While the NCLAT also observed that it may ask the lenders of the 'red' listed entities to initiate insolvency proceeding against them, once resolution process of 'green' and 'amber' companies is complete.
The NCLAT Wednesday asked IL&FS group companies, which are being upgraded to ‘green’ category, to start servicing their debts as per the payment schedule. A two-member NCLAT bench headed by Chairman Justice S J Mukhopadhaya said the IL&FS board should allow the new entities, which are coming into ‘green’ list from ‘amber’ to pay their debts after getting their terms-sheet approved by the retired Supreme Court judge Justice D K Jain. Justice Jain is supervising operations of the resolution process undertaken by debt-laden IL&FS.
The National Company Law Appellate Tribunal (NCLAT) also said that if ‘amber’ listed companies are not reclassified into ‘green’ category, then it may pass an order directing such companies to pay 100 per cent of their obligations towards provident and pension funds, and rest other creditors would get on “proportionate basis”. “We make it clear that once one or other entity is declared as Green entity the board of directors of IL&FS will permit such Green entity to service their debt obligation as per its sequence of repayment,” the tribunal said.
These ‘green’ companies will service their debt as per the February 11 order passed by the appellate tribunal. While the NCLAT also observed that it may ask the lenders of the ‘red’ listed entities to initiate insolvency proceeding against them, once resolution process of ‘green’ and ‘amber’ companies is complete. It had directed to list the matter on July 12 for next hearing. So far, 55 companies have been classified into ‘green’ category and 13 are in ‘amber’, while 82 firms are placed in the ‘red’.
During the proceedings of the NCLAT, senior advocate Ramji Srinivasan representing IL&FS informed the appellate tribunal that 11 companies are yet to be classified. As per the roadmap for IL&FS, which has a total debt of over Rs 90,000 crore, its group companies have been categorised into three categories — Green, Amber and Red – based on their respective financial positions.
Companies under the green category will be those that continue to meet their payment obligations. Amber category will be for those companies that would not be able to meet their obligations but can meet only operational payment obligations to senior secured financial creditors.
Amber category entities “are permitted to make only payments necessary to maintain and preserve the going concern”. “Companies falling in the red category are the entities which can not meet their payment obligations towards even senior secured financial creditors,” as per the plan.
Such companies will be permitted to make payment necessary to maintain and preserve. The entire resolution process is based on the principles enunciated in the Insolvency and Bankruptcy Code.
In October last year, the NCLAT had placed a moratorium on dues recovery from IL&FS and group companies. Later, it had lifted moratorium for companies placed under the green category.