ACRE Issues Apology To IIFL Finance To Avoid Contempt

IIFL Finance filed a contempt petition on March 26, 2024, under Section 27(5) of the Arbitration Act, accusing ACRE of blatant disregard for the arbitration court’s directions

In a significant development, Assets Care & Reconstruction Enterprise Limited (ACRE), backed by global asset manager Ares Management, has tendered an "unqualified and unconditional apology" to IIFL Finance.

According to reliable sources, the apology, submitted before the arbitration court, was prompted by a contempt case arising from ACRE’s violation of an earlier undertaking.

The dispute originated over fees payable by IIFL Finance to ACRE for its role as trustee in resolving accounts assigned by IIFL Finance. Between 2021 and 2022, IIFL Finance issued postdated cheques to ACRE for trustee fees. These payments were honored until October 2022, when a Reserve Bank of India (RBI) circular prohibited such fee payments. Complying with the directive, IIFL Finance halted further payments.

However, ACRE disputed the RBI regulation and continued to demand payment, depositing the cheques despite the regulatory prohibition. This led to disagreements over the validity of the payments under the RBI notification.

After IIFL Finance stopped payments, ACRE initiated proceedings under Section 138 of the Negotiable Instruments Act, accusing IIFL Finance, its directors, and key management personnel of cheque bouncing. This was despite ACRE’s explicit undertaking on February 3, 2024, to refrain from taking further action while arbitration was ongoing.

On March 7, 2024, ACRE breached its undertaking by obtaining summons against IIFL Finance and its directors from the Chief Metropolitan Magistrate Court. In response, IIFL Finance filed a contempt petition on March 26, 2024, under Section 27(5) of the Arbitration Act, accusing ACRE of blatant disregard for the arbitration court’s directions.

Faced with strong rebuke from the arbitration court and the prospect of severe legal consequences, ACRE submitted an affidavit and a letter of authorization on September 28, 2024, offering an "unqualified and unconditional apology." The affidavit acknowledged the violation of its earlier undertaking and expressed regret for its actions.

When contacted by Bizz Buzz, IIFL Finance declined to comment officially.

However, a director, seeking anonymity, confirmed receiving ACRE’s apology affidavit.

Meanwhile, Mahesh Mimani, President of Recovery & Resolution at IIFL Finance, refrained from discussing the arbitration proceedings but voiced concerns over ACRE’s conduct. “We have grave concerns about the way ACRE has handled its fiduciary responsibilities for the recovery of assets and distribution of proceeds,” Mimani stated.

According to company insiders, further legal action against ACRE is being considered.