The National Company Law Appellate Tribunal (NCLAT) has allowed 22 domestic arms of the IL&FS group to service their debt obligations, providing a much needed relief to the lenders.
Additionally, the appellate tribunal lifted the moratorium on debt payments on 133 IL&FS firms incorporated outside the country even as they were allowed to continue with the resolution process.
Besides, a two-member bench headed by Justice S.J. Mukhopadhaya approved the appointment of former Supreme Court judge Justice D.K. Jain to supervise the resolution process of the group.
The NCLAT was hearing the government plea over the IL&FS group. Earlier this month, the corporate affairs ministry submitted the debt resolution plan for IL&FS.
Under the plan, the IL&FS group companies were grouped on the basis of their payment ability — green, amber and red.
Companies under the green category would be those that continue to meet their payment obligations. Amber category firms can only meet operational payments obligations and to senior secured financial creditors. On the other hand, red entities are those who cannot meet their payment obligations towards even senior secured financial creditors.
The classification was done by the resolution consultant appointed by the IL&FS board.
In its affidavit filed with the NCLAT, the government has suggested the green entities be allowed to service their debt obligations; and certain amber and red firms be allowed to make payments only to maintain and preserve the “going concern” status.
The appellate tribunal in October last year had imposed a moratorium on all creditor actions against IL&FS and its 348 group firms till further orders, following a petition moved by the Centre.
The ministry of corporate affairs (MCA) had approached the appellate tribunal after the Mumbai bench of the National Company Law Tribunal (NCLT) turned down its plea to grant 90 days’ moratorium against legal action over the loans taken by IL&FS and its subsidiaries.
Passing an interim order over the Centre’s plea, a two-member NCLAT bench headed by Justice S.J. Mukhopadhaya had 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 moratorium prohibited initiation or continuation of legal proceedings, enforcement of security over assets of IL&FS and its group companies in addition to restricting creditors from making demands for payment of their credit facilities, debt securities, premature withdrawal of deposits or appropriating cash balance of IL&FS or its group companies.