Financial creditor IL&FS Financial Services had moved the apex court against the HC orders of March 4 and April 9 that stalled the insolvency proceedings initiated against La-Fin by NCLT, Mumbai
The Supreme Court has stayed the Bombay High Court order that allowed handing over of the management of embattled investment firm La-Fin Financial Services back to its erstwhile management led by the former MCX promoter Jignesh Shah group.
Financial creditor IL&FS Financial Services had moved the apex court against the HC orders of March 4 and April 9 that stalled the insolvency proceedings initiated against La-Fin by National Company Law Tribunal, Mumbai, on August 28, last year. IL&FS had moved the insolvency plea in May 2017, in respect of a debt of `97.79 crore and default of payment of a financial debt of `266.39 crore.
A bench led by Justice RF Nariman stayed a part of the HC judgment that gave back charge of the corporate debtor to its suspended board of directors. It also asked IL&FS to serve copy of the appeal to the government. Besides, it also sought a copy of the winding up suit filed by IL&FS against La-Fin for examining it.
The National Company Law Appellate Tribunal had in January dismissed the petitions filed by Jignesh, his mother Pushpa Shah and others challenging the NCLT order that allowed insolvency proceedings against La-Fin. The appellate tribunal said that IL&FS is the ‘Financial Creditor’ and there is a debt and default, thus the insolvency plea had been rightly admitted. It had rejected Shah group’s stand that there was no financial debt and there was no relationship of debtor and creditors between La-Fin and IL&FS.
Soon after the NCLAT order, Shah, instead of moving the apex court, filed a writ petition before the HC against the appellate tribunal’s January order. The HC should not have entertained the petition as it “undermines the statutory framework and encourage forum shopping by unscrupulous litigants,” IL&FS said in its appeal filed through counsel Liz Mathew before the SC.
According to the financial creditor, the HC had given in to a delay tactic to thwart and delay the CIRP of the debt-laden firm which is at an advanced stage of completion.
Senior counsel NK Kaul argued that IL&FS suit was filed well in time in June 2013 and the winding up plea was within a limitation period. “The management of the company can’t go back to Shahs. The RP has been there since 2018,” he said.
The issue dates back to August 20, 2009, when IL&FS Financial Services purchased 5% equity shares (4.42 crore) of Multi Commodity Exchange of India (MCX) at `36 per share for total consideration of `159.12 crore.
Simultaneously, an LoU was executed by La-Fin to purchase IL&FS Financial Services share in commodity bourse MCX-SX between a period of one year and three years. However, later a Scheme of Reduction of the Share Capital of MCX-SX was passed and Jignesh through his family investment company agreed to buy back the shares. But, according to IL&FS, La-Fin completely reneged from its obligations. IL&FS then issued a Statuary Demand Notice on November, 2015 asking La-Fin Financial to pay `232.50 crore along with 15% interest. La-Fin denied the payment, thus forcing IL&FS to file winding up petition under the the old provisions of the Companies Act, 1956. However, the petition was later transferred to NCLT in June, 2017.