NCLAT Exempts IL&FS ‘Red’ and ‘Amber’ Firms from CSR Requirements

The National Company Law Appellate Tribunal (NCLAT) has granted a relief to IL&FS Group, exempting companies classified as 'red' and 'amber' from corporate social responsibility (CSR) obligations. This decision, based on accrued interest expenses impacting loan amounts, benefits approximately 50 companies within the beleaguered group.

This exemption comes as a result of interest not accruing on outstanding debts, which led these companies to show notional profits that triggered CSR obligations under the Companies Act. IL&FS sought this exemption to correct the financial outlook for their companies hindered by the earlier imposed moratorium.

The two-member bench, including Chairperson Justice Ashok Bhushan, utilized discretionary powers under company law sections to allow this waiver. The roadmap divides IL&FS companies into green, amber, and red categories based on financial stability. These efforts are part of a broader push to manage substantial debts by asset resolution and financial distributions.