Banks Cannot Declare IL&FS Accounts As NPA Without NCLAT Approval

Financial institutions will not be able to declare the accounts of the debt-ridden IL&FS group and its subsidiaries as non-performing assets (NPAs) without the permission of National Company Law Appellate Tribunal (NCLAT), the appellate tribunal said on Monday.

"No IL&FS or its subsidiaries' account to be declared NPA by any financial institution without approval from NCLAT," the two-member NCLAT bench headed by Chairman Justice S J Mukhopadhaya said citing that the decision was in the interest of the IL&FS debt resolution plan.

The direction was given during the hearing on the government's plan for resolution of IL&FS group companies, according to a PTI report.

On 11 February, the last hearing, NCLAT had allowed 22 companies of the IL&FS group that were classified as in the 'Green' category of financial health to service their debt obligations. It has also approved the appointment of Justice DK Jain to supervise the resolution process of IL&FS and its group companies.

Based on their financial positions, these subsidiaries are classified as Green, Amber and Red. Those in the 'Green' category have to continue meeting their payment obligations. Those that cannot meet their payment obligations but only the operational payment obligations to senior secured financial creditors are classified as 'Amber' while those in a worse financial state are categorized as 'Red.'