Assets Care and Reconstruction Enterprise (ACRE), backed by global asset manager Ares Management, has tendered an “unqualified and unconditional apology” for dragging IIFL Finance in a cheque bounce case.

The dispute between IIFL Finance and ACRE started over payment of fees. IIFL Finance had appointed ACRE as trustee for resolving accounts assigned.

Between 2021 and 2022, IIFL Finance issued postdated cheques for trustee fees to ACRE. These payments were honoured till October 2022, when RBI circular prohibited payment of such fee. Complying with the directive, IIFL Finance halted further payments.

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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, to refrain from taking further action while arbitration was ongoing.

However, on March 7, 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 under Section 27(5) of the Arbitration Act, accusing ACRE of blatant disregard for the arbitration court’s directions.

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Faced with the prospect of severe legal consequences, ACRE submitted an affidavit and a letter of authorisation on September 28 offering an “unqualified and unconditional apology.” The affidavit acknowledged the violation of its earlier undertaking and expressed regret.

While IIFL Finance declined to comment officially, a director confirmed the receipt of ACRE’s apology affidavit under the condition of anonymity. 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,” said Mimani.

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