Maruti Suzuki Chairman R C Bhargava, ex-director of crisis-hit IL&FS, Thursday ruled out resigning from the board of the auto major, stating as per the law a director needs to step down only when "something is established against" him.

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He also said at least for the last three to four years, the management and the board of IL&FS had the knowledge about the paucity of capital and liquidity faced by the company and the situation was reviewed in most of the board meetings that took place during the period.

Bhargava is among the 10 former directors of IL&FS against whom the Ministry of Corporate Affairs has filed a petition to the National Company Law Tribunal (NCLT) alleging mismanagement and negligence as the firm defaulted on payments. Reports have suggested that these directors would not be allowed to serve on the board of other companies.

"I am not stepping down and the law as far as I have understood is that you only need to step down if something is established against you which makes you unfit to be a director," Bhargava told TV channel CNBCTV18. Commenting on the issues faced by IL&FS, he said there was not enough capital and liquidity in the company to service debt.

"This situation was in the knowledge of the management and the board at least for the last three to four years. It was reviewed in most of the board meetings, which happened during these period," he claimed. Action plans and solving this problem of liquidity and stabilising the operations of the company were made in every review meeting, he added.

"Unfortunately, I think this is where the question of failure comes in. What was done in terms of raising capital or increasing the equity capital did not happen. The divestment of assets did happen to an extent but not adequate to stave off the defaults which took place," Bhargava said. Applauding steps taken by the government to step in and reconstitute the board of IL&FS, he said the company is extremely important for the economy and the infrastructure sector.

"The government acted to ensure what was required, that the company remained as a going concern, which is obviously was the right thing to do and which was required," he said. The government on Monday seized control of debt-trapped IL&FS, superseding its board with one led by Uday Kotak, and vowed to stop further loan defaults.

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The move came after the National Company Law Tribunal approved an immediate takeover of crisis-hit IL&FS Ltd's board by six government nominees. IL&FS has defaulted on payment of loans to SIDBI and along with its subsidiaries has a combined debt of over Rs 91,000 crore. There were concerns that default by a large NBFC like IL&FS would create liquidity crunch in the financial markets. The key shareholders of IL&FS include LIC, SBI and Central Bank of India.