NCLT Rules in Favor of IL&FS on Unilateral Contract Amendments

Chronos Properties' challenge against IL&FS's amended contract terms dismissed; directed to renew performance guarantee.

In a significant ruling, the National Company Law Tribunal (NCLT), Mumbai Bench, has upheld the rights of Infrastructure Leasing & Financial Services Limited (IL&FS) to unilaterally amend contract terms under the Letter of Intent (LoI) with Chronos Properties Private Limited. The tribunal ruled that the LoI, dated March 21, 2022, constitutes a concluded contract, but recognized IL&FS's unilateral amendment rights, as outlined in the LoI, to increase the transaction consideration in line with its value maximization framework.

Chronos Properties, the successful bidder for IL&FS's Financial Centre at Bandra Kurla Complex, Mumbai, had contested IL&FS's decision to enhance the property transaction consideration from INR 1080 Crores to INR 1481 Crores. Chronos argued that the LoI was a binding and enforceable contract, opposing IL&FS's unilateral amendment as a breach.

The tribunal, led by Member (Technical) Shri Prabhat Kumar and Member (Judicial) Shri Sushil Mahadeorao Kochey, concluded that the LoI contained all essential contract terms, thereby constituting a binding agreement. However, the tribunal recognized IL&FS's right to amend the LoI for value maximization, as detailed in the contract terms, and dismissed Chronos's plea to set aside the amendment.

Additionally, the NCLT addressed Chronos's failure to renew the performance bank guarantee, which had expired. The tribunal ruled that no disqualification should arise from this lapse, given Chronos's expressed willingness to comply. Chronos is directed to tender the performance guarantee with the tribunal's registrar within 30 days to avoid future disqualification.

This decision underscores the tribunal's affirmation of IL&FS's contractual rights under the LoI, emphasizing the importance of adhering to agreed terms within the legal framework of corporate resolutions.

Bottom Line:

Letter of Intent (LoI) with essential terms and conditions, including property identification, consideration, and timelines, constitutes a concluded and enforceable contract unless explicitly stated otherwise. Unilateral amendment rights provided in the LoI are binding if agreed upon by the parties.

Statutory provision(s): Companies Act, 2013, Section 241-242.

Chronos Properties Private Limited v. Infrastructure Leasing & Financial Services Limited, (NCLT)(Mumbai Bench) : Law Finder Doc Id # 2816455