Even as a government-appointed board is leading the turnaround of the beleaguered Infrastructure Leasing & Financial Services (IL&FS) group entities and distribution of group assets to creditors is going on under an insolvency resolution framework, some public sector banks, including Bank of Baroda, Allahabad Bank and Oriental Bank of Commerce, have refused to create fixed deposit accounts for some of the group entities. Subsequent intervention by the court eased the situation to some extent, but the problem persists even now in certain cases, sources say.
The new IL&FS Board wanted to invest the amount lying in the escrow and other accounts of various Group entities by creating fixed deposits, as part of their efforts to earn interest income and maximise value to shareholders.
“However, various banks have either refused to create fixed deposits from amount lying in the accounts of the relevant Respondent No.1 (IL&FS) Group entity or have not actioned the request placed by such Respondent No. 1 Group entities for investing the respective available cash flows in interest bearing investments such as fixed deposits,” the government has said in a recent affidavit to the National Company Law Appellate Tribunal (NCLAT).
The government’s status-update affidavit before the NCLAT has also highlighted the banks’ refusal to create FD accounts as one of the few challenges that are coming in the way of the IL&FS resolution. Following interventions by the NCLAT and Justice (Retd) DK Jain, who is overseeing the resolution and the distribution process of IL&FS, there have been “certain positive developments”, the ministry of corporate affairs (MCA) said in the affidavit.
For instance, FDs amounting to nearly 385 crore had been created in BAEL in July 2021, pursuant to the order issued by Justice Jain. Also, FD amounting to nearly162 crore had been created in IRIDCL in July 2021 after engagement with lenders. The distribution of IRIDCL has subsequently been concluded in December 2021.The MCA has also highlighted challenges such as failure to receive annuities from the Jharkhand government and constraints in completing the resolution of IWEL that are coming in the way of the resolution.
“This Hon’ble tribunal (NCLAT) has passed ab order dated December 1, 2021, allowing creation of fixed deposits amounting to nearly 1,942 crore in RMGL and RMGSL. However, despite the said order, the lenders of RMGL and RMGSL are yet to create such fixed deposits and the RMGL/RMGSL team continues to be in discussion with such lenders,” the MCA said. With 302 entities, IL&FS Group went bust in 2018 with a debt of around99,000 crore, but the government-appointed board has been projecting 62% or around 61,000-crore debt resolution in the overall IL&FS group. The board has projected55,000-crore debt resolution by March this year. It has recently moved a petition before the NCLAT seeking approval for interim distribution of group assets worth `16,200 crore to the creditors, including public funds, by March 31. The complete resolution of all IL&FS entities may take a “significant amount of time”.
