ED court extends custody of IL&FS officials; to probe quid pro quo on loans sanctioned

A special court of the Enforcement Directorate (ED) on June 25 extended the custody of the two arrested officials of Infrastructure Leasing and Financial Services (IL&FS) and IL&FS Transportation Networks (ITNL) by three days.

The ED had arrested K Ramchand, former managing director of ITNL and Arun Saha, former joint managing director of IL&FS Financial Services (IFIN) on June 19 under a money laundering probe. A special court had remanded them to custody until June 25.

The two officials were being investigated for alleged financial irregularities in loans given to two companies -- GHV Hotel and New India Infra.

In the hearing on June 25, the lawyer representing the ED presented the statements of both the IFIN borrowers as well as the comments of IFIN audit committee chairman SS Kohli in court while seeking an extension of custody.

“Audit committee chairman SS Kohli told Enforcement Directorate that the committee of directors {of IFIN} that sanctioned loans did not present the true picture in front of the audit committee. And without the proper knowledge, the audit committee was unable to take action against these officials," a source told Moneycontrol.

The two borrowers -- GHV Hotel and New India Infra -- were given loans without any collaterals despite having a negative net worth. This raised suspicion of a quid pro quo arrangement. “GHV Hotel took a loan of Rs 120 crores from IFIN. The company had a history of negative net worth and yet it got a loan from IFIN. The same goes for New India Infra that took a loan of Rs 270 crores without giving anything as collateral,” another source close to the development told Moneycontrol.

The ED's lawyer sought four more days of remand while arguing that,  “Enforcement Directorate wanted to check whether the officials received any personal benefit for giving loans without any collateral to those companies which did not even have a proper business." The ED also submitted the bank statements in court as proof to seek permission to investigate further.

The ED may now confront these officials along with borrowers of companies to establish personal benefit.

IL&FS borrowed more than Rs one lakh crore from banks and other various financial institutions. IL&FS started defaulting from July last year.