NCLAT directs banks not to take action against ILFS, directors

On October 15, 2018, the NCLAT stayed all proceedings against IL&FS and other group companies till its further order. It had also restrained creditors of IL&FS from filing suits, in the case of non-repayment of loans.

“Despite several protective orders passed by this Tribunal and the National Company Law Tribunal, Mumbai restraining creditors from taking any coercive action against the IL&FS companies, including their directors, the respondent banks under the garb of taking procedural action have been harassing the directors of the IL&FS companies by issuing show cause notices and calling for personal hearing before the wilful defaulter Identification Committee,” IL&FS petition said. Banks have been threatening initiation of criminal proceedings, including initiating proceedings as well as and for declaring IL&FS companies and their current directors as wilful defaulters and getting issued Look Out Circulars, the petition said.

On October 1, 2018, the NCLAT superseded the existing board of IL&FS on the recommendation of the Centre after the mega-crisis in IL&FS, which shook the finance industry.

A new board for IL&FS, which had a debt burden of Rs 94,000 crore, was appointed to take charge of the affairs and the NCLAT conceived a framework for resolution of the crisis-hit group. It also granted protection to the IL&FS companies against recovery of any further dues and immunity to the newly appointed directors of IL&FS against any proceedings for the past actions of suspended directors or any of the officers thereof.