In the second such takeover of a private firm in a decade, the government on Monday seized control of the debt-ridden IL&FS, superseded its Board and named eminent banker Uday Kotak as its chairman in an attempt to save it from going bankrupt.
The new Board of the Infrastructure Leasing and Financial Services (IL&FS), consisting of five other directors, will take up its responsibility with immediate effect and hold its first meeting on October 8, the Ministry of Finance stated.
The new Board is tasked with the responsibility of preparing a robust and time-bound resolution plan, the government said.
Prior to this, the government had taken control of Satyam Computers in 2009 after its promoter B Ramalinga Raju confessed to committing fraud.
“The government, after analysing the emerging situation of the IL&FS Group come to the conclusion that the governance and management change in IL&FS Group is very necessary for saving the Group from financial collapse,” the ministry stated but put the blame of its deterioration in the financial performance on the UPA government, its stalled infrastructure projects and policy paralysis before 2014.
A top finance ministry source said that the company hid important facts from its Board and continued to pay the dividend and huge managerial payout regardless of the liquidity crisis.
“IL&FS Group has an infrastructure and financial assets exceeding Rs 1,15,000 crore and is struggling to service around Rs 91,000 crore in debt which is the outcome of its mismanaged borrowings in the past,” the ministry said.
“The continuance of the present Board had become prejudicial to the interests of the company and its members and this management was affecting public interest because of its adverse impact on financial stability and making capital markets so adversely affected,” it said.
It said the government stood fully committed to ensuring the much-needed liquidity arranged for the IL& FS from the financial system so that no more defaults took place and the infrastructure projects implemented smoothly.
Apart from Kotak, who is a non-executive chairman, other directors on the board included former Sebi chief G N Bajpai, former ICICI Bank chairman G C Chaturvedi and three retired IAS officers - Malini Shankar, Vineet Nayyar and Nand Kishore.
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