IL&FS has a debt pile of over Rs 91,000 crore.
Crisis-hit IL&FS will be taken over by the government as debt defaults by the infrastructure group have led to fears of contagion in the markets and a liquidity crisis.
The National Company Law Tribunal (NCLT) on Monday ordered the IL&FS (Infrastructure Leasing and Financial Services) board suspended and allowed a government team to take control of the debt-ridden company. The new board, which includes banker Uday Kotak, will meet before October 8 and submit a roadmap before the next hearing of the tribunal on October 31.
The government had said the “continuity of current board” is “prejudicial to public interest”.
Besides Mr Kotak, the managing director and CEO of Kotak Mahindra Bank, the board features: Vineet Nayyar, a retired IAS officer, GN Bajpai, a former chairperson of market regulator Sebi, GC Chaturvedi, the non-executive chairperson of ICICI Bank, Malini Shankar, an IAS officer, and Nand Kishore, a senior bureaucrat from CAG (Comptroller and Auditor General).
The new board has been given the liberty to unanimously elect a chairperson.
The suspended management cannot represent the company anywhere, the tribunal noted.
IL&FS has a debt pile of over Rs. 91,000 crore. A string of defaults by IL&FS in recent weeks has led to a series of credit rating downgrades on the company and its subsidiaries that hold some of its debt pile. Its rapid fall from grace has spooked financial markets and sparked fears that its troubles could cause a crisis in the non-banking financial services sector.
The government had said last week that it is monitoring the situation of IL&FS and would take appropriate action to ensure that there is no undue impact on the financial system.
Debt defaults by certain group entities of diversified IL&FS have triggered fears of liquidity crisis in the financial markets and the Reserve Bank of India has been taking steps to improve the overall cash situation.
Key IL&FS shareholders include Life Insurance Corporation (LIC), State Bank of India (SBI) and Central Bank of India, with the insurance major being the largest shareholder owning a 25.34 per cent stake.
The bench set October 31 as the next date of hearing. It also directed IL&FS to respond to all points raised by the government in its plea by October 15 this year.