IL&FS board begins legal action against defaulters of subsidiary IFIN after detecting irregularities, fraud

After detecting major irregularities in IL&FS Financial Services (IFIN), the government-appointed board of Infrastructure Leasing and Financial Services (IL&FS) has begun legal action against the defaulters of the firm, said a media report.

The move for criminal proceeding came after huge irregularities were found such as ever-greening of loans and funds being routed to entities which are not eligible to borrow, according to a report in The Times of India.

“We have initiated legal action against companies that have defaulted on due payment to IFIN, after giving them notice to make payment. We also propose to take legal action in cases where loans have been sanctioned in collusion — by committee of office bearers concerned — with the borrowers,” an IL&FS spokesperson was quoted as saying by The Times of India.

In November last year, Uday Kotak-led government appointed board of crippled infra lender IL&FS group had informed the government and National Company Law Tribunal (NCLT) that it expected to complete the resolution process in stages over the next two-three quarters and hinted at corrupt practices by the previous management.

The resolution plan submitted to the bankruptcy court and the government also hinted at non-transparent and illegal tractions by the previous management in selling a group entity in June 2017 and that the audit committee will conduct a special audit of the books of the key group companies.

After a month of market mayhem following the crisis at the diversified (IL&FS), the government had on 1 October, in a Satyam Computers-style rescue, superseded its board and appointed a seven-member board headed by Kotak as the chairman.

Following this, the government moved the National Company Law board for approval which on the same day asked the new board to submit an interim revival plan by 31 October.

About the alleged corruption in the group, the board informed the NCLT that “a certain asset of the group was transferred from one group entity to another group entity in June 2017 at a value of Rs 30.8 crore for cash based on an independent fair valuation, and in just about a year, a committee of directors resolved to sell this to a third party for Rs 1 crore, the reasons for which the board finds are inadequately supported.”

IL&FS, represented by counsel Sanjay Shorey, submitted the plan that consists of a micro-level picture and the resolution plan and the way forward to a bench of judges V P Singh and Ravikumar Duraisamy.

“This blueprint is the hope and it has to be realised,” Shorey informed the judges.

Earlier this month, state-owned gas utility GAIL India terminated a Rs 270-crore pipe laying contract it had awarded to financially-troubled IL&FS and replaced it with another contractor.

The contract was terminated “due to poor project progress driven on account of acute financial crisis,” GAIL said in a statement here. GAIL had last year awarded a portion of the 2,655-km of the Pradhan Mantri Urja Ganga project to IL&FS.

— With PTI inputs