How IL&FS Collapsed: The ₹99,000 Crore Debt Crisis That Shook India’s Markets

M. Nagaraju Maddirala becomes chairman and managing director Government and board

The change: The Mumbai bench of the NCLT appointed Nagaraju Maddirala, a retired 1993-batch IAS officer and former Secretary in the Department of Financial Services, to the IL&FS board on 1 October 2026. The Ministry of Corporate Affairs then designated him chairman and managing director for two years from the day he takes charge.

Whom he follows: Nand Kishore, a member of the first Kotak-led board of October 2018 and later its chairman and managing director, completed his tenure in that post on 30 September 2026.

Supreme Court stays the NCLAT order on the ₹1,080-crore transactions Tribunals and courts

What happened: The Supreme Court stayed the operation of the NCLAT’s 30 June order, which had revived IL&FS’s plea to unwind six lending transactions worth ₹1,080 crore. Senior Advocate Shyam Divan, for SREI, argued that IL&FS had treated the transactions as valid for years. Gopal Sankaranarayanan, for IL&FS, said the NCLT should have examined them on the merits.

What it does not mean: The stay is interim. It does not decide whether the transactions were circuitous or fraudulent, only that the NCLAT’s revival of the plea is paused while the Supreme Court considers the challenge.

NCLAT upholds the SFIO’s right to seek disgorgement from auditors Investigation and audit

The ruling: The NCLAT dismissed appeals by the audit firm BSR & Associates and a former partner, N. Sampath Ganesh, who had challenged the Serious Fraud Investigation Office’s authority to file disgorgement proceedings for the Union government. The tribunal said the SFIO’s report goes to the Central Government, which decides whether to file.

What it does not decide: Disgorgement proceedings are about recovering gains. The ruling settles who may bring the case, not whether any auditor is liable.

Status report: ₹50,387 crore discharged against a ₹61,000-crore target Recovery and payouts

The figures: As of 30 June 2026 IL&FS reported ₹50,387 crore of debt discharged, about 83% of the ₹61,000-crore target: ₹26,027 crore through asset monetisation, concession termination or settlement, and transfer to the InvIT; ₹16,013 crore through interim distributions to external financial creditors; and about ₹8,347 crore through auto-debits, principal servicing by Green entities and release of non-fund-based limits.

The wider measure: Counting cash and InvIT units still held inside the group, the overall resolution value was ₹57,556 crore, more than 94% of the target. That is not money paid to creditors. Cash held by the group was ₹7,259 crore, of which ₹1,551 crore was available for distribution.

The entities: Resolution was complete for 205 of the original 302 entities. About 240 had reached an advanced or concluded stage, 128 had been released from the moratorium and 41 still needed its protection.

NCLAT sets aside the NCLT order and revives IL&FS’s applications Tribunals and courts

The order: The NCLAT held that the NCLT had misread its own order of 16 January 2025 by treating transactions as capable of being collapsed only if all parties consented. It said the consent provision could not be used to bar scrutiny of allegedly sham or fraudulent transactions. It set aside the 13 April order and revived IL&FS’s application and SREI’s two applications for fresh decision.

The money: Amounts payable to SREI out of the resolution of IL&FS group entities are to stay in an escrow account until the NCLT decides the applications afresh.

NCLT Mumbai refuses to unwind six transactions Tribunals and courts

What it held: The NCLT Mumbai bench rejected IL&FS’s application to declare six transactions between IL&FS Financial Services and SREI group entities sham, circuitous and fraudulent, and allowed SREI Infrastructure Finance’s applications. It held that IL&FS, having treated the loans as independent, valid and enforceable since 2019, could not now take a contradictory stand.

The amount: The transactions were lending arrangements between March 2017 and March 2018 aggregating ₹1,080 crore. IL&FS appealed to the NCLAT.

Debt discharged reaches ₹48,463 crore Recovery and payouts

What was reported: IL&FS reported ₹48,463 crore of debt discharged as of 30 September 2025, up from ₹45,281 crore at 21 March 2025, when 197 of 302 entities had been resolved. The figure included asset monetisation, principal servicing by operating group entities, release of non-fund-based limits and interim distributions. The group then held ₹8,575 crore in cash, of which ₹406 crore was available for distribution.

NCLAT allows only consensual unwinding of circuitous transactions Tribunals and courts

The order: On applications to unwind circuitous transactions involving IL&FS, its lending arm and SREI group entities, the NCLAT allowed those that all sides had agreed to unwind. For the rest it indicated that a closer examination was needed in the proper proceedings.

Why it mattered: The NCLT read this order in April 2026 as barring unwinding without consent. The NCLAT said that reading was wrong.

