IL&FS likely to file contempt plea against lenders for withdrawing Rs 800cr during moratorium

Debt-ridden IL&FS is likely to file a contempt plea against 11 banks and financial entities and seek refund of about Rs 800 crore that was drawn out of its escrow account during the moratorium period, according to a source.

State Bank of India, Bank of Baroda, HDFC Bank, Yes Bank, Punjab & Sind Bank, Punjab National Bank, Indian Bank, Indian Overseas Bank, Federal Bank, Birla Sun Life AMC, L&T Infra Finance are among the entities who withdrew about Rs 800 crore even as the company faces debt resolution under the National Company Law Appellate Tribunal (NCLAT), a person in the know of the development said on the condition of anonymity.

The NCLAT in February had prohibited banks from recognising any IL&FS group accounts as non-performing assets without first seeking its approval from the tribunal. The tribunal had asked them not to initiate recovery process and debit money.The crisis at the non-banking financial company (NBFC), which had a debt of over Rs 91,000 crore, had surfaced last September following a spate of repayment defaults due to internal mismanagement.

We are likely to file for the contempt because the withdrawals have been made in the moratorium period," the person said.However, in case these entities agree on repaying or reversing, the company may not go ahead with the contempt proceedings, the person added.

Company spokesperson Shard Goel declined to comment on the matter.Queries sent to the 11 financial entities seeking their comments on the issue remained unanswered.

IL&FS and its subsidiaries have defaulted on several debt repayments due to liquidity crisis. The company and its group entities have been on a spree of repayment default on commercial papers and bonds since September 2018 and continues till as recently as June 6, 2019, according to statutory disclosure made by the company on its website.

The management of IL&FS was taken over by the government in October last year. It inducted new board members, with seasoned banker Uday Kotak as its executive chairman.

The NCLAT had in February prohibited banks from recognising any IL&FS group accounts as non-performing assets without first seeking approval from the tribunal.

Besides, the appellate tribunal has also directed the lenders would not to declare the IL&FS accounts as NPAs but can not initiate recovery process and debit money.

Lenders must not withdraw support until a resolution is found of the IL&FS and its group companies, the tribunal said earlier in May.