Ravi Parthasarathy, former chief of crisis-hit Infrastructure Leasing & Financial Services (IL&FS) has been sent to three-day police custody by the court of the special judge under Tamil Nadu Protection of Interest of Depositors (in Financial Establishment) Act, 1997.
According to a report from Times of India
, the economic offences wing (EOW) contended that the IL&FS group has defaulted in payments to various creditors through a calculated fraud and the total default caused to the entire creditors is approximately a mind-boggling figure of Rs1 lakh crore.
"Considering the nature, gravity, seriousness and magnitude of the case, this court is of view that police custody has to be ordered in the interest of justice in order to facilitate the Investigating Agency to effectively investigate the case further," the special judge was quoted as saying by the newspaper while granting a three-day police remand of the accused from 16th June.
After avoiding several summons by the EOW-Chennai, Mr Parthasarathy had moved the Madras High seeking an anticipatory bail and quashing of FIR filed against him under various sections. The Madras High Court quashed his defence of ill-health and ceasing to be the chairman of IL&FS with effect from 2017, paving the way for EOW-Chennai to take him into custody.
Making a very hard-hitting statement, the remand note from EOW pointed out that the Union government had to intervene since the activities of the IL&FS group affected the interests of the economy of India. The companies were set up as a vehicle of fraud and innocent depositors were cheated and their livelihood taken away by virtue of the fraud committed by Mr Parthasarathy, who it termed 'kingpin and mastermind'.
Ravi Parthasarathy became the chairman of the board of directors of IL&FS group in 2004. He served as the president and chief executive (CEO) of IL&FS group since 1989, thus clearly establishing that he was at the helm of affairs of the IL&FS group for over 30 years since its inception. Since then, Mr Parthasarathy had been controlling the arm and mind of the IL&FS group and he was responsible for managing its day-to-day affairs and played a major role in the scam.
The Serious Fraud Investigating Officer (SFIO) has also named Ravi Parthasarathy as the prime accused and mentioned him as the key decision-maker in the IL&FS group, who used the group as his fiefdom. Being chairman of IL&FS group and director of its various subsidiaries, it noted, the coterie led by Mr Parthasarathy abused its position and diverted funds of its group companies.
As reported by Moneylife, in one of its most damaging findings, the Union government mentioned, "IL&FS had created a trust known as the Employee Welfare Trust (EWT), which was used as an instrument to enrich its directors at the cost of the company. The trust was used to perpetrate fraud on IL&FS ad its group companies. The trust owned 12% of IL&FS Ltd. Ravi Parthasarathy and certain other senior IL&FS personnel were major beneficiaries of the Trust." (Read: A2Z of How IL&FS Employee Welfare Trust Ripped off Shareholders of IL&FS https://www.moneylife.in/article/a2z-of-how-ilfs-employee-welfare-trust-ripped-off-shareholders-of-ilfs/55561.html)
The RBI report underlined that the major role in perpetrating the fraud and financial irregularity was played by Parthasarathy during his tenure as Group Chairman. The report noted indiscriminate sanctioning of loans, diverting of funds, flouting of RBI norms, fraudulent transactions to certain accounts, showing inflated numbers of subsidiaries, conflict of interest and concentration of power in the hands of few, which included Ravi Parthasarathy and his coterie.
In 2019, the National Company Law Tribunal (NCLT) bench at Mumbai had taken note of key findings of the SFIO interim report about the way the IL&FS group conducted its affairs contrary to public interest. It observed that the committee of directors (COD) from among the now suspended board of directors of IL&FS group abused their powers. Through various acts, including circuitous transactions increased the debt burden across the IL&FS Group.
The Union government had filed company petition no3638 of 2018 under Sections 241 and 242 of the Companies Act seeking suspension of the board of directors of IL&FS under section 242(2)(k) of the Companies Act. In the Petition, the government inter alia stated as, Ravi Parthasarathy and his team were responsible for the negligence, incompetency and misleading the public by presenting rosy financial statements.
"IL&FS was camouflaging its financial statements by hiding severe mismatch between its cash flows and payment obligations. It was also hiding total lack of liquidity and glaring adverse financial ratios," the petition added.
In its complaint, 63 moons had alleged offences of cheating and criminal breach of trust in the repayment of Rs200 crore invested by the company in debentures of IL&FS Transportation Networks India Ltd (ITNL). During 2014 and 2015, ITNL had notified issuance of 1,000 and 2,000 non-convertible debentures with a face value of Rs10 lakh each, aggregating to Rs100 crore and Rs250 crore respectively, on private placement basis.
"To lure investors, ITNL falsely promised guaranteed annual return of up to 11.8% payable half yearly until redemption to its investors against their deposits with ITNL. We relied on the representations and assurances made by the ITNL and key managerial personnel and invested Rs200 crore in debentures," 63 moons had stated in its complaint.
In 2018, IL&FS defaulted on its obligations and ITNL too defaulted in repaying interest on debentures to investors.
Earlier in January this year, the EOW had arrested Ramchand Karunakaran, former managing director, and Hari Sankaran, former vice-chairman, and director of ITNL from Mumbai.
Based on complaint filed by 63 moons, the Chennai EOW had registered a first information report (FIR). The EOW says, it has been receiving complaints from other depositors of ITNL. It has also asked aggrieved depositors and investors of ITNL to forward their claims to the Chennai EOW.