The government-appointed board of IL&FS on August 13 submitted a report to the National Company Law Tribunal (NCLT), mentioning the progress made on the resolution of the IL&FS group companies. The report highlights ongoing liquidity issues being faced by the group. It also said two group entities were wound up in May, and the board reduced staffing by 43% between October 2018 and June 2019.
This is the fifth such report submitted by the board to the NCLT. The report was submitted a week after the National Company Law Appellate Tribunal (NCLAT) had pulled up the Uday Kotak-led board for slow progress on the resolution plan.
The report said despite a moratorium being imposed on the dues of most IL&FS group entities, “certain banks/financial institutions have been debiting accounts of IL&FS group entities without authorisation/instruction of the IL&FS group to service debt obligations payable by the relevant IL&FS group entity.” Lenders have debited over Rs 750 crore from the accounts of IL&FS group entities between October 2018 and May 2019, the report stated.
It further stated that “if the creditors of IL&FS group continue with such actions, the result will be that the ‘going concern’ status of relevant companies will be affected, leading to disruption in operations and consequent value deterioration”.
Despite an order passed by the NCLAT in February stating that banks may release amounts payable by lenders to any members of the IL&FS group companies, Allahabad Bank had refused to release going concern payments for Road Infrastructure Development Company of Rajasthan, the report said.
An earlier progress report submitted in January drew attention to the fact that banks, including State Bank of India and Punjab National Bank, refused to release funds held in escrow accounts to IL&FS group entities, which would have significant negative impact on the group’s road assets.
These payments are essential to preserve the value of the IL&FS group entities and failure to release timely funds may “materially impact the successful implementation of the resolution framework,” the latest report said.
The report also said two group entities, Infrastructure Development Corporate of Assam and Jharkhand E-Governance Solutions & Services were wound up in May. By way of cost-cutting measures, the board has reduced staffing by 43% till June 2019, “leading to a saving of nearly 47% in the annualised wage bill,” the report said.
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Source: Financial Express