The National Company Law Tribunal (NCLT), Mumbai has told New Tirupur Area Development Corporation Limited (NTADCL) and its shareholder Infrastructure Leasing & Financial Services Ltd. (IL&FS) to approach appropriate forums regarding their dispute over debt repayment.
In 1995, NTADCL was incorporated as a special-purpose vehicle and public utility to improve potable water and sewerage infrastructure in Tiruppur through an integrated water supply and sewerage project. Overall, the Tamil Nadu government owns 38.32% stake in NTADCL, while IL&FS owns 25.88%.
The total project cost of ₹1,023 crore. The debt of ₹613.8 crore was arranged from various banks and financial institutions, with IDBI Bank being the lead lending institution. Of this, IL&FS brought in ₹180 crore as a senior loan, of which it raised ₹90 crore from the U.S. Agency for International Development (USAID). On this loan, IL&FS made deductions of about ₹41.24 crore and disbursed ₹48.76 crore to NTADCL.
Due to the deteriorating financial position of NTADCL, a corporate debt restructuring (CDR) plan was implemented on March 29, 2012, as part of which the Tamil Nadu government infused ₹150 crore into NTADCL and also provided enhanced pricing. According to the restructuring plan, 30% of the IL&FS debt was converted into equity. After the implementation of CDR, the senior loan repayable by NTADCL was ₹120.27 crore. NTADCL had to make repayments from April 2013 to March 2026.
In its plea before NCLT, the NTADCL said, going by the amount received by it from IL&FS, there has already been an excess payment of ₹249.92 crore from NTADCL to IL&FS and sought an order exempting it from discharging its further obligations under CDR.
It also alleged a fraud perpetrated by IL&FS in loan disbursement.
In its plea, IL&FS said since December 1, 2022, NTADCL has unilaterally stopped repayment of principal and interest amounts. As of December 30, 2022, IL&FS claimed a total principal amount of ₹52.92 crore. It sought for recovery of what it termed as an “overdue amount” from NTADCL and sought reinstatement of the total outstanding principal debt.
IL&FS said the NTADCL has always admitted and acknowledged its indebtedness to it in respect of the USAID portions amounting to ₹90 crore.
The issues raised by NTADCL in relation to the levy of charges amounting to ₹41.24 crore by IL&FS require investigation, as there are contested facts in relation to the agreement on those charges, and the affairs of IL&FS are already the subject matter of investigation by the Serious Fraud Investigation Office (SFIO). Accordingly, NTADCL may approach SFIO about the transaction in relation to the levy of charges for their investigation, NCLT said in its recent order.
The directions sought by IL&FS are in the nature of recovery proceedings and lie within the jurisdiction of Civil Courts only, it added.
“NCLT has dismissed both the NTADCL and IL&FS petition in its order. IL&FS will pursue its recovery in civil court, as directed by the NCLT. All future actions will be undertaken within the contours of the IL&FS resolution framework given that NTADCL is a green entity and one of the 302 IL&FS Group companies being resolved by the Public Interest Board,” said a spokesperson from IL&FS Group.
NTADCL has termed the transaction as fraud and taken the then Advocate General’s opinion to stop the payment to IL&FS. It is established in law that to call a debt it has to be disbursed. Mere accounting entries does not make entry valid. The Tamil Nadu government has infused equity and provided enhanced pricing for revival of the project and has to protect its interest, said a senior official from NTADCL.
