New Delhi: The government moved National Company Law Tribunal (NCLT) on Monday, looking to take over debt-ridden IL&FS by dissolving the entire board and appointing ten new directors with Kotak Mahindra Bank boss Uday Kotak as the non-executive chairman.
The government claimed that the directors have failed to discharge their duties.
The government is looking to supersede the IL&FS board, banking sources said, adding the foreign shareholders are hesitant in putting more money unless there is a change in the management.
The domestic shareholders have also expressed their concerns in lending to the same management at the helm, the sources said.
Sources from the company said IL&FS will support and co-operate with the government and the NCLT application will help the company in an early resolution of its pending issues.
The government had told the law tribunal that many mutual funds will collapse if IL&FS collapses and the company has been showing a rosy picture of its balance sheet.
The company's counsel told the law tribunal that the government has to form an objective opinion in the case.
A similar sort of situation had played out at the time of Satyam crisis during the UPA term.
A management reorganisation will be the best way to allay concerns as well as provide some sort of blueprint going forward, sources said.
However, the company has also approached NCLT to secure permission for asset sale resolution.
An order in this matter is expected to be announced later on Monday, according to ET NOW.
The company owes between Rs 55,000 and 60,000 crore to banks out of the total debt, the management had informed earlier. The total long-term exposure of the IL&FS group stands at around Rs 91,000 crore.
JN Gupta, a former Sebi executive director, said it is unfortunate that the IL&FS issue is being politicised. He suggested that the government and the Reserve Bank of India (RBI) should form a committee to look into the resolution of the financials.
Earlier, IL&FS said on Saturday it is working on a detailed restructuring plan and will appoint Alvarez & Marshal to formulate a turnaround strategy.
The decision was taken by the crisis-ridden company's board after the AGM on September 29.
"We will develop a comprehensive plan for restructuring so as to be able to demonstrate to the creditors and the shareholders that the intrinsic value of the group is sufficient in repaying its liabilities. We have decided to appoint a specialist agency — Alvaraz & Marshal — to take this plan forward," vice-chairman and managing director Hari Sankaran said in a video released late evening to the media after the board meeting.
Financial advisory firm Alvarez & Marshal will develop the plan, seek approvals from the board and all stakeholders, and then proceed to implement it, Sankaran said.
He said the company would continue to pursue its application under the relevant section of the Companies Act to ensure that it gets a moratorium to detail out revival plans in a manner that can satisfy both creditors and shareholders with its capacity to service debt and equity, he said.
The company will implement the asset monetisation plan in a manner that is consistent with the comprehensive restructuring plan, he added.
The group has lined up a plan to divest as many as 24 projects to raise around Rs 30,000 crore and pare its mount of debt, which as of the June quarter stood at over Rs 91,000 crore, of which over Rs 57,000 crore is from state-run banks.
The IL&FS group is facing a serious liquidity crisis and has defaulted on interest payment on various debt repayments since August 27.
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