NCLAT Directs IL&FS to Halt Third-Party Rights on Mumbai HQ

The National Company Law Appellate Tribunal (NCLAT) has instructed the infrastructure lender IL&FS to refrain from creating any third-party interest over its headquarters located in Mumbai’s Bandra-Kurla Complex. This directive comes after the highest bidder, Brookfield, filed an appeal against a recent order by the National Company Law Tribunal (NCLT).

The NCLT order had stated that IL&FS has the unilateral right to amend the letter of intent (LoI) and that this amendment would be binding on the applicants. Additionally, the NCLT had asked Brookfield to renew the performance guarantee submitted during the bidding process for the property.

Following Brookfield’s appeal, NCLAT has directed adherence to the NCLT’s conditions and asked the global institutional investor to renew the performance guarantee within a month. NCLAT has also instructed IL&FS to file its reply by January 6 and Brookfield to file its rejoinder by January 16. The matter is now scheduled for hearing on February 2, as per NCLAT’s December 5 order.

According to an IL&FS spokesperson, NCLAT has upheld the NCLT order directing Chronos to renew its performance bank guarantee to avoid disqualification as a bidder. NCLAT has also reiterated that IL&FS must not create any third-party rights over the property.

Brookfield declined to comment on the matter.

With a bid of Rs 1,080 crore, Brookfield entity Chronos Properties emerged as the highest bidder for the property. The bid went through a rigorous four-tier approval process. IL&FS issued an LoI on March 21, 2022, following which Chronos deposited 10% of the offer amount as a performance bank guarantee.

On November 28, the NCLT ruled that the LoI dated March 21, 2022, constituted a concluded contract but also held that IL&FS had the unilateral right to amend it. The NCLT further ruled that Chronos had not been disqualified for failing to renew the performance bank guarantee and permitted the company to renew the guarantee within 30 days.

The property, situated in Mumbai’s prime business district, is among the most valuable assets under the resolution process of the beleaguered infrastructure lender. The resolution process is crucial for IL&FS as it seeks to stabilize its financial position and meet its obligations to creditors and stakeholders.