New Delhi, March 22 The National Company Law Tribunal (NCLAT) has exempted IL&FS Group companies – categorized as ‘red’ and ‘amber’ – from corporate social responsibility (CSR) obligations due to accrued interest expenses on their loans.
This order will benefit approximately 50 ‘amber’ and ‘red’ companies within the debt-ridden IL&FS Group, which are protected under the moratorium granted by the NCLAT from its order dated October 15, 2018.
These ‘red’ and ‘amber’ entities have not been accruing interest on their outstanding debts, resulting in such companies showing notional profits in their accounts under Section 198 of the Companies Act.
This has led to such companies being required to comply with CSR obligations under Section 135 of the Act. IL&FS Group moved an application before NCLAT last year to correct this, seeking exemption for entities from complying with CSR obligations.
The government received a notice regarding this application from IL&FS.
A two-member bench, which also included Chairperson Justice Ashok Bhushan, granted the waiver using its discretionary power under Sections 241(2) and 242(2) (m) of the Companies Act in its order passed earlier this month.
"We find that sufficient cause has been shown in the application for allowing the prayer made by the Applicant to dispense with the requirement to undertake spending the necessary amount on CSR activities under Section 135(5) of the Companies Act, 2013 from Red/Amber Companies," said NCLAT.
Section 135(5) of the Companies Act mandates that the board of every company shall ensure that the company spends, in every financial year, at least 2 per cent of the average net profits of the company made during the three immediately preceding financial years.
This section applies to every company having a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore.
According to the roadmap, IL&FS Group companies have been divided into three categories – green, amber, and red – based on their respective financial positions.
Companies in the green category are those that continue to meet their payment obligations.
Red entities are those failing to meet debt obligations even to senior secured creditors, while amber entities can only meet operational expenses and senior secured debt payments, lacking the capacity for others.
At the time of the crisis, IL&FS Group comprised 302 entities as of October 15, 2018, of which 169 were domestic group entities, and the remaining 133 were offshore group entities.
According to the latest status report affidavit filed before NCLAT, IL&FS Group has discharged Rs 48,463 crore to its creditors as of September 2025.
At the time of the crisis, IL&FS Group's total external debt outstanding was Rs 99,355 crore. It is reducing debts through asset resolution, interim distribution, which includes cash & InviT units among others.
In this, IL&FS has fully resolved 202 companies, of which 76 are domestic firms and 126 are offshore firms, the affidavit had said.