MUMBAI/NEW DELHI: Alarmed at the defaults by Infrastructure Leasing & Financial Services (IL&FS) and the spectre of contagion spreading, the government on Monday took the rare move of taking control of a private company.
At the instance of the Ministry of Corporate Affairs, the Mumbai bench of the National Company Law Tribunal (NCLT) on Monday scrapped the old board of IL&FS and appointed six government nominees.
Kotak Mahindra Bank chairman Uday Kotak has been given charge of IL&FS as non-executive chairman.
The other five board members are former Sebi chairman G N Bajpai, ICIC Bank chairman G C Chaturvedi, former deputy CAG Nand Kishore, retired IAS officer Malini Shankar and former executive vice chairman of Tech Mahindra Vineet Nayyar.
The new board has been asked to convene a meeting on or before October 8 and come up with a roadmap before the next NCLT hearing on October 31.
The government’s move to intervene was in public interest and the decision to supersede the board of ILFS need not be viewed as a takeover, said Subhash Chandra Garg, Economic Affairs Secretary.
The IL&FS management has been accused of negligence, incompetence and painting a rosy financial picture when it knew its finances were constrained.
The finance ministry said the government was committed to ensuring liquidity for IL&FS from the financial system so that “no more defaults take place and the infrastructure projects are implemented smoothly”.
The government is also concerned about the “misrepresentation of facts by the company”, which will now be investigated by the Serious Fraud Investigation Office (SFIO) under the Ministry of Corproate Affairs. TNIE had on Sunday reported the ministry’s probe into the affairs of the company.
It is estimated that IL&FS would need Rs 7,000 crore in the next two months and Rs 16,000 crore over six months to meet debt repayment obligations.According to experts, bringing in a new board and restructuring the company would solve the liquidity issue and allow it to continue operations. IL&FS has several ongoing infrastructure projects and is also running many projects on annuity basis.