The sessions court of Mumbai on Friday admitted the chargesheet filed by Serious Fraud Investigation Office (SFIO) against 30 entities in the IL&FS Financial Services Limited (IFIN) fraud case. The chargesheet, filed on May 30, named several members of the former top management of IL&FS, including Ramesh Bawa, former managing director and CEO and Hari Sankaran, former vice president of IFIN.
The next date of hearing is June 18, when the court will take cognizance of the matter and is expected to issue notices to all the accused parties, an official with knowledge of the matter said. In an over 40 page complaint, the SFIO detailed the methodology used by former senior officials of IFIN to defraud its investors and creditors.
In its chargesheet, SFIO said a coterie of senior officials, including Bawa, Sankaran, Arun Saha, Vaibhav Kapoor and Ravi Parthasarathy flouted group lending norms set out by the Reserve Bank of India to avoid classifying defaulting loan accounts as non-performing assets (NPA).
The coterie… in order to avoid non-performing asset of the defaulting loan facilities, lent to other companies belonging to the borrowing group for repaying the principal and/or interest of the defaulting borrowing company, SFIO said in its complaint. This process was repeated several times until the final loan facility was either written off or declared an NPA or went unrecognised. IFIN also substantially increased lending to its group companies in the guise of funding for vendors or contractors of IL&FS Transportation Network Limited. Lending to IFIN’s group companies stood at Rs 5,200 crore for the financial year 2018 , accounting for 37% of its total loans and advances.
Bawa and Sankaran have already been taken into judicial custody in April for their role in the fraud. The SFIO also accused audit firms, Deloitte Haskin and Sells & BSR and Associates of colluding with officials of the company to conceal facts and of fraudulently falsifying the books of accounts and thereby financial statements from FY2013-14 to 2017-18 . The audit firms knowingly withheld crucial information, including the negative NOF and CRAR of IFIN, which directly led to losses for creditors and investors, the chargesheet said.
The SFIO continues to investigate other affairs of IL&FS which led to the company failing to service its debt obligations of over Rs 91,000 crore. The Supreme Court on Tuesday allowed the SFIO to reopen the accounts of IL&FS, IFIN and IL&FS Transport Networks for five years starting financial year 2013.
The financial irregularities in the books of IL&FS came into scrutiny last year, after the company failed to fulfill short-term and long-term debt obligations to the tune of Rs 91,000 crore.
In October 2018, the Mumbai bench of the tribunal ordered the suspension of the IL&FS board, to be replaced by a government appointed board. Uday Kotak, managing director, Kotak Mahindra Bank, was appointed non-executive chairman of the new board, which currently oversees the resolution process of the company.