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Running out of options, cash-strapped IL&FS has approached the National Company Law Tribunal (NCLT), seeking relief from being dragged by lenders into insolvency proceedings.
The company on Tuesday sought the NCLT’s permission to settle with creditors outside the insolvency court.
This comes even as some promoters of the infrastructure finance firm are pressing for an audit of transactions at its 50 overseas step-down subsidiaries (companies floated by IL&FS’ subsidiaries).
IL&FS has a complex web of 135 step-down subsidiaries, of which 50 are based overseas. While 11 each are in Spain and Singapore, six are in the UAE and three in Mexico. Through the scrutiny, IL&FS’ promoters may be aiming to get a true and fair view of various transactions — inter-company transactions, end-use of funds, inter-company investments and quantum of leverage — at those entities, according to sources.
The move to file a plea with the NCLT’s Mumbai Bench, under Section 230 of the Companies Act, 2013, comes in the backdrop of IL&FS and some of its subsidiaries facing rating downgrades, and their inability to service commercial papers (CPs) and inter-corporate deposits.
Countering SIDBI
The infrastructure lender has defaulted on inter-corporate deposits taken from the Small Industries Development Bank of India (SIDBI).
According to industry sources, IL&FS moving the NCLT may be in anticipation of SIDBI dragging it, or its subsidiaries into insolvency proceedings for not repaying its dues on time.
The problems at IL&FS have been exacerbated by top-level resignations. IL&FS Financial Service Ltd (IFIN) recently informed the exchanges about the resignations of five directors. Its MD and CEO Ramesh C Bawa has also stepped down.
Meanwhile, insurance behemoth Life Insurance Corporation of India (LIC), which holds over 25 per cent in IL&FS, said on Tuesday that it would do all it can to prevent the collapse of the beleaguered company. All options, including increasing the equity holding in IL&FS, are open, LIC Chairman VK Sharma told reporters in New Delhi.
Meeting with RBI
The RBI has scheduled a meeting with IL&FS shareholders for September 28. The meeting is likely to be chaired by an RBI Deputy Governor.
Indications are that the discussions will centre around the reason for the defaults, funding gaps and asset and liability mismatches faced by IL&FS.
Sources said officials from LIC and SBI are also likely to brief Finance Ministry officials ahead of IL&FS’ annual general meeting on September 29.
(With inputs from our Delhi Bureau)
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