IL&FS Approaches NCLAT For Not Being Tagged As ‘Wilful Defaulter’

IL&FS, a debt-ridden company, has filed an urgent application with the National Companies Law Appellate Tribunal (NCLAT) to restrain 11 public sector lenders from initiating proceedings to declare its group companies as ‘wilful defaulters’. The newly appointed board of IL&FS has accused the banks of violating previous NCLAT orders and taking procedural action under the guise of RBI guidelines. IL&FS has also accused the banks of harassing the directors of the company.

The banks have been issuing show cause notices, calling for a personal hearing before the Wilful Defaulter Identification Committee, and threatening to initiate criminal proceedings, including getting Look Out Circulars issued. IL&FS has called these actions coercive and an attempt to pressure the company to meet their debt demands, without regard to the fact that the resolution or satisfaction of the debts of all the creditors of the company is subjudice before this Tribunal.

IL&FS has filed a petition to restrain banks from taking any legal action against the company's directors and officers appointed after October 2018 by the IL&FS New Board and other IL&FS companies. The Reserve Bank of India (RBI) has also been made a party to the petition. IL&FS has requested the National Company Law Appellate Tribunal (NCLAT) to pass an order directing the RBI to restrain banks from taking any coercive action against the company and other IL&FS companies. IL&FS has further requested NCLAT to direct banks not to take any coercive action against the company and its directors and officers during the pendency of the hearing and final disposal of this present application.

The following banks are a part of the IL&FS Resolution Process: Central Bank of India, Bank of Baroda, Indian Bank, Canara Bank, Punjab National Bank, Indian Overseas Bank, State Bank of India, Bank of India, Jammu & Kashmir Bank, IDBI Bank and Union Bank of India. However, according to IL&FS, these banks are taking parallel coercive steps that go against the orders passed by NCLAT. This could be due to either a selective reading of such orders or an uncoordinated mechanical attempt at complying with guidelines issued by RBI.

Despite the New Board of IL&FS having already referred the acts and actions of the previous management of IL&FS companies for investigation, these banks are still taking these steps. The petition further states that various agencies such as SFIO, ED, and CBI have already investigated and continue to investigate these actions, including inspection by RBI itself of a few IL&FS companies since October 2018.

On 1 October 2018, NCLAT superseded the existing board of IL&FS on the recommendation of the centre after the mega-crisis in IL&FS, which shook the finance industry.

A new board for IL&FS, which had a debt burden of Rs 94,000 crore, was appointed to take charge of the affairs and NCLAT conceived a framework for resolution of the crisis-hit group.

It had also granted protection to the IL&FS Companies against recovery of any further dues and immunity to the newly appointed Directors of IL&FS against any proceedings for the past actions of suspended Directors or any of the officers thereof.

"The protection granted under the aforementioned orders is premised on the fact that the newly appointed Directors have been appointed m larger public interest to regulate the affairs of the IL&FS companies and to save the said companies from financial collapse," it said.

However Banks have been violating these protective orders passed by NCLAT, IL&FS said while submitting a list of such violations.

As per the roadmap for IL&FS, its group companies have been categorised into three categories -- green, amber and red -- based on their respective financial positions companies under the green category are those that continue to meet their payment obligations.

IL&FS has a total of 302 entities of which 169 are domestic and the rest 133 are offshore.