IL& FS has many iconic projects working closely with the Government and formed various joint ventures (JVs) and participate in public-private partnership(PPP) projects initiated by the Government, including GIFT city, Gandhinagar, Gujarat, various affordable housing projects. Now, the National Company Law Tribunal (NCLT) has approved the takeover of IL&FS board by government nominees, under Article 241 of the Companies Act.

IL&FS Group, an infrastructure development and financial services company,  is predominantly into providing IT solutions for efficient citizen service delivery and smart governance. The expertise lies in developing a unified, data-driven infrastructure that transforms service models and experiences for citizens and government agencies. ITL has also implemented renowned projects such as Bhamashah for Government of Rajasthan, CM Dashboard for one of the State governments, enabling various central universities of India with Wi-Fi and also won the Naya Raipur Smart Infrastructure project. Headquartered in Gurgaon, the company has delivered successful IT solutions in India, South East Asia and SAARC nations.

Following the Smart Cities Mission, Indian cities are rapidly advancing towards getting smarter and IL&FS Technologies Ltd is helping them reach there by integrating global technologies in Indian environment, says Durga Prasad Y, Chief Executive Officer, IL&FS Technologies Limited. As per the report, Schneider Electric India, in partnership with IL&FS, has bagged a contract from Naya Raipur Development Authority to develop the first greenfield integrated smart city in the capital of Chhattisgarh. 

Now, the National Company Law Tribunal (NCLT) has approved the takeover of debt-laden IL&FS board by government nominees and Uday Kotak to be chairman. A new six-member board to prepare resolution plan for the beleaguered firm. The existing 10-member board has been suspended, in effect giving the Centre direct control over the company. Over the past one month, IL&FS has defaulted on payments and is sitting on total liabilities of Rs 91,000 crore.

“The suspended directors henceforth shall not represent the company as a Director and shall also not exercise any powers as a Director in any manner before any authority as well,” said the Tribunal, comprising Members MK Shrawat and Ravikumar Duraisamy.

Mismanagement has been the proven fact:

During the hearing procedure, the Ministry argued that the company’s management was responsible for negligence and incompetence by failing to discharge its fiduciary duties. The Registrar of Companies conducted an enquiry and found evidence of mismanagement and compromise in corporate governance norms by the indiscriminate raising of short-term loans. The Centre told the NCLT that the company was presenting a rosy picture and camouflaging its financial statements by hiding a severe mismatch between cash flows and payment obligations.

The NCLT approved the induction of six board directors - Uday Kotak, MD & CEO, Kotak Mahindra Bank; Vineet Nayyar, IAS, former Vice-Chairman of TechMahindra; GN Bajpai, former Chairman of SEBI and LIC ; GC Chaturvedi, Non-Executive Chairperson, ICICI Bank; Malini Shankar and Nand Kishore, IA&AS (Retd.) - on the reconstituted Board.

The new IL&FS board will meet on October 8 to chart out to a roadmap for recovery. The Ministry of Corporate Affairs has been authorised a maximum of 10 board members and that four more board members will be appointed going forward. Liberty is granted to the board of directors to select a Chairman among themselves. Thereafter, report the roadmap to the NCLT, Mumbai Bench, at the earliest possible not later than the next date of hearing by October 31,” NCLT said.

With IL&FS Group’s outstanding borrowings at 91,000 crore (of which 55,870 crore is by way of term loans from banks and 24,297 crore via debentures) as of end-March 2018, the Centre may be fearful of the ripple effect further debt defaults by IL&FS and some of its subsidiaries have on the banking system, mutual funds and non-baking finance companies in the run up to the elections.

The new Board, which has been tasked with the responsibility of preparing a time-bound resolution plan, will take up its responsibility with immediate effect, after following due procedures.

With the new Board taking charge, Life Insurance Corporation of India and State Bank of India, which have a 25.34 per cent and 6.42 per cent stake, respectively, in IL&FS, may now be more willing to participate in the rights issue of the company and also extend it lines of credit. However, it remains to be seen if Orix Corporation of Japan and Abu Dhabi Investment Authority, which have 23.54 per cent and 12.56 per cent stake, respectively, will subscribe to IL&FS’ proposed rights issue of 4,500 crore.