Photo: Mint
Photo: Mint

IL&FS nominee directors to continue on board

The government's move to supersede IL&FS was prompted by fears of potential systemic disruption after the company defaulted on its commercial papers

Mumbai: The status of five directors that large shareholders have nominated to the board of IL&FS will remain unchanged though its board has been superseded, two big shareholders said.

“The nominee directors will continue to be a part of the new board and attend board meetings like in the past," said State Bank of India (SBI) chairman Rajnish Kumar said.

“We are currently waiting for the date of the board meeting," said another senior official with one of the shareholders.

Currently, Life Insurance Corporation of India, SBI, Abu Dhabhi Investment Authority and Central Bank of India have one nominee director each on the board, with Orix Corp. being represented by two directors. Besides the nominee directors, former LIC chairman S.B. Mathur was appointed as chairman to the board of IL&FS following a board meeting on 15 September. He had replaced Hemant Bhargava, LIC’s managing director who was serving as non-executive chairman since July.

Clarity over the continuation of nominee directors comes a day after the Mumbai bench of the National Company Law Tribunal ordered the reconstitution of the IL&FS board by appointing six government nominee directors. These directors include Uday Kotak, managing director of Kotak Mahindra Bank; G.N. Bajpai, former chairman of the Securities and Exchange Board of India; G.C. Chaturvedi, chairman of ICICI Bank Ltd; former bureaucrats Vineet Nayyar (also a former vice chairman of Tech Mahindra); Malini Shankar and Nand Kishore.

The order had not specified whether the nominee directors representing large shareholders could continue on the new board.

“Further directed that the present board of directors be suspended with immediate effect. The six directors as reproduced supra shall take over the R1 company immediately. Newly constituted board shall hold a meeting on or before 8th October, 2018 and conduct business as per the Memorandum and Articles of Association of the company and the provisions of the Companies Act, 2013," the order said.

The government’s move to supersede IL&FS was prompted by fears of potential systemic disruption after the company defaulted on its commercial papers. The IL&FS group has infrastructure and financial assets of over 1,15,000 crore, but is struggling to service around 91,000 crore in debt, leading to concern among banks and mutual and pension fund managers about further losses.