The government on Monday submitted the debt resolution plan for crisis-hit IL&FS to the NCLAT and also suggested the name of retired Supreme Court judge Justice D K Jain to supervise the entire process.

The entire resolution process would be based on the principles enunciated in the Insolvency and Bankruptcy Code.

Under the plan, the government has categorised IL&FS group companies into green, amber and red based on their respective financial positions.

The corporate affairs ministry has fixed September 30, 2018 as the cut-off date for entertaining the claims submitted by the lenders. On October 1 last year, a newly appointed board took over the reins of IL&FS.

"During the conduct of the resolution process of the IL&FS group, payments will be permitted only to maintain and preserve the going concern status of the companies of the IL&FS group," the ministry said in its affidavit detailing the resolution plan.

According to the ministry, it would maintain the waterfall system during asset monetisation, wherein the seniority of lenders would be maintained as is done under the IBC.

"The distribution of the sale proceeds would be in accordance with the waterfall mechanism specified under section 53 of the IBC," it added.

Under Section 53 of IBC, senior secured creditors loans are cleared first and any surplus that remains thereafter is given to unsecured or subordinated creditors and thereafter to the equity owners.

"... we allow the counsels for Union of India and IL&FS to contact Justice (Retd) DK Jain, for consent and to discuss the terms and conditions of engagement including monthly fee, travelling expenses, allowance etc," the two-member NCLAT bench said.

According to the resolution plan, suitable eligibility criteria will be stipulated, approved by the newly appointed directors and then expression of interests will be invited for the same.

It further added that upon receipt of the recommendations, a successful bidder would be declared, who will deposit the earnest money.

Upon declaration of the successful bidder, documentation of the sale will be completed and the forwarded to National Company Law Tribunal for the final approval.

According to the affidavit filed before the NCLAT, the classification of the IL&FS group companies is "based on a 12 month cash flow based solvency test".

Companies falling in the green categories are the entities, which will continue to meet their payment obligation.

While companies falling in amber category are those who are not able to meet their obligations but can meet only operational payment obligations to senior secured financial creditors.

Amber category entities "are permitted to make only payments necessary to maintain and preserve the going concern".

"Companies falling in the red category are the entities which can not meet their payment obligations towards even senior secured financial creditors," it said, adding that these companies would be permitted to make payment necessary to maintain and preserve the going concern status.

Over the cut-off date, it said: "Financial, operational and statutory claims and liabilities as of September 30 (Cut-Off-Date) will be invited... the Cut-off date has been kept as September 30 since the newly appointed directed were appointed by the NCLT on October 1, 2018".

First Published:Feb 4, 2019 10:39 PM IST