A tribunal consented with the decision of the newly constituted board of the IL&FS and observed that the initiation of bankruptcy proceedings was the best option for the two firms.
Debt-ridden IL&FS has proposed to initiate bankruptcy proceedings for two of its offshore firms - ITNL Infrastructure Developers LLC (IIDL) and ITNL International DMCC (IIDMCC) - in the courts of the UAE.
IL&FS had requested the Mumbai-bench of the National Company Law Tribunal (NCLT) to take on record its proposal to initiate the bankruptcy proceedings before the Dubai Courts under UAE Federal Decree.
The tribunal consented with the decision of the newly constituted board of the IL&FS and observed that the initiation of bankruptcy proceedings was the best option for the two firms.
"After hearing both the sides and on perusal of records, this bench is of the view that the initiation of bankruptcy proceedings is the best option in the given scenario.
“The same is recorded as prayed for. In the circumstances, the proposal of the applicant for initiation of insolvency proceedings of IIDL and IIDMCC is taken on record," the NCLT said.
The tribunal also observed that the Regional Director (WR), MCA, Mumbai representing the government has also no objection.
"There is no objection from the Petitioner (MCA) for the proposal of the Applicant," it said.
Justice D K Jain, who is supervising the assets, has already accorded his approval for initiation of bankruptcy proceedings for both - IIDMCC and IIDL - in May this year.
Under the roadmap for IL&FS, the offshore entities of the group have been exempted from the resolution framework by the National Company Law Appellate Tribunal (NCLAT) through its order on February 11, 2019.
The IL&FS board decides on the resolution of the offshore entities under the supervision of Justice D K Jain, appointed by the NCLAT to conduct the asset resolution of the company.
It has to inform the NCLT only about the actions taken for the resolution of offshore IL&FS Group Entities which places it in on the record, unlike the domestic entities, whose sale has to be approved by the tribunal.
IIDMCC is a wholly-owned subsidiary of ITNL International Pte Limited (IIPL), which is a step-down firm of IL&FS Transportation Networks Ltd (ITNL). IL&FS holds around 73 per cent in ITNL.
IIPL holds 49 per cent shareholding in IIDL and the balance 51 per cent is held by one MAK Holdings LLC.
IIDL was incorporated for implementing Transport Infrastructure Projects in UAE on public private partnership (PPP), including a car park project.
IIDMCC was incorporated for providing support services to ITNL offices globally and for implementing transport infrastructure PPP projects in the Middle East/Africa.
IL&FS had earlier recommended divestment of IIPL's stake in IIDL, however, the said proposal could not be carried out successfully and the negotiations with the investors failed.
Moreover, on account of default on the part of IIDL to discharge its financial obligations, the Dubai Courts had on October 7, 2019, issued the default notice to IIDL.
The outstanding liabilities of IIDL as on December 31, 2019, stands 59.60 lakh AED (United Arab Emirates Dirham), which mostly comprise of unpaid salaries of employees, service benefits and vendors payments.
The liability of IIDMCC is 30.08 lakh AED and has virtually no assets.
Photograph: Francis Mascarenhas/Reuters