NCLAT Expunges Adverse Remarks Against IL&FS Companies In Wind World Insolvency

The National Company Law Appellate Tribunal (NCLAT) at Delhi has expunged adverse remarks made by the NCLT Ahmedabad against three IL&FS group companies during the insolvency proceedings of Wind World (India) Limited. The appellate tribunal held that the observations were made without evidence and could not be allowed to remain.

A bench of Judicial Member Justice Mohd. Faiz Alam Khan and Technical Member Indevar Pandey said removing a creditor from the Committee of Creditors is not a minor issue. The tribunal stressed that such decisions require procedural fairness.

"Exclusion of any member of the CoC, howsoever small voting share it is having, is a serious issue and the same could only be decided after providing ample opportunity of being heard to the parties."

The dispute arose during Wind World's insolvency process. The resolution professional admitted claims filed by three IL&FS-linked entities. They were included in the CoC with a voting share of about 8.73%. Yogesh Mehra, the suspended managing director of Wind World, objected.

He claimed that the Enforcement Directorate had initiated money laundering proceedings against IL&FS Financial Services Limited and its group companies. On that basis, he sought their exclusion from the CoC.

While rejecting the resolution plan on other grounds, the NCLT Ahmedabad went further. It recorded that IDBI Bank had also objected to the inclusion of the IL&FS entities. It then held that since money laundering cases were pending against IL&FS Finance group companies, they must not be allowed to be part of the CoC. Jogihali Wind Energy Private Limited challenged these remarks before the appellate tribunal.

The NCLAT found the record did not support the NCLT's findings. It noted that IDBI Bank had never raised any such objection. The tribunal said the NCLT had wrongly attributed the suspended director's arguments to the bank. It also examined the IL&FS corporate structure.

The bench found that the appellant companies were subsidiaries of IL&FS Energy Development Company Limited. IL&FS Financial Services Limited was only a fellow subsidiary under the same parent.

“It is not understood as to on what basis the Adjudicating Authority has recorded his findings that these are group companies of IL&FS Finance”

The tribunal also faulted the NCLT for stating that it was an “admitted” fact that money laundering cases had been initiated against the appellants. The companies had denied this on record. No ECIR or investigation document was produced.

“We hold that the aforesaid observations in para 28 have also been made without any evidence/material available before Ld. Adjudicating Authority and consequential direction have been passed that IL&FS companies must not be allowed to be a part of the CoC and these observations in our considered opinion may not be allowed to remain in the judgment.”

The appellate tribunal allowed the appeal. It directed that the adverse remarks against the IL&FS entities be deleted from the NCLT's order.

For Appellant: Advocates Kuber Dewan, Neeharika Aggarwal, and Kaustubh Srivastava

For Respondents: Advocates Alok Dhir, Varsha Banerjee, Aishwarya Nabh for R1; Advocates Sanaea Laskari, and Neha Naik for RP; Advocates Fatema Kachwala, Vishrutyi Sahni, and Ridhima Sharma for R3.