NCLAT directs PSBs to not take coercive action against IL&FS, its board

New Delhi: The National Company Law Appellate Tribunal (NCLAT) has directed 11 public sector lenders not to take coercive action against IL&FS and its group companies till its next hearing on May 14.

A two-member NCLAT bench headed by Chairperson Justice Ashok Bhushan also issued notices to the banks, along with the Reserve Bank of India (RBI), directing them to file a reply.

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"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 direction came on Tuesday over an urgent plea moved by the newly appointed board of debt-ridden IL&FS, seeking direction to the banks restraining them from initiating or pursuing any proceedings for declaration as willful defaulter against its group companies and their officials.

The appellate tribunal has directed to list the IL&FS application on May 14, 2024, for the next hearing.

On October 1, 2018, the NCLAT superseded the existing board of IL&FS on the recommendation of the centre after the mega-crisis in IL&FS, which shook the finance industry.

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 Wilful Defaulter Identification Committee, threatening initiation of criminal proceedings, including initiating proceedings and for declaring IL&FS companies and their current directors as wilful 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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