NCLAT revives IL&FS plea in Rs 1,080 crore circuitous transactions, sets aside NCLT order

New Delhi, Appellate tribunal NCLAT has revived the plea of debt-ridden Infrastructure Leasing & Financial Services (IL&FS) seeking examination of six alleged circuitous lending transactions aggregating Rs 1,080 crore.

The appellate tribunal set aside a previous order passed by the Mumbai Bench of the National Company Law Tribunal (NCLT). The tribunal said the NCLT "erred" in its order and misconstrued its earlier directions, failing to examine the merits of allegations that the transactions were designed to circumvent regulatory restrictions.

The two-member NCLAT bench observed that the NCLT had misconstrued its earlier order passed on January 16, 2025, by concluding that transactions could be collapsed only when all parties had mutually agreed.


The dispute relates to six transactions worth about Rs 1,080 crore involving IL&FS Financial Services Ltd (IFIN), SREI Infrastructure Finance Ltd (SIFL) and their group entities. These transactions were structured through SREI group entities and ultimately routed to IL&FS group companies, allegedly to circumvent RBI restrictions on group exposure.

The Mumbai bench of NCLT in its earlier order dated April 13, 2026, had dismissed IL&FS' application seeking a declaration that six transactions between IL&FS Financial Services Ltd (IFIN) and SREI Group entities were sham, circuitous and fraudulent, while allowing applications filed by SREI Infrastructure Finance Ltd. (SIFL).

Challenging this order, IL&FS approached the NCLAT, contending that the NCLT had incorrectly interpreted the appellate tribunal's earlier order dated January 16, 2025.

The NCLAT held that these allegations warranted proper judicial examination rather than dismissal on a preliminary legal interpretation.

The judgment also reiterates the wide powers available to the Tribunal under Sections 241 and 242 of the Companies Act, 2013.

NCLAT noted that reports of the Reserve Bank of India (RBI), the Serious Fraud Investigation Office (SFIO), Grant Thornton Bharat LLP and market regulator SEBI had raised concerns regarding the nature of the transactions and alleged that funds were routed through third-party entities.

The appellate tribunal held that powers available under Sections 241 and 242 of the Companies Act, dealing with oppression and mismanagement, are wide in scope and not confined only to situations specifically enumerated under the statute.

Rejecting the NCLT's interpretation of Section 242(2)(f), which requires consent of parties for modification or termination of agreements, NCLAT said the provision could not be used to restrict the tribunal's jurisdiction where allegations pertain to sham, fraudulent or void transactions.

"Order dated 13.04.2026 passed by the NCLT, Mumbai Bench - I, is set aside. CA No.226/2025 is revived for fresh consideration in accordance with law and in accordance with the observations made in this order," said NCLAT.