Former IL&FS directors under scanner for money laundering

Former ILFS directors under scanner for money laundering

The Enforcement Directorate(ED), in February, 2019 made a foray at multiple locations in Mumbai, Delhi and Gurugram regarding the financial irregularities of Infrastructure Leasing & Financial Services(IL&FS). IL&FS CFO Maharudra Wagle was briefly questioned during these raids. After the stern investigation, the money laundering charge was confirmed on 5th March, 2019. 14 former board directors of IL&FS have been charged under this. It includes the former IL&FS Chairman Ravi Parthasarthy and the Vice-Chairman Hari Sankaran. 

The current management on board of IL&FS have charged these directors for sanctioning loans without security, unlawful gains and for assisting money laundering. IL&FS is an RBI registered core investment company. It was formed by three financial institutions viz. the Central Bank of India (12.56%), Housing Development Finance Corporation(HDFC) (9.02%) and Unit Trust of India(UTI) (7.67%). The State Bank of India(SBI) has the lowest stake in the company of around 7%. Their institutional shareholders include Life Insurance Corporation of India(LIC), ORIX and Abu Dhabi Investment Authority.


Depth of the crisis:

The ED also searched premises of the IL&FS’ lender’s former officials and have seized various properties, false records and data. An FIR has also been filed for cheating and forgery on part of IL&FS Group and its managing committee for the 8 year period from 2010 to 2018. The FIR contained allegations regarding investments taken on the basis of false projections, falsifying business records and for layering the funds. Huge loans were granted to certain entities even when these entities were under financial stress.

The amount of loans granted were said to be found in the directors’ bank accounts. While sanctioning a loan of Rs 28.99 crore to Bay Capital’s Indus Equicap Consultancy. Rs 2.95 crore was transacted to the personal account of Siddharth Dinesh Mehta who was a director of the borrower company and also director of IEDCL(group company of IL&FS).

Similarly, in a loan of Rs 515.5 crore given to Geowork’s Infra Projects Pvt Ltd, Rs 8.81 crore was transferred to Viren Ahuja, the promoter of the borrower company. Loans were also extended at a negative spread to borrowers suffering from liquidity issues. The sum of these loans amounted to Rs 4,300 crore. There were 16 other instances where loans worth Rs 1922 crore were extended under the same circumstances.

The overall allegations on the directors for the financial irregularities count up to Rs 13,000 crore. IL&FS noticed irregularities in transaction in excess of Rs 7100 crore during the last 5 years ending September, 2018. They are currently under a debt of Rs 94,000 crore and has defaulted multiple times in the past six months.

New Board:

The Government, due to these recurring defaults, appointed a new board under the chairmanship of Uday Kotak. The officials said that in the case of directors failing to respond in time, the company will take a stern action which may also include filing of cases. These allegations, defaults and irregularities came to light only after the special audit which was set up by the new board.

This audit was conducted by Grant Thornton, US accounting and advisory organization. 



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