IL&FS Crisis: Govt Seeks Freezing & Attachment of Properties of Key Executives Ravi Parthasarathy, Hari Shankaran and Others
The government on Monday sought attachment of properties of a few more directors of debt-ridden Infrastructure Leasing & Financial Services (IL&FS). The counsel for the ministry sought to freeze all assets, securities, lockers, bank accounts of Ravi Parthasarathy and Hari Shankaran.
 
Top executives from IL&FS group who were made parties to the case include Vibhav Kapoor, Pradeep Puri, K Ramchand, S Rangarajan, RC Bawa and Mukund Sapre. The government is also seeking attachment of movable and immovable properties of these top executives of IL&FS group.
 
During the hearing, the National Company Law Tribunal (NCLT) agreed to make these executives as parties to the case and allowed the company application to make all of them respondents in the case.
 
Earlier, the ministry of corporate affairs (MCA) filed its interim report on the IL&FS case, naming several high-profile individuals and 302 group companies as respondents. The MCA, in its report mentioned that 39 companies that were listed as part of IL&FS have ceased to be group companies and Serious Fraud Investigation Office (SFIO) is probing the matter. 
 
The counsel for the government told the Tribunal that interim probe shows manner in which fund diversion took place at IL&FS. While Kapoor was the chief investment officer of IL&FS, Ramchand was the managing director (MD) of IL&FS Transportation Network. Rangarajan was the MD and chief executive (CEO) of IL&FS Securities, Sapre was the executive director of IL&FS Transportation Networks Ltd (ITNL), while Bawa was the MD of IL&FS Financial Services. Puri, an officer from the Indian Administrative Services (IAS) was the chairman of IL&FS Water Ltd.
 
Last week, IL&FS initiated the process to sell its renewable energy business and has invited expression of interest (EoI) proposals from prospective buyers. IL&FS's assets from the renewable energy business put on the block include, operating wind power generating plants with aggregate capacity of 873.5MW, and its under-construction wind power generating plants with aggregate capacity of 104MW. Its asset management services for the wind power generating plant, business division that carries out project development and implementation of wind power plants will also be sold.
 
Last month, several lenders of IL&FS had opposed the 90-day moratorium over loans taken by the debt-laden group and its subsidiaries. Lenders also requested the National Company Law Appellate Tribunal (NCLAT) to allow them not to classify IL&FS accounts as non-performing assets (NPAs) in case of defaults.
 
However, there was no decision and the NCLAT fixed 17th December as next date of hearing. 
 
During October, the NCLAT had stayed all proceedings against IL&FS group and its 348 group companies till further orders, over an urgent petition moved by the government.
 
Earlier, the ministry of corporate affairs had approached the appellate tribunal after the Mumbai bench of NCLT turned down its plea to grant 90-day moratorium over the loans taken by IL&FS and its subsidiaries. On 1 October 2018, the NCLT suspended the board of IL&FS on the government's plea and authorised reconstitution of the board by appointing seven directors two days later.
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COMMENTS

tanay

4 months ago

Are Ravi Parthasarathy and his cronies in India? Also, why haven't they spoken on this issue even once yet?

IL&FS invites Proposal for Selling Assets from Renewable Energy Business
Debt-laden Infrastructure Leasing & Financial Services (IL&FS) has initiated the process to sell its renewable energy business and has invited expression of interest (EoI) proposals from prospective buyers.
 
IL&FS's assets from the renewable energy business put on the block include, operating wind power generating plants with aggregate capacity of 873.5MW, and its under-construction wind power generating plants with aggregate capacity of 104MW. Its asset management services for the wind power generating plant, business division that carries out project development and implementation of wind power plants will also be sold.
 
IL&FS is also selling its businesses relating to project development and implementation of solar power generating plants and projects under development of approximately 300MW capacity solar power plants for corporates, the group said in a release.
 
As per the statement, the proposed stake sale may be carried out as a basket or individually or any combination.
 
