IL&FS Scam: Full Reports of SFIO and MCA UploadeD

Money life
December  05,2018


The ministry of corporate affairs (MCA) in its submission before the National Company Law Tribunal (NCLT) has revealed details of its finding on several instances of misreporting of income, dubious transactions, conflict of interest, ever-greening of loans and rampant personal enrichment of key employees, including Ravi Parthasarathy, Hari Sankaran, and Arun Kumar Saha besides others.
The MCA, quoting interim report from the Serious Fraud Investigation Office (SFIO) says, "IL&FS and its main subsidiaries had the same set of persons as controlling officials who have been at the helm of the affairs for a long period. As part of the governance structure, the board of directors of all key IL&FS group companies had constituted committee of directors (CoD), which was empowered to take decisions pertaining to the operations of that respective entity. The CoD of important subsidiaries comprised of managing directors (MDs), joint MDs, and executive directors (EDs) of IL&FS to deal with all on-going operational matters, including credits and investments."
"....the set of officials of the holding company, were the decision makers and 'the controlling will and mind' for most of the other group companies, especially at the direct subsidiary level or companies having substantial operations, and the IL&FS Employee Welfare Trust. These other group companies practically acted as departments of their respective holding companies, rather than functioning as separate legal/ business entities.
 
The interest of the holding companies were held supreme, many a times at the cost of their subsidiaries, joint ventures or associates," the report from SFIO says.
 
In the interim report, the SFIO had stated,"...it is evident that IL&FS procured funds from the market through short-term instruments and invested in its group companies by way of giving long-term loans and advances, which was prejudicial to the interest of IL&FS, in terms of financial solvency. During these distressed times, IL&FS and its key subsidiaries such as IL&FS Financial Services Ltd (IFIN) and IL&FS Transportation Network Ltd (ITNL) were contained to raise short-term market funding through commercial papers or inter corporate deposits based on its bogus and fictitious but good credit rating and these short-term loans were passed to its project special purpose vehicles (SPVs) or group companies, for helping them service their debt obligations, management fully aware, thereby hid and avoided possible defaults resulting into increasing indebtedness on a standalone basis."

"This is virtually an act of fraud causing indebtness of IL&FS to over Rs91,000 crore. This indebtness is deliberate, wilful, fraudulent act of directors who were the mind controlling the affairs of IL&FS with intention to defraud creditors, who too had failed in their due diligence. An increasing level of indebtness of IL&FS, year after year, was sufficient red flat for the creditors to prevent further loans and advances. Such discriminator acts of lenders have provided long rope to the directors in control of affairs to put IL&FS in coma," the report added.
 
Since the submission by MCA is widely available with the media and is widely circulated, we are putting it out in public interest. 

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