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Keeping “larger public interest and economy of the nation” in mind, the National Company Law Appellate Tribunal (NCLAT) Monday stayed all proceedings by lenders or companies against debt-laden IL&FS and its 348 group companies in any court of law or tribunal, excluding petitions under Article 226 of the Constitution before any High Court of the Supreme Court. The NCLAT also set aside the National Company Law Tribunal (NCLT), Mumbai bench’s order last week that refused to grant a 90-day moratorium as demanded by the government in the case of Infrastructure Leasing & Financial Services (IL&FS). A moratorium period is a time during which the borrower is not required to make any loan repayment.
“Taking into consideration the nature of the case, larger public interest and economy of the nation and interest of the Company and 348 group companies, 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,” two-member NCLAT bench headed by Justice SJ Mukhopadhaya and comprising Justice AIS Cheema, said while passing an interim order over the government’s plea.
“The interim order will continue until further orders and not be applicable to any petition under Article 226 of the Constitution of India before any Hon’ble High Court or under any jurisdiction of the Hon’ble Supreme Court,” the NCLAT order said. The government had sought a 90-day moratorium on creditor and legal actions IL&FS in order to aid the new board of the group to implement a resolution plan that helps all stakeholders.
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IL&FS has an aggregate debt of Rs 91,000 and has been defaulting on its debt obligations since last month, putting the credit markets in a downward spiral. The government appointed a new board chaired by banker Uday Kotak at the IL&FS to resurrect the company and prevent the debt defaults from leading to a contagion in the financial markets. Without the moratorium, the IL&FS group could end up facing insolvency cases from multiple lenders under the Insolvency and Bankruptcy Code.
The NCLAT Monday also asked the five largest creditors of the IL&FS to respond on these appeals of the government for a moratorium. The next date for hearing for these appeals has been fixed on November 13. In its order, the NCLAT said that there would also be 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 NCLAT has also stayed “any and all banks, financial institutions from exercising the right to set off or lien against any amounts lying with any creditor against any dues whether principal or interest or otherwise against the balance lying in any bank accounts and deposits, whether current or savings or otherwise of the IL&FS and its 348 group companies.”
Commenting on the interim order, IL&FS said in a statement: “In addition to providing much needed relief from precipitative creditor actions against different entities within the IL&FS group, the moratorium enables value preservation of the group’s assets and will also assist the newly constituted board of directors of IL&FS in its effort to evaluate and prepare a resolution plan keeping various stakeholders in mind.” The moratorium is effective immediately and will continue till further orders.
