IL&FS should pay 80% dues of small creditors: NCLAT
Emphasising on the repayment of dues to small creditors including provident and pension funds, the National Company Law Appellate Tribunal (NCLAT) on Tuesday observed that IL&FS should distribute funds to small creditors, in a manner that 80 per cent of their entitled amounts are paid.
 
As IL&FS submitted the a chart with details of four "amber" companies, the NCLAT bench headed by Chairperson, Justice S.J. Mukhopadhyay asked the government to provide details on the rest of the nine "amber" companies.
 
The IL&FS filed details on the Hazribagh Ranchi Expressway, Jharkhand Road Project Implementation Company, Moradabad Bareily Expressway and West Gujarat Expressway.
 
Under the resolution plan, the government has categorised IL&FS group companies into green, amber and red categories based on their financial position.
 
Firms classified as "green" would continue to meet their payment obligations, while "amber" companies can meet only operational payment obligations to senior secured financial creditors. The "red" firms are the entities which cannot meet their payment obligations at all.
 
Thousands of crores of money of more than 15 lakh employees of both public and private sector companies have exposure to IL&FS bonds. As these investments were classified as unsecured debt, the funds feared that all money would be lost if all market-related risks fell on them.
 
The bench, headed by Chairperson Mukhopadhya, on April 9 had directed the new management of the debt-ridden firm to submit details of investment made by pension and provident funds in its four group firms along with details of and financial liabilities of those entities.
 
The tribunal would next hear the matter on April 29.
 
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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    Jet seeks Rs 400 cr instant funds to avoid closure
    Jet Airways, which is on the verge of collapse, on Tuesday reportedly requested lenders for Rs 400 crore interim funding of to stave off temporary closure, even as its operational fleet shrunk to five aircraft.
     
    According to Civil Aviation Secretary Pradeep Singh Kharola, the airline on Tuesday operated only five aircraft, down from seven on Monday. Under the current regulations, the airline is required to operate five aircraft to save its air operating permit.
     
    In a BSE filing, the airline said in view of the critical liquidity position, its operations have been severely impacted. "The company is awaiting emergency liquidity support from the consortium of the domestic lenders, led by SBI," the filing said.
     
    "The company's leadership, in consultation with its board of directors, is engaged with lenders in connection with the said emergency funding request to arrest a further deterioration of its services and minimise inconvenience to its guests," it said. 
     
    A meeting was also held at the Civil Aviation Ministry to review the spurt in air fares in the wake of Jet Airways' troubles.
     
    Earlier in the day, the airlines' board meeting ended inconclusively as the airline awaited the lenders' decision on its plea for interim funds to stay aloft.
     
    "The board meet was inconclusive. We are awaiting the lenders' reply. It is of paramount importance that we receive a clarity on interim funding," an airline source told IANS in Mumbai.
     
    In a late evening letter to employees, the airline CEO Vinay Dube said the company had highlighted specific areas that would be immediately impacted if the funding was not provided. 
     
    "Please be assured that we continue to work pro-actively with the lenders to provide all the support, which may be required to help us resurrect Jet Airways, including working closely with the potential parties that are keen on bidding for the airline," the CEO wrote. 
     
    However, the airline's lenders said they were committed to its revival.
     
    Punjab National Bank (PNB) Managing Director and CEO Sunil Mehta said discussions were on to provide interim funding. "Lenders are committed to Jet Airways' revival. SBI and SBI Capital are working on a package, but it has not been finalised," he said.
     
    Jet Airways has almost run out of funds to pay for fuel and other operational expenses. If extra funds don't come through then the airline might have to temporarily suspend operations.
     
    Currently, it has folded up most operations due to grounding of over 80 per cent of its fleet by lessors. Besides, it has also extended cancellation of international flights till April 18 (Thursday), after last week suspending them till April 15 (Monday).
     
    It owes over Rs 8,000 crore to the SBI-led consortium of lenders. Its only ray of hope is immediate injection fund and completion of the stake sale process, initiated by lenders.
     
    The airline's scrip on the BSE declined by Rs 19.95, 7.62 per cent, to Rs 241.85 on Tuesday from its previous close of Rs 261.80.
     
    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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    NCLAT allows promoters under liquidation settle with creditors
    Opening up a new window for promoters looking to retain control of their companies facing bankruptcy proceedings, the National Company Law Appellate Tribunal (NCLAT) has held that shareholders and owners can reach a settlement with creditors when their entity is under liquidation and an official liquidator has been appointed by the insolvency court.
     
    The NCLAT order has far reaching consequences over resolution of stressed assets, especially those where promoters are seeking settlement post-initiation of bankruptcy proceedings in the National Company Law Tribunal (NCLT).
     
    As per amendments made to the Insolvency and Bankruptcy Code (IBC), promoters are barred from participation in the resolution process of their stressed assets If at the liquidation stage, they are now permitted to file an application for approval of settlement with creditors, several promoters could jump at the opportunity as it would allow them to retain control of their respective companies while cleaning up the debt.
     
    The path breaking NCLAT order came on an appeal filed against the decision of the NCLT Mumbai bench. This bench had held that the application filed under Section 391 of the Companies Act 1956 (corresponding to Section 230(1), Companies Act 2013) could not have been moved by the shareholders after the appointment of Official Liquidator. 
     
    The NCLT reasoned that only the Official Liquidator was entitled to represent the company under liquidation and formulate or approve any scheme of settlement.
     
    Section 391 of Companies Act, 1956, deals with the "Power to compromise or make arrangements with creditors and members". This is similar to provisions in section 230 of Companies Act, 2013.
     
    The NCLAT, however, held this view of the NCLT to be erroneous after referring to judgements of the Supreme Court and several High Courts. 
     
    The Appellate Tribunal held : "Liquidator is only an additional person and not exclusive person who can move application under Section 391 of the old Act when the company is in liquidation. Looking to these Judgements, we are unable to support the view taken by NCLT that the Appellant could not have filed the Petition under Section 391 of the old Act".
     
    In this matter, the promoter-director of Amar Dye Chem Ltd had filed a scheme of compromise in winding up proceedings before the Bombay High Court earlier where Liquidator had already been appointed. The matter was transferred to the NCLT Mumbai bench on the basis of a notification dated December 7, 2016.
     
    "We will have to see whether the NCLAT ruling in the Amar Dye Chem case sets a precedent as in this case the winding up process was already up for approval in High Court. NCLAT has also said that settlement application given by promoters will be decided by the High Court and would be accepted by NCLT," said a legal expert not willing to be named.
     
    While NCLAT has said that it had no doubts over the applicability of a scheme of compromise and arrangement even when the liquidation process is on, NCLT could accept or reject the offer of settlement under the provisions of Companies Act.
     
    Legal experts, however, say this could open the way for a fresh resolution even when a company is being liquidated, by giving the opportunity to the promoters to come up with a viable plan.
     
    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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    COMMENTS

    Ramesh Poapt

    4 months ago

    very interesting. but...how it is implemented is important.

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