Govt outlines three options for IL&FS revival

Mumbai: The government has submitted a broad revival plan for Infrastructure Leasing and Financial Services Ltd (IL&FS) where it is considering three options, including resolution at the group level, sale of business verticals, or the sale of individual assets.

The government is conducting audit and investigation of IL&FS and all the 346 subsidiaries and very soon it will go to the National Company Law Tribunal for the execution of the roadmap for revival, the government said on Wednesday while submitting the progress report to the tribunal’s Mumbai bench.

“There is a universe of options available to the government for the revival of the infrastructure group,” argued Sanjay Shorey, director, legal prosecution, ministry of corporate affairs (MCA).

“The new board’s current assessment is that the resolution options could broadly involve (individually or in a combination) significant capital infusion, divestments, and debt restructurings at an IL&FS group level, a business vertical or platform level or at an asset level,” Shorey said.

The counsel representing the government in the NCLT added that they have found various instances of mismanagement and the Serious Fraud Investigation Office (SFIO) is still conducting an investigation into the conduct of the erstwhile board.

“The new board continues its efforts to unravel the intragroup borrowings and believes that large parts of the IL&FS Group were, in the past, operated as a single enterprise with no boundaries of legal entities and separate managements,” argued Shorey.

“On a preliminary analysis of the financial statements and records of IL&FS Financial Services Ltd (IFIN) for the last three financial years, it is noticed that IFIN had outstanding loans and investments to companies in the IL&FS Group of ₹ 5,728 crore, ₹ 5,127 crore, and ₹ 5,490 crore between FY16 and FY18,” he said.

“The new board has found that in one instance, around ₹ 1,500 crore was routed through one of the IL&FS subsidiaries and had transferred to other group companies,” argued Shorey.

“Their own auditors are unable to give us the true picture of the fund flow currently,” he said.

The new board has taken several austerity measures and also decided that any expense above ₹ 1 crore will require the approval of board members.

The board also found that IL&FS has appointed 55 retired employees as consultants at an annual cost of ₹ 16.5 crore and has resolved to cancel the contracts of these consultants subject to some exceptions.

Meanwhile, Fredun De Vitre, senior counsel appearing for ousted IL&FS vice-chairman Hari Sankaran, said that the government’s argument that earlier it was only 169 companies were mentioned while in fact, the group has around 346 companies is wrong.

“When the earlier board had moved the tribunal under Section 230 of the Companies Act, we had said that out of 346 companies, we were seeking moratorium for around 169 companies,” argued De Vitre.

NCLT, presided over by V.P. Singh and Ravikumar Duraisamy, while accepting the progress report, also asked MCA to give an updated report on the number of IL&FS subsidiaries currently facing corporate resolution insolvency process (CIRP) and the updated list of directors nominated by the new board.

It has also asked IL&FS counsel to consider all the subsidiaries also as party to the matter as the moratorium is applicable to all the 347 companies.

The tribunal has adjourned the matter to 3 December.

Ravi Kadam, senior counsel appearing for the IL&FS, said that he will discuss this with the board and then file his reply.

“While it has been under one month since the new board has taken charge and it is still working towards unravelling the complexities pursuant to multiple layers of entities (totalling 347 in all), varied interests of various stakeholders, diverse businesses with varied age, scale and market positions of these businesses, different jurisdictions, and significant intra-group transactions, the new board has provided in the report a high-level assessment of the key considerations for the resolution as well as broadly, the options available,” IL&FS said after the NCLT hearing.

IL&FS has accumulated a debt of more than ₹ 91,000 crore and has defaulted on some of its commitments.