June 10, 2019

IL&FS Case: Government Appointed Board To File Contempt Case Against Nine Big Banks For Unauthorised Withdrawals

[ By Bobby Anthony ]


Contempt proceedings are likely to be initiated against nine large banks by the government appointed board of Infrastructure Leasing & Financial Services (IL&FS) for alleged unauthorized withdrawals of about Rs 800 crore from IL&FS escrow accounts during the moratorium period.

State Bank of India, Bank of Baroda, HDFC Bank, Yes Bank, Punjab and Sind Bank, Punjab National Bank, Indian Bank and Indian Overseas Bank are likely face legal action which could also include refunds of amounts withdrawn.

The banks allegedly indulged in unauthorized auto-deduction from IL&FS escrow accounts during the in the last six months towards debt recovery between October 2018 and April 2019. By doing so, the banks allegedly violated the protection granted to the financier and its subsidiaries by the National Company Law Appellate Tribunal (NCLAT), which restricted any lender from initiating recoveries.

According to estimates, SBI withdrew over Rs 100 crore, while HDFC Bank and Bank Of Baroda withdrew a combined Rs 90 crore. Canara Bank, Union Bank, Allahabad Bank as well as Punjab and Sind Bank together withdrew over 100 crore. IL&FS group companies have an outstanding debt in excess of Rs 91,000 crore.

Allegedly, auto debits were made from escrow accounts tied to the Hazaribagh Ranchi Expressway, Barwa Adda Expressway, Karyavattam sports facility, East Hyderabad Expressway and Baleshwar Kharagpur Expressway.

It is being alleged, that such unauthorized deductions affected IL&FS cash flow and could affect timelines, making it detrimental to the overall resolution framework being followed by the government appointed board towards speedy resolution.

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