NCLT attaches properties of 9 former IL&FS directors

The National Company Law Tribunal (NCLT) on Monday passed an interim order to attach all movable or immovable properties of nine former directors of IL&FS. The tribunal also directed them to disclose their securities and bank accounts within the country and abroad.

The tribunal has directed them to disclose movable and immovable assets and ensure that no one creates any third party rights on these properties.
The NCLT order comes on an interim report of the Serious Fraud Investigation Office (SFIO) submitted by the ministry of corporate affairs to the NCLT Mumbai seeking to implead six former directors of IL&FS. 
In a separate petition, MCA also sought the attachment of movable or immovable properties of nine former directors. The court accepted both the petitions.
MCA named chief investment officer of IL&FS Vibhav Kapoor, managing director of IL&FS Transportation Networks (ITNL) K Ramchand, managing director of IL&FS Financial Services RC Bawa, managing director and CEO of IL&FS Securities Services Rengarajan, director and member of committee of directors responsible for sanctioning loans Pradeep Puri, and executive director of ITNL Mukund Sapre. 
Besides the six officials, the tribunal seized properties of three other former directors of the IL&FS group, including Ravi Parthasarathy, Hariharan and Arun Saha.
"IL&FS used a circuitous way to pay off loans of its own entities to meet RBI guidelines and used this method to obtain a high credit rating, and high managerial remuneration. On the one hand, percentage increase in the remuneration of Ravi Parthasarathy in FY18 was 144 per cent, while on the other, average percentage increase in salaries of employees in the same year was 4.44 per cent.”
On 30 November 2018, SFIO submitted a report to the central government on IL&FS.
Counsel for former directors of IL&FS argued that the business model followed was project-specific and the board used to take decisions on that basis. While they might have erred in their decisions, the counsel said the accounts of all the years were fully audited.
"The old board took business decisions that may have gone wrong. The business model was followed in a project-specific subsidiary way and all the accounts of all the years are fully audited. Shareholders of ILFS (LIC, SBI) have approved all the activities. The downfall in Infrastructure sector ILFS was no exception. We tried to take steps to solve the debt situation through an asset sale and even got into a deal with a foreign company and Piramal that did not get through.”
MCA counsel Sanjay Shourie raised concern on alleged wrongdoing in employee welfare trust (EWT) saying, "Of the Rs440 crore of welfare trust, only 1 per cent went to the employees. In 2014 - as part of restructuring, IL&FS’ merger with Piramal was contemplated. Employees trust held 15 million shares of IL&FS Ltd and trustees distributed 90 per cent of the EWT holding of 13.5 million shares to select employees. The SFIO investigation reveals EWT took loan to purchase shares of IL&FS and group companies despite knowing of no way to repay.”
NCLT Mumbai will next hear the matter on 16 January 2019.