New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Monday said that accounts of debt-ridden Infrastructure Leasing and Financial Services (IL&FS) and its group entities would not be declared as non-performing assets (NPAs) until its further orders. The order will remain in effect even if there is a default.
The appellate tribunal’s order came during the hearing over the government’s plan for the resolution of IL&FS group companies. A two-member bench of the tribunal, headed by Chairman Justice SJ Mukhopadhaya said, “No IL&FS or its subsidiaries’ account will be declared NPA by any financial institution without approval from NCLAT.”
During the last hearing on February 11, the NCLAT had allowed 22 IL&FS Group companies, which were classified in the green category based on their financial health, to service their debt obligations.
Besides this order, the tribunal had also approved the appointment of former Supreme Court judge Justice DK Jain to supervise the resolution process of crisis-hit IL&FS and its group companies. The appellate tribunal also lifted the moratorium and allowed 133 IL&FS firms incorporated outside India to continue with the resolution process.
IL&FS group companies are classified into three groups — green, amber and red— based on their financial positions. The companies falling under the green category will continue to meet their payment obligation.
While the companies, which cannot meet their obligations but can meet only operational payment obligations to senior secured financial creditors are classified as amber. The red category includes those entities which cannot meet their payment obligations towards even senior secured financial creditors.
In December 2018, the Indian Banks’ Association had made a representation to the central bank, seeking grant of temporary dispensation of asset classification requirements in relation to their exposure to IL&FS group companies.
The amount of loan that falls under the amber category is around Rs 16,000 crore, while loans under the red category is around Rs 65,000 crore, for which banks will have to compulsorily make provisions. This was also represented to the board.
