IL&FS crisis: Debt-laden firm closes 45 entities accused of round-tripping funds, halves workforce to 8,000

IL&FS has reportedly closed 45 of its 347 group firms that were allegedly round-tripping loans and funds, and has almost halved its workforce to 8,000, a media report said. According to Mint, 42 of these firms were registered overseas. The report added that the exercise to close these companies was also an attempt to simplify the complex structure at IL&FS. The firm has reportedly brought down permanent staff strength to 2,500 from earlier 5,000. The crisis at IL&FS, which is estimated to have a debt burden of over Rs 94,000 crore, came to light last year after some group companies defaulted on debt repayments. IL&FS has initiated a digital forensic investigation into the alleged fraud at the firm and is looking to rope in an expert investigator, The Economic Times said, citing sources familiars with the matter. The report added that the Serious Fraud Investigation Office (SFIO) and a private investigator “will scan company servers and the desktops, laptops, tablets and mobile phones of senior company executives for evidence of any wrongdoing.” Meanwhile, the Central Board of Indirect Taxes and Customs has asked its officials to take action against India-based subsidiaries of IL&FS in order to recover dues, Bloomberg Quint reported. [caption id=“attachment_5309041” align=“alignleft” width=“380”] Representational image. Image courtesy: IL&FS[/caption] Last week, it was reported that independent directors of various IL&FS companies were under the scanner of the corporate affairs ministry for alleged lapses in carrying out their duties as financial problems continued to brew at the diversified group. The sources said independent directors of various group companies were under the ministry’s lens, including individuals who were on the boards of blue-chip firms. The role of auditors, credit rating agencies and some former officials entities was being looked into by the ministry, which had superseded the IL&FS board in October 2018. Earlier in the month, a senior government official had said the group’s auditors had “many questions to answer” prima facie as they were supposed to act as “gatekeepers” and detect widespread irregularities. “What is the gravity of the offence — whether it is dereliction of duty, total negligence, collusion with management or abetting the crime and the extent of public interest involved — will determine the quantum of action. It will be premature to pass any judgment on this at this stage,” the official was quoted as saying by PTI. In April, the SFIO arrested former vice chairman of IL&FS Hari Sankaran for fraudulent conduct and causing wrongful loss to the company and its creditors. He was arrested on the grounds of abusing his powers in IL&FS Financial Services Ltd through fraudulent conduct and in granting loans to entities that were not credit-worthy or were declared as non-performing accounts. --With inputs from agencies