Sack IL&FS Board To Fix the Mess

Infrastructure Leasing & Financial Services (IL&FS), the massive conglomerate of over 174 direct and indirect subsidiaries, is unravelling fast. Like the cops in Bollywood movies, the regulators and rating agencies have woken up to the implications of IL&FS’s imploding only after it began to default on its obligations.

The Reserve Bank of India (RBI), which classifies IL&FS as a systemically-important non-banking finance company, has ordered a special audit, only after it began to default. RBI, we are told, will investigate why the investment company did not inform it beforehand about its financial position. This belated action is laughable and is not going to resolve the looming crisis triggered by the huge debt overhang and severe liquidity crunch.

For years together, I have been highlighting the governance and accountability issues in a set of ‘professionally managed’ companies that quickly turned into protected fiefs headed by one or two people for decades. They, often, posture as quasi-government entities and have played a critical role in our economic or financial system. But these companies are not subjected to any government oversight such as by Central...

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COMMENTS

Dr Ananthanarayanan

3 days ago

I shudder to think as to how many such behemoths exist and how our regulators have consistently failed in their oversight processes.Kudos to the alacrity and vigilance exercised by media like Moneylife.

REPLY

SURAJIT SOM

In Reply to Dr Ananthanarayanan 1 day ago

It was 15th September 2008 when Lehman Brothers collapsed. "That sucker is going down !!!" , President Jr Bush remarked contemptuously. Within days the contagion spread to the world banking system. The US politicians across party lines scrambled to save the world economic system(read the western banksters' mafia ). US Congress authorised US$ 700 billion dollar for fire fighting. Many are comparing IL & FS with Lehman Brothers. Hope Govt takes action rather than watching like George W Bush. Friday's Sensex drop of 1100 point was no fun. Without Govt intervention ,it may repeat next week or thereafter. The cost will be much much higher .

Prakash Patel

In Reply to SURAJIT SOM 24 hours ago

There is no point in saving this company. Let it die a natural death or some stronger company acquire it. The government should not intervene. Only shareholders and bondholders will suffer. By the government bailout, entire taxpayers have to suffer for no fault of theirs.
The same principle has to be adopted both for private and government-owned companies that naturally will lead to the privatization of government-owned companies.

Sunil Rebello

In Reply to SURAJIT SOM 1 day ago

Lehman Brothers was not a government company.
UTI & IL&FS are both government companies - both failed like our PSU banks.
Our politicians cannot take care of their own jobs like infra and they want to run businesses - where they have no knowledge or expertise - They have only ulterior / selfish motives. Basically they want to rob the poor citizens to fill their pockets - HOOK OR BY CROOK. All will be held responsible for their misdeeds.

Sucheta Dalal

In Reply to Sunil Rebello 1 day ago

IL&FS is not a government company. it took pride in being a private company but pretended it was govt-like when it suited it. But the private nature allowed it to escape all norms of govt and scrutiny - no CAG, CVC, RTI or caps on salaries, perks, tenders etc.

B. Yerram Raju

4 days ago

Strange that SIDBI meant for small industries loaded investment to the SI-NBFC, IL&FC giving back seat to to micro and small enterprises. The then Board should account for any consequent losses.

surajit som

4 days ago

How things could come to such a stage in IL & FS ? The finance of the company appears to be a riddle wrapped in a mystery inside an enigma. Tens of billions of dollar have been mismanaged or swindled. Even top audit companies are unable to decipher its webs of accounting numbers(read frauds). Compared to this , Mallya, Mama-Bhanja ... look like innocent kids. Now we know why India has such shoddy infra. Sack the board immediately and send some ( the former boss ,to start with) to jail immediately. Or- may be- some of them have already fled like Mama-Bhanja etc ?

rajee

7 days ago

Very good suggestion. Further excess salary paid to top management to be recovered

Anil

1 week ago

It's time, when Govt calls spade a spade and take to task all those credit rating agencies, who till yesterday were rating company's borrowings as AAA. What's the credibility of their assessment of company's financial strength? Should these credit rating agencies not be faulted for misleading ratings and should not their senior officials especially credit rating committee members, be sacked immediately.

Karthick babu

1 week ago

The intresting and curious question is how many such entities are there that operates in public and private partnership and has been hidden from RTI and another audit requirements. Sad to know india's future is in the hands of such institutions.

Prakash Patel

1 week ago

What the species called (in)dependent directors are doing? They must be sacked first.

Harish

1 week ago

The direction-less ILFS Board Members should also resign from all other Boards of Companies where they may cause mischief because of "expertise" gained in ILFS.

Vasant Kulkarni

1 week ago

BE A SILENT SPECTATOR?

