This paper deals with rotor flux-linkage estimation in interior permanent magnet synchronous motor. In most applications, the rotor flux is considered as a known constant. However, sharp transients, high loads and high temperatures may cause demagnetisation which has dominant impact on the motor performance. As a result, estimating the rotor flux-linkage can be helpful to detect and manage demagnetisation faults. To estimate the rotor flux-linkage, a novel integral terminal sliding mode observer is proposed. The observer uses stator currents as state variables which can tolerate well against the motor uncertainties. To keep the motor performance during the demagnetisation fault, a sliding mode block control strategy is proposed for the interior permanent magnet synchronous motor for a first time. The suggested robust controller is composed of a speed control loop and two stator current control loops. Comprehensive simulations are carried out to show the effectiveness of the proposed observer and controllers.