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The government is likely to move quickly to induct four more directors with experience in infrastructure lending and EPC (engineering, procurement and construction) into the debt-laden IL&FS. This is being done to stave off criticism that the six who have already been appointed to manage its affairs lack sufficient experience in the infrastructure space.
According to sources, the additional board seats may also be offered to some of the large foreign shareholders of IL&FS.
The National Company Law Tribunal, in its order on October 1, suspended the entire board of the company, replacing it with six individuals recommended by the Ministry of Corporate Affairs.
However, the petition filed by the Ministry had specifically sought the removal of only seven members from the board of IL&FS — Hari Sankaran, Arun K Saha, SB Mathur, RC Bhargava, Michael Pinto, Jaitirth Rao and Rina Kamath.
The petition is silent about the other members on the board representing large shareholders, including ORIX Corporation of Japan (which holds 23.54 per cent of IL&FS) and Abu Dhabi Investment Authority (12.56 per cent).
In addition, the Ministry of Company Affairs, in its petition, had prayed for the appointment of 10 persons as directors even though it had proposed only six. This means that the Centre may have intended to include four more directors subsequently.
The six new directors who have been appointed to the IL&FS Board are — Uday Kotak, MD & CEO, Kotak Mahindra Bank; Vineet Nayyar, IAS (Retd) and former Vice-Chairman of Tech Mahindra; GN Bajpai, former Chairman of SEBI and LIC; GC Chaturvedi, IAS (Retd) and Non-Executive Chairman of ICICI Bank; Malini Shankar, IAS and Director General of Shipping, and Nand Kishore, IA&AS (Retd)
Given that IL&FS is looking to raise ₹4,500 crore via a rights issue and is also seeking loans to overcome liquidity mismatches, market watchers say the government may allow representation on the board to at least the two foreign investors.
The NCLT has ruled that “the interim prayer of suspending the present board of directors and reconstitution of the new board is hereby allowed. At present, by an additional affidavit only six names of the Board members have been proposed by the Union of India.”
“Further, directed that the present board of directors be suspended with immediate effect. The six directors as reproduced supra (above) shall take over the R1 company (IL&FS) immediately.”
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