* Sale of some units, individual road projects considered
* Board to make proposal to appellate tribunal on Wednesday (Adds details on latest default by an IL&FS unit in para 10)
By Nidhi Verma
NEW DELHI, Oct 30 (Reuters) - India is considering selling Infrastructure Leasing and Financial Service Ltd (IL&FS) or divesting some of its assets as it seeks to end the company's debt crisis, a person with direct knowledge of the matter said on Tuesday.
The Indian government took control of IL&FS, a major infrastructure financing and development company, this month after it defaulted on some of its debt, triggering fears of contagion across India's financial system.
The government-appointed board plans to propose a sale of the whole firm, some of its units or individual road projects to the National Company Law Tribunal on Wednesday, the source said.
It could take six to nine months to fully address the problems at IL&FS, whose shareholders include Japan's Orix Corp and Abu Dhabi Investment Authority, the source said.
"We will be able to gauge buyers' interest only when we hit the market," the source said, adding that IL&FS had road building projects totalling about 12,000 kilometres that could be sold to buyer who would finish the work and collect tolls.
IL&FS's subsidiaries include transport network builder IL&FS Transportation Networks Ltd, engineering and procurement company IL&FS Engineering and Construction Co Ltd and financier IL&FS Financial Services Ltd.
IL&FS defaulted on some debt it owes banks in recent weeks, and its credit rating has been downgraded to junk.
The defaults triggered sharp falls in Indian stock and debt markets amid fears about risk in the rest of the country's financial sector. The Indian government took control of the company and replaced its board with six nominees.
IL&FS Transportation said on Tuesday it has defaulted on interest totalling about 178.84 million rupees for non convertible debentures, due to insufficient funds.
Government officials have ruled out any direct state financial support for IL&FS, which has 348 businesses and gross debts of around 910 billion rupees ($12 billion).
Government-owned firms, including Life Insurance Corp of India and State Bank of India, own nearly 40 percent of the company, while Orix Corp owns 23 percent, and Abu Dhabi Investment Authority has a 12 percent stake.
There was also a plan to ask state-run road developer, National Highways Authority of India, to take over some of IL&FS' incomplete road projects and award them to other firms, government sources told Reuters last week.
Officials at India's finance ministry and market regulators met in New Delhi on Tuesday to discuss a liquidity crunch following the defaults by IL&FS. ($1 = 73.6925 Indian rupees) (Writing by Krishna N. Das Edited by Martin Howell/Susan Fenton/Alexander Smith)