MCA wants to question erstwhile IL&FS 'independent directors'
The Ministry of Corporate Affairs, extremely concerned about the extent of the malfeasance in IL&FS during the Ravi Parthasarthy regime, is now looking at expanding the scope of its ongoing probe to independent directors of the time. This includes many marquee names - including R.C. Bhargava, chairman Maruti Suzuki and S.B. Mathur, former chairman LIC.
In fact, many of the company's independent directors had protracted stints on the board, R.C.
Bhargava, chairman of Maruti Suzuki India, was on the board from August 1990; Michael Pinto, a former bureaucrat, joined the board in July 2004; Sunil B. Mathur, former LIC chairman, joined the board in January 2005 and Jaithirth (Jerry) Rao, formerly from Citibank, was appointed as director in August 2012. All of them had to go once the government superseded the board as a result of the deep set conflagration in the company.
All the major shareholders have had their nominee directors on IL&FS with the exception of HDFC, whose nominee, Harish Engineer, formerly executive director, HDFC Bank, stepped down as a director on September 14, 2017, without any explanation, and was not replaced by HDFC. 
Moreover, the role of all the independent directors who headed vital sub-committees like audit, risk and remuneration of the defaulting companies will be probed. The MCA wants to enlarge the size of the investigation to understand the complexities of the case for it gets bigger and bigger by the day due to the complete opacity practiced by the earlier board.
It wants to understand the role of the independent directors of the time who chose not to red-flag so many issues related to the then ongoing malaise. With so many heavy hitters of India Inc. on the board, management oversight and accountability should have been airtight and senior management emoluments should have been commensurate with performance. 
Instead, the Group's books were in a shambles. Former independent directors of IL&FS have already written to Uday Kotak, extending their "complete support" in the revival of the entity. In the letter, they claimed that IL&FS being unable to raise additional equity despite several attempts and the "asset-liability" mismatch created financial consternation.
The five former independent directors said the Centre's action was correct as it enabled reaching out to various counter parties, from a position of strength and clarity.
The risk management committee (RMC) of the board is an extremely important committee in NBFC specialising in high-risk infrastructure finance and development, where there exists an inherent asset-liability mismatch. The RMC is empowered to review the core functions of the company such as asset liability management, credit, liquidity and market risk, capital adequacy and compliance with regulatory norms. Since FY'2015, the RMC consisted of R.C. Bhargava, Michael Pinto, Arun Saha and S. Bandyopadhyay, LIC nominee and then managing director, LIC Pension Fund, who resigned from the board on April 3, 2017, and was replaced by Hemant Bhargava, managing director, LIC.
Bizarrely, as per annual report disclosures, this important and critical committee of the board has met only once since FY'2015, on July 22, 2015. In three of the last four years, the committee did not hold a single meeting (in contrast, in IDFC, another infrastructure finance company, the RMC met 14 times from FY'2015 till FY'2018). This comes on the back of what happened in early March when the government-appointed Board of IL &FS approached SFIO and ED to initiate criminal proceedings against 14 former directors of IL&FS Financial Services Ltd (IFIN).
The action comes almost a week after the forensic audit report by accounting firm Grant Thornton LP. The report by Grant Thornton LLP clearly establishes money laundering. The Board has already informed the Ministry of Corporate Affairs, SFIO and the ED to initiate criminal proceedings against the culprits, with an enclosed copy of the report. 
The new IL&FS Board had hired Grant Thornton to conduct a forensic audit of 12 firms, including IL&FS and IFIN, for the April 2013 to September 2018 period. The report submitted on February 27 highlighted multiple irregularities in the operations of IFIN, one being that loans were provided to firms, in which an existing director of one of the IL&FS group companies was the promoter. The report had charged 14 former IFIN directors with "facilitating money laundering" and sanctioning loans without any security.
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.
Hudaf Shaikh
5 years ago
A welcome decision. That said, MCA and SFIO should also haul in the Chairman and nominated directors from various financial institutions for the past 3-4 years as they had a far major role in the whole scam.
Free Helpline
Legal Credit