The National Company Law Appellate Tribunal (NCLAT) gave permission for the board of Infrastructure Leasing & Financial Services (IL&FS) to modify the status of certain companies. These companies, previously classified as ‘amber’, will now be recognized as ‘green’ companies. The IL&FS management had categorized its group companies into three divisions according to their financial stability and their ability to meet the demands of both secured and unsecured creditors.
Understanding the Colour-Coded Classification System
IL&FS had come up with a unique colour-coded categorization for its companies. The categories comprised of ‘green’, ‘amber’, and ‘red’. Each color signified the financial health of a company within the grouping. Companies classified as ‘red’ were unable to make any payments to creditors due to a lack of liquid resources. On the other hand, ‘amber’ companies had enough assets to pay off secured creditors but fell short when it came to unsecured creditors. ‘Green’ companies were in the best financial position, with sufficient funds to service all their debts and meet their obligations to both secured and unsecured creditors.
Categorization Statistics
Up until now, the IL&FS group has placed 55 companies under the ‘green’ category and another 13 have been labeled as ‘amber’. A total of 82 companies have been marked as ‘red’ due to their dismal financial situation. However, 11 companies still remain to be classified.
| Category | Number of Companies |
|---|---|
| Green | 55 |
| Amber | 13 |
| Red | 82 |
| Unclassified | 11 |
NCLAT’s Decision and Role
The NCLAT has given the green signal for the IL&FS board to alter the status of ‘amber’ companies, which are capable of paying off a portion of their loans, into ‘green’ companies that possess the capability to meet all their payment obligations. But who exactly is the NCLAT?
The NCLAT was established under Section 410 of the Companies Act, 2013. Its primary function is to hear appeals against the rulings of the National Company Law Tribunal (NCLT). Apart from this, it is also the Appellate Tribunal for hearing appeals against the orders given by NCLTs under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Beyond this, the NCLAT is also responsible for handling appeals against the orders passed by the Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC. The NCLAT is also the appellate authority that deals with appeals against any direction issued or decision rendered or order issued by the Competition Commission of India (CCI).