NCLAT Grants IL&FS New Board Members Legal Immunity from Bank Actions

The National Company Law Appellate Tribunal (NCLAT) has continued the legal protection granted to directors appointed to the new board of Infrastructure Leasing & Financial Services (IL&FS), preventing banks from prosecuting them as wilful defaulters without prior tribunal approval, as per news reports.  

The ruling applies to professional directors appointed after the government took over the company’s board. 

Order Linked to Earlier Moratorium 

A 2-member bench led by Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra said the directions issued earlier remain in force.  

The tribunal stated that banks must seek permission from NCLAT before initiating action against the newly appointed directors. It also said that any notices issued to these directors after April 4, 2025, cannot be acted upon without leave of the court. 

Differentiation Between Boards 

The tribunal clarified that lenders can continue proceedings against former IL&FS directors who were part of the original management.  

State-owned lenders, including Canara Bank and Indian Bank, have been allowed to pursue action against those directors who were not part of the reconstituted board appointed by the government. 

Context of the IL&FS Crisis 

The government replaced the original board on October 1, 2018, after the National Company Law Tribunal superseded it following a liquidity crisis and defaults. At the time, IL&FS had debt of about ₹90,000 crore.  

On October 15, 2018, NCLAT imposed an interim moratorium on creditor action against IL&FS and its 302 group entities to stabilise the group and enable an orderly resolution process. 

Debt Resolution Status 

According to an affidavit filed by the new board, IL&FS had repaid ₹48,463 crore to creditors as of September 30, 2025. The board is targeting ₹61,000 crore in total recoveries, equivalent to about 61.39% of the group’s external debt of ₹99,355 crore. 

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Conclusion 

The latest clarification keeps the requirement for court approval before banks act against the reconstituted board, while allowing action against former management. The resolution process continues under judicial oversight with ongoing repayments to creditors. 

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