NCLAT approves interim distribution to creditors Recovery and payouts

The order: The NCLAT approved an interim distribution of about ₹16,361 crore to financial creditors, around ₹11,296 crore in cash and ₹5,065 crore in InvIT units. Payments were to be pro rata, only after the new board approved them, and creditors had to undertake to refund any excess when the final resolution was settled.

Cash and units: Because part of each payout was in InvIT units, “debt discharged” and “cash received” are different things, a distinction the later status reports keep.

SEBI raises the penalty on three rating agencies to ₹1 crore each Group and markets

What changed: SEBI raised its penalty on ICRA, CARE and India Ratings to ₹1 crore each, over lapses in rating IL&FS debentures. Its earlier order of December 2019 had fined each ₹25 lakh.

The finding: SEBI said the agencies relied too heavily on management’s assurances and failed to exercise due diligence, and that ratings stayed high even after IL&FS Transportation Networks had defaulted.

The audit regulator reports on the IFIN audit Investigation and audit

What it found: The NFRA, set up on 1 October 2018, reported serious lapses in the 2017–18 statutory audit of IL&FS Financial Services, which was done jointly by Deloitte Haskins & Sells and BSR & Associates. It was among its first quality reviews.

Caution: These are regulatory findings about audit quality. Later orders and appeals decide what follows for the firms, so they are not a conviction of any person.

NCLAT accepts a pro-rata framework for creditors Tribunals and courts

What was approved: The NCLAT accepted a pro-rata distribution framework for creditors, as the government had proposed, and a separate framework suggested by SBI for Red and Amber entities. It also confirmed its stay of October 2018, which has itself been challenged before the Supreme Court.

Not the classification: The Green, Amber and Red classification dates from the new board’s work in late 2018 and early 2019. The March 2020 order dealt with how creditors would share recoveries.

SEBI fines three rating agencies ₹25 lakh each Group and markets

The order: SEBI’s adjudicating officer fined each agency ₹25 lakh for failing to exercise due diligence in rating IL&FS debentures. As reported, the order criticised “lethargic indifference”, “needless procrastination” and laxity, and said high ratings had rested largely on the group’s parentage and management’s assurances.

NCLAT lets 22 group companies service their debt Tribunals and courts

The order: The NCLAT allowed 22 IL&FS group companies to pay their lenders, lifting the stay for them. The new board had sorted entities by a 12-month cash-flow test: Green entities could meet their obligations, Amber ones part of them, and Red ones none.

Why it mattered: It broke the blanket stay of October 2018. Healthy businesses could pay their own debts and the rest were held back for the resolution plan.

NCLT lets the government reopen three companies’ books Investigation and audit

The order: The NCLT allowed the government to reopen and recast the accounts of IL&FS, IL&FS Financial Services and IL&FS Transportation Networks for the five years from 2012–13 to 2017–18 under section 130 of the Companies Act. The NCLAT dismissed an appeal by a suspended director on 31 January 2019, and the Supreme Court later upheld both.

Why it mattered: It was the first time the government sought to reopen such accounts. The aim was to see whether earlier statements had been misstated.

SFIO submits its interim report Investigation and audit

What it is: The SFIO, which began investigating on the government’s order after the takeover, sent its interim report to the Ministry of Corporate Affairs on 30 November. It was placed before the NCLT on 3 December.

Caution: An investigation report, and later prosecutions, set out allegations to be tested in court. They are not findings of guilt against everyone named.

The new board says the group cannot be sold whole Government and board

The plan: The new board told the NCLT that a single solution for the whole group, with about ₹91,000 crore of debt, was not realistic. It proposed resolving the group business by business and asset by asset instead.

The Kotak board files its first report Government and board

The report: The new board sent its first progress report to the ministry on 30 October and filed it with the NCLT on 31 October. It set out the group’s key challenges and a range of resolution options, and said large parts of the group had in the past been run as a single enterprise with no boundaries between entities.

Group lending: The board told the tribunal that IL&FS Financial Services’ exposure to group companies appeared, prima facie, to be well above RBI norms in each of 2015–16 to 2017–18. That was the board’s preliminary assessment, not a finding by a court.

NCLAT stays proceedings against the group Tribunals and courts

What happened: The NCLT had declined the government’s request for a moratorium on 12 October. On appeal, the NCLAT on 15 October stayed proceedings by any party against IL&FS and its subsidiaries, including action to enforce security. Public-sector lenders were later told not to take coercive action.

Why it mattered: It stopped a race among creditors for the group’s assets and gave the new board time. The order was later challenged in the Supreme Court.

