IL&FS BOARD DIVIDES GROUP FIRMS BY FINANCIAL POSITION

NCLAT appoints former SC judge D K Jain as supervisor of resolution

The National Company Law Appellate Tribunal (NCLAT) on Monday directed the central government to submit a list of subsidiaries of the Infrastructure Leasing & Financial Services (IL&FS), categorised by their ability to meet payment obligations as decided by the newly constituted board of the company.

The appellate tribunal also asked the government to contact former Supreme Court judge D K Jain to be the supervisor of the operation of the resolution process.

In a meeting that took place last month between the newly constituted board of the IL&FS group, its financial creditors, and the executives of the Ministry of Corporate Affairs, Kotak Mahindra Bank Managing Director and Chief Executive Officer Uday Kotak — the non-executive chairman of IL&FS group — said the board had classified the IL&FS group companies into three categories of green, amber, and red.

The companies under the green category are those still operating with a positive net worth and have enough cash flows to meet their one-year payment obligations to all creditors. Those under the red category are not in a position to repay even secured creditors. Those under amber have adequate cash flow for payment to secured creditors, but not enough to meet the claims of unsecured creditors.

At the meeting, it was decided that the green-category companies will continue to service their debt. Companies marked red would enjoy full moratorium. Firms under the amber category will not serve any debt obligation until the resolution process of the entire group is completed. The resolution process will be similar to a corporate insolvency resolution process under the Insolvency and Bankruptcy Code, and will ensure the seniority of lenders to such special purpose vehicles (SPVs) is maintained, the affidavit filed by the company with the NCLAT showed.

Moreover, the balance funds of the companies under the amber category will be kept in an escrow fund at the SPV level and would be used for distribution among creditors when the SPV goes for resolution.

Also, it was decided that attempts would be made to form a committee of creditors during the resolution process. And the resolution plan, agreed to by all, will have to be made public for the knowledge of all stakeholders concerned through an affidavit filed by the Government of India before the NCLAT.

The tribunal has also directed the government to provide a list of companies incorporated within the territorial jurisdiction of India. Moreover, a separate list of companies incorporated in other countries has to be provided to the tribunal.

The next hearing will be on February 11.