"Since the UP government was bound by the provisions of the sanctioned scheme, it is directed to comply with the scheme regarding equity amounting to Rs 12 crore along with conversion of loan totalling Rs 9.76 crore into share capital," a BIFR bench said at a review of the progress of implementation of the sanctioned revival scheme of UPSYC.

The bench warned that if the state government failed to comply with the provisions, then it would re-examine the viability of the sick company. The state government was also asked to ensure payments of statutory dues to the workers and resolve pending issues so that modernisation could be implemented.

It also formed a special committee consisting of representatives from the company, Bank of Baroda, State Bank of India and Allahabad Bank and Industrial Development Bank of India to examine the modernisation programme of the company.

BIFR appointed former National Textile Corporation chairman and managing director RS Nirvan as special director on the company's board on its behalf. He will also be a member of the special committee.

The company has been asked to implement the modernisation programme only after clearance from the BIFR bench.