This is an interesting model that is proposed by IL&FS to NCLAT but yet to be approved and accepted. The resolution model proposed by the IL&FS board is interesting, although the practically workability is yet to be tested. Under the new model proposed, the Committee of Creditors (COC) will only have the powers to vote on the highest bidder. All other decisions pertaining to distribution of proceeds of the assets will be taken by the board. Let us first look at where the IL&FS issue stands as of today.

Let us look back at the IL&FS saga to understand what is at stake. You will recollect that the problems at IL&FS first emerged in early 2018 and by mid-2018 IL&FS had begun to default on its loans and ICDs. This triggered a crisis of confidence as IL&FS was also viewed as a quasi state enterprise. Subsequent to the default it emerged that there were serious lapses in governance and connivance by the board of IL&FS. This led to the board being dismissed and the government appointed an independent board under the chairmanship of Uday Kotak. As the situation stands today, IL&FS has total debt to the tune of Rs.94,000 crore of which nearly 50% is housed in the subsidiary companies. Commercial bank exposure to IL&FS is to the tune of Rs.44,075 crore while employee related PF and pension dues are to the tune of Rs.10,173 crore. The rest are in the nature of private lenders and other operational creditors. In the past, the COC had an inordinate influence in deciding the best bids and the modus operandi of distribution.