NCLAT breather for IL&FS, subsidiaries

Infrastructure Leasing and & Financial Services (IL&FS), which is in the midst of a huge liquidity crisis, has got a one-month relief from proceedings filed against the company by banks and other creditors as the National Company Law Appellate Tribunal (NCLAT) has stayed all such proceedings against the company and its subsidiaries till November 13. Govt. appeal While hearing an appeal filed by the government, the appellate body issued a moratorium on all cases against IL&FS and its 348 subsidiaries till November 13 when the case has been posted for admission. The interim stay effectively bars banks and other financial institutions from exercising any form of lien held against any dues of IL&FS or invoking any term loan, debentures or fixed deposits of the infrastructure financing company. The interim stay will, however, not be applicable on matters that are ongoing or filed in the High Court or Supreme Court. “There shall be stay of the institution or continuation of suits or any other proceedings by any party or person or bank or company, etc. against IL&FS and its 348 group companies in any court of law/tribunal/arbitration panel or arbitration authority,” the appellate tribunal said. There would also be stay on “any action by any party or person or bank or company etc to foreclose, recover or enforce any security interest created over the assets of IL&FS and its 348 group companies, including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.” The government moved the appellate body after its plea for a moratorium of up to 90 days was rejected by the National Company Law Tribunal (NCLT). “These appeals have been taken up for admission even on a holiday taking into consideration the nature and importance of the appeals,” the NCLAT highlighted in its order. Big creditors made party The appellate has also, in the larger national interest, directed the five largest creditors of IL&FS to be made a party to the case when it comes up for admission on November 13. Welcoming the NCLAT decision, a statement from IL&FS said that the moratorium would enable “value preservation” of the group’s assets while allowing the recently-constituted board of directors to prepare a resolution plan in the best interests of all stakeholders.

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