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Last Updated : Aug 16, 2019 08:31 PM IST | Source:

IL&FS case: Enforcement Directorate gets cracking, files first chargesheet

ED's investigation also revealed that credit rating agencies were pressurised for favourable ratings.

Tarun Sharma @talktotarun

The Enforcement Directorate (ED) on August 16 filed the first chargesheet in the IL&FS case in a special court in Mumbai. The agency has named Ravi Parthasarthy, Ramesh C Bawa, Arun K Saha, Hari Sankaran, K Ramchand, IL&FS Financial Services Ltd and Siva Group's C Sivasankaran in the chargesheet.

ED's investigation revealed collusion between the top management of company and Sivasankaran and it has also come to light that some officials of IL&FS via various methods, like performance related perquisite (PRP), were using the employee welfare trust fund for their personal interests.

According to the investigation report, "there is considerable hike in receivables from IFIN and ILFS by R Parthasarathy, Hari Sankaran, Vibhav Kapoor and Arun Saha whereas Ramesh Bawa has received high amount of Performance related perquisite, which is usually given on the basis of profit earned by any company. It is clear that there was substantial hike in PRP and sitting fees of the members of CoDs  in the last consecutive of three Financial years when there was already substantial liquidation crisis in ILFS Group.


"Money was also taken out from the IL&FS employee welfare trust (EWT) which was made for the purposes of welfare of the employees. However, the committee of directors changed the trust deed multiple times and in process also devised a strategy of siphoning off the money from the trust in garb of distribution of shares of IL&Fs and other group concerns and also sale of shares and distribution of profits to the employees. The distribution criterion devised was such that the committee of members were the largest beneficiaries of the same. Employees were given shares of IL&FS at a very nominal price (Well below the value) and later group also facilitated the sale of same shares to LIC at a very high price, thus providing windfall gains. Later distributed the cash to the employees in which larger chunk was taken by committee of directors. All this was done despite the fact that the trust was running in operational losses."

The investigation also revealed that Rs 2,270 crore of loan was disbursed without collateral. Even IFIN routed money to ITNL through various other companies despite RBI restrictions. As per report that “Investigation so far has further revealed that in March 2018, the committee of Directors sanctioned and disbursed loans to the tune of Rs. 2270 Cr. to various third parties for further financing to ITNL, as RBI had issued injunction in November 2017 directing IFIN not to finance any more to its Group companies. Hence the said Rs. 2270 was also sanctioned and disbursed by committing Scheduled offence, hence the entire amount of Rs. 2270 also constitute Proceeds of Crime".

The investigation report said that those companies used for transferring money to ITNL were working only on commission basis.

According to the investigation report, "Ladhulal Soni, Group CFO of Sangam Group it is absolutely clear that they were contacted by Ramesh Bawa and Subhash Chandra of IFIN and asked us to do a quid pro quo transaction of Rs 250 crore. Accordingly, IFIN extended a short term loan of Rs 100 crore to M/s KSIL and Rs 150 crore to SBCL. Both the companies transferred the said loan to M/s Suchitra Finance and Trading and Suchitra Finance and Trading Ltd. transferred the same to ITNL. The said transactions occurred on March 22, 2018 and March 23, 2018 without any time gap. He further stated that they had borrowed at 13 percent annum and lend it to ITNL ant 14 percent since the transaction involved deposit of TDS twice.

"Hence, to cover the said TDS funding, 1 percent extra was kept; that As on date, the outstanding amount of M/s Kalyan Sangam Infratech Ltd. is Rs. 100 crore and interest thereon from July 1, 2018 with IFIN whereas outstanding of M/s Sangam Business Credit Ltd. is Rs. 150 crore interest thereon from 1st July 2018, with IFIN; that they had not given any collateral securities from KSIL and SBCL and nor they have received any collateral securities from ITNL in favour of SFTL. It was mere transaction where we had been transferred Rs. 250 Crore by IFIN without any request made by them and the sole purpose of loan was to transfer the said fund to ITNL. Hence no security was executed".

Enforcement Directorate provisionally attached properties worth Rs 600 crore.

The agency found that auditors also did not raise any concern. As per statement of Udayan Sen, a partner at Deloitte & Haskin, statutory auditor of IFIN, “on the basis of the observation given by Management, we had not raised any objections of funding to stressed companies”.

