The ministry of corporate affairs and Infrastructure Leasing and Financial Services (IL&FS) have moved the Supreme Court seeking vacation of an order related to the debt-ridden company passed in April. In its order, the top court had stayed the NCLAT’s decision to reopen the books of accounts and recasting of the financial statements of the debt-ridden firm and two of its group entities for the past five years.

At present, IL&FS group companies, with a collective debt of over Rs 90,000 crore, are going through resolution process.

A Justice RF Nariman-led Bench refused urgent hearing and asked senior counsel PS Narsiman, appearing for the ministry and IL&FS, to mention it before the vacation Bench.

The SC had on April 29 stayed the NCLAT’s January 31 order that allowed re-opening of the books of accounts and recasting the financial statements of IL&FS, IL&FS Financial Services and IL&FS Transportation Networks for the past five financial years – 2012-2018. The appellate tribunal had also directed the government to appoint such person/firm as the chartered accountants to recast the accounts/financial statements of all the three companies for the these five years.

The SC had passed the order on an appeal filed by IL&FS Financial Services former vice-president and director Hari Shankaran alleging that the January order was passed ex-parte without giving him any hearing.

In its application before the SC, IL&FS said the suspended director had failed to show how the impugned order had prejudiced him. It said the reopening of accounts was ordered on the basis of the interim SFIO report and prima facie findings of the disciplinary committee of the Institute of Chartered Accountants of India by which the erstwhile board of directors (BoDs) was suspended on grounds of mismanagement itself.

“In case the order of April 29 is not vacated it will cause grave prejudice to the ongoing investigation into the affairs of IL&FS. The reopening of accounts and recasting of financial statements is imperative in order to ascertain the extent of mismanagement due to which the erstwhile BoDs were suspended,” the application stated.

The importance of reopening of accounts is to draw a true and fair picture of the financial position of IL&FS and its group companies, which have a significant market and public borrowings of over Rs 91,000 crore, according to IL&FS.

The ministry also stated that a probe into the affairs of the company should continue as it was necessary to arrest the effect of mismanagement which can’t be done without reopening of the accounts.

Last week, the NCLAT had allowed the banks to declare as non-performing assets the accounts of IL&FS and its group companies that have defaulted on payments, as sought by RBI. It has lifted the embargo on the banks to declare the accounts of the debt-ridden IL&FS and its 300 group entities, which are unable to pay their debt. However, the banks were barred from initiating any recovery process and debit money.

The appellate tribunal had observed that lenders must not withdraw support until a resolution is found of the IL&FS and its group companies.

Now, all group companies of IL&FS are being classified according to their ability to meet payment obligations. Those able to meet all payment obligations are categorised as ‘green’ while companies able to meet only operational payments and senior secured debt obligations are categorised as ‘amber’. Others are categorised as ‘red’.