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August 16, 2019

MCA Informs NCLT That Financial Institutions Debited Rs 758 Crore From IL&FS Accounts Despite NCLAT Moratorium


[ By Bobby Anthony ]

IL&FS

The Ministry of Corporate Affairs (MCA) informed the National Company Law Tribunal (NCLT) in an affidavit that banks and financial institutions have violated a moratorium imposed by the National Company Law Appellate Tribunal (NCLAT).

Earlier, in October 2018, the NCLAT had prohibited banks and financial institutions from deducting any amount from the accounts of Infrastructure Leasing & Financial Services (IL&FS) or its group companies between October 2018 and June 2019.

However, financial institutions like the Bank of Baroda, State Bank of India, Oriental Bank of Commerce, Union Bank of India, Allahabad Bank, ICICI Bank, HDFC bank, among others violated the appellate tribunal’s moratorium and deducted more than Rs 758 crore to service their debt.

It may be recalled that the NCLAT stayed all proceedings against IL&FS and 348 group companies in all courts other than the Supreme Court, until its further orders.

In its detailed progress report, the MCA stated that for IL&FS and 25 of its sister companies, financial institutions such as the Bank of Baroda, State Bank of India, Oriental Bank of Commerce, Union Bank of India, Allahabad Bank, ICICI Bank, HDFC bank, Bank of Maharashtra, Andhra Bank, Jammu & Kashmir Bank, Punjab National Bank, and Australia and New Zealand Banking group, among others debited the amounts despite the NCLAT moratorium against the same.

Though the NCLAT had partially lifted its moratorium to allow green companies to service the debt, it had still forbidden banks from automatically debiting monies without express approval.

The IL&FS companies from whose accounts these monies have been debited are placed under the amber and red category, MCA said in the affidavit.

The MCA progress report, attached as part of its affidavit, stated that if creditors of the IL&FS group continue with such actions, this would result in the “going concern” status of the relevant companies getting affected leading to disruption in operations and consequent deterioration of their value.

These “going concern” payments are essential to preserve and protect the value of IL&Fs group entities and may impact successful implementation of the resolution framework, if not paid in a timely manner, the MCA progress report stated.

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