Supreme Court gives green signal to SFIO to reopen and recast accounts of IL&FS for last five years

Supreme Court gives green signal to SFIO to reopen and recast accounts of IL&FS for last five years

Shruti Mahajan

The Supreme Court today allowed the Serious Fraud Investigation Office (SFIO) to reopen and recast accounts of IL&FS and two of its subsidiary companies for the last five years.

The Ministry of Corporate Affairs had approached the Supreme Court seeking a vacation of the stay imposed by the Supreme Court through its order passed on April 29. 

The National Company Law Appellate Tribunal (NCLAT) had allowed SFIO to reopen the accounts of IL&FS and probe the debt-ridden companies’ former directors as well as the CEO. However, former Managing Director Hari Shankaran had approached the Supreme Court pleading for a stay on the NCLAT order, as it was passed ex parte. The Apex Court Bench of Justices Rohinton Nariman and Vineet Saran thus stayed this order. 

When the Ministry of Corporate Affairs subsequently moved the Supreme Court against the stay order, the Bench presided by Justice Nariman refused to hear the matter urgently and directed the Ministry to approach the Vacation Bench.

Today’s order allowing the reopening of the books of accounts of IL&FS was passed by a Bench of Justices Indu Malhotra and MR Shah. Senior Counsel Dhruv Mehta appeared for the former Managing Directors of IL&FS and Senior Counsel Maninder Singh represented the Ministry.

The Court today said that it found no reason to interfere with the order of the NCLAT. 

The Ministry had taken the stance that for the probe into the matters of the company to continue, reopening of the accounts was imperative. Reopening of the accounts of the last five years was important to get a fair picture of the financial position of IL&FS and its subsidiary companies, the Ministry had contended.

The IL&FS group of companies currently owes close to Rs 90,000 crore to lenders. The company and its subsidiaries are currently being managed by new management headed by Uday Kotak. The NCLAT is hearing a batch of pleas filed by several lenders seeking to recover monies from IL&FS and its subsidiaries. 

Following a series of defaults by IL&FS caused due to severe illiquidity, it got interim relief from the NCLAT in October 2018, in the nature of a moratorium under the Insolvency and Bankruptcy Code (IBC).

Read the Judgment:

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