NCLT attaches properties of 9 former IL&FS directors; seeks disclosure of all assets

IL&FS Transportation Networks | The company defaulted on the interest on non-convertible debentures due on August 25, 2020. (Image: Reuters)

The National Company Law Tribunal (NCLT) on December 3 passed an interim order to attach all movable or immovable properties of nine former directors of IL&FS. The court also directed them to disclose their securities and bank accounts within the country and overseas.

The Ministry of Corporate Affairs submitted an interim report of the Serious Fraud Investigation Office (SFIO) in NCLT Mumbai today seeking to implead six former directors of IL&FS. In a separate petition, MCA also sought the attachment of movable or immovable properties of nine former directors. The court accepted both the petitions.

MCA named Chief Investment Officer of IL&FS, Vibhav Kapoor; K Ramchand, Managing Director of IL&FS Transportation Networks (ITNL); RC Bawa, Managing Director of IL&FS Financial Services; Rengarajan, Managing Director and CEO of IL&FS Securities Services; Pradeep Puri, Director and member of committee of directors responsible for sanctioning loans, and Mukund Sapre, Executive Director of ITNL. Ravi Parthasarathy, Hariharan and Arun Saha are the three other former directors whose properties have been seized.

The MCA counsel argued in court: "IL&FS used a circuitous way to pay off loans of its own entities to meet RBI guidelines and used this method to obtain a high credit rating, and high managerial remuneration. On the one hand, percentage increase in the remuneration of Ravi Parthasarathy in FY18 was 144 percent, while on the other, average percentage increase in salaries of employees in the same year was 4.44 percent.”

On November 30, 2018, SFIO submitted a report to the central government on IL&FS.

IL&FS former directors' counsel argued: "The old board took business decisions that may have gone wrong. The business model was followed in a project-specific subsidiary way and all the accounts of all the years are fully audited. Shareholders of ILFS (LIC, SBI) have approved all the activities. The downfall in Infrastructure sector ILFS was no exception. We tried to take steps to solve the debt situation through an asset sale and even got into a deal with a foreign company and Piramal that did not get through.”

MCA counsel Sanjay Shourie raised concern on alleged wrongdoing in employee welfare trust (EWT) saying, "Of the Rs 440 crore of welfare trust, only 1 percent went to the employees. In 2014 -- as part of restructuring, IL&FS’ merger with Piramal was contemplated. Employees trust held 1.50 crores shares of IL&FS Ltd. and trustees distributed 90 percent of the EWT holding of 1.35 crores to select employees. The SFIO investigation reveals EWT took loan to purchase shares of IL&FS and group companies despite knowing of no way to repay.”

NCLT Mumbai will next hear the matter on January 16, 2019.