Infrastructure Leasing & Financial Services (IL&FS) and its 40 subsidiaries have filed a petition before the National Company Law Tribunal (NCLT), Mumbai, under Section 230 of the Companies Act, 2013, seeking to restructure their debts. This will delay debt repayments to its lenders.
The Small Industries Development Bank of India (Sidbi), one of IL&FS’ creditors, has moved insolvency court against the company, seeking its money back. IL&FS owes nearly Rs 10 billion to Sidbi. Sidbi wants to recover Rs 4.5 billion from IL&FS and about Rs 5 billion from its subsidiary IL&FS Financial Services. IL&FS moved the NCLT on Monday, “seeking certain relief” in connection with the filing of scheme of arrangement. The scheme will be subject to approval from shareholders, creditors, and the board of directors of the relevant entities, the company said in a filing with the BSE on Tuesday.
Section 230 to 240 of the Companies Act, 2013 contains provisions on ‘compromises, arrangements and amalgamations’. After an application is filed, the tribunal calls for a meeting of its shareholders and lenders. After that, the company’s debt restructuring plan is put to vote.
“This is bad news for all the creditors of IL&FS and its 40 subsidiaries. By moving the NCLT, IL&FS is seeking time to repay its debt. It’s clear they don’t have the money to repay,” said a corporate lawyer. The company has a consolidated debt of Rs 910 billion. It has missed loan repayments to a host of banks in the past one month.
According to Section 230 of the Companies Act, the application to the tribunal has to disclose all material facts related to the company, such as the firm’s latest financial position, the latest auditor’s report, and whether any investigation is pending against the firm. It also has to disclose reduction of share capital of the company and any scheme of corporate debt restructuring consented to by not less than 75 per cent of the lenders.