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In a breather to the beleaguered IL&FS, the National Company Law Appellate Tribunal (NCLAT) on Monday passed an interim order granting a moratorium on all creditor actions against the debt-laden group.
The Ministry of Corporate Affairs (MCA) had filed an appeal after the National Company Law Tribunal (NCLT) declined to grant relief on a petition seeking a moratorium on creditor proceedings against IL&FS (and its group companies) to enable the formation of an orderly resolution plan in the light of the current circumstances facing the group.
Overturning the NCLT ruling, the NCLAT ruled that there shall be a stay of the institution or continuation of suits or any other proceedings by any party against IL&FS and its 348 group companies in any court of law. It took this decision after taking into consideration the nature of the case, the larger public interest and the economy, and the interest of the company and 348 group companies.
Further, the two-member NCLAT Bench stayed any action by any party or person or bank or company to foreclose, recover or enforce any security interest created over the assets of IL&FS and its group companies, including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
The Appellate Tribunal kept in abeyance the acceleration, premature withdrawal or other withdrawal, invocation of any loan (term/ corporate/bridge), commercial paper, debentures, fixed deposits, guarantees, letter of support/ commitment/ comfort and other financial facilities or obligations availed by IL&FS and its arms.
The Tribunal held off any or all banks, financial institutions from exercising the right to set off or lien against any amounts lying with any creditor against any dues against the balance lying in any bank accounts and deposits of IL&FS and its group companies.
Next hearing
The moratorium is effective immediately and will continue till further orders. The next date of hearing has been scheduled for November 13.
The Tribunal, comprising Justice SJ Mukhopadhaya, Chairperson, and Justice AIS Cheema, Member (Judicial), said that taking into consideration the nature of the case, it is of the view that the five largest creditors should also be impleaded as party respondents to these appeals in the representative capacity of creditors.
According to the Tribunal, these appeals have been listed for urgent mentioning and taken up for admission even on a holiday taking into consideration the nature and importance of the appeals.
IL&FS, in a statement, said that 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.
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