Mumbai: The National Company Law Appellate Tribunal (NCLAT) has given relief to several companies of the IL&FS Group by exempting them from Corporate Social Responsibility (CSR) obligations.
This decision applies to around 50 companies that fall under the ‘red’ and ‘amber’ categories and are currently under financial stress.
Why CSR Exemption Was Needed?
These companies are under a moratorium since October 15, 2018, which protects them during the resolution process. Due to this, they are not adding interest on their loans in their accounts.
Because of this accounting method, these firms showed “notional profits” on paper. Under the Companies Act 2013, such profits made them eligible for CSR spending.
However, in reality, these companies are financially weak and struggling with debt. IL&FS approached NCLAT to seek relief from CSR obligations, calling the profits only technical and not real.
Tribunal’s Decision
A two-member bench of NCLAT, led by Justice Ashok Bhushan, accepted the request. The tribunal used its special powers under Sections 241 and 242 of the Companies Act to grant the exemption.
It said there was enough reason to allow these companies to skip CSR spending under Section 135(5), which normally requires firms to spend at least 2% of their average profits on social activities.
Understanding Red, Amber and Green Categories
IL&FS Group companies are divided into three categories based on financial health.
Green companies are financially stable and continue to meet all payment obligations. Amber companies can pay operational costs and some debts but not all. Red companies are the most stressed and unable to meet even major debt payments.
Progress in Debt Resolution
At the time of the crisis in 2018, IL&FS had total debt of about ₹99,355 crore. As of September 2025, the group has repaid around ₹48,463 crore to its creditors.
So far, 202 companies have been resolved, including both domestic and overseas entities. The group is reducing debt through asset sales and structured payouts.
