NCLAT gives go-ahead to IECCL resolution, delinks with other IL&FS cos

The NCLAT on Thursday gave a go-ahead to the insolvency resolution of IL&FS Engineering and Construction Company Limited (IECCL) and delinked it with the other listed loss-making companies of debt-ridden IL&FS.

However, the National Company Law Appellate Tribunal (NCLAT) also clarified that ICICI-led consortium, which is opposing the IECCL resolution, would have the liberty to press for its "objection on the extinguishment of its entire debt, or mere payment of 42.25 per cent shareholding of IECCL in the ongoing resolution process."

IL&FS, which owns 42.25 per cent of IECCL, is selling a stake in the company and has invited bids under the Swiss Challenge method. It has received a binding bid from a prospective buyer and voting by lenders is expected to be completed by September 30, 2024.

The consortium led by ICICI has opposed the proposal before the NCLAT, where IL&FS has filed an application seeking its permission to sell its stake with a "haircut" and without shareholders' approval in its companies, which are insolvent with unsustainable debts and placed under the Category II list of resolution framework.

ICICI Bank has opposed the sale of 42.25 per cent in IECCL, contending 100 per cent share capital should be sold to fetch a better value for the company.

Regarding the sale of IL&FS stake in other Category II companies, in which IL&FS shareholding is less than 100 per cent, NCLAT has directed "to list hearing on October 14 (along with) all the objections including the objections filed by ICICI Bank."

A two-member bench comprising Chairperson Justice Ashok Bhushan and Barun Mitra clarified that "ICICI-led lenders' consortium shall be at liberty to press for its objection on the extinguishment of its entire debt, or mere payment of 42.25 per cent shareholding of IECCL in the ongoing resolution process."

IL&FS has received a binding bid from a prospective buyer for the acquisition of 42.25 per cent of the paid-up share capital of IECCL held collectively by IL&FS and IL&FS Financial Service (IFIN) under the share purchase agreement.

The remaining 57.75 per cent shareholding of IECCL comprises banks and financial institutions, bodies corporate, trusts, firms, and individuals.

IL&FS, which had a debt burden of Rs 94,000 crore at the time of crisis, is currently going through asset monetisation, a resolution framework approved by NCLAT, which also has a mechanism for the distribution of the sale proceeds.

The resolution framework has divided the sales companies into two categories.

Those companies in which bidders are willing to take financial and operational liabilities have been placed in Category I.

However, the companies where the financial bid amount offered is lower than their liability have been put under Category II companies.

Last year, it approached NCLAT to seek permission to sell its stake in Category II list of resolution framework.