NEW DELHI: The Serious Fraud Investigation Office (SFIO) has charged former IL&FS chairman Ravi Parthasarathy and his team with causing immense damage to the infrastructure financing firm by window-dressing financials, diverting funds in the form of loans and reaping personal benefits by way of “high managerial remunerations”.
In all, the SFIO report has named nine senior executives including former MD Hari Sankaran, former CEO Arun Kumar Saha, former CIO Vibhav Kapoor and former managing director of IL&FS Financial Services R C Bawa. The SFIO had submitted its interim report to the NCLT on December 3.
“This is an act of fraud causing indebtedness of over Rs 91,000 crore to IL&FS. This is deliberate, wilful, fraudulent act of the directors who were the mind controlling the affairs of IL&FS with the intention to defraud creditors, who too had failed in their due diligence,” the report said.
It noted that rising indebtedness should have served as a red flag for the creditors to stop further loans. But, through their discriminatory acts, “the lenders provided long rope to the directors in control of affairs to put IL&FS in coma,” the report noted.
SFIO claims they have formed a separate committee of directors, which acted without the information of the board for the debt binge, overstated profits and took all key decisions about the group’s credit and investments in subsidiary firms to “reap personal benefits by way of high managerial remunerations”.
For instance, the SFIO has pointed out the average percentage increase in the managerial remuneration was 66 per cent in 2017-18, with Parthasarathy getting the biggest hike at 144 per cent. In comparison, salaries to employees other than managers rose 4.4 percent. Another serious charge is of manipulating the loan disbursal by the company.
“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,” the report said. The management was able to hide possible defaults resulting in increasing indebtedness on a standalone basis, as during distressed times, IL&FS and its key subsidiaries were raising short-term market funding through “commercial papers or inter corporate deposits based on its bogus and fictitious but good credit rating”.
The report adds that they arbitrarily disbursed over Rs 400 crore in loans to the employees’ trust, despite being aware of the fact it would not be repaid.