Ministry of Corporate Affairs (MCA) has requested the National Company Law Tribunal (NCLT) to relax rules for speedier resolution of the Infrastructure Leasing & Financial Services (IL & FS) debt crisis.
However, NCLT judge observed that the Companies Act doesn’t permit an exemption from the procedure. The Tribunal is yet to pass its final order in the case.
The MCA’s request for an expedited resolution process was based on three factors.
First one was involved the appointment of Mr. Vineet Nayyar as Managing Director (MD) of IL & FS. As Mr. Vineet Nayyar is 80 year old man, his appointment would have to be done through the approval of a Special Resolution which is necessary for the appointment of anyone above 75 years of age as Managing Director.
MCA’s counsel argued that the completion of “all procedures will take a lot of time, which will derail the resolution plan.” Counsel also state that MCA had put in a lot of efforts to get an eminent personality on IL & FS’s Board and that if any person were to step down now; all the efforts made will have been vain.
To convene a general meeting, which would be necessary for the appointment of MD, Company would need to give 21 day’s clear notice to its shareholders, who will then have to approve it.
The second factor behind the MCA’s request was the suppression of Boards of all 348 of IL & FS’s subsidiaries. Counsel said that Ministry needed directions to supersede the subsidiaries Boards for the fruitful result in lesser time.
The judge said that, if erstwhile Management of IL & FS had the power to supersede the Boards of the Company’s subsidiaries, the new management will have that power.
The third factor behind the MCA’s request for an expedited resolution process was that IL & FS’s needs to repay nearly Rs. 4000 Crores of Debt over the next 30 days. The Ministry had also requested NCLT to exempt the new Board from any regulatory action or action from state authorities and agencies.
Source – Economic Times