On August 25, 2026, the NCLAT dismissed appeals by BSR & Associates and N Sampath Ganesh, confirming the Serious Fraud Investigation Office (SFIO) has the legal authority to seek asset disgorgement in the IL&FS Securities Services Ltd case. This ruling clarifies that the Central Government, not the SFIO, remains the petitioner in civil recovery proceedings, clearing a key legal hurdle in the ongoing investigation.
The National Company Law Appellate Tribunal (NCLAT) has delivered a significant ruling regarding the accountability measures in the ongoing IL&FS crisis. On August 25, 2026, the tribunal dismissed appeals filed by the audit firm BSR & Associates LLP and its former partner, N Sampath Ganesh. The ruling confirms that the Serious Fraud Investigation Office (SFIO) is legally authorized to pursue the disgorgement of assets in matters involving IL&FS Securities Services Ltd (ISSL).
Disgorgement is a legal process where a court orders individuals or entities to give up funds or assets that were allegedly obtained through misconduct or fraud uncovered during an investigation. The appellants had challenged this process before the National Company Law Tribunal (NCLT), arguing that the SFIO lacked the proper standing to initiate these specific civil applications under the Companies Act, 2013.
Clarifying Legal Roles
A central point of the dispute was the claim of a conflict of interest. BSR & Associates and N Sampath Ganesh argued that the SFIO’s dual role—acting as a prosecutor in criminal matters while also acting as a petitioner in civil asset recovery—could prejudice the proceedings. The appellants contended that the SFIO could not exercise these powers without formal delegation through a specific Gazette notification from the Central Government.
The NCLAT bench, led by Officiating Chairperson Justice Yogesh Khanna, rejected this argument, labeling it baseless. The tribunal clarified that in these civil proceedings, the formal petitioner is the Central Government (the Union of India), while the SFIO is the agency authorized to execute the proceedings and present the investigation report. By establishing that the government holds the formal standing, the tribunal negated the claim that the SFIO was acting beyond its jurisdiction.
Impact on the IL&FS Resolution
The IL&FS group has been under a government-mandated resolution process since September 2018, following a series of defaults that triggered a liquidity crisis in the Indian financial system. The SFIO was tasked with investigating the affairs of IL&FS and its subsidiaries, including ISSL, and submitted its findings to the government in July 2023.
This latest NCLAT order is a notable development in the long-running probe. By validating the SFIO's authority to seek asset recovery, the ruling provides a clearer path for the government to proceed with civil actions against parties implicated in the investigation. For stakeholders, this reinforces the regulatory intent to enforce accountability as part of the broader group-level resolution framework.
Investors and market participants tracking the governance and cleanup of the IL&FS group may monitor further updates on the actual execution of asset disgorgement orders. The next phase will likely involve the NCLT advancing the recovery applications based on the findings presented by the investigative agencies.