NCLAT allows 22 IL&FS group companies to service debt
12 February 2019
The National Company Law Appellate Tribunal (NCLAT) has allowed 22 companies belonging to crisis-hit IL&FS group that are in sound financial health to service their debt irrespective of the group’s debt woes.
IL&FS has categorised group entities into three — Green (firms that can meet all debt obligations), Amber (firms that can meet some debt obligations), and Red (firms that can’t meet any debt obligations), while proposing a new repayment structure to the courts.
On Monday, the NCLAT gave IL&FS the go-ahead to proceed with this repayment structure.
According to the plan, 22 domestic subsidiaries have been classified as “Green” as they could service all their financial and operational debt, as per their repayment schedule; 10 companies have been classified as “Amber” as they can service only their operational debt obligations and payment to senior secured financial creditors while 38 others have been marked “Red” as they cannot meet any of their payment obligations, even those to senior secured financial creditors.
A two-member bench of the appellate tribunal headed by Justice S J Mukhopadhaya approved the appointment of former Supreme Court judge Justice D K Jain as resolution professional to supervise the debt resolution process of IL&FS and its group companies.
The appellate tribunal also lifted moratorium and allowed 133 IL&FS firms incorporated outside India to continue with the resolution process.
"We allow the boards (of the green companies) to permit them to service debt obligations as per schedule," said NCLAT.
The NCLAT's direction came during the hearing over government's plan for the resolution of IL&FS group companies.
As per the terms and agreement, Justice Jain will get a monthly remuneration of Rs10 lakh per month and Rs2.5 lakh per sitting, besides other expenses, which would be paid by IL&FS.
Solicitor General of India Tushar Mehta appearing for the ministry of corporate affairs submitted a list of 302 subsidiaries of IL&FS, which are jointly controlled entities, group companies and associates forming part of IL&FS group companies.
Out of 302 companies, 169 companies are incorporated in India, he added.
Mehta sought permission from the appellate tribunal to allow the 'Green entities' to service their debt obligations as per scheduled repayment, to which the NCLAT agreed.
However, over Amber and Red category, the appellate tribunal said that it would pass any order after hearing them in next hearing on March 12.
"We want to know from the government and IL&FS as how they intend to resolve all entities particularly in 'amber' and 'red' group entities. Whether they would form a Committee of Creditor as normally done in the company insolvency resolution process," said the tribunal.
It also said that moratorium against them "cannot continue for an indefinite period".
During the hearing, senior lenders such as Indusind Bank, L&T Finance and Aditya Birla & Capital Fund opposed the government's plea to allow the Amber and Red companies to make payment necessary only to maintain and preserve their going concern status.
Senior advocate Abhishek Manu Singhvi, appearing for Indusind Bank submitted that any such payment would have a great cascading effect on the NPAs of the top five lenders of the group companies.
Major IL&FS group companies which are in green list include:
- IL&FS Investment Manager,
- IL&FS Security service,
- IL&FS Paradip Refinery Water,
- Tamil Nadu Water Investment,
- IL&FS Asian Infrastructure Manager,
- IL&FS Urban Infrastructure Manager,
- IL&FS Infra Asset Management, North Karnataka Expressway,
- IL&FS Solar Power,
- Tadas Wind Energy,
- Khadke Wind Energy,
- Etesian Urja,Kaze Energy,
- Wind Urza India,
- Maytas Logiparks,
- Lalpur Wind Energy,
- Jharkhand Infrastructure Invest Company and
- IIML Asset Advisors and IISL Settlement & Transmission Services.
Still over 100 IL&FS group companies remained under the assessment of the resolution consultants for classification, the affidavit further informed.
The government will file another affidavit in next two weeks, classifying these remaining 100 companies, it added.
On February 5, the NCLAT had asked the government to provide a list of IL&FS group companies along with their categorgorisation based on their respective financial positions.