New Delhi: In a setback to a few secured creditors of the crisis-ridden IL&FS Group, the National Company Law Appellate Tribunal (NCLAT) on Thursday accepted the suggestion of pro-rata distribution of the remainder sales proceeds after the creditors are paid under Section 53 of the Insolvency and Bankruptcy Code (IBC).
In January, the Ministry of Corporate Affairs (MCA) had submitted a revised framework for distribution of the financial bid amounts/termination amount and settlement amounts for all set of creditors.
As per the resolution, the resolution process costs would be recovered first and then up to the liquidation value to the creditors in accordance with the waterfall mechanism under Section 53 of the IBC.
The excess amount was proposed to be distributed on a pro-rata basis to each class of creditors of the relevant group company.
Few financial creditors raised objections to the resolution process and the pro-rata distribution of the excess amount.
The two-judge bench headed by the NCLAT Chairman S.J. Mukhopadhaya said: "While we reject the objections raised by some of the creditors, as noticed above, we accept the suggestion of pro-rata distribution as suggested by the Union of India and the procedure as suggested by it for the purpose of completing resolution process."
The appellate authority observed, "it cannot be said that 'Shareholders' including the Life Insurance Corporation, IL&FS Employees Welfare Trust, Housing Development Finance Corporation Limited, Central Bank of India, State Bank of India, UTI-Unit Linked Insurance Plan etc. should not be paid by following the procedure under Section 53 of the I&B Code."
It noted that denying payment to them would be against the public interest as the money invested by purchasing shares by Life Insurance Corporation of India, IL&FS Employees Welfare Trust, Central Bank of India and SBI are public money, who are the shareholders.
Further, the bench also directed the government and the IL&FS board to conclude resolution of all the IL&FS entities "preferably" within 90 days. "The development should be brought to the notice of this appellate tribunal every month," said the judgement.