IL&FS Moves NCLAT To Avoid ‘Wilful Defaulter’ Tag
IL&FS Group, which includes eight companies such as IL&FS Financial Services and IL&FS Transportation Network, has requested judicial intervention to prevent banks from declaring it a ‘wilful defaulter’ and taking action against members of its board who took control of the infrastructure financier after it went bankrupt in October 2018.
The group filed these pleas against the Reserve Bank of India (RBI) and 11 public sector banks in December, arguing that such actions by banks would violate court orders that provided immunity to the board appointed by the government in the public interest.
Since October 2018, the board has been working to address bad debt of Rs 94,000 crore.
IL&FS said that the National Company Law Tribunal (NCLT) had already granted immunity to its directors, preventing any action against them without prior approval. Despite this and a moratorium on debt repayment from the NCLAT, the banks are still issuing show-cause notices.
An IL&FS spokesperson confirmed the news but declined further comments.
Several Indian banks, including State-run 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, had issued show-cause notices to the companies of IL&FS Group. They had raised objections to some former directors and executives continuing to be a part of the new management and threatened to declare the companies as wilful defaulters, despite the NCLAT and NCLT issuing protective orders.
The petition claimed that certain banks, which are part of the approved resolution framework and have benefited from interim distribution pay-outs, are threatening to apply the defaulter tag on IL&FS without proper consideration.
The ongoing resolution process is being carried out without incurring fresh debt, and therefore, the defaulter tag is irrelevant. The petition argued that the actions of the banks were aimed at pressuring the group into meeting debt demands.
