Under all-round attack over the crisis in the Infrastructure Leasing & Financial Services Limited (IL&FS), the Narendra Modi Government on Monday, October 1 superseded the management of the beleaguered company by appointing a six-member Board led by banker Uday Kotak to restore the financial solvency of the debt-stricken conglomerate.
"The NCLT (National Company Law Tribunal) suspended the existing board and directed that the suspended members should not represent the company in any form with immediate effect," an official statement said.
The new board comprises Uday Kotak, MD and CEO of Kotak Mahindra Bank as Non-Executive Chairman and Vineet Nayyar, IAS (Retd), GN Bajpai, former Chairman, SEBI, GC Chaturvedi, Non-Executive Chairperson, ICICI Bank, Malini Shankar, IAS and Nand Kishore, IAS (Retd) as Directors, according to a Ministry of Corporate Affairs (MCA) statement. "The new Board shall take up its responsibility with immediate effect, after following due procedures," said the statement.
The development comes after the NCLT Mumbai ordered the supersession of the existing Board on a plea moved by the MCA to prevent any "further mismanagement in order to protect public interest".
Key public sector lenders and undertakings such as LIC (25.34%), Central Bank of India (7.67%) and SBI (6.42%) have large stakes in IL&FS, which has around ₹91,000 crore in long-term debt. As per some industry estimates, the company has an urgent liquidity requirement of around ₹5,000 crore. As on March 31, 2018, LIC is the largest shareholder, followed by ORIX Corporation (23.54%). Other prominent shareholders include ADIA (12.56%) and HDFC (9.02%).
Lately, the credit crunch has led a few of the company's subsidiaries to default in servicing some of the inter-corporate deposits. Subsequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programmes. The IL&FS crisis has dented equity investors' confidence in the entire NBFC space.
Congress President Rahul Gandhi in a tweet alleged that in 2007, when PM Modi was the Gujarat Chief minister, IL&FS was given the ‘GIFT CITY’ project worth ₹70,000 crore. Till date no work has been achieved under the plan. Gandhi added that in 2018, Modi was bailing out the same company via LIC and SBI
Calling the IL&FS crisis “India's Lehman Brothers moment”, the Congress on September 26 had sought a Supreme Court monitored multi-agency probe saying the irregularities in it has brought India on the verge of economic collapse.
Congress spokesperson Manish Tewari said the IL&FS Group, an infrastructure development and finance company, has a total debt of ₹91,000 crore as on March 31, 2018 and was in no position to pay back its dues and had started defaulting.
"This is such a serious matter that a multi-agency investigation needs to be carried out under the Supreme Court's monitoring," Tewari said and questioned how a company with 40% stake of government institutions was allowed to pile up ₹91,000 crore debt.
The Congress stepped up its attack further on September 30, with party President Rahul Gandhi alleging that Prime Minister Narendra Modi is bailing out the IL&FS group via public money in LIC and SBI.
Rahul’s tweet alleged that in 2007 when Modi was the Gujarat Chief minister, IL&FS was given the 'GIFT CITY' project worth ₹70,000 crore. Till date no work has been achieved under the plan. Gandhi added that in 2018, Modi was bailing out the same company via LIC an SBI.
Inputs by NH Web Desk