Government to step in to take control of troubled IL&FS: Reports

India`s government is moving to take control of Infrastructure Leasing and Financial Services (IL&FS), two television channels reported, in a rare move that underscores the extent of the troubles at the debt-laden financing and construction behemoth.  CNBC TV 18 and ET NOW reported on Monday that the government has filed an application with the National Company Law Tribunal (NCLT) to remove the board of the company, whose recent defaults have roiled Indian markets. An order on the matter is expected later in the day, according to ET NOW.

An intervention could derail IL&FS` restructuring plan. The firm announced on Sunday that its shareholders had approved a plan to raise funds via debt and equity issuances. A string of defaults by IL&FS in recent weeks have led to rating downgrades on the company and its subsidiaries that house some of its debt. Its rapid fall from grace has sparked fears of a crisis in the country`s non-banking financial services sector, prompting the government`s bid for intervention.

ET NOW said the government may also look to also oust the management of the company.  India has rarely stepped in to take such a drastic step. The last time the government moved to take control of a company was during the Satyam scandal in 2009 that shook investor confidence in the information technology sector.

Satyam`s board was dissolved by the government after its then chairman and founder, Ramalinga Raju, revealed India`s biggest corporate accounting fraud.  The government then set up a six-member board to stabilise the struggling software company, which was later sold to Tech Mahindra.