Mumbai: The government moved the Mumbai bench of the National Company Law Tribunal (NCLT) on Friday to seek protection for the newly appointed board of Infrastructure Leasing & Financial Services (IL&FS) Ltd from any future adverse proceedings.
Govt moves to shield IL&FS board from adverse cases
The ministry of corporate affairs told the tribunal that the new board is court-appointed, which meant it should get protection against any proceedings that could be civil, criminal or punitive in nature.
“We are seeking a shield for the new board from any future threat,” argued Sanjay Shorey, joint legal director in the ministry of corporate affairs. “We want an order from the tribunal that without the prior permission of this tribunal no one should file any case against the current board in any court. This is merely a shield for the new board and not immunity so that they can work freely to revive the company,” he said.
However, the government also clarified that the board will cooperate with all the government agencies in the Serious Fraud Investigation Office (SFIO) probe into the affairs of the company as well as the conduct of the erstwhile board.
Ravi Kadam, senior counsel for IL&FS argued that there are a few defaults by the company and that in the near future there will be further defaults by the company or its subsidiaries. This immunity is against those defaults, he said.
“The immunity will shield the current board from the adverse impact of such default as under law a director of a defaulting company can’t serve on the board of the other companies,” argued Kadam. “Currently, people like G.C. Chaturvedi and Uday Kotak are also on the board of other companies, including banks, and hence the default of this company should not impact them in other boards,” he said.
The government also sought the tribunal’s order to further empower the new board to change the boards of the subsidiaries, JV and other affiliates of IL&FS Ltd as well.
IL&FS has accumulated a debt of more than ₹91,000 crore and has defaulted on some of its commitments. The government had to intervene to salvage the situation, because of its major exposure to fund houses, banks and insurance companies.
The tribunal, presided by over V.P. Singh and Ravikumar Duraisamy, reserved its order after hearing the arguments.
In a separate development, counsel Kadam also argued on Friday in another bench of NCLT, as the new board has taken over, IL&FS will require more time to decide on the petition that the company had filed under Section 230 of the Companies Act, 2013, to restructure the company.
The counsel for the Small Industries Development Bank of India’s (Sidbi) argued that they too are willing to wait for some more time after a new board has taken over.
IL&FS owes around ₹1,100 crore to Sidbi, which had moved the Mumbai bench of NCLT after IL&FS defaulted on the first trench of its dues. The bench, presided over by Bhaskara Pantula Mohan and V. Nallasenapathy, after hearing the arguments adjourned the case to 12 November.