Rajendra Ganatra

1 week ago

The group has never come up with a single project without financial distress and haircuts to banks. In the education / skill development sector it grabbed attractive contracts with government due to posse of IAS folks it hires. This was waiting to happen, and now it's a speedy road downhill. The board needs to be sacked and high class professionals brought in if to protect the remnants. This is a never before situation and it would b
be interesting to see the government's resolve to dress down this white elephant with powerful sympathizers.

dhingra

1 week ago

OVERHAULING SECURITY EXCHANGE BOARD OF INDIA IS QUITE NECESSARY BY INFUSION OF TALENTS IN THE BOARD. INSTEAD OF SIMPLIFYING THE REGULATORY PROCESSES, THE EXISTING SET UP OF THE THE BUREAUCRATS UNWITTINGLY GETTING THE REGULATIONS MORE AND MORE COMPLEX IN THE NAME OF STRINGENT NORMS TO BE UNDERSTOOD PROPERLY BY THE GULLIBLE INVESTORS.

dhingra

1 week ago

Inefficient team of any organization always lands the organization to the brink of disaster. A pertinent question arises, what the SEBI had been doing so far, when it is the first and foremost duty of SEBI to protect the rights of investors and ensuring safety to their investment? SEBI seems to always remain busy in issuing stringent norms, which always go against the investors and the companies and their Share Transfer Agents manipulate such instructions and discretely take advantage of such regulations and instructions in their own interests. On the other hand, the Sock Exchanges would conveniently delist such companies to add more to the woes of the investors.

In fact, nobody actually works to safeguard the rights of the investors, more particularly the small and petty investors.

Prakash Patel

1 week ago

There is no other way left other than outright privatization of our PSBs/FIs .Otherwise cases of such defaults will keep on coming as they are ready to change the corrupt and unprofessional way of working. I think they are not competent enough to appraise the projects for which they lend.

Sunil Rebello

1 week ago

Your conclusion: In an election year, the government clearly does not want to admit that IL&FS’s precarious finances may be as big a problem as those of telecom, steel, coal and realty.
This is India’s Lehman Brothers. It will surely have an impact on the 2018 & 2019 Indian elections.
Why does all the dirty linen come out for a wash, the was just before Elections.

SANJEEV

1 week ago

Nothing short of a CBI and ED enquiry into how credit rating Agencies issued AAA ratings to help ILFS loot investors, banks and the public. Ms. Dalal, you owe it to the nation to keep up your investigation into this horror story.

NCLT and NCLAT shouldn't interfere in insolvency resolution proceedings: SC

The Supreme Court on Thursday said the National Company Law Tribunal (NCLT) and the Appellate Authority (NCLAT) should refrain from interfering in insolvency resolution proceedings by the Interim Resolution Professional (IRP) and the Committee of Creditors (CoC) of the lender banks of a sick enterprise under the Insolvency and Bankruptcy Code (IBC).

Making it clear that the role of adjudicating bodies -- NCLT and NCLAT -- come only after resolution plan is finalised, a bench of Justice Rohinton Fali Nariman and Justice Indu Malhotra said that by their "jumping in" when the proceedings before IRP and CoC is going on is like throwing spanner and everything goes.

Emphasising that "None of these steps by the Corporate Insolvency Resolution Process (CIRP) and the CoC could be interdicted in between", the Court said, "They (NCLT and NCLAT) are not supervisory authority to see what is happening, who was invited, who not..."

Making it clear that the adjudicating authorities do not come into picture when resolution process is before IRP and CoC, Justice Nariman said it is only after the resolution plan is finalised that the "adjudicating authorities can look into the...

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COMMENTS

pvmaiya

1 week ago



NCLT and NCLAT arrogantly assumed powers not vested in them and frustrated resolution biy the Resolution agent and the creditors. There are strong rumours that much money has to be passed under the table for these entities for some settlement and the only sufferers are the creditors- banks who take a huge hit called

euphemistically ‘hair cut’.

Debt tribunals de-cluttered to focus on high value NPAs
The Finance Ministry on Tuesday doubled the minimum threshold for filing cases in debt recovery tribunals (DRT) to Rs20 lakh to de-clutter DRTs so that they can focus on quick recovery of high value non-performing assets (NPAs).
 
It also advised public sector banks (PSBs) to develop an e-auction portal in collaboration with the Indian Banks' Association (IBA) and upload details of properties of all defaulters on the common platform to have an enlarged bidder base.
 
"The Department of Financial Services has adopted a targeted approach to make debt recovery laws and processes more effective so as to increase recovery of public money from defaulting borrowers," Finance Services Secretary Rajeev Kumar told reporters. 
 
He said the government is expecting good recovery in the second quarter.
 
As per the government data, there were 38,376 cases with a default amount between Rs 10 lakh and Rs 20 lakh pending in DRTs till June 30. This accounted for 38 per cent of the total pending cases but amounted to only four per cent of the total value, he said.
 
The share of cases in the range of Rs10 lakh to Rs20 lakh filed with the DRTs in recent...

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