IL&FS Gets Time Until Oct. 8 To Settle Matters With SIDBI
The National Company Law Tribunal gave insolvent infrastructure finance firm IL&FS time until Oct. 8 to try and settle matters with Small Industries Development Bank of India before dealing with the insolvency application submitted by the lender and the company’s application to initiate a scheme of arrangement, amalgamation and compromise under section 230 of the Companies Act, 2013.
IL&FS defaulted on a short-term loan of Rs 1,000 crore from SIDBI, among other debts. The IL&FS group has a consolidated debt of Rs 91,000 crore, which it’s unable to service due to a cash crunch.
In the absence of a draft scheme, the tribunal has been reluctant to pass any order or direction.
According to section 230 of the Act, if a company proposes to enter into a compromise or arrangement, it must apply to the tribunal to order a meeting of creditors or shareholders, whoever may be relevant. If the NCLT approves the application— which in the case of IL&FS it hasn’t—it will order such a meeting.
If the NCLT approves the application, a notice will be sent to all relevant regulators, including the Securities and Exchange Board of India and the Reserve Bank of India, who may raise objections to the scheme.
The company is evaluating an equity infusion, which will be taken up at the shareholders’ meeting on Sept. 29.
India’s largest insurer, Life Insurance Corporation of India, is IL&FS’ largest shareholder with 25.34 percent stake, followed by Orix Corporate of Japan at 23.54 percent.