NCLAT’s Directive on IL&FS Entity: Preserving Concession Agreement

In a recent development, the National Company Law Appellate Tribunal (NCLAT) has issued a directive to the National Highways Authority of India (NHAI) concerning the concession agreement of an IL&FS group entity, Baleshwar Kharagpur Expressway Ltd (BKEL). The directive instructs NHAI to abstain from terminating the concession agreement and instead focus on facilitating the insolvency resolution process for BKEL.

Context and Rationale

The NCLAT emphasized that BKEL’s insolvency resolution is currently in its final stages and cautioned against any premature termination of the concession agreement, which could potentially complicate the resolution process further. Notably, BKEL, established as a special purpose vehicle (SPV) by IL&FS Transportation Networks Limited (ITNL), is engaged in the development of a road project in the Baleshwar-Kharagpur Section of NH-60.

Compliance with Resolution Framework

The directive from NCLAT underscores the adherence to the resolution framework approved by the appellate tribunal for addressing the debt recovery challenges faced by crisis-hit entities within the IL&FS group. According to the resolution framework, payments to creditors and claimants, including lenders, must align with the prescribed resolution process.

Appropriate Measures for Resolution

Acknowledging the imperative of bringing closure to the resolution process, NCLAT directed both the applicant and respondents to undertake necessary measures for the final resolution of BKEL. This directive, while disposing of an interim application filed by the State Bank of India (SBI), underscores the concerted efforts required to navigate the complexities of the insolvency resolution.

Background and Implications

The concession agreement between NHAI and BKEL, inked in April 2012, involved financial facilities extended by SBI. While BKEL was obligated to remit concession fees and premiums to NHAI, a deferment in premium payment was granted in 2016. However, the unfolding of the IL&FS crisis in 2018 led to BKEL’s categorization as a ‘Red Entity,’ signifying its inability to meet financial and operational obligations.

Resolving Discrepancies

The intervention by NCLAT comes amidst NHAI’s insistence on premium repayment, prompting objections from SBI due to concerns over derailing the resolution process. NHAI’s notice for third-party agency procurement for toll plaza fee collection further exacerbated tensions, prompting SBI’s recourse to NCLAT.

Conclusion

NCLAT’s directive underscores the importance of preserving the concession agreement and prioritizing the resolution process for entities ensnared in the IL&FS crisis. By aligning with the approved resolution framework and averting premature terminations, stakeholders can navigate the insolvency landscape effectively while safeguarding the interests of all parties involved.