NCLAT Decision: NHAI to Keep IL&FS Agreement

The National Company Law Appellate Tribunal (NCLAT) has emerged as a knight in shining armor for Baleshwar Kharagpur Expressway Ltd (BKEL), a subsidiary of the beleaguered IL&FS group. A recent NCLAT order dated August 1, 2023, mandates the National Highways Authority of India (NHAI) to maintain the status quo on BKEL’s concession agreement, valued at approximately ₹1,550 crore, preventing its termination. This critical intervention allows BKEL to proceed with its insolvency resolution process without facing a major roadblock.

IL&FS Crisis and the Domino Effect

The IL&FS group, a titan in India’s infrastructure financing sector, crumbled under the weight of a massive debt burden exceeding ₹91,000 crore in 2018. This triggered insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) for the company and its subsidiaries. BKEL, a special purpose vehicle (SPV) established by ILFS Transportation Networks Limited (ITNL) to manage a highway project, found itself entangled in this financial web.

Looming Threat of Termination

With the IL&FS group facing insolvency, NHAI reportedly considered terminating the concession agreement with BKEL. This posed a serious threat to BKEL’s ability to navigate its financial difficulties. Termination would have jeopardized the project’s future and potentially discouraged potential investors or buyers interested in rescuing the venture, impacting not only the ₹1,550 crore project but also jobs and development in the region.

NCLAT Steps Up to the Plate

Recognizing the delicate stage of BKEL’s insolvency resolution, NCLAT stepped in to safeguard the concession agreement. The Tribunal emphasized that terminating the agreement at this crucial juncture would only exacerbate the situation. NCLAT’s order underscores the importance of fostering a conducive environment for companies undergoing insolvency proceedings, with a focus on revival and completion of projects.

A Path Forward for BKEL

NCLAT’s decision brings a glimmer of hope for BKEL. The secured concession agreement allows BKEL to concentrate on finalizing its insolvency resolution plan. This will likely involve securing a new investor or buyer to take over the project and ensure its successful completion. The ruling sets a noteworthy precedent for similar cases involving infrastructure projects caught in the throes of insolvency. It highlights the need for a nuanced approach that balances the interests of all stakeholders, including creditors (owed over ₹91,000 crore by IL&FS), developers, and government agencies.

This development holds significance for the infrastructure sector in India. By protecting ongoing projects facing insolvency, NCLAT’s ruling can potentially bolster investor confidence and encourage a more robust approach to resolving financial challenges within the sector, paving the way for the completion of critical infrastructure projects.

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