IL&FS hid facts from board; government to ensure liquidity for IL&FS to prevent defaults: Finance Ministry source

Infrastructure Leasing and Financial Services (IL&FS), whose recent defaults have roiled Indian markets, hid important facts from the company`s board, a senior finance ministry source said on Monday.

The infrastructure company is currently looking for an equity injection after a subsidiary failed to make interest payments.

Meanwhile, the government has said it stands fully committed to ensuring that needed liquidity is arranged for the debt-trapped IL&FS to prevent any more defaults in payment of loans by the non-banking financial company.

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On a day when the Mumbai-bench of NCLT allowed the government to take over the board of IL&FS, the Finance Ministry in a statement said the move was essential to restore confidence in the financial market and hoped that financial institutions would provide the NBFC liquidity.

"There is an emergent need to immediately stop further financial defaults and also take measures to resolve defaulted dues to the claimants.

"This would require a combination of measures of asset sales, restructuring of some liabilities and fresh infusion of funds by the investors and lenders. The confidence of the financial market in the credibility of the IL&FS management and the company needs to be restored," the ministry said.

Observing that the company continued to pay dividends and huge managerial pay-outs regardless of looming liquidity crisis, the statement said, "it shows that the management had lost total credibility."

If further said that there have also been serious complaints on some of the companies for which an SFIO investigation has been ordered into the affairs of IL&FS and its subsidiaries.

The NCLT Monday approved reconstitution of IL&FS board appointing six members including Uday Kotak as non-executive chairman.