NCLAT to Take Action Against IL&FS and 348 Group Firms

The National Company Law Appellate Tribunal (NCLAT) stayed all proceedings against IL&FS and its 348 group firms till a further order, after an urgent petition moved by the Government.

The Ministry of Corporate Affairs swiftly approached the appellate tribunal after the Mumbai bench of the National Company Law Tribunal (NCLT) turned down its plea to grant 90 days moratorium over the loans taken by IL&FS and its subsidiaries.

Passing an interim order over the Government’s plea, a two-member NCLAT bench headed by Justice S J Mukhopadhaya stayed all the proceedings “taking into consideration the nature of the case, larger public interest and economy of the nation and interest of IL&FS and 348 group companies”.

The NCLAT also directed to implead the top five lenders of IL&FS and asked to submit their replies over the Government’s plea seeking 90 days moratorium.

“There shall be stay of the institution or continuation of suits or any other proceedings by any party or person or bank or company, etc against IL&FS and its 348 group companies in any court of law/tribunal/arbitration panel or arbitration authority,” the appellate tribunal said.

There would also stay on “any action by any party or person or bank or company etc to foreclose, recover or enforce any security interest created over the assets of IL&FS and its 348 group companies including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002”.

The appellate tribunal has also put suspension of temporarily the acceleration of any term loan, corporate loan, bridge loan, commercial paper, debentures, fixed deposits and any other financial facility by the IL&FS and its 348 group companies.

It has also stayed all banks, financial institutions from exercising the right to set off or lien against any amounts lying with any creditor against any dues.

The appellate tribunal has directed to list the Government’s appeal on November 13 “for admission”.

Meanwhile, the NCLAT also clarified that the interim order will not be applicable to any writ petition filed before high courts or the Supreme Court.

During the proceedings of the appellate tribunal, the Government side was represented by Additional Solicitor General Tushar Mehta. A moratorium period is a time during which the borrower is not required to make any repayment towards the loans.

The Government, in its application filed before the NCLT, had sought three months’ moratorium over “institution or continuation” or any other proceedings against IL&FS and any of its group companies in “any court of law/tribunal/arbitration panel or arbitration authority”.

It has also asked for moratorium over any action by any party “to foreclose, recover or enforce any security interest” created over the assets of IL&FS or its group firms under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

The Government had stated that the newly appointed board is “likely to face certain problems” relating to IL&FS and its group company and there may be a need to “rationalise/rethink” business process and strategies that may ensure effective and more efficient manner of functioning.