NCLAT directs IL&FS to complete resolution of remaining firms by March 31

The Insolvency appellate tribunal has directed the debt-ridden IL&FS group to complete the resolution of the remaining 58 firms by March 31, 2025 and has extended the moratorium until the date.

A two-member bench observed that the resolution process for the remaining 58 entities is at an advanced stage and "considerable progress has been made by IL&FS (Infrastructure Leasing and Financial Services), which is pairing debts through asset resolution and other mechanisms.

"We, thus, for the time being, are of the view that 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 March 31, 2025," said NCLAT in an order passed on Tuesday.

NCLAT also directed IL&FS to take "appropriate steps" before the National Company Law Tribunal (NCLT) to close the process.

Earlier, on August 28, 2024, the National Company Law Appellate Tribunal (NCLAT) questioned the continuation of the moratorium for the IL&FS entities and observed that "the protection under order dated October 15, 2018, cannot be allowed to continue for all time to come."  The appellate tribunal had also issued a notice to IL&FS and its group entities, requiring them to show cause as to why the order dated October 15, 2018, which placed them under moratorium protection should not be allowed to continue, after a reasonable period, effective October 15, 2024.

In response to that notice, IL&FS filed an affidavit on October 5, 2024, providing a status update on the ongoing debt resolution process.

It informed that a debt of Rs 37,700 crore has been resolved as of September 30, 2024, with a resolution of 188 entities out of 302 entities, and only 114 entities remain to be resolved, out of which moratorium protection is now only required to be continued for 58 entities.

"The affidavit further indicates that 37 per cent of debt resolution has been completed for the IL&FS Group and final resolution of 188 entities has been achieved and the new board expects the overall recovery to be approximately Rs 61,000 crore, i.e. 61 per cent of the overall debt as of the financial year 2024-25," noted the NCLAT bench comprising Chairperson Justice Ashok Bhushan and Barun Mitra.

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

IL&FS group, which had an outstanding external debt of Rs 99,355 crore at the time of its crisis, is resolving the debts through monetisation and settlement of payments by its entities from the concessioning authorities and counterparty to the relevant contract.

IL&FS Group as of October 2018, had availed fund-based debt of Rs 94,215 crore out of the total outstanding external debt of Rs 99,355 crore.

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

On October 1, 2018, NCLT superseded the existing board of IL&FS on the recommendation of the centre 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 resolution of the crisis-hit group.

It had also granted protection to the IL&FS companies against recovery of any further dues and immunity to the newly appointed directors of IL&FS against any proceedings for the past actions of suspended directors or any of the officers thereof.

As per the roadmap for IL&FS, its group companies have been categorised into three categories -- green, amber and red -- based on their respective financial positions.

Companies under the green category are those that continue to meet their payment obligations.

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