IL&FS Scam: Former Directors May Have To Pay Up; also Face SFIO Probe, Say Reports
The new board of scam-hit Infrastructure Leasing & Financial Services (IL&FS) is evaluating the option of calling back all bonuses and benefits paid to former directors of three group companies for the past five financial years. In addition, the Serious Fraud Investigation Office (SFIO) to likely to question IL&FS' former chairman Sunil B Mathur and independent director RC Bhargava, besides a few officials from State Bank of India (SBI), say media reports.
 
According to sources, IL&FS’ new management may attempt to clawback fees to independent directors; however, they can argue that they relied on the ‘fixed’ audit reports from Deloitte. In fact, independent directors do have to rely on internal audit and statutory audit reports; so the primary action has to be against the auditor. 
 
As reported by Moneylife, an anonymous whistleblower has alleged Deloitte has helped IL&FS fudge its accounts year after year. The whistleblower, who claims to be part of the “senior management team at Deloitte, Haskins and Sells LLP (Deloitte)” and has been “privy to several internal irregularities in providing professional services to the IL&FS group” outlined how the audit firm benefited by helping the failed group fudge its accounts year after year. (Read: Whistleblower Alleges Deloitte Has Helped IL&FS Fudge Its Accounts Year after Year
 
Deloitte has audited IL&FS Financial Services Ltd (IFIN) for 10 years and remained the auditor until it completed 10 years in 2018. The audit report had absolutely no adverse findings even in 2017-18. On 3rd April, the new IL&FS management headed by banker Uday Kotak said that 90% of the loans advanced by IFIN, the lending arm of IL&FS, had turned bad.  
 
Coming back to clawback, which is invoked under Section 199 of the Companies Act, allows a company that is required to restate its financial statements due to fraud or non-compliance with the law to recall any excess remuneration, including stock options, given to directors for the period reviewed.
 
The clawback option is being evaluated for IL&FS, IL&FS Transportation Networks India Ltd (ITNL) and IL&FS Financial Service Ltd (IFIN) and would include all directors, including nominees and independent directors. 
 
A report from Economic Times says that IL&FS expects to recover more than Rs10 crore from each director and as much as Rs2 crore per year from each independent director of the troubled group. 
 
Earlier, the National Company Law Tribunal (NCLT) had approved re-opening of books of IL&FS and its group units for the five year period from 2012-13 to 2017-18 under Section 130 of the Companies Act. However, the Supreme Court while hearing a petition filed by Hari Sankaran, former vice chairman and managing director (MD) of IL&FS, had stayed the re-opening and re-casting of the books ex parte. IL&FS has approached the vacation bench of the apex court for the order to be vacated. 
 
Separately, after questioning three auditors of fraud-hit IL&FS, a senior official from SFIO, told New Indian Express that “The agency has not given a clean chit to anyone at present. We are looking for all the possible connections and the involvement of stakeholders. In this regard, we need to question some independent directors and the former chairman of LIC. Last week we questioned some of them, and this week we will continue with the questioning."
 
Following the exit of Ravi Parthsarathy in September 2018, SB Mathur, who is former chairman of Life Insurance Corp of India (LIC), was made IL&FS' group chairman. LIC is the largest shareholder in IL&FS, with a 25% stake, and had its representatives on the board. 
 
Last week, according to the newspaper, the SFIO formally recorded statements of executives from Central Bank of India and is likely to begin questioning officials from SBI.
 
In April this year, the SFIO arrested Ramesh C Bawa, former chief executive (CEO) of IFIN.
 
The SFIO, which is probing the IL&FS fraud, had issued summons to several former senior executives of IL&FS, including Mr Bawa. As much as 90% of the loans advanced by IFIN, the lending arm of the infrastructure conglomerate IL&FS have turned bad. Interpol notices have been issued against all the key members of the management cabal that worked closely with Mr Ravi Parthasarathy, founder of IL&FS, who ruled the 346-company conglomerate with unfettered powers and pliant boards for over 25 years. 
 
IL&FS vice chairman, Mr Sankaran, is already in SFIO custody. However, its founder and past chairman Ravi Parthasarathy has not been touched on humanitarian grounds since he is undergoing treatment. However, red corner notices have been issued against him too and he is no longer allowed to go to London for treatment. 
 
As reported by Moneylife, almost 90% of the loans advanced by IFIN have turned bad underlining the deep corruption and culpability of the previous management. Of its loan book of Rs18,805 crore, Rs10,656 crore was lent to third-party borrowers and nearly Rs7,000 crore to group companies, N Sivaraman, chief operating officer at IL&FS group, has revealed.  
 
