IL&FS Seeks Rs 185.87 Crore From Former Directors

Infrastructure Leasing & Financial Services (IL&FS) has approached the National Company Law Tribunal (NCLT), Mumbai, seeking recovery of Rs 185.87 crore in excess remuneration paid to former directors and managerial personnel of the group and two subsidiaries. The application names 23 former directors and executives associated with IL&FS, IL&FS Financial Services (IFIN) and IL&FS Transportation Networks (ITNL).

The recovery effort has made little progress so far. According to the application, the three companies identified Rs 187.01 crore as refundable but have recovered only Rs 91.08 lakh, including payments made by two independent directors after accounting for taxes. This amounts to less than 0.5% of the total identified liability. The application also states that none of the former managerial personnel has refunded the amount demanded.

The individuals named include former IL&FS chairman Ravi Parthasarathy, former vice-chairman and managing director Hari Sankaran, former joint managing director Arun Kumar Saha and several former independent directors. Former executives of IFIN and ITNL are also included. Parthasarathy passed away in April 2022.

NCLT Asked to Order Refunds and Secure Disputed Amounts

In its application dated October 28, 2026, IL&FS has asked the tribunal to declare the identified payments as excess remuneration and direct the former directors and managerial personnel to return the money. It has also sought an interim order requiring them to deposit the disputed amounts into separate interest-bearing fixed deposit accounts while the proceedings are pending.

The recovery claim concerns remuneration paid between financial years 2013-14 and 2017-18. During those years, IL&FS, IFIN and ITNL reported profits in their original financial statements. However, a subsequent forensic exercise to reopen and recast the accounts transformed the reported profits into substantial losses.

The revised financial position forms the basis of IL&FS’s argument that remuneration paid to directors exceeded the limits prescribed under the Companies Act, 2013. The company is seeking repayment on the grounds that the original payments were calculated using financial statements that were later found not to reflect the companies’ actual financial condition.

Recast Financial Statements Revealed Heavy Losses

The National Company Law Tribunal ordered the reopening and recasting of the companies’ financial statements in January 2019 after the government alleged that the original accounts did not present their true financial position. The exercise covered five financial years, from 2013-14 to 2017-18, and was carried out by appointed chartered accountancy firms and auditors. The NCLT took the recast financial statements on record in June 2024.

The revised figures showed a dramatic reversal in the financial performance originally reported by the three companies. IL&FS had initially reported cumulative profits of Rs 1,865.73 crore over the five-year period. After the accounts were recast, it reported cumulative losses of Rs 9,415.24 crore.

IFIN’s original cumulative profits of Rs 1,246.33 crore were revised into losses of Rs 1,628.44 crore. ITNL also saw its reported profits of Rs 1,015.67 crore replaced by cumulative losses of Rs 5,655.22 crore.

These changes affected the remuneration calculations because the payments had been made when the companies’ original financial statements showed profits. The restated accounts indicated that the remuneration exceeded the statutory limits applicable under company law.

Companies Act Provisions Support IL&FS Recovery Claim

IL&FS has cited Sections 199 and 197(9) of the Companies Act, 2013, to support its demand for repayment. Section 199 provides for the recovery of excess remuneration from former or serving managing directors, whole-time directors, managers and chief executive officers when financial statements are restated due to fraud or non-compliance.

Section 197(9) requires directors, including independent and non-executive directors, to refund remuneration received beyond the prescribed limits. By relying on these provisions, IL&FS argues that the recovery obligation extends beyond executive management to other directors who received excess payments.

The legal provisions are central to the dispute because former directors have questioned whether remuneration approved under the original audited accounts can be reclaimed after those accounts are restated. The tribunal will have to consider the company’s interpretation of the law alongside the objections raised by the former directors.

Former Directors Dispute the Recovery Demands

The recovery exercise has been underway for more than two years. IL&FS and its subsidiaries issued notices to former directors in February and August 2024, followed by reminders in March, April, May and June 2025. However, the companies have encountered resistance from several former directors and executives.

The former directors have raised several objections to the demands. They argue that the remuneration was approved and paid on the basis of audited financial statements available at the time. They have also questioned whether the recast accounts can retrospectively invalidate payments that had already been authorised.

Some former directors have further argued that the companies did not provide adequate information and calculations to explain the amounts being claimed from them.

IL&FS has rejected these objections, maintaining that the recast accounts are final under Section 130(2) of the Companies Act and have been taken on record by the NCLT. It has also stated that detailed calculations and relevant financial information were shared with the former directors.

MCA Backs Effort to Recover Excess Remuneration

The Ministry of Corporate Affairs (MCA) has supported the recovery process. In February 2024, it directed the three companies to initiate action to recover the excess remuneration, noting that the money could be used in the group’s resolution process and distributed among creditors.

In March 2026, the ministry reiterated that independent directors who had received excess remuneration would also be required to return it. The clarification reinforced the position that the recovery exercise should cover all directors liable under the relevant provisions, rather than being limited to executive management.

IL&FS and its subsidiaries approached the MCA again in August 2026, seeking support for recovery and appropriate legal action. The ministry responded on September 9, referring to its earlier directions.

Recovery Claim Adds to IL&FS Debt Resolution Process

The latest legal action is part of the broader effort to resolve the financial crisis that led to the collapse of the IL&FS group in 2018. At the time, the group had a fund-based debt burden of approximately Rs 94,215 crore, triggering concerns across India’s financial system.

A government-appointed board took charge in October 2018 to oversee the group’s resolution. The new management has since focused on restructuring operations, resolving debt and recovering value for creditors. According to the board, approximately Rs 50,387 crore of group debt had been resolved as of June 30, 2026.

The attempt to recover excess remuneration adds another layer to this process. IL&FS believes that money returned by former directors and executives can contribute to the resolution effort and support distributions to creditors.

However, the recovery of only Rs 91.08 lakh against the Rs 187.01 crore identified as refundable highlights the challenges facing the companies. The former directors’ objections over the original approvals, the retrospective impact of restated accounts and the calculation of individual liabilities remain unresolved.

The NCLT’s consideration of the application will determine whether the disputed remuneration must be repaid and whether the requested interim deposits should be ordered. The outcome could also clarify how the Companies Act’s recovery provisions apply when financial statements are restated after remuneration has already been paid.