IL&FS, Groups Not To Be Declared As NPAs, Says NCLAT

The National Company Law Appellate Tribunal (NCLAT) has released an order saying that IL&FS and its groups will not be tagged as non- performing assets till further orders come into being. 

The order will carry on even if there is a defect, the tribunal said. 

The order was passed today by a bench headed by NCLAT Chairperson Retired Justice SJ Mukhopadhyay on an application moved by certain lenders.

IL&FS (Infrastructure Leasing and Financial Services) first defaulted on debt securities in September 2018. Subsequently, the government dismissed the board of the group and appointed an interim board to finalise a resolution plan. While the total debt of the group stood at Rs 91,000 crore, most of this is on the books of subsidiaries and special purpose vehicles. While some of these entities have the ability to pay, others do not.

On February 11, the NCLAT said that subsidiaries of IL&FS would be divided into three categories — Green (firms that can meet all debt obligations), Amber (firms that can meet some debt obligations), and Red (firms that can’t meet any debt obligations). The tribunal went on to say that entities classified as green can continuing servicing debt obligations, while others would wait until a resolution plan is finalised.

On Monday, the appellate tribunal went a step further and said that none of the entities would need to be classified as NPAs, even if they are not making payments as scheduled. As per banking regulations, an account is tagged as a NPA when payments are overdue by 90-days.

BloombergQuint had earlier reported that a number of these accounts were scheduled to be tagged as non performing in the current financial year. An appeal by bankers to the RBI to allow special dispensation for IL&FS had been rejected.

The NCLAT’s intervention will come as a relief for lenders but dilutes banking regulations.

IL&FS, Groups Not To Be Declared As NPAs, Says NCLAT

The National Company Law Appellate Tribunal (NCLAT) has released an order saying that IL&FS and its groups will not be tagged as non- performing assets till further orders come into being. 

The order will carry on even if there is a defect, the tribunal said. 

The order was passed today by a bench headed by NCLAT Chairperson Retired Justice SJ Mukhopadhyay on an application moved by certain lenders.

IL&FS (Infrastructure Leasing and Financial Services) first defaulted on debt securities in September 2018. Subsequently, the government dismissed the board of the group and appointed an interim board to finalise a resolution plan. While the total debt of the group stood at Rs 91,000 crore, most of this is on the books of subsidiaries and special purpose vehicles. While some of these entities have the ability to pay, others do not.

On February 11, the NCLAT said that subsidiaries of IL&FS would be divided into three categories — Green (firms that can meet all debt obligations), Amber (firms that can meet some debt obligations), and Red (firms that can’t meet any debt obligations). The tribunal went on to say that entities classified as green can continuing servicing debt obligations, while others would wait until a resolution plan is finalised.

On Monday, the appellate tribunal went a step further and said that none of the entities would need to be classified as NPAs, even if they are not making payments as scheduled. As per banking regulations, an account is tagged as a NPA when payments are overdue by 90-days.

It was earlier reported that a number of these accounts were scheduled to be tagged as non performing in the current financial year. An appeal by bankers to the RBI to allow special dispensation for IL&FS had been rejected.

The NCLAT’s intervention will come as a relief for lenders but dilutes banking regulations.

Lost Arbitration Case: Infosys To Pay Rs 12.17 Crore to Its Former CFO

Arbitral Tribunal decreed a 12.17 crore compensation with interest to Rajiv Bansal, Former Chief Financial Officer of Infosys Limited after the latter lost the arbitration case over severance package.

Infosys said it will take legal advice for further action on the issue.

The IT firm had agreed to pay Bansal a severance amount of Rs 17.38 crore or 24 months of salary, but the company suspended payments after he got Rs 5 crore as co-founder N R Narayana Murthy and others objected to the severance package as excessive.

Following this, Bansal had dragged his former employer to arbitration to claim the remaining Rs 12 crore of his severance pay.

Bansal’s severance payout has been one of the issues that Infosys founders had raised to allege governance lapses at the Bengaluru-based firm.

When Bansal left Infosys in 2015, Infosys had agreed to pay him Rs 17.38 crore in severance pay, equivalent to 24 months of pay.