The National Company Law Appeal Tribunal (NCLAT) has ordered the new board of directors of Infrastructure Leasing & Financial Services (IL&FS) to first pay the lenders on a pro rata basis, as opposed to the normal method of payment prescribed under the article 53 (distribution of assets) of the Insolvency and Bankruptcy Code (IBC). This will be done as part of the provisional distribution.
“We are of the view that IL&FS and its entities can take all steps to complete the resolution process in accordance with the Resolution Framework and submit their application for approval before the NCLT by June 30, 2022,” the NCLAT said. .
Raj Bhalla, a partner at law firm MV Kini, explained that shareholders should not be paid through the IBC Section 53 procedure as it would be against the public interest. “The investment was made by its shareholders: Life Insurance Corporation of India, IL&FS Employees Welfare Trust, Central Bank of India and State Bank of India. They have public money. The NCLAT also ordered that said distribution adhere to the final resolution of IL&FS entities in accordance with the Resolution Framework. However, a few entities have been kept out,” he said.
As of December 31, 2021, 191 entities of the IL&FS group have been resolved (basic filings made with various courts and tribunals) by way of sale, liquidation/closure or transfer/proposed transfer to the Infrastructure Investment Trust (InvIT) put in place placed in accordance with the Securities and Exchange Board of India (Infrastructure Investment Trust) Regulations 2014 (InvIT Regulations). “As of December 7, 2021, approximately Rs 16,742 crore was available from various entities of the IL&FS group,” the NCLAT said.
The interim distribution will be Rs 16,361 crore – Rs 11,296 crore in cash and Rs 5,065 crore in InvIT units.