- SFIO claim this probe has so far discovered a tip of the iceberg, that involves defaulting accounts of an estimated amount of over INR 90,000 crore.
- The SFIO’s first charge sheet involves 1 entity of IL&FS group that is IL&FS Financial Services Ltd (IFIN)
- The ‘coterie’ spotted by SFIO involves Ravi Parthsarthy, Hari Sankaran, Arun Saha, Ramesh Bawa, Vibhav Kapoor and K Ramchand, who were a part of top management in various IL&FS firms
The Serious Fraud Investigation Office (SFIO) probe led to an immense break on accused of the IL&FS fraud. SFIO indicted the top management of the IL&FS group’s subsidiary IFIN of forming a “coterie” with its Independent Directors and Auditors to participate in fraudulent of the company while operating the business as their “personal fiefdom” (A territory or sphere of operation controlled by a particular person or group).
Officials claim this probe has so far discovered a tip of the iceberg, that involves defaulting accounts of an estimated amount of over INR 90,000 crore. The SFIO’s first charge sheet involves 1 entity of IL&FS group that is IL&FS Financial Services Ltd (IFIN). The investigation also continues against the parent firm Infrastructure Leasing and Financial Services Ltd (IL&FS) and its other subsidiaries.
The SFIO claims to be gathering data regarding all borrowings by IFIN from banks and via market instruments, also questions circling over the role of banks and their officials and credit agencies.
The first charge sheet, filed by the government’s white-collar fraud investigation agency, follows examination of accounts of approx 400 entities, a large-scale forensic audit, details collected from laptops confiscated from several IL&FS offices, also the emails have been exported from the IL&FS servers, RBI inspection reports, minutes of meetings held, and also the assessment reports from the government appointed new board of IL&FS.
This massive scam emerged last year after IL&FS and its subsidiaries failed to pay debts on several occasions due to dire liquid crisis. The company owed over INR 90,000 crore to banks and other creditors as of March 2018. In October 2018, the government replaced board of IL&FS and appointed renowned banker Uday Kotak as its executive chairman.
The previous top management members of IFIN have been indicted with committing fraud with an intent to harm the interests of the company, shareholders and creditors, ultimately leading towards loss to the company.
The top management has also been accused of conspiring with few borrowers to assist them in making illegit gains in the form of loans with no intention of paying back.
It is also been said that statutory auditors of the company were also involved with the top management of IFIN and scammed the books of accounts and financial statements from the FY 2013-14 to 2017-18.
The members of the audit committee were also a part of conspiracy with the ‘coterie’ and left unnoticed the violations of norms, generating unlawful loss to the company.
The ‘coterie’ repeated its particular technique to scam several times by receiving an earlier loan facility for a borrower closed and creating a fresh facility, which was funded once again after default with another funding cycle via the same or different group entity. Eventually, the final loan facility resulted as an NPA or written off, while several of them left outstanding leading to debt increment.
The ‘coterie’ took misadvantage of their position, conspired with auditors and others to defraud the company by injecting an “illegit strategy” of loaning out money to group companies of IFIN by funding to vendors and contractors of another group company.
The SFIO listed out the companies like Deloitte Haskins and Sells LLP and BSR and Associates LLP in the chargesheet. The SFIO said “The statutory auditors failed to discharge their duties diligently and did not use professional scepticism to ensure true and fair disclosure of the state of affairs of the company”
“They, in fact, colluded with officials of the companies in order to conceal their fraudulent activities,”
The investigation agency said the financial statements produced and filed by the company did not appear to give a true and legitimate view of the state of affairs in the company, whereas financial statements from FY 2010-11 to 2017-18 were not in compliance with accounting standards.
One of the directors refused to reveal his interest in a borrower company which had his wife and daughter on the board.
The ‘coterie’ spotted by SFIO involves Ravi Parthsarthy, Hari Sankaran, Arun Saha, Ramesh Bawa, Vibhav Kapoor and K Ramchand, who were a part of top management in various IL&FS firms.
SFIO said its investigation discovered that IFIN, as an NBFC, extended loans to companies of Siva, ABG, A2Z, Parsvnath and other corporate firms, and several of them were not paying debts timely.
The ‘coterie’ knew about the potential problematic accounts, and still got the loans extended for the other companies of the same borrower groups.
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