Eleven public sector lenders have been ordered by the National Company Law Appellate Tribunal (NCLAT) to refrain from using coercive measures against IL&FS and its group entities until the tribunal’s next hearing on May 14.
The Reserve Bank of India (RBI) and the banks were also sent letters by a two-member NCLAT panel led by Chairperson Justice Ashok Bhushan, requiring them to submit a response.
“In view of the order dated October 15, 2018, the Respondents (banks) shall not proceed to take any coercive action against the Applicant (IL&FS and group companies) till the next date,” said the NCLAT.
On October 15, 2018, the NCLAT stayed all proceedings against IL&FS and other group companies till its further order. It had also restrained creditors of IL&FS from filing suits, in the case of non-repayment of loans.
The NCLAT issued its directive on Tuesday in response to an urgent request made by the recently established board of the heavily indebted IL&FS. The request asked the banks to refrain from taking any action that would force them to be declared willful defaulters against the group firms and their officials.
The IL&FS application is scheduled for hearing on May 14, 2024, according to an order from the appeal tribunal.
On the advice of the centre following the mega-crisis at IL&FS that rocked the finance sector, the NCLAT replaced the IL&FS board of directors on October 1, 2018.
A new board for IL&FS, which had a debt burden of Rs 94,000 crore, was appointed to take charge of the affairs and the NCLAT conceived a framework for resolution of the crisis-hit group.
It also granted protection to the IL&FS companies against recovery of any further dues and immunity to the newly appointed directors of IL&FS against any proceedings for the past actions of suspended directors or any of the officers thereof.
IL&FS, in its application filed before the NCLAT, said it is aggrieved by the “blatant violation and disregard” of previous NCLAT orders by the banks. IL&FS also charged banks of taking procedural action under the garb of the RBI guidelines, and harassing directors of the IL&FS companies.”
The banks are “issuing show cause notices, calling for a personal hearing before the Willful Defaulter Identification Committee, threatening initiation of criminal proceedings, including initiating proceedings and for declaring IL&FS companies and their current directors as willful defaulters, as well as getting issued Look Out Circulars,” it submitted.
“All such coercive actions/steps are attempts by the Respondent Banks to pressurise the IL&FS companies to directly or indirectly meet their debt demands, without having regard to the fact that the resolution/satisfaction of debts of all the creditors of the IL&FS companies is subjudice before this tribunal,” it had submitted.
IL&FS has prayed to restrain the banks from pursuing proceedings against “other IL&FS companies and/or their Directors and/or officers appointed after October 2018 by the IL&FS New Board”.
Moreover, it has also made the banking sector regulator RBI a party, and requested the NCLAT to “pass an order directing Respondent No 12 (RBI) to direct Respondent No 1 to 11 (banks) restraining them from taking any coercive action against the Applicants and other IL&FS companies”.
It has also requested the National Company Law Appellate Tribunal (NCLAT) to direct banks “not take any coercive action against the applicant and other IL&FS companies and/or their Directors and/or officers” during the pendency of the hearing and final disposal of this present application before it.
The banks are – Central Bank of India, Bank of Baroda, Indian Bank, Canara Bank, Punjab National Bank, Indian Overseas Bank, State Bank of India, Bank of India, Jammu & Kashmir Bank, IDBI Bank and Union Bank of India.
