New Delhi: The National Company Law Appellate Tribunal (NCLAT) has exempted ‘red’ and ‘amber’ category companies of the IL&FS Group from mandatory corporate social responsibility (CSR) spending, citing distortions caused by interest accounting.
The relief applies to nearly 50 financially stressed entities protected under the tribunal’s October 15, 2018 moratorium order. These firms had stopped accruing interest on outstanding loans, leading to notional profits in their books under Section 198 of the Companies Act. Such paper profits triggered CSR obligations under Section 135, despite the companies’ weak financial position.
The IL&FS Group had approached the tribunal last year seeking exemption from CSR compliance for these entities. Acting on the plea, a two-member bench led by Chairperson Justice Ashok Bhushan granted the waiver using discretionary powers under Sections 241 and 242 of the Act.
In its order, the NCLAT said sufficient grounds had been shown to dispense with CSR spending requirements for red and amber companies.
Under the Companies Act, firms meeting specified financial thresholds must spend at least 2 per cent of their average net profits over the previous three years on CSR activities.
IL&FS entities are classified as green, amber, or red based on financial health.
While green firms meet all obligations, amber entities can service operational and senior secured debt, and red firms are una-ble to meet even senior obligations.
According to the latest filing, the group has repaid Rs 48,463 crore to creditors by September 2025, against total debt of Rs 99,355 crore at the time of the 2018 crisis. It has fully resolved 202 entities so far.