NCLT Approves Sale of Chenani Nashri Tunnelway Ltd. for INR 5300 Crore, Clearing IL&FS Debt - 2025-03-11

NCLT Greenlights INR 5300 Crore Sale of Chenani Nashri Tunnelway, Boosting IL&FS Resolution

Mumbai, India – February 14, 2025 – The National Company Law Tribunal (NCLT) has approved the sale of 100% stake in Chenani Nashri Tunnelway Limited (CNTL) to Cube Highways and Infrastructure II Pte. Ltd. for a revised bid of INR 5300 crore. This landmark order, delivered on February 14, 2025, marks a significant step in the ongoing resolution process of Infrastructure Leasing and Financial Services Limited (IL&FS) and its group companies.

Background of the Case

The application, C.A. 16 of 2021, was filed by IL&FS seeking approval for the sale of its subsidiary IL&FS Transportation Networks Limited's (ITNL) entire shareholding in CNTL. This sale is part of the broader resolution framework initiated for the IL&FS group following the financial crisis of 2018. The Union of India is the petitioner in the main case, C.P. No. 3638/MB/2018, overseeing the resolution process.

Initially, an agreement was reached with Cube Highways in December 2020 for INR 3907 crore. However, revised valuations and negotiations led to an increased offer of INR 5300 crore from Cube Highways in February 2024. This revised bid was subsequently approved by the Committee of Creditors (CoC) of CNTL with a 98.29% majority. The matter then came before the NCLT for final approval.

Key Arguments and Developments

The judgment highlights several key developments leading to the final approval:

• Revised Bid and Valuation: Independent valuations conducted in 2023 indicated a higher enterprise value for CNTL, prompting negotiations for an improved bid. Cube Highways eventually offered INR 5300 crore, a significant increase from the initial offer.
• Creditors' Approval: The Revised Cube Offer received overwhelming support from CNTL's Committee of Creditors, demonstrating consensus on the proposed sale as a viable resolution strategy.
• Independent Oversight: Justice (Retd.) D.K. Jain , appointed to supervise the IL&FS resolution process, also gave his approval to the Revised Cube Offer, emphasizing the fairness and transparency of the process. While Justice Jain suggested including an interest payout within the offer value, he ultimately left the decision to the New Board, acknowledging potential delays from renegotiations.
• New Board's Rationale: The New Board of IL&FS, exercising its discretion, decided to proceed with the Revised Cube Offer. They considered the near 95% recovery for intra-group creditors, the speed of resolution compared to alternative options like transferring CNTL to an Infrastructure Investment Trust (InvIT), and the certainty of cash recovery.

NCLT's Decision and Order

The NCLT bench, comprising Shri Prabhat Kumar (Hon’ble Member Technical) and Justice V.G. Bisht (Retd.) (Hon’ble Member Judicial), after reviewing the application and hearing arguments, granted the approval.

The key orders passed by the NCLT include:

1. Approval of Sale: The sale of 100% shares of CNTL to Cube Highways for INR 5300 crore (subject to adjustments as per the Share Purchase Agreement) was approved. This sale is to be free from all encumbrances and third-party claims.
2. Implementation of SPA: IL&FS, ITNL, CNTL, and Cube Highways are authorized to execute and implement the amended Share Purchase Agreement (SPA).
3. Payment Mechanism: The Revised Cube Offer amount will be paid as per the terms of the SPA.
4. Extinguishment of Liabilities: Upon payment, all claims and liabilities against CNTL predating October 15, 2018, will be extinguished. This includes claims from government bodies and those under arbitration.
5. Resolution Process Costs: CNTL is permitted to utilize up to INR 18 crore for resolution process costs, including payments to valuers and consultants.
6. Distribution Framework: After covering resolution costs, the remaining sale proceeds will be distributed to CNTL creditors as per a pre-defined "Revised Distribution Framework."

Implications of the Order

This order is a crucial step forward in the complex resolution of the IL&FS group. The approved sale of CNTL will inject significant funds into the system, enabling repayment to creditors and reducing the overall debt burden. It also highlights the effectiveness of the resolution framework and the role of the NCLT in facilitating large-scale corporate debt restructuring.

The sale is expected to bring closure to long-pending litigation related to CNTL and provide a clearer financial outlook for the involved parties. For Cube Highways, the acquisition adds a significant asset to their portfolio, further solidifying their presence in the Indian infrastructure sector.

This judgment underscores the commitment to a transparent and efficient resolution process for IL&FS, aiming to maximize value for all stakeholders and restore confidence in the Indian financial system.