IL&FS subsidiaries cannot be declared NPAs without permission: NCLAT

The NCLAT yesterday passed an order directing the banks and financial institutions to refrain from declaring accounts of IL&FS and its group companies as non-performing assets (NPA) without its permission..“…we make it clear that due to non-payment of dues by the IL&FS or its entities including the ‘Amber Companies’, no financial institution will declare the accounts of ILF&FS or its entities as ‘NPA’ without prior permission of this Appellate Tribunal“, held a bench of Justice S.J. Mukhopadhaya and Justice Bansi Lal Bhat..Following a series of defaults, the Ministry of Corporate Affairs dismissed the IL&FS board in September last year and appointed an interim board, headed by Uday Kotak, to finalise a resolution plan. The NCLAT had, in October 2018, passed an order of moratorium over the entire 348 IL&FS group companies..The NCLAT has also temporarily suspended 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 group companies. The outstanding loan of the IL&FS group is about Rs 60,000 crore, while the debt is over Rs 91,000 crore.On February 11, the central government and the new board of IL&FS had submitted an affidavit to the NCLAT, detailing three categories — 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). Sixty-nine firms of the group have been classified under these categories based on their ability to service routine debt obligations..During the hearing, the NCLAT lifted the moratorium placed on 133 group companies incorporated outside India and allowed their resolution plan to go on as planned. The NCLAT also allowed 22 companies, which were classified in the green category based on their financial health, to service their debt obligations..On February 22, PTC Financial Services filed an intervention application with the NCLAT seeking temporary dispensation of the asset classification..On February 25, the NCLAT passed an order directing banks to refrain from declaring accounts of IL&FS and its group companies as NPA without its permission..Senior Advocate Ramji Srinivasan along with Cyril Amarchand Mangaldas team Gauri Rasgotra, L. Vishwanathan, Raunak Dhillon, Vikash Kumar, Aditya Sikka, Karan Khanna, Ananya Dhar Choudhury, Sylona Mohapatra..J. Sagar Associates acted for PTC Financial Services and the team included Partners Dhirendra Negi and Sidharth Sethi and Associate Tanya Tiwari..(Read order)