Tribunal Allows Impleadment in IL&FS Case: New Respondents Added, Restraining Orders Extended

The Tribunal allowed the impleadment of Mrs. Asha Kiran Bawa and Ms. Akansha Bawa as respondents in a case involving Infrastructure Leasing and Financial Services Ltd. (IL&FS) due to allegations of misfeasance and non-compliance with restraining orders. The restraining orders were extended to the newly impleaded respondents to prevent asset alienation. Additionally, the Tribunal granted dispensation to IL&FS from appointing independent and women directors during the moratorium period, citing challenges in finding suitable candidates given the financial crisis. Efforts were encouraged to appoint more independent and women directors in the future.

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Issues Involved:
1. Impleadment of Mrs. Asha Kiran Bawa and Ms. Akansha Bawa as respondents.
2. Extension of restraining orders to additional respondents.
3. Dispensation with the requirement to appoint independent and women directors on the board of subsidiaries and associated companies.

Issue-wise Detailed Analysis:

1. Impleadment of Mrs. Asha Kiran Bawa and Ms. Akansha Bawa as respondents:

The Union of India, Ministry of Corporate Affairs (MCA) filed M. A. Nos. 1576 and 1577 of 2019 in connection with C. P. No. 3638 of 2018, seeking to implead Mrs. Asha Kiran Bawa and Ms. Akansha Bawa as respondents Nos. 319 and 320. The petitioner argued that due to the continuous failure of Infrastructure Leasing and Financial Services Ltd. (IL&FS) to service its debt, there was an imminent possibility of a contagion effect in the financial market. Consequently, Company Petition No. 3638 of 2018 was filed under sections 241 and 242 of the Companies Act, 2013, seeking suspension of the then board of directors of IL&FS and restraint on alienation of properties during the investigation by the Serious Fraud Investigation Office (SFIO).

The Tribunal had previously ordered the suspension of the IL&FS board and appointed Government-nominated directors. Interim reliefs were sought against certain respondents, including disclosure of properties and restraining them from alienating assets. The Tribunal, relying on the SFIO's interim report, directed certain respondents to disclose their properties and restrained them from dealing with securities. The order was communicated to banks for compliance. However, instances of non-compliance and disobedience of the order by Ramesh C. Bawa and his family members were highlighted, including significant withdrawals and locker operations.

The Tribunal found that substantial amounts were transferred from Ramesh C. Bawa's account to his daughter and wife after the restraining order. Given the circumstances and the allegations of misfeasance, the Tribunal allowed the impleadment of Mrs. Asha Kiran Bawa and Ms. Akansha Bawa as respondents Nos. 319 and 320 for proper adjudication of the case.

2. Extension of restraining orders to additional respondents:

M. A. No. 1577 of 2019 sought to extend the restraining orders dated December 3, 2018, and January 16, 2019, to the newly impleaded respondents Nos. 319 and 320. The Tribunal noted that the amount in Ramesh C. Bawa's account was transferred to his daughter and wife after the knowledge of the petition. Consequently, the same restrictions imposed on the original respondents were extended to the newly impleaded respondents. The Tribunal disposed of M. A. No. 1577 of 2019 accordingly.

3. Dispensation with the requirement to appoint independent and women directors:

M. A. No. 1054 of 2019 was filed by IL&FS seeking dispensation with the requirement under section 149 of the Companies Act, 2013, read with relevant rules, to appoint independent directors and women directors on the board of its subsidiaries, jointly controlled entities, associates, and jointly controlled operations. The applicant argued that the newly appointed Government-nominated directors might not qualify as independent directors and that it was challenging to find suitable independent and women directors given the financial condition of the IL&FS group.

The Tribunal noted that the newly appointed directors were performing functions similar to independent directors and were discharging an important public duty. Given the financial crisis and the moratorium order, it was difficult to find suitable independent and women directors. The Tribunal, exercising powers under section 242(2) and (4), granted dispensation regarding the appointment of independent and women directors during the moratorium period. However, efforts should be made to appoint more independent and women directors to ensure their participation in the board. The prayer for dispensation for appointing a company secretary was rejected. The Tribunal disposed of M. A. No. 1054 of 2019 accordingly.

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