The Enforcement Directorate (ED) has arrested two former top officials of the Infrastructure Leasing & Financial Services Ltd (IL&FS) under its money-laundering probe into alleged financial irregularities of the crisis-hit group. This is the fourth arrest by investigating agencies in the multi-crore IL&FS scam.
A senior ED official told IANS that the agency has arrested Arun Saha, former joint director of IL&FS Financial Services (IFIN), and Karunakaran Ramchand, former managing director (MD) of IL&FS Transportation Networks (ITNL), from Mumbai. They were arrested under the Prevention of Money Laundering Act (PMLA).
Both of them were involved in various illegal activities detrimental to IL&FS, the official said, adding that both, Mr Saha and Mr Ramchand, were involved in sanctioning and disbursement of loans without taking proper security, to borrowers who were already in financial distress and unable to pay earlier loans.
The ED was probing the case based on a first information report (FIR) filed before the economic offences wing (EOW) of the Delhi Police in December last year.
Earlier, in April, the Serious Fraud Investigation Office (SFIO) had arrested IL&FS' former MD and chief executive officer (CEO) Ramesh Bawa and Hari Sankaran, former vice chairman of IL&FS in connection with financial irregularities in the company. At present, Mr Bawa and Mr Sankaran are in judicial custody.
Last month, the SFIO had filed its first charge-sheet against IL&FS Financial Services, one of the two major companies of IL&FS, the 347-company conglomerate that is in serious financial trouble.
The criminal complaint (20 of 2019) filed before the additional special judge in Mumbai has cast the net wide with 30 respondents who include the entire board of IFIN led by Ravi Parthasarathy and all the audit firms and their key partners and C Sivasankaran, the industrialist whose loans pop-up in various disputes with the Tatas and others.
The charge-sheet alleges that C Sivasankaran was given loans without adequate collateral and, when they went bad, senior management connived with him to cause a wrongful loss to the company. Siva group founder C Sivasankaran was a close friend of Ravi Parthasarathy and Mr Shankaran—the chairman and vice chairman of IL&FS, respectively, says the charge-sheet.
Apart from failure to disclose information or follow Reserve Bank of India (RBI) guidelines, the SFIO accused Mr Bawa specifically of failing to disclose his interest in AAA Infosystems and AAAB Infrastructure Pvt Ltd, in which his wife and daughter are directors.
SFIO also accuses IFIN of devising an illegal strategy to lend money to IL&FS group companies in violation of RBI’s concentration rules. IL&FS Transportation Network, the large listed company in the IL&FS group, was allegedly one of the primary beneficiaries.
The charge-sheet accuses independent directors of being mute spectators and failing to raise appropriate governance issues at board meetings.
The charge-sheet says that a coterie of persons led by Mr Parthasarathy and comprising Mr Shankaran, Mr Saha, Vibhav Kapoor, Mr Ramchand, and Mr Bawa “were controlling the affairs and decision making in the IL&FS group as well as IFIN.”
It also says that the independent directors knew the actions of this coterie in hiding bad loans and stressed assets or lending to companies that were already under corporate debt restructuring.
Apart from outlining how various RBI norms and rules were breached to hide the poor financials of IL&FS group companies, the rosy picture they presented allowed the group to announce hefty dividends and this also formed the basis of the remuneration earned by senior management.