IL&FS crisis: IndusInd Bank moves NCLAT to recover unpaid interest

IndusInd Bank has moved the National Company Law Appellate Tribunal (NCLAT) to relax the conditions related to lien on IL&FS and its subsidiaries’ assets. Lien is the right to keep somebody’s property until a debt is paid.

The lender has asked the NCLAT to allow it to appropriate the amount already lying with the bank towards interest due as of October 31 and after. The bank has an exposure of Rs 24 billion to IL&FS.

The NCLAT has adjourned the matter till November 13. The court said it would hear other lenders of IL&FS as well. 

The tribunal asked IL&FS to file its response to IndusInd's application. The petition was in response to the court's October 15 order that stayed certain actions against IL&FS and its 346 companies. The NCLAT order had granted moratorium on dues by IL&FS and its firms. The NCLAT had barred banks and financial institutions from exercising the right to set off, or lien against amount with creditors, against any of IL&FS' obligations.

“All accounts of the group are currently classified as ‘standard’ with us as of date,” IndusInd said. According to analysts, IndusInd’s exposure is broadly to Chenani-Nashri Tunnel and IL&FS. 

In June, IndusInd Bank had signed a definitive share purchase agreement with IL&FS to acquire IL&FS Securities Services (ISSL). In September, IndusInd announced it had received all regulatory approvals to take over ISSL. The closure of the deal is underway, it said.

Analysts have said these asset sales will help reduce overall debt of the company, but the sale proceeds will likely go to banks holding charge on assets. IL&FS has a consolidated debt of Rs 942 billion as of September. 

“Asset sales, like the expected sale of IL&FS Securities to IndusInd Bank for Rs 15 billion, may solve some issues but is unlikely to bring in cash into the company as these assets may be pledged for borrowings. IndusInd Bank has an unsecured loan of Rs 7.5 billion to Chenani-Nashri Tunnelway SPV. There are chances that the shares of ISSL may already be pledged to lenders. The company has not provided any information on asset pledges,” REDD Intelligence noted in a report on September 27.