The Ministry of Corporate Affairs (MCA) on Friday moved the Mumbai bench of the National Company Law Tribunal (NCLT) seeking protection for the newly appointed board of Infrastructure Leasing & Financial Services (IL&FS) Ltd against legal action by its lenders, creditors and investors.
“We are seeking shield for the new board from any future threat.We want an order from the tribunal that without the prior permission of this tribunal no one should file any case against the current board in any court. This is mere a shield for the new board and not immunity so that they can work freely to revive the company,” said Sanjay Shorey, joint legal director, MCA.
The ministry in the tribunal said that any legal or punitive action by the creditors, lenders or investors of IL&FS group against the new board should go through the tribunal. It also said that any action against default of loan by the group should be directed through the NCLT. However, the ministry said that the new board will co-operate with all the government agencies for the investigation. The Serious Fraud Investigation Office (SFIO) has begun a probe into the group.
Ravi Kadam, senior counsel appearing for IL&FS said that there are already a few defaults by the company and in the near future, there may be further defaults by the company or its subsidiaries and this immunity is against those defaults. “The immunity will shield the current board from the adverse impact of such default since under the law a director of a defaulting company can’t serve on the board of the other companies. Currently, people like G C Chaturvedi and Uday Kotak are also on the board of other companies including banks and hence the default of this company should not impact them in other boards,” said Kadam.
The total liabilities of the IL&FS group stand at Rs 91,000 crore currently, with most of its operating assets owned by its subsidiaries. Earlier this week, the government had moved the NCLT to supersede the board of IL&FS, which had defaulted on payments of over Rs 3,000 crore over a two-month period.
The new board members are: Uday Kotak, vice chairman and MD of Kotak Mahindra Bank, retired IAS officer Vineet Nayyar, former Sebi and LIC chairman GN Bajpai, former IAS officer and ICICI’s non-executive chairperson G C Chaturvedi, Director General of Shipping and Maharashtra cadre IAS officer Malini Shankar and former Deputy Comptroller and Auditor General Nand Kishore. On October 3, former Rajasthan State Secretary CS Rajan also joined in.
The government Friday also sought an order from NCLT to empower the new board to change the boards of the subsidiaries, joint-ventures and other affiliates of IL&FS Group. The tribunal has reserved its order in the case.