their realistic value, unless increase over original cost is shared by seller with Statutory authorities on transfer of unit. This at times is a major hurdle in rehabilitation of sick/ financially weak units located in such industrial areas, without applying these provisions.

In many cases, promoters of sick unit are interested in gaining waivers on dues and are interest in dragging the matter till such time FI's/Banks run out of time and energies and agree for final settlement by accepting part of outstanding dues. In such cases, change in management is highly desirable for exposing faint sickness/weakness. There are required suitable enabling provisions to facilitate takeover of unit byoutside investor in casesubstantial erosion of equity investment has already taken place and chances of revival under same management appear to be remote.

Most of the sick/ financiall weak units have pending statutory and non-statutory obligations. Settlement of these obligations for unit/ company taken up for turn-around is sought before any permanent revival package could be worked out. To deal with situation, there is needed amechanism whereby deferment of pending statutory and non-statutory liabilities can be envisaged.

In many sick/financially weak companies, public at large, is invesstor. In such case investors or SEBI, can object to any revival plan envisaging restructuring of existing capital unless investors exposure in copany is settled satisfactorily under proposed revival plan of company. In order to facilitate takeover of sick[financially weak listed companies for rehabilitation, applicability of SEBI regulations for substantial acquisiton may have to be relaxed.

Any revival plan for a unitor company may acknowledge part or complete erosion of capital. The re-organisation of capital of any company, at present, involves lot of legal hassles/procedural formalities. These legal formalities may have to be simplfied for case of rehabilitation of sick/financially weak companies.

At present the mechanism for ealistic assessment of potential for revival of sick/financially weak unit is not available. Credit Rating agency/specialised agencies may take up evaluation of revival potential of sick/financially weak units. The revival plan may be worked out only after careful examination of cause of sickness, realistic assessment of value remained in the unit, potential for revival and funds required for revival. In case of listed companies evaluation of revival potential of sick/financially weak units by credit rating agencies/specialised units may be made compulsory.

There would alsobe required a common platform whereby details of sick/financially weak units with potential for revival, can bedisseminated to potential entrepreneur and investors willing to revive these sick/financially weak units. A dedicated Web-site, Industry Revival Bulletin etc. may be helpful for disseminating information on units and receiving time-bound offers for revival. Banks/FIs may flash details of sick/financially weak units available for takeover, for information to potential investors/interested companies.

The investment for revival of sick/potentially weak units/companies would involve considerable risk for potential entrepreneurs/investors. Income tax incentives and tax holiday kind of benefit, will go long way in promoting investment for revival of sick/potentially weak units.

Addressing to above issues would be highly desirable for any sincere move for rehabilitation of sick/financially weak units/companies taken up for revival. From economy's poiint of view, thrust for rehabilitation of sick/financially weak units will lead to revival of assets lying idle and at the same time, it will enable banks/FIsrealise substantial part of outstanding dues stuck in sick/financially weak units.