NCLAT restrains banks from declaring IL&FS from wilful defaulter

The National Company Law Appellate Tribunal (NCLAT) has restrained 11 banks from initiating proceedings for declaration as wilful defaulter against Infrastructure Leasing & Financial Services Ltd (IL&FS), its associate companies and directors. It has also asked the banks not take any other coercive action against the company.

IL&FS has moved NCLAT against what it termed the blatant violation and disregard by the banks of NCLAT’s earlier orders passed in regards to the affairs of the company. As per the submission of IL&FS, despite several protective orders passed by NCLAT and NCLT restraining creditors from taking any coercive action against the IL&FS companies, including their directors, the banks under the garb of taking procedural action per the guidelines issued RBI and otherwise, have been harassing the Directors of the group companies by issuing show cause notices, calling for personal hearing before the Wilful Defaulter Identification Committee, threatening initiation of criminal proceedings, including initiating proceedings as well as and for declaring IL&FS companies and their current directors as Wilful Defaulters, as well as getting issued Look Out Circulars.

The company in its submission further says that all such coercive actions/steps are attempts by banks to pressurize 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 sub Judice before NCLAT, wherein the Resolution Framework has been approved and is in the process of being implemented.

It says that while the respondent banks are participating in the IL&FS Resolution Process to get their debts addressed, these parallel coercive actions/steps are not only squarely in the teeth of the orders passed by this Hon’ble Tribunal and the Hon’ble NCLT from time to time, but are the likely result of either a convenient/selective reading of such orders, or an uncoordinated mechanical attempt at purportedly complying with applicable guidelines issued by the RBI.

Also See: Changes in RBI’s new Master Direction for wilful defaulters