A similar version was given by Sampath Ganesh, Partner of BSR & Associates LLP (KPMG Group), statutory auditor of IFIN.

In his version, Sampath stated "that the significant matters arising from our audit were discussed with management of IFIN as well as with the audit committee of IFIN, comprising SS Kohli, Shubalakshmi Panse and Arun Saha. The board’s authority for sanction of loans, which were business decisions, was delegated to certain directors and officers of the company. The procedure that we performed was to verify if the loans were approved as per the process".

On being asked about the third party financing to ITNL from IFIN, he stated that he was not aware of any of these loans were for financing of ITNL and the same was not stated in any of the approval documents produced to them. He also added that management of the company should be aware of this.

However, audit committee chairman SS Kohli said that the issue of evergreening was never presented before the board.

"Loans were sanctioned by the Committee of Directors as per the Credit Policy under the UAF where no independent Directors were Members. Such sanctioned were reported to Board of Directors in a statement Form. It was required whenever there is any deviation from the Credit policy by the Management, such cases should be reported to the Board of Directors. Not a single case indicating deviation was put up to the Board of Directors. Any issue used to come to Audit Committee after it is either raised by internal Auditors or by Statutory Auditors," he said.

Investigation also revealed that credit rating agencies were pressurised for favourable ratings. According to the report, “Chief Rating Officers of ICRA has also accepted that they were being pressurised by Saha, Parthasarathy and Bawa for favourable ratings. The rating officer of ICRA stated that IFIN would have different rating if those facts were disclosed to them. The members of CoD of IFIN maintained high rating under the parentage of IL&FS”.

Care Ratings' Chief Rating Officer TN Arun Kumar said that they were aware of the top exposures of IFIN being stressed but issues of evergreening and dilution of collateral securities were not disclosed to them by the officials of IFIN/ILFS;

“We were informed that company’s NPA position was also not alarming” he said.

Collusion with Siva Group

IL&FS Group sanctioned around Rs 494 crore of loan to Siva Group in between December 2011 to 2018 in different group companies. ED attached properties of Siva group and made proceed of crime. SIVA Industries & Holdings Ltd.,(Rs. 100 Cr.) Siva Ventures Ltd.(Rs. 270 Cr), SIVA Compulink Ltd. (Rs. 35 Crs.), Alwo Ltd.(Rs. 40 cr.) and SIVA India Commercial Traders Pvt. Ltd.(Rs. 55 Cr.), against the pledging of 7.85 Crore unlisted shares of Tata Tele Services Ltd. on 31.03.2016, by committing Scheduled Offence. IFIN invoked the entire shares @ Rs. 32.30 and the proceeds equivalent to Rs. 254 crore is adjusted in the outstanding loan of SIVA Group. Further loans disbursed in the favour of SIVA Green Power Projects Ltd. (Rs. 190 crore) and in the favour of SIVA Shelter and Construction Pvt. Ltd (Rs. 50 crore) which were utilized otherwise than the sanctioned purpose, also remained outstanding.

ED found mail trails and documents of Siva’s business dealings with Parthasarthy’s wife. Similarly in the Unitech case, he stated that SIVA Group had lent Rs 400 crore to Unitech in 2012 as short-term loan for 90 days. M/s Unitech repaid Rs. 320 crore and gave a post-dated cheque of Rs 80 crore. The cheque was not honored on the due date. An amount of Rs 125 crore was sanctioned by IFIN to Unitech Group, out of which Rs 80 crore was repaid to SIVA Group. Sivasankaran held discussions with Ramesh Bawa and V Parthasarathy regarding sanction of loan to Unitech Group. Unitech Group also had good terms with Bawa and after discussions, the loan to Unitech was sanctioned.

In another case, Ramesh Bawa and Hari Sankaran told agency that Hill County Properties Ltd. sold two Villas to one of the Group companies of SIVA group namely Utoo Cabs at a very low price and so far Utoo cabs has made partial payment. Registry of the said properties are yet to be done.

ED registered ECIR on February 19, 2019, on the basis of an FIR filed against IL&FS Rail Limited . After that, ED arrested Saha and Ramchand on May 19, who are still in judicial custody.

Even SFIO filed its first chargesheet on May 30 against IFIN and its auditors. SFIO is soon expected to file the second report against ITNL.

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First Published on Aug 16, 2019 08:30 pm
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