"In order to ascertain market interest and to examine feasibility of maximisation of value in an orderly and transparent manner, the Board, acting on behalf of its relevant subsidiaries, has today initiated the process of exploring the sale of controlling stake(s) held by IL&FS Group in renewable energy assets or businesses...," the company said in the statement.
 
The decision is based on the report prepared by the new board of IL&FS which was submitted to the ministry of corporate affairs and, in turn, to the national company law tribunal (NCLT).
 
"As stated in the said report, it is the objective of the board to achieve, by one or more plan(s), the resolution of the IL&FS group through certain measures, including asset divestment," the statement said.
 
IL&FS's board has appointed Arpwood Capital Pvt Ltd and JM Financial Ltd as financial & transaction advisors, along with Alvarez & Marsal as resolution consultants.
 
Earlier this week, the debt-ridden group had said that it has received over a dozen EoI towards acquiring its stake in IL&FS Securities Services Ltd (ISSL) and ISSL Settlement and Transaction Services Ltd (ISTSL).
 
IL&FS had started the asset monetisation process a fortnight ago, towards developing a resolution plan for the IL&FS Group. The last date for receipt of EoI was 23 November 2018.
 
On 24th November, corporate affairs secretary Injeti Srinivas said that following an 'overwhelming response' to buy units of the debt-ridden company, State-appointed will soon put on sale another 8 to 10 subsidiaries.
 
IL&FS group had a debt of more than Rs91,000 crore at the end of March 2018.
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GIFT City: 9 Steps the Gujarat Government Should Take To Fix the Mess
In a damage-control exercise, which also helps reduce the magnitude of the IL&FS (Infrastructure Leasing & Financial Services) crisis, the Gujarat government has decided to step in and buy the 50% stake that the beleaguered company held in its prestigious GIFT City (Gujarat International Finance Tec-City) project. Gujarat chief minister (CM) Vijay Rupani revealed this in a series of interviews in Mumbai, to promote Gujarat as a business destination. 
 
Ironically, this smart city project to develop an international financial centre was first offered to Maharashtra as a concept, by financial expert DC Anjaria; but the state failed to respond. Narendra Modi, as the CM of Gujarat, snapped up the idea and got it going. 
 
GIFT City is located 12km  from Ahmedabad International Airport but has been making slow progress because of the mistake—in hindsight—of selecting IL&FS as an equal partner with the Gujarat Urban Development Company Limited (GUDCOL). 
 
The Rs70,000-crore project is a ‘smart’ city with high-quality physical infrastructure and includes an international financial services centre (IFSC) structured as special economic zone and global financial hub. 
 
While the CM admitted to an ‘in-principle’ decision to acquire the stake, it raises many issues. From the perspective of resolving the IL&FS mess, the big question is: What price will Gujarat pay for the 50% stake? That depends on several factors. 
 
If one were to go by the calculations of Mr Anjaria, who blew the whistle on the shocking gold-plating of this project, the Gujarat government could probably demand control of GIFT City without paying anything at all. 
 
Mr Anjaria reckons that IL&FS owes the government several thousand crores of rupees, even after IL&FS’s entities pocketed multiple fees and charges, in what has been its signature modus operandi. Also, the entire project is built on land that belongs to the people of Gujarat. Moneylife was the first to expose how the whole project was virtually a gift to IL&FS, in a one-sided deal.  
 
Since the issue is now before the bankruptcy court, Gujarat may have to cough up more money to acquire IL&FS’s stake. It will be a question of who else is interested (which is unlikely) and how it is pitched to the bankruptcy court and creditors of IL&FS. 
 
For instance, if Gujarat can show that it will salvage the project and make it viable again, most creditors will support the acquisition. The amount shelled out for acquiring the stake will be the cost of putting complicit bureaucrats in charge who did not protect the state’s interest. 
 
There has been a lot of action behind the scenes to make Gift City work. Last week, the Securities & Exchange Board of India (SEBI) permitted alternate investment funds (AIFs), such as private equity funds and venture funds, to operate out of Gift City’s IFSC. This will give it a boost; but new investors are unlikely to rush in, unless they see evidence of a genuine clean-up. Here is what the Gujarat government needs to do to make the GIFT City work:
 
1. It needs to start by separating infrastructure development (find a new partner to replace IL&FS) from IFSC. It should also take back control of some of the land rights and development rights that it has relinquished to IL&FS, before it finds a new partner.
 
