The Mumbai Bench of the National Company Law Tribunal (NCLT) has suspended the current board of directors of IL&FS and has allowed for the reconstitution of the board with nominees from the government.
IL&FS is a systemically important infrastructure financing company that recently defaulted on its debentures and has been downgraded by credit rating agencies.
Given the systemic impact a default by IL&FS could have, the Ministry of Corporate Affairs moved the NCLT on Monday seeking the suspension of the board.
"After considering the impacts of the case as filed in the petition by the Union of India, this Bench is of the considered view that this is a fit case to invoke the jurisdiction prescribed under Section 241 of the Companies Act, 2013. And to declare that the conduct of the IL&FS management was prejudicial to the public interest," said the NCLT Bench of Justice MK Shrawat and Justice Ravi Duraiswamy.
The NCLT has allowed for the reconstitution of the board with six members -- nominees that the government recommended. They include Uday Kotak, MD Kotak Mahindra Bank, Vineet Nayar, retired IAS, GN Bajpayee, ex-chairman Sebi, DC Chatturvedi, non-executive chairman ICICI Bank, Malini Shankar, IAS and director general of shipping at the Ministry of Shipping, and Nand Kishore, retired IAS.
The new board has been asked to elect its chairman at the next scheduled meeting.
The present board of directors are suspended and cannot have a representation at the next scheduled board meeting.
Business Standard has contacted Alvarez and Marsal, the firm appointed to help turnaround IL&FS. Their replies to queries will be added once they are received.
The NCLT has directed the new board to hold its first meeting on or before October 8 and to submit a full roadmap to the tribunal by the next date of hearing.
Further, replies to petitions have to be served by October 15, while the Bench is set to hear the case on October 31.