The tribunal's direction came during the hearing over the government's plan for the resolution of IL&FS group companies.
The NCLAT on Monday ordered banks and financial institutions to refrain from declaring accounts of IL&FS and its group companies as non-performing assets (NPA) without its permission.
The appellate tribunal said it was done in the interest of IL&FS’ debt resolution plan. The tribunal’s direction came during the hearing over the government’s plan for the resolution of IL&FS group companies.
“Without going into the rival contention of the parties, we make it clear that due to non-payment of dues by IL&FS or its entities, including Amber companies, no financial institution will declare the accounts IL&FS or its entities as NPA without the prior permission of the appellate tribunal,” a two-member NCLAT bench, headed by chairman Justice SJ Mukhopadhaya, said.
Following a series of defaults, the government dismissed the IL&FS board in September last year and appointed an interim board to finalise a resolution plan. The total debt of the group stood at Rs 91,000 crore and most of the debt was on the books of subsidiaries and special purpose vehicles.
The appellate tribunal on February 11 ordered subsidiaries of IL&FS would be divided into three categories: Green (firms that can meet all debt obligations), Amber (firms that can meet some debt obligations), and Red (firms that can’t meet any debt obligations). It also allowed 22 IL&FS group companies which were classified in the green category based on their financial health to service their debt obligations.
The interim order on Monday was a step further as it said none of the entities would need to be classified as NPAs, even if they are not making payments as scheduled. As per banking regulations, an account is labelled as non-performing asset if payments are overdue by 90-days.