Government replaces the IL&FS board Government and board

What happened: On the Ministry of Corporate Affairs’ application, the NCLT Mumbai bench suspended the existing board and approved a new one: Uday Kotak as non-executive chairman, with Vineet Nayyar, G.N. Bajpai, G.C. Chaturvedi, Malini Shankar and Nand Kishore. The government said the company’s affairs were being run in a manner prejudicial to public interest.

The stakes: The government told the tribunal that the group’s collapse could cascade to mutual funds. The Ministry of Finance estimated group debt at about ₹91,000 crore, of which about ₹57,000 crore was owed to public-sector lenders.

AGM approves a rights issue and a higher borrowing limit Group and markets

What was approved: Shareholders backed raising ₹4,500 crore through a rights issue and lifting the borrowing limit from ₹25,000 crore to ₹35,000 crore. The company named Alvarez & Marsal to run its debt restructuring.

The RBI meets the major shareholders Group and markets

What happened: The RBI met IL&FS’s top shareholders and raised its concerns about the crisis. LIC was the largest, with about 25%. The day before, IL&FS Financial Services had told the stock exchange it had missed payments on a ₹52.4-crore short-term deposit and a ₹104-crore term deposit.

SIDBI threatens legal action; the group loses commercial-paper access Group and markets

What happened: According to reports at the time, SIDBI said it could go to the NCLT over non-payment, the group lost access to the commercial-paper market for up to six months after a missed repayment, and the board approached the NCLT to work out an arrangement with shareholders and creditors.

A mutual fund’s paper sale sets off a market panic Group and markets

The panic: A sale of Dewan Housing Finance commercial paper by DSP Mutual Fund at a high yield set off a rout. The Sensex fell about 1,500 points as investors questioned the model of financing long loans with short-term borrowing.

The resignation: Ramesh C. Bawa, managing director and chief executive of IL&FS Financial Services, resigned the same day.

S.B. Mathur is named chairman; SEBI says it is monitoring Government and board

What happened: Former LIC chairman S.B. Mathur was named chairman of the IL&FS group, replacing Hemant Bhargava, LIC’s managing director, who had held the post since July. SEBI said it was monitoring the situation, and contagion spread to mutual funds and the debt market.

The group says it is waiting for ₹16,000 crore from government bodies Group and markets

The claim: IL&FS told staff the defaults arose because it had not received about ₹16,000 crore from government agencies, and said it was trying to raise money by selling non-strategic assets, a rights issue and corporate debt.

A ₹1,000-crore loan from SIDBI goes unpaid Group and markets

What happened: IL&FS missed repayment of a ₹1,000-crore short-term loan from SIDBI, as reported at the time. Rating agencies downgraded almost all of the group’s debt instruments in the days after.

IL&FS Financial Services misses a commercial-paper payment Group and markets

What happened: The group’s financial services arm defaulted on commercial paper, then repaid within days. The incident raised fresh doubts about its ability to meet short-term obligations.

Founder Ravi Parthasarathy steps down Group and markets

What happened: Ravi Parthasarathy resigned as chairman, citing health. LIC’s managing director, Hemant Bhargava, who represented the group’s largest shareholder, was elected non-executive chairman at a board meeting shortly after.

IL&FS Transportation Networks delays a ₹450-crore repayment Group and markets

What happened: The group’s road arm delayed repayment of about ₹450 crore of inter-corporate deposits owed to SIDBI. ICRA and CARE downgraded its instruments.

The RBI’s inspection tells IFIN to cut group exposure Group and markets

What was reported: As cited in a later forensic report, the RBI’s inspection report on IL&FS Financial Services, issued in November 2017, advised it to reduce its exposure to group companies and not lend further to them. The same report says IFIN then bought shares from group firms, which the forensic report said gave them funds another way. The primary RBI document is not public, so this is given as reported.

Borrowing grows on long-gestation projects Group and markets

The model: IL&FS and its subsidiaries funded projects with loans, commercial paper, inter-corporate deposits and debentures, relying on refinancing and on recovering money from projects over many years. Delayed projects, cost overruns, disputes and stuck concession payments widened the gap between debt due and cash coming in.

The scale: By March 2018 the group’s debt was estimated at about ₹91,000 crore, around ₹57,000 crore of it owed to public-sector lenders. At the takeover it had 302 entities, 169 domestic and 133 offshore.

IL&FS is established Group and markets

The business: Infrastructure Leasing & Financial Services was set up in 1987 to mobilise long-term money for infrastructure. It grew into a group of subsidiaries, joint ventures and associates across transport, energy, urban services and finance.