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The new IL&FS Board has listed as a major challenge some lenders action of marking lien on or appropriating funds from the respective accounts of the IL&FS Group entity against their outstanding dues in that entity/other group entities despite the National Company Law Appellate Tribunal restricting them from doing so its interim order on October 15.
“While the Hon’ble National Company Law Appellate Tribunal had in its interim order dated October 15, 2018 inter alia restricted banks and financial institutions from setting off or exercising lien over any amounts lying with any creditor in any account of IL&FS or its group companies, some lenders have marked lien on or appropriated funds from the respective accounts of the entity against their outstanding dues in that entity/other group entities,” the company said in a report to the Ministry of Corporate Affairs.
Listing out other challenges, the report said lenders in certain entities are not permitting O&M (operations and maintenance) payments or other operational payments, including salaries, which are essential for the going concern status of the entity.
Such lender action is to the detriment of such entities and would lead to value erosion for all stakeholders, it added.
The report cited examples whereby in case O&M payments are not made in entities with concession agreements (for example, roads), the vendors may stop providing O&M services, which could lead the concession authority to levy penalties and even terminate the O&M contract. In such a scenario, the project would deteriorate physically, which in turn would yield lower value from prospective investors.In entities where employees and other vendors are not paid at the discretion of the lenders, there would be a disruption in activities and potential mismanagement of such entities.
The problem with regard to O&M payments is underscored by the fact that seven Indian employees of IL&FS Transportation Networks Ltd, which has been executing projects across three sites in Ethiopia through its subsidiary Elsamex SA, were not allowed to leave their respective camp sites by the local community on account of unpaid dues by the project company.
While two Indian employees have been allowed to move out of the camp, the others continue to remain captive. ITNL is believed to have remitted a month’s pay for the local employees of the sites in Ethiopia.
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