PSBs Instructed by NCLAT Not to Use Coercive Action Against IL&FS or Its Board
- Indian Masterminds Bureau
- Published on 21 Mar 2024, 12:41 pm IST
- 4 minutes read
Highlights
NCLAT directs PSBs to not take coercive action against IL&FS, its board. NCLAT has issued order to 11 public sector lenders regarding this, till its next hearing on May 14
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.Related Stories
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.
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