A two-member NCLT bench headed by acting president B S V Prakash Kumar allowed IL&FS to sell its 3.27 crore shares, having a face value of Rs 10 each, of the Gujarat International Finance Tec-City Company Limited (GIFTCL) or GIFT City to the Gujarat Urban Development Company Ltd (GURDCL).
While granting permission, the tribunal observed, "It is evident that the sale consideration is higher than the fair market value of the stake of the applicant in GIFTCL" as determined by RBSA, the agency appointed for valuation.
The GIFT City is India's first operational smart city and international financial services centre in Ahmedabad, Gujarat.
Sale of stake in the GIFT City is a part of the resolution process of the IL&FS, which along with its over 300 group companies had a cumulative debt of Rs 94,215 crore.
The newly constituted board of the company has decided to adopt an "asset level resolution" with regard to various group companies and entities.
In 2007, IL&FS had entered in to a Memorandum of Understanding (MOU) with the Gujarat government to develop an integrated township/ International Financial Services City (IFSC).
The joint venture agreement provided an exit option to either of the parties with a right of first refusal to the other.
In January 2019, when IL&FS communicated its intention to divest the shareholding in GIFTCL, the Gujarat government also expressed its willingness to purchase IL&FS shares.
The sale was subsequently approved by IL&FS' Committee of Creditors in terms of the approved resolution framework and was placed before Justice (Retd) D K Jain who supervises the operation of IL&FS resolution process.
IL&FS thereafter moved the NCLT to consummate the sale agreement.
While approving the sale, the NCLT said sale of shares of the GIFT City held by IL&FS to GURDCL shall be "free and clear from all encumbrances, liens, security interest and third-party claims including any statutory or tax claims" upon receipt of sale consideration.
The sale amount shall be credited into a designated escrow account and shall be maintained as an interest bearing fixed deposits.
The NCLT also permitted withdrawal of Rs 3 crore from the escrow account maintained in connection with IL&FS resolution process, to meet the expenses towards resolution costs.
As per the road map for IL&FS, its group companies have been categorised into three categories -- Green, Amber and Red -- based on their respective financial positions.
Companies under the green category, such as GIFT City, were those which continue to meet their payment obligations.
Amber category is for those companies that would not be able to meet their obligations but can meet only operational payment liability to senior secured financial creditors. KRH MKJ