The National Company Law Appellate Tribunal (NCLAT) on Thursday asked the IL&FS board to come out with a mathematical formula for distribution of proceeds from the resolution of group companies. It said the revised distribution framework proposed by the board on the basis of liquidation value was bound to face opposition among creditors.
In an affidavit to the appellate tribunal on January 9, the IL&FS board had submitted a revised framework for distribution of the financial bid amounts/termination amount and settlement amounts for all set of creditors.
It wanted to recover the resolution process costs first and then up to the liquidation value to the creditors in accordance with the waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code (IBC). The excess amount was proposed to be distributed on a pro-rata basis to each class of creditors of the relevant group company.
The two-member NCLAT Bench, headed by its chairperson Justice SJ Mukhopadhaya, asked the IL&FS counsel, “How will you calculate the liquidation value?”
“We will neither look into the IL&FS matter in the Essar way nor through the IBC. We will look into it in a different way. A formula has to be given,” the Bench said.
Creditors have already expressed reservations over the government’s proposed distribution framework. Their counsels did not argue their case on Thursday, but said the suggestions of the IL&FS board were akin to bypassing the committee of creditors (CoC).
Sources said secured creditors want that they should be paid back fully from the receivables first and then if anything is left, that could be distributed the way the IL&FS board wants it to do. The NCLAT has scheduled the matter for further hearing on February 7.
IL&FS had a total debt of Rs 94,215 crore.
Source: Financial Express, January 17, 2020