C Sivasankaran, promoter of Siva Group, had arranged hospitality and other amenities for IL&FS Chairman Ravi Parthasarathy, director Vibhav Kapoor, and vice-chairman Hari Sankaran, SFIO has said in its report.
The Enforcement Directorate (ED) has initiated probe against Siva Group companies in case of loans taken from IFIN on the basis of dud shares of Tata Tele Services Limited (TTSL).
"In the IL&FS case, ED has gathered evidence of getting money back to company's director's account after giving loan to negative collateral," a senior official of ED told Moneycontrol.
In the chargesheet filed by SFIO, it said that loans were given to Siva Group companies despite Reserve Bank of India raising the red flag on collaterals.
As per the SFIO report, "IFIN entered into a fraudulent Put Option arrangement with Shanmugha Real Estate and Promoters Private Limited (SREPPL, a SIVA Group entity) on Dec 23, 2015 for purchase of TTSL shares, after 1 year of the agreement and within 5 year period ending Dec 23, 2020. It was agreed that the share have a put option price of Rs 32.30 per share this was agreed to in order to justify the valuation of the investments in TTSL shares in the books of IFIN. This was to avoid complete write off of Rs 253.55 crore which would have adversely affected their financial performance.
The put options of SIVA Group had no value as the entity did not have any asset to monetize against the said put option and other means of revenue sources. Further, Siva group has not been able to honour the liabilities under the loans given by IFIN because of which the shares of TTSL were invoked, thus the commitment of put option by SIVA Group was a farce proposition. RBI has observed in its inspection report dated 22nd March 2019 that SREPL the counter party to derivative transaction of put option had accumulated losses of Rs 25.30 Crore, and the total asset size is only 13.7% of carrying value of derivative amount and further Siva Group was classified as NPA in the books of IFIN and thus the full provision should be made in the books of IFIN for TTSL shares.
In FY 2016-17, there was no provision made for these investments as there were independent valuers’ report issued by NM Raiji & Co. supporting the value of TTSL shares and Siva Green. In addition, the shortfall, if any in future, was covered through shortfall guarantee agreement of Rs 300 Crore from Siva Group”.
IFIN, in order not to write off the equity investment in TTSL, had created a put option against Shanmuga Real Estate Private Limited, which was a loss making company. As per the report that this transaction was an eye-wash to circumvent the requirement of writing off the TTSL share in the books of IFIN.
In the case of OCDs of Siva Green, RBI had directed to provide for provision for investment in OCDs of Siva green and to write off investment of Equity shares in TTSL acquired by IFIN pursuant to execution of pledge. In order to avoid provisioning/write off, in order to show the income generating capacity of Siva group, extensions were given in above mentioned MoUs.
It was observed that in December 2015, an agreement was signed for creating security of Rs 300 crore from the receivables of CPIL, on account of MOU with HCPL. However, the MOU signed in November 2014 was expected to generate Rs 750 crore in six months. There was no revenue generation, still the said MOU was used to create fictitious cash flows projections and thus avoid provisioning for Siva group loans. The security given to IFIN was purported to be 40 percent of the total receivables by CPIL from the sale of the land of parcels held by HCPL. The MoU/contract was created to camouflage and delay the provisioning as the intended purpose monetisation had never attempted/took place. These investments were not written off despite the fact that the regulator had identified the same as lost investments.ED is investigating both deals of Siva Group companies with IFIN. In SFIO report, it was mentioned that "Sivasankaran was arranging hospitality for Ravi Parthasarathy (ex-chairman IL&FS), Vibhav Kapoor (ex-CIO) and Hari Sankaranan (ex-CEO), including foreign travels, arranging private jets & helicopter rides, booking of resorts and arranging for interiors of their flats at Brussels, among others. In turn, Parthasarthy, Kapoor and Sankaran were found to have facilitated/connived with Sivasankaran, by influencing the decision-making process in IFIN, including the critical decisions for recovery and disbursement of loans and fees".Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.