The newly-constituted board of the crisis-hit Infrastructure Leasing and Financial Services Ltd (IL&FS) is trying to make the most of the breathing room granted by the National Company Law Appellate Tribunal (NCLAT) last month, when it observed that lenders must not withdraw support until a resolution is found. In other words, while the bench headed by Chairman Justice SJ Mukhopadhaya finally allowed banks to declare the accounts of IL&FS and its 300 group companies as non-performing assets, it put a stop on initiating the recovery process.
The new board, headed by Kotak Mahindra Bank managing director Uday Kotak, is likely to file contempt proceedings against nine large banks, including State Bank of India (SBI), Bank of Baroda (BoB), HDFC Bank, Yes Bank and Punjab National Bank, for unauthorised withdrawals of about Rs 800 crore during the moratorium period, people in the know told The Economic Times, adding that IL&FS will be seeking refunds.
"[The banks] made unauthorised auto-deduction from IL&FS escrow accounts in the last six months towards debt recovery," said a source, adding that the unauthorised deductions not only affected cash flow but is also likely to affect timelines. This is detrimental to overall resolution framework being followed by the board toward speedy resolution.
According to an IL&FS internal assessment, at least nine major banks made the deductions between October 2018 and April 2019. The projects where such deductions have been made include the Chenani Nashri tunnel highway, where SBI is the lead bank and Rs 200 crore was withdrawn. Another Rs 60 crore was deducted from the escrow account for Jharkhand road projects, where Allahabad Bank is the lead bank.
Similar auto debits have reportedly been made from escrow accounts tied to the Hazaribagh Ranchi Expressway, Barwa Adda Expressway, Karyavattam sports facility, East Hyderabad Expressway and Baleshwar Kharagpur Expressway. All in all, SBI alone is estimated to to have deducted over Rs 100 crore, while Canara Bank, Union Bank, Allahabad Bank, Punjab and Sind Bank collectively withdrew a roughly equivalent amount. HDFC Bank and BoB are pegged to have deducted Rs 90 crore in total.
As part of the resolution efforts, the IL&FS group companies have been classified into three categories, mainly based on their financial positions, namely green, amber and red. Corporate Affairs Secretary Injeti Srinivas told PTI last month that there are almost 55 companies in the green category - covering entities that are able to meet all payment obligations - with a collective loan exposure of about Rs 12,000 crore. The 13-odd amber companies, those that have enough money to pay senior secured creditors but not unsecured ones, have debt obligations worth around Rs 20,000 crore. The over 80 entities that are unable to meet obligations to even senior secured financial creditors have been categorised as red.
The IL&FS Group, sitting on a debt pile of over Rs 99,358 crore as of last September, had sparked off a liquidity crisis in the country last year, when the parent firm and multiple subsidiaries defaulted on several debt repayments. The Serious Fraud Investigation Office (SFIO), which has been probing the Group since last October, filed its first chargesheet earlier this month. The 840-page chargesheet focusses on just one subsidiary, IL&FS Financial Services Ltd (IFIN), and more are under the scanner.
With PTI inputs