The Enforcement Directorate (ED) is unhappy with the Grant Thornton interim report on IL&FS Financial Services, as the audit firm has been able to find money trail for anomalies worth only Rs 2,364 crore while the report had pointed out financial irregularities totalling Rs 13,000 crore.
IL&FS has a debt of about Rs 89,000 crore, of which Rs 65,000 crore has been classified under the 'amber' and 'red' categories.
Grant Thornton did not respond to a query by Moneycontrol.
The ED received Grant Thornton's report about a week after it submitted the report to the IL&FS board on February 20.
According to the ED, the audit report only sheds light on some transactions but an in-depth forensic report is missing.
A source close to the development told Moneycontrol “The forensic report did not go into details of layering in loan disbursement to companies, that do not have proper collateral. As per our primary investigation, the first layer of loan disbursement had no issue with respect to the prevention of money laundering (PMLA). Their annual books have mentioned related party transactions with details on relatives who have received contracts."
"The main investigation point is about who received contracts in the second or third layers and whether those companies actually exist or are just on paper. These critical details are not a part of the (Grant Thornton) forensic audit report”.
Another source said, “Grant Thornton was under investigation from the Serious Fraud Investigation Office in the Kingfisher Airlines case where the auditor had given a report on the brand equity of Kingfisher, based on which Kingfisher took a loan from IDBI bank."
“Enforcement Directorate feels this case may be the biggest scam of the financial crime and could be worth more than Rs 30,000 crores. Even the Ministry of Corporate Affairs feels over Rs 30,000 crores may not be returned to banks and over Rs 50,000 crores lie in the red category which means no kind of debt will be serviceable."
Moneycontrol was the first to report the findings of the forensic audit report by Grant Thornton on IFIN.
The ED is investigating instances where funds lent to borrowers of IFIN, were utilised to provide funds to certain group companies of IL&FS (primarily ITNL). Based on the unapproved minutes of the IL&FS board meeting held on September 11, 2018, it appears that the then Board of Directors and certain members of the board who were part of the Committee of Directors were allegedly aware that the loans provided to third parties had been forwarded or lent to IL&FS group companies.
As per the forensic audit, "Certain companies of IL&FS Group (that were available) were identified following instances amounting to Rs 2,270 crores where they received funds from the third party to whom IFIN has lent loans.”
The Grant Thornton audit claimed, ITNL received Rs 1,150 crore, Srinagar Sonmarg Tunnelway got Rs 390 crores, Gujarat Integrated Maritime Complex received Rs 250 crores, Fagne- Songard Expressway received loans of Rs 200 crore, Chennai-Nashri Tunnel Way received Rs 150 crore, Sea Land Port and Sitar Bikaner got loans of worth Rs 100 crore and Rs 30 crore, respectively. SREI, Empower, Vistar, GHV, PCL, Sangam and Dynamatic had allegedly transferred the loan to these companies.
The ED is investigating at least six instances where nearly Rs 100 crore in loans disbursed to borrowers were transferred to their promoters or directors.
The audit firm revealed that “a certain amount of loan which was disbursed by IFIN to borrowers, were directly utilised to pay the latter’s promoters or directors”.
IFIN had lent Rs 75 crore in October 2017 to Prism, which was again forwarded to Gupta in the form of a loan. Similarly, group company Flemingo received loans of up to Rs 514.50 crore and directors of the company, Kabir and Viren Ahuja received Rs 8.81 crore.
IL&FS Energy Development Company Limited director also got Rs 2.95 crores. Siddhartha Dinesh Mishra who is one of the promoters of Bay Capital got a loan from IFIN in Indus Equicap Consultancy private limited".
In one of the cases, it was noted that Siddharth Dinesh Mehta, who is a promoter of group Bay Capital and director at IL&FS Energy Development Company Limited, had received Rs 2.95 crore in a similar manner.