NCLAT Grants IL&FS Group Immunity To Resolve Remaining Debt Issues

NCLAT Grants IL&FS Group Immunity To Resolve Remaining Debt Issues

Directs listing the matter for further orders in the first week of April 2025

The National Company Law Appellate Tribunal (NCLAT) has granted debt-ridden group Infrastructure Leasing and Financial Services (IL&FS) time until 31 March 2025, to resolve its issues with 58 firms.

The appellate tribunal order read, “A direction needs to be issued to IL&FS and a new board to complete the resolution process of 58 entities as captured in paragraph 24 of the affidavit by 31 March 2025.”

The Coram of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the resolution process for 58 entities was at an advanced stage and the company resolved debts through asset resolution and other mechanisms.

Thus, the NCLAT directed IL&FS to take appropriate steps before the National Company Law Tribunal (NCLT) to end the matter.

In August, the NCLAT questioned the continuation of the moratorium for IL&FS entities and stated, “The protection under the 15 October 2018 order, cannot be allowed to continue endlessly.”

The appellate tribunal then issued a show-cause notice to IL&FS and its group entities questioning the continuance of the moratorium protection.

In response, IL&FS recently filed an affidavit, updating on the ongoing debt resolution process.

It informed that a debt of Rs.37,700 crore to 188 out of 302 entities, was resolved as of 30 September 2024. The case for 114 was to be settled, of which moratorium protection was required only for 58 entities.

The bench noted, "The affidavit further indicates that 37 percent of debt resolution has been completed for the IL&FS group and final resolution of 188 entities has been achieved. The new board expects the overall recovery to be approximately Rs.61,000 crore (61 percent of the overall debt as of the financial year 2024-25).”

NCLAT has directed to list the IL&FS matter for further orders in the first week of April 2025.

The IL&FS Group (as of October 2018) availed a fund-based debt of Rs.94,215 crore out of the total outstanding external debt of Rs.99,355 crore. It resolved the arrears through monetization and settling payments from the concession authorities and the counterparty to the contract.

Four key holding companies, IL&FS Group, IFIN, ITNL and IEDCL, used 51 percent of Rs. 48,000 crores.

Out of Rs.48,000 crore, 51 percent was availed by four key holding companies - IL&FS Group, IFIN, ITNL, and IEDCL.

In October 2018, the NCLT superseded the existing board of IL&FS on the recommendation of the Central government after the mega-crisis in IL&FS, which shook the finance industry.

A new board for IL&FS, which had a debt burden of Rs.94,000 crore, was appointed to take charge of the affairs and NCLAT conceived a framework for resolving the crisis.

The IL&FS companies were granted protection against the recovery of further dues. Also, immunity was given to the newly-appointed directors against any proceedings for the past actions of suspended directors or officers.

At that time IL&FS had a total of 302 entities of which 169 were domestic and 133 offshore.

Based on their financial position, companies were placed into green, amber and red categories. The ones in green continue to meet their payment obligations.