IL&FS Forensic Audit Exposes Web of Corruption, Shady Loans: Moneycontrol

Moneylife Digital Team 15 May 2019

Economy & Nation

The final forensic audit report of Infrastructure Leasing & Financial Services (IL&FS), prepared by Grant Thornton, exposes ever-greening of loans, loans given without proper collateral and other malpractices, says a report from Moneycontrol.

The final forensic audit report from Grant Thornton confirms what Moneylife had written two months ago. "The 166-page interim report of Project Icarus, as the investigation was named by the audit firm, exposes 10 different kinds of fraud, which are succinctly tabulated with names, numbers and detailed proof, provided in the annexures. According to GT, the 10 types of possible fraud identified by it in IL&FS Financial Services Ltd (IFIN) alone involves a massive Rs13,299 crore.

"The report also points out that IL&FS had adopted a ‘unified approval framework’ to facilitate intra-group synergy and to provide IL&FS group visibility for all transactions. This further pinpoints responsibility, primarily, on the committee of directors (CoD) of four persons, comprising—founder and former chairman Ravi Parthasarathy, former vice-chairman Hari Shankaran, director Arun Saha and IFIN’s former managing director, Ramesh C Bawa," the Moneylife report published on 6 March 2019 says. (Read: Why the Delay in Action When GT Report Pins Responsibility on Cabal of Four at IL&FS)

Coming back to the final audit report of Grant Thornton submitted to IL&FS, as per Moneycontrol, it mentions names of several prominent companies like Essar, DB Realty, SKIL Infrastructure, Gayatri Group, Shiva Shelters and Construction Pvt Ltd (Siva Group), Srei Infrastructure Finance Ltd (SIFL), Kohinoor, Parsvanath Developers and Housing Development Infrastructure Ltd (HDIL), with regards to the ever-greening process by IL&FS.

Moneycontrol, which has a copy of the final forensic audit report, says the auditor has found 107 instances of loan ever-greening, loans given without proper collateral and management links with borrowers companies.

"Grant Thornton found indirect links of Mr Bawa, former managing director (MD) of IFIN with Silverglades Group and Ansal Group, which were provided loans to the tune of Rs487 crore. The auditor found that Silverglades was given loans by the company's former director without seeking any securities. Overall loans worth Rs3,768 crore were sanctioned without security. Mr Bawa did not disclose his investments in AAA Infosystem and AAAB Infrastructure," the report says.

Grant Thornton was engaged by the new government-appointed board of directors (BoD) of IL&FS to conduct a special audit for all high-value transactions undertaken by IL&FS Ltd and few of its group companies for the period commencing from 1 April 2013 to 30 September 2018.

In 73 instances, many prominent companies were given loans despite a negative assessment after taking approval from the company directors. "During the audit, Grant Thornton found that 14 external companies had borrowed money and transferred to IL&FS group companies. SREI borrowed capital thrice and transferred it IL&FS group companies, and Sangam Group borrowed twice and transferred the money to IL&FS."

"Moreover, Grant Thornton found 20 instances where loans were given to companies totally worth Rs1,827 crore without any security from borrowers. It also found 17 instances of loan disbursements worth Rs1,941 crore, where securities fell short in comparison to the sanctioned amount," the report from Moneycontrol says.

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