The National Company Law Appellate Tribunal (NCLAT) has granted permission to the debt-laden IL&FS group to proceed with the sale of its subsidiary, IL&FS Paradip Refinery Water Ltd (IPRWL), to the winning bidder. This move is part of the group’s ongoing effort to resolve its financial crisis and pay off its outstanding debts. According to reports, the sale of IPRWL could help IL&FS repay approximately ₹1,000 crore of its debt.
Background of IPRWL and the dispute
IPRWL was established to cater to the water requirements of the 15 Million Tonnes Per Annum (MTPA) Paradip Refinery Project developed by Indian Oil Corporation Limited (IOC) in Odisha. However, IL&FS faced significant roadblocks in selling its stake in the subsidiary, primarily due to the lack of consent from IOC.
IL&FS had sought NCLAT’s intervention to facilitate the sale, requesting IOC either to acquire 100% of the shareholding in IPRWL at a fair valuation or to give its consent for the sale according to the terms outlined in the Build, Own, Operate, and Transfer (BOOT) agreement.
NCLAT’s decision on the sale
IOC, however, opposed the sale. Through its legal counsel, IOC argued that the BOOT agreement, which runs until 2039, prevents the sale or disinvestment of IPRWL before that period. The tribunal dismissed this objection, stating that since IOC had not provided consent for a full acquisition, IL&FS must be allowed to proceed with selling the subsidiary to the successful bidder based on the ongoing resolution framework.
The NCLAT emphasized that the successful bidder must meet the eligibility criteria outlined in the BOOT agreement and possess the required technical expertise to manage the project effectively. “We accept the prayer of the appellant to proceed for giving it to the successful bidder as per the terms of the BOOT agreement and the RFP,” the NCLAT said in its ruling on November 22, 2024.
IL&FS’ debt repayment strategy
As of September 30, 2024, IL&FS had repaid a total of ₹38,082 crore to its creditors, according to the company’s latest affidavit filed with NCLAT. The group, which faced a severe financial crisis, had outstanding external debts of ₹99,355 crore as of October 2018. The group’s resolution efforts continue, with NCLAT instructing IL&FS to resolve the remaining 58 firms by March 31, 2025.
