IL&FS Moves NCLT to Recover ₹185.88 Crore in Excess Remuneration from Former Directors

Infrastructure Leasing & Financial Services (IL&FS) has approached the Mumbai Bench of the National Company Law Tribunal (NCLT) seeking directions to recover ₹185.88 crore in excess managerial remuneration. The amount was paid to its former directors and those of two key subsidiaries, IL&FS Financial Services (IFIN) and IL&FS Transportation Networks (ITNL), following the recasting of financial statements for five financial years between 2013-14 and 2017-18.

In its application, IL&FS has requested an interim direction requiring the identified former directors to deposit the excess managerial remuneration and undue gains in a separate interest-bearing fixed deposit account during the pendency of the hearing. The company stated that remuneration was originally paid based on profits shown in the original accounts. However, subsequent recasting directed by the NCLT revealed that the entities actually incurred cumulative losses during the period.

According to the recast accounts, IL&FS recorded a cumulative loss of ₹9,415.24 crore from FY14 to FY18 against a previously reported profit of ₹1,865.73 crore. Similarly, IFIN showed a loss of ₹5,655.22 crore against a reported profit of ₹1,015.67 crore, while ITNL reported a loss of ₹1,628.44 crore against a profit of ₹1,246.33 crore. Following directives from the Ministry of Corporate Affairs, IL&FS issued notices to all 23 erstwhile directors.

IL&FS noted that despite multiple notices and reminders, no refunds have been made by the vast majority of the former managerial personnel. So far, only three former non-executive directors—two from IL&FS and one from ITNL—have refunded money. Out of a total refundable amount of ₹187.02 crore, only ₹91.09 lakh, net of income tax paid, has been refunded, representing less than 0.5 per cent of the total claim.

The recovery proceedings name 23 former directors as respondents, including prominent independent directors such as R C Bhargava, Jaithirth Rao, Michael Pinto, S B Mathur, Rina Kamath, Subhalakshmi Panse, Surinder Singh Kohli, Neera Saggi, Deepak Dasgupta, and Pradeep Puri. Former executive directors named include Hari Sankaran, Arun Kumar Saha, Ramesh Bawa, and K Ramchand. For former IL&FS Chairman Ravi Parthasarathy, who has since died, the claim has been initiated against his legal heir.

IL&FS is pursuing recovery from managing directors, whole-time directors, managers, and CEOs under Section 199 of the Companies Act, while Section 197(9) obligates any director, including non-executive and independent directors, to refund sums drawn beyond prescribed limits. The former directors have disputed the notices, arguing that recast financials cannot retrospectively invalidate pay approved under audited original accounts, that recast accounts are un audited statements, and that the notices were vague.

IL&FS termed these responses baseless and without merit, clarifying that calculation variations have been corrected. On October 1, 2018, the NCLT superseded the existing board of IL&FS following a mega-crisis in the finance industry, appointing a new board to resolve group debt through asset monetisation and settlement of payments.

"This case highlights the critical importance of financial accountability and governance at the board level. When financial statements are recast due to regulatory interventions, historical executive compensation tied to erroneous profit reporting naturally comes under intense scrutiny. For corporate leadership and boards, this serves as a stark reminder that managerial remuneration must strictly reflect genuine, verified financial health rather than superficial reporting, as regulatory mechanisms will eventually pursue accountability for undue gains." — Dr. Shishir Gupta, Founder & CEO, StartupLanes