IL&FS: NCLAT Expresses Displeasure over Delay in Progress Report Submission

Moneylife Digital Team 09 August 2019

Economy & Nation

The National Company Law Appellate Tribunal (NCLAT) has expressed its displeasure over the delay in filing progress report on the resolution process by Infrastructure Leasing and Financial Services Ltd (IL&FS) and the government.

"Inspite of our order dated 12 July, 2019 no 'progress report' has been filed by union of India or IL&FS. They are allowed to file the 'progress report' by tomorrow (Friday)," said the NCLAT order.

The bench headed by NCLAT chairperson SJ Mukhopadhaya further asked the government to settle claims of all the creditors of the three amber and green entities, including Moradabad-Bareilly Expressway Ltd, Jharkhand Road Projects Implementation Company, and West Gujarat Expressway Ltd as per signed 'term sheet', before the next hearing on 5 September 2019.

"The Union of India or IL&FS should also give notice to all the financial creditors of rest of the 10 'Amber' entities and take preliminary step by taking their consent in the manner it was followed in the cases of aforesaid three amber entities," the NCLT said.

Further, the bench asked the government and IL&FS to intimate the steps which they intend to take with regard to all the 82 red entities.

Commenting on lenders, the NCLT bench made it clear that banks and financial institutions cannot debit any amount from the accounts of IL&FS and its group companies. It says, "If any of the bank or financial institution has debited any amount in violation of order of this Appellate Tribunal dated 15 October 2018, it will be open to union of India or IL&FS to bring the same to the notice of

Justice DK Jain for appropriate orders and also intimate the bank and the financial institution that it may amount to contempt of court."

The new board at IL&FS had classified the IL&FS group companies into three categories -- 'green', 'amber', and 'red' -- on the basis of their ability to service debt obligations to secured and unsecured creditors. Companies classified as "green" would continue to meet their payment obligations, while "amber" category firms can meet only operational payment obligations to secured financial creditors.

Those under the "red" category are the entities which cannot meet their payment obligations at all.

During the hearing, Rajiv Ranjan, counsel for Dakshin Delhi Swatch Initiative Ltd told the bench that the company, which is categorised as red entity, is viable and solvent and ready to pay debt to financial creditors. Responding to the contention, the bench says, "If that be so, the applicant or

financial creditor (Tata Motors Finance Ltd) or any other financial creditor may bring the same to the notice of Justice DK Jain for appropriate orders."

The NCLT bench further said that it would be open to the government and IL&FS to call for meeting of the lenders and if necessary, the matter can be taken up on day-to-day basis to ensure that the total process with regard to all the amber entities, particularly the aforesaid three companies which IL&FS has decided to reclassify as green entities, is concluded on an early date.

"They will keep it in mind that already 300 days approximately have completed since the interim order was passed on 15 October 2018," the order said.

The appellate tribunal directed the government and IL&FS to file a fresh progress report by 3 September 2019.

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