According to Kaushik Modak, who now heads IFIN, the company has recovered Rs931 crore since the new board led by banker Uday Kotak took over the IL&FS group.
 
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Air India gets Jet's unused foreign traffic rights
State-run Air India seems to be finally getting its preferential rights in allocation of traffic rights over foreign routes after losing it to private carriers in the previous UPA government.
 
The government has decided to allot it about 5,700 weekly seats out of grounded Jet Airways' unused quota on the lucrative India-Dubai route.
 
The public sector airline has also been promised over 5,000 seats on India-Qatar route besides about 4,600 additional seats to and from London following the re-allocation of grounded Jet's unused international traffic rights.
 
A Civil Aviation Ministry told IANS that Air India will get preference in allocation of bilateral seat entitlements.
 
"The allocation would be for the ongoing summer schedule and considered temporary given that efforts are on to revive Jet Airways," said a reliable source.
 
Amid faint possibility of grounded Jet Airway's revival anytime soon, the ministry had on May 3 held a meeting with local carriers to discuss re-allocation of the airline's foreign traffic rights.
 
Private carriers SpiceJet, IndiGo, GoAir, Vistara and Air India had pitched for bigger share of the pie in the last meeting. While IndiGo co-founder Rahul Bhatia had suggested for allocating foreign traffic rights in proportion to various airlines' fleet capacity, Vistara argued that smaller airlines be given bigger share. 
 
Jet Airways had last month withdrawn operations due to severe fund crunch and remain grounded in absence of a viable revival plan.
 
While re-allocation of traffic rights would ensure additional capacity on various popular foreign routes thus reducing fare level, it will significantly affect the valuation of Jet Airways.
 
Investors are already miffed over the government's move to re-allocate its slots at various domestic airports.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Lenders to consider NBCC plan for Jaypee Infratech as NCLAT refuses stay
NBCC India Ltd's offer for the debt-laden realty firm Jaypee Infratech Ltd (JIL) will be put to vote by a committee of creditors (CoC) later this week with the National Company Law Appellate Tribunal (NCLAT) on Tuesday refusing to stay the proceedings.
 
ICICI Bank and a few other banks had on Tuesday approached the NCLAT with the plea that as they were not a part of the CoC of bankrupt JIL and thus had no voting rights, they should be heard before the lenders decided on the NBCC offer. 
 
After seeking clarifications from the revised offer for the JIL given by the NBCC, the CoC is set to vote on the proposal. The voting is expected to start on Thursday and end by Sunday. The decision of the lenders, however, will be subject to the outcome of an appeal filed by ICICI Bank and the other lenders. 
 
Last year, the Allahabad bench of the NCLT had ordered Jaiprakash Associates Ltd (JAL) to return 858 acres of land to the JIL to facilitate settlement process by lenders. The parent firm JAL had mortgaged this land pool with lenders such as State Bank of India, ICICI Bank, IDBI Bank, and Standard Chartered Bank to obtain loans. It got the land transferred to itself after lenders had started classifying the accounts of its subsidiary JIL as non-performing assets. 
 
The banks had approached the NCLAT against the NCLT order and the case is still sub judice.
 
With the ground now clear for CoC voting for NBCC's revised offer, all eyes are on the PSU developer that has put a lot of condition on its bid and has so far refused to dilute those conditions. It is understood that the NBCC had demanded that all income tax liabilities should be extinguished and a dispensation from seeking consent of YEIDA (Yamuna Expressway Industrial Development Authority) for any business transfer is granted. 
 
The CoC will consider NBCC's offer after it rejected Mumbai-based Suraksha Realty's bid on May 3, through the voting process.
 
Earlier Anuj Jain, the interim resolution professional, had in a letter to the CoC, categorically said that the state-run infrastructure firm's proposal is conditional and based on being granted relief from income tax (I-T) liabilities. Acceptance of its bid by the CoC is thus difficult. 
 
The NBCC has offered to settle the total operational debt aggregating to Rs 9,712 crore by paying Rs 20 crore. Operational debt comprises I-T department claims, additional compensation claims of Yamuna Expressway landowners, and claims of other operational creditors. It has promised to deliver flats to homebuyers in four years. It has also offered 1,400-acre land worth Rs 6,000 crore as well as Yamuna Expressway highway to lenders.
 
Its proposal also talks about banks monetising Yamuna Expressway and providing half of the realised amount to the public sector undertaking, which it will utilise as an upfront payment. The NBCC will also fund the gap of about Rs 1,500 crore between estimated construction cost and receivables from customers.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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