Infrastructure Leasing & Financial Services Ltd. (IL&FS) has filed an appeal in the Supreme Court challenging the National Company Law Appellate Tribunal’s ( NCLAT) September 19, 2024 order, which allowed an interim distribution of funds from the escrow account of Baleshwar Kharagpur Expressway Ltd. ( BKEL), an arm of IL&FS Transportation Networks Ltd. ( ITNL).
NCLAT passed an order in response to an application filed by the State Bank of India ( SBI), directing distribution of Rs 263.44 crore to lenders under the interim distribution arrangement. However, IL&FS has challenged this decision, arguing that the interim distribution it follows is based on a different set of rules approved by NCLAT, which apply to all IL&FS Group companies.
There are two different ways of distributing money. While under the Concession Agreement’s escrow mechanism, money should first go towards paying off debts before making any payments to the National Highways Authority of India (NHAI), IL&FS’ approved resolution framework allows secured lenders to be paid up to the liquidation value of the entity first, and then remaining funds are distributed equally among all creditors.
IL&FS has claimed that the NCLAT order breaches the “principle of equitable distribution to all creditors”, a framework designed for the resolution of IL&FS Group entities. IL&FS was referred for an in-court resolution process in October 2018 for resolution of around Rs 1 lakh crore debt across over 300 entities.
The NCLAT order had permitted lenders of BKEL to receive 75% of the funds deposited in the concession escrow account, with the remaining amount reserved for operations, maintenance, and other essential payments.
NCLAT’s order said that NHAI’s premium payments do not qualify as “going concern expenses,” a classification currently being contested in the Supreme Court under NHAI’s appeal. This ruling, IL&FS said, could have an impact on the resolution process of its group entities.
NCLAT passed an order in response to an application filed by the State Bank of India ( SBI), directing distribution of Rs 263.44 crore to lenders under the interim distribution arrangement. However, IL&FS has challenged this decision, arguing that the interim distribution it follows is based on a different set of rules approved by NCLAT, which apply to all IL&FS Group companies.
There are two different ways of distributing money. While under the Concession Agreement’s escrow mechanism, money should first go towards paying off debts before making any payments to the National Highways Authority of India (NHAI), IL&FS’ approved resolution framework allows secured lenders to be paid up to the liquidation value of the entity first, and then remaining funds are distributed equally among all creditors.
IL&FS has claimed that the NCLAT order breaches the “principle of equitable distribution to all creditors”, a framework designed for the resolution of IL&FS Group entities. IL&FS was referred for an in-court resolution process in October 2018 for resolution of around Rs 1 lakh crore debt across over 300 entities.
The NCLAT order had permitted lenders of BKEL to receive 75% of the funds deposited in the concession escrow account, with the remaining amount reserved for operations, maintenance, and other essential payments.
NCLAT’s order said that NHAI’s premium payments do not qualify as “going concern expenses,” a classification currently being contested in the Supreme Court under NHAI’s appeal. This ruling, IL&FS said, could have an impact on the resolution process of its group entities.
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