2023 (5) TMI 533 - AT - Companies Law

Change of categorization - declaring/ retaining the status of the JIICL as Green entity only - HELD THAT - The categorization of the IL FS Entities was noticed by this Tribunal in its order dated 11.02.2019 and 19.09.2019. the categorization was noticed and recorded on the basis of affidavit filed before this Tribunal. The order passed by this Tribunal does not indicate that the categorization could be changed by the Entities themselves, without any reference to the Tribunal. When the Entities are categorized in Green , the object is that the Entity should continue to discharge its all obligations, including the obligation to Lenders and the Entities should be incentivize by all including the Lenders to continue the categorization as a Green . If the entity is given liberty to change its categorization from Green to Red , there will be no obligation on the Entity to carry on its categorization as Green . The Entity itself, which is categorized as Green cannot be permitted to change its categorization unilaterally. It was open for Respondent No.1 or any such Entity to bring necessary material before the Tribunal and asking leave of the Tribunal to re-categorize the Entity. The Resolution Consultant having already recommended and the New Board in its meeting dated 24.03.2023 having already decided to grant conditional approval of re-categorization of JRPICL to Green , subject to receipt of additional annuities of INR 58 Crores in March 2023, we are satisfied that JRPICL has to be treated as a Green Entity. Insofar as the financial liability as referred to on the basis of arbitral award is concerned, suffice it to notice that the note itself mentions that arbitral award is under process of challenge. The arbitral award being under process of challenge, that cannot be any ground to refuse categorization of JRPICL as Green . Liberty granted to Respondent No.1 to seek leave of this Tribunal for re-categorization in event any liability falls on the JRPICL on the basis of arbitral award and it is unable to discharge its liabilities - application allowed.

Summary

Issues Involved:
1. Re-categorization of Jharkhand Infrastructure Implementation Company Ltd. (JIICL) from "Green" to "Red".
2. Re-categorization of Jharkhand Road Projects Implementation Company Limited (JRPICL) from "Green" to "Red".

Summary:

Issue 1: Re-categorization of JIICL from "Green" to "Red"

Interlocutory Application No.1709 of 2022 was filed by Punjab National Bank and Indian Bank, objecting to the re-categorization of JIICL from a "Green" entity to a "Red" entity. The categorization of IL&FS Group Entities, including JIICL, was initially recorded in the Tribunal's orders dated 11.02.2019 and 19.09.2019, where JIICL was categorized as "Green". Respondent No.1 filed an affidavit requesting the Tribunal to take on record the change in solvency categorization of JIICL from "Green" to "Red". The Lenders objected, noting that annuities had been received from the State of Jharkhand, making the entity solvent. The Tribunal concluded that JIICL should be declared a "Green" entity, subject to appropriate orders being passed by the Lenders regarding waivers and renegotiation of interest rates.

Issue 2: Re-categorization of JRPICL from "Green" to "Red"

Similarly, an affidavit dated 20.10.2022 filed by Respondent No.1 stated that JRPICL should be re-categorized from "Green" to "Red" due to non-receipt of annuity payments. However, subsequent annuity payments were received, making the entity solvent. The Resolution Consultant recommended re-categorization to "Green", subject to certain conditions. The Tribunal noted that the arbitral awards against JRPICL, which were under challenge, could not be grounds to refuse re-categorization. The Tribunal decided that JRPICL should be treated as a "Green" entity, with liberty for Respondent No.1 to seek re-categorization if financial liabilities from the arbitral awards affect the entity's ability to discharge its obligations.

Conclusion:

The Tribunal allowed IA No.1709 of 2022, holding that JIICL be treated as a "Green" entity, subject to Lenders' decisions on waivers and interest rate renegotiation. JRPICL is also to be treated as a "Green" entity, with liberty for Respondent No.1 to seek re-categorization if necessary due to financial liabilities from arbitral awards.

Ordered accordingly.