2. If the IL&FS board could be sacked, one wonders what is stopping the Gujarat government from doing the same with the messed-up GIFT City’s as well as IFSC’s boards and put in place a transparent and credible management. This is especially important in view of some serious allegations made by Mr Anjaria in a public interest litigation (PIL), after being removed as independent director and head of GIFT City’s audit committee for refusing to ratify questionable decisions of the board.
 
3. If the Gujarat government intends to attract global investment, it needs to address the issues raised by Mr Anjaria’s PIL and persuade him to withdraw it and re-start on a clean slate.
 
4. Mr Anjaria has asked for an investigation into the Gift City’s contracts by the Serious Frauds Investigation Office (SFIO). While the Central government has addressed this by ordering a wide-ranging SFIO investigation into IL&FS, it has to demonstrate its seriousness by changing the Gift City management. The PIL has some serious charges, with evidence, against Dipesh Shah, chairman of IFSC, including falsification of minutes of meetings. Ajay Pandey, managing director of GIFT City, also remains in place in spite of the false and defamatory allegations made against Mr Anjaria in an advertorial in the Business Standard. (The newspaper later published a long rejoinder by Mr Anjaria). 
 
5. GIFT City and IFSC need to be brought under the ambit of the Comptroller and Auditor General (CAG) of India and the Right to Information Act (RTI), since there is a substantial investment by the state in terms of land value. This was deliberately obfuscated in the 50:50 joint venture (JV) with IL&FS. 
 
6. In May 2012, the state government received an extensive report from GIFT City’s audit committee, documenting irregularities and defaults by IL&FS’s entities. Subsequently, more facts and details have been provided to the government by gathering information under RTI. All these must be handed over to the SFIO for its investigation and action.  
 
Here are some details that were part of these submissions. 
 
7. IL&FS was initially sold 7.77 million sq ft of development rights at a discount to the price set by the board of directors for other investors. The value was estimated at Rs550 crore and 50% of the amount (or Rs225crore) had not been paid until 2016. This is a direct default of GIFT City to the state government. How IL&FS persuaded the government to sell its development rights, when it was already the promoter, manager and developer of the project, is itself an issue needs SFIO investigation, since it is a misappropriation of public funds.
 
8. GIFT City’s deal with the Gujarat government was that land would be leased to it at Re1/ acre for 99 years. The revenue department, through a formal resolution, had ensured that land-related profits will accrue to the state, if development rights granted by it were sold at a commercial price. Over 16 million sq ft of development rights have been sold by Gift City/IL&FS at commercial rates (over Rs5,000/sq ft), amounting to at least Rs8,000 crore. A part of this profit has to be returned to the Gujarat government. An RTI query reveals that this had not been paid at least until 2016, and is unlikely to have been paid afterwards, when IL&FS was already facing liquidity issues. 
 
9. As per the JV contract, GIFT City itself has to pay the Gujarat government 1% of the income from sale of development rights as a premium. Since the value of development rights sold are approximately Rs8,000 crore, payment of Rs80 crore or so is due; this has not been paid. 
 
Clearly, the acquisition of the IL&FS’s stake in Gift City is not as simple as it seems. The real challenge is to clean it up and demonstrate that this global smart city and international financial centre are viable propositions. Otherwise, it will only be a bailout of IL&FS paid for by the people of Gujarat. 
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COMMENTS

Liju Philip

4 months ago

Why is anyone surprised? This is exactly the kind of crony capitalism that was practised under modi when he was Gujarat's CM. Now he has bought the same business principle to the whole country. No wonder the mess we are in. Soon all the PSUs will be sold to modi's capitalist friends for a song and the public wealth will be gone to dust.

REPLY

VIVEK SINGH

In Reply to Liju Philip 4 months ago

Please don't spread you own propaganda under the guise of this article

Ramesh Poapt

4 months ago

superb!

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