IL&FS Scam: MCA Says DEA Raised Red Flag on 30 September 2018. Really?
A national news agency has credited the department of economic affairs (DEA) under the ministry of finance of flagging the problem at Infrastructure Leasing & Financial Services (IL&FS) and warning the finance ministry of its impact on 30 September 2018. This is part of a recent affidavit filed by the Ministry of Corporate Affairs before the National Company Law Appellate Tribunal (NCLAT). 
 
While several leading newspapers have diligently reproduced the report from Press Trust of India (PTI), it is unclear why this is even newsworthy; or why the DEA is made to sound like a whistle-blower. If anything, it suggests that it took 25 days after IL&FS defaulted on a loan to Small Industries Development Bank of India (SIDBI) for the finance ministry to understand the grave implications of the default and the contagion effect to this shady, under regulated, 347 company conglomerate. 
 
Remember, Moneylife was the first to break the news IL&FS defaulting on Rs1,000 crore loan from SIDBI on 4 September 2018. SIDBI, a public sector undertaking, was the first to classify IL&FS’s loan as non-performing asset (NPA); we had learnt that it had even asked one of its senior officials to resign owning responsibility for the default. (Read: IL&FS defaults on Rs1,000 Crore Short-term Loan from SIDBI?)
 
Surely, SIDBI’s actions would have got the attention of the ministry? It certain had the entire financial sector sit up and take notice, since Moneylife received innumerable calls seeking details and confirmation from shocked and disbelieving market intermediaries.
 
And yet, PTI says of the 30 September 2018 missive: “DEA had raised red signals of the likely collapse of IL&FS and had expressed its deep concern of such a collapse on the Indian economy”. That communication may have led to the finance ministry’s decision to sack the IL&FS board and appointed a new one headed by top banker Uday Kotak and a bunch of bureaucrats on 1 October 2018.
 
It may also be recalled that at the time when IL&FS’s board was sacked, the government was clueless about the number of companies in this group. It has put the number at just 169. It was only after the new board took charge that they realised that the mess was far bigger and even people working with it were hazy about the exact number of companies, special purpose vehicles and step-down subsidiaries which had  spawned their now multi-level subsidiaries. 
 
As reported by Moneylife on 4 September 2018, IL&FS had defaulted in repaying a short-term loan of Rs1,000 crore to SIDBI. At the same time, a subsidiary of IL&FS too had defaulted in repaying loan worth about Rs500 crore to the development financial institution. 
 
As an immediate measure, SIDBI at that time had asked Swaminathan Mallikarjun, its chief general manager in the risk management department, to resign owing to the bad debt from IL&FS.
 
This was followed by other defaults and a series of credit downgrades by rating agencies. The group debt at that time was estimated at Rs1.2 lakh crore. 
 
In a release, the government had stated, "…after analysing the emerging situation of the IL&FS Group come to the conclusion that the governance and management change in IL&FS Group is very necessary for saving the Group from financial collapse, which required an immediate change in the existing Board and management and appointment of a new management. The decision to supersede the existing board was taken after careful consideration of a report received from the Regional Director, Mumbai under the MCA, which clearly brought out serious corporate related deficiencies in the IL&FS holding company and its subsidiaries," the release said. (Read: NCLT Approves Government Petition. IL&FS Gets a New Board Headed by Uday Kotak)
 
Last week, the MCA requested the NCLAT to give additional 270 days for completing resolution of 105 companies of the scam-hit IL&FS group. In an affidavit, the MCA also requested NCLAT to release 55 other entities from moratorium, so that they can discharge their debt obligations. 
 
The affidavit states, "...for the remaining 105 domestic group entities, extend the scope and operation of the order passed by this Tribunal on 15 October 2018 for an additional period of 270 days from the date on which the resolution framework is approved by this Tribunal, to enable the New Board to successfully complete the resolution of IL&FS."
 
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    NCLAT allows JSW Steel to acquire Bhushan Power and Steel, grants immunity
    In a major relief to JSW Steel, the National Company Law Appellate Tribunal on Monday permitted the steel major to acquire the bankrupt Bhushan Power and Steel Ltd and provided it immunity from prosecution by Enforcement Directorate (ED).
     
    The verdict comes after the NCLAT earlier in the month reserved its judgement on the matter.
     
    The two-member bench, headed by NCLAT Chairman Justice S.J. Mukhopadhaya, said that the acquirer, JSW Steel will be rendered immune from the acts done by the former promoters of BPSL. However, it added that the prosecution of the former promoters under the money laundering act would continue.
     
    JSW Steel had moved the appellate tribunal seeking immunity against future litigation due to alleged fraud by former BPSL promoters.
     
    The development comes around three months after the appellate tribunal ordered a freeze on payments by JSW Steel. In October last year, the bench had ordered a stay on JSW Steel's payment of Rs 19,700 crore to acquire BPSL and asked the ED to release BPSL's attached properties. The appellate tribunal had also asked the ED not to attach any more properties of BPSL without its permission.
     
    The ED, which is investigating alleged fraud committed by the debt-laden firm's previous management, had attached the assets of BPSL which it believes to be from proceeds of crime.
     
    In an affidavit filed before the NCLAT, the ED had opposed immunity to JSW Steel in the BPSL matter.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Airtel pays Rs 10,000 cr AGR as Govt gets first dues
    The first AGR payment came to government as Airtel on Monday paid Rs 10,000 crore dues to the Department of Telecom (DoT).
     
    The company said it is paying Rs 10,000 crore in compliance with the Supreme Court order. 
     
    It paid Rs 9500 crore on behalf of Bharti Airtel and Telenor which has merged with the parent company and Rs 500 crore for Bharti Hexacom, its subsidiary.
     
    Further, it said it is in the process of self assessment of accounts and and will duly make the balance payments before the next date of hearing (March 17). 
     
    According to DoT, Bharti Airtel owes Rs 35,500 crore to DoT.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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