SFIO Suspects RBI Top Official’s Collusion with IL&FS
In a recent addition to the Infrastructure Leasing and Financing Services (IL&FS) crisis, the Serious Fraud Investigation Office (SFIO) suspects that a senior official from the Reserve Bank of India (RBI) may have had some role to play in turning a blind eye to the non-compliance with various inspection report findings, says a report in the Time of India.
 
The SFIO has asked the central bank to conduct an internal investigation to find out why there was no action against IL&FS for ignoring RBI's directions in connection with its inspection reports. The report suggests that Ramesh C Bawa, CEO (chief executive officer) of IL&FS Financial Services (IFIN) allegedly had some links with a senior official from RBI, although there has been no evidence of quid pro quo on part of the RBI official. 
 
The RBI inspection of 2015 had raised several issues with IFIN but no action was taken until 2017 and it was given time until 2019 for certain compliances—but IL&FS’s parent company itself started defaulting on its obligations in 2018. 
 
This background is interesting because the RBI has been steadily stonewalling Right to Information (RTI) queries from Moneylife as well as others activists with regard to IL&FS. 
 
One of the RTIs filed with them was concerning details and information of the officers at the RBI who were responsible for monitoring IL&FS. The RBI however, refused to give us the information saying that revealing such information could pose a risk to the officers’ life.
 
We had also filed another RTI with RBI asking them for copies of annual inspection report conducted by the RBI concerning IL&FS for the past three years. The public information officer (PIO) of the RBI refused to give the information. The PIO, in his response observed, “The Central government has ordered investigation into the affairs of the IL&FS Ltd and therefore requested for the inspection reports relating to the company. As investigation into the affairs of the company is still pending with the SFIO, the information sought is exempted from disclosure under sub clause (h) of sub-section (1) of Section 8 of the Right to Information Act, 2005.”
 
The PIO also refused to give the information regarding IL&FS inspection report quoting Section 45NB of the RBI Act, 1934. This refusal to give information quoting Section 45NB of the RBI Act is both illegal and wrong. 
 
Information can only be denied under Section 8 or Section 9 of the RTI Act. Further to that, the RTI Act categorically states that as far as dispersal of information is concerned, the RTI Act takes precedence over every other existing act and this includes the Official Secrets Act. The Act reads, “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923 (19 of 1923), and any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.”
 
As far as denial of information under Section 8(i)(h) is concerned, it states that information which would impede the process of investigation cannot be given, the operative word being impede which effectively means that the PIO refusing information using this clause has to therefore show how it would impede. In case they cannot show how that will happen, information has to given. 
 
Given how the information was refused illegally, we filed a first appeal. The first appellate authority (FAA) of the RBI again upheld the decision of the PIO observing that,” As regards the appellant's request of providing him with the copies of the annual inspection report conducted by RBI pertaining to IL&FS, I agree with the CPIO that the said request for information of the appellant cannot be acceded to.”
 
The FAA further observed, “As Section 45NB of the RBI Act deals with specific information relating to the NBFCs, the said provision cannot consider to be over-ridden by the provisions of  the Right to Information Act which is a general legislation dealing with every kind of information.” This decision of the FAA is blatantly in violation of the RTI Act’s rules. 
 
The FAA also upheld the PIO’s decision to not reveal information using Section 8(i)(h) even though no just reasoning was provided as to how revealing such information would impede the process. 
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    COMMENTS

    Srisaisarantraders

    3 months ago

    Alert me when a new comments is posted

    Ramesh Jaradhara

    5 months ago

    In my opinion, in such cases, you shall make an appeal to the Central Information Commission for providing information which was not given out by RBI, citing improper provisions of RTI Act. The slack attitude of RBI induce many FIs/NBFCs to indulge in illegal activities causing huge losses of public money.

    Ramchandra Karve

    5 months ago

    With the passage of time amendments need to be carried out to the RTI Act 2005. The exemptions Certain clauses of the RTI Act which exempt a body from provide certain information besides defeating the purpose for which said Act was introduced, also encourage organisations to indulge in malpractices. Ramchandra Karve retired RBI officer and RTI activist

    PwC Resigns as Auditor of Reliance Capital, Reliance Home Finance
    Price Waterhouse & Co Chartered Accountants LLP (PwC), one of the big four audit firms, has resigned as statutory auditor of Reliance Capital Ltd and Reliance Home Finance. 
     
    In a similarly worded regulatory filings, both Reliance Capital and Reliance Home Finance said, "The Company does not agree with the reasons given by PWC for the resignation. The Company expected PWC to have participated in the meeting of the Audit Committee and not resigned on the eve thereof. The Company has also duly furnished all requisite and satisfactory details as required by PWC, especially including certification and confirmations of the transactions in question on multiple occasions by PWC themselves."
     
    Reliance Capital, the Anil Dhirubhai Ambani (ADA) group company, says, Pathak HD & Associates will continue as is sole statutory auditor until the conclusion of its annual general meeting (AGM) for FY20-21. The audit committee and board of Reliance Home Finance are meeting on 13 June 2019 to decide upon the new statutory auditor for the company.
     
    Earlier, in a letter, PwC had alleged that Reliance Capital disputed observations highlighted by the audit firm and did not convene an audit committee meeting within the expected time. "PWC has stated that as part of the ongoing audit for FY2018-19, it noted certain observations or transactions which in its assessment, if not resolved satisfactorily, might be significant or material to the financial statements, and that it did not receive satisfactory response to its queries."
     
    "PWC has further stated that though it sent a letter dated 24 April 2019 under relevant provisions of the Companies Act, Reliance Capital disputed the same to be in accordance with the provisions of law, notwithstanding a subsequent letter issued by PWC on 14 May 2019 to reiterate the intent of letter issued on 24 April 2019, and the Company did not convene an audit committee meeting within the expected time. Reliance Capital also stated that it might initiate appropriate legal proceedings against the firm. According to PWC, these actions by the Company have prevented it from performing its duties as statutory auditors and exercising independent judgment in making a report to the members of the Company, and impaired its independence, and hence, it is no longer in a position to complete the audit and instead feels compelled to withdraw from the audit engagement and resign," PwC had said in a statement shared by Reliance Capital in its regulatory filing.
     
    Reliance Capital, however, has rejected the contention of PwC. It says, "The Company has duly responded to the various queries and letters of PWC and has also duly and validly convened a meeting of the Audit Committee on 12 June 2019 to further respond to the letter dated 14 May 2019 from PWC."
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    COMMENTS

    B. KRISHNAN

    5 months ago

    PwC is now doing what they should have done years ago! After being party to paper over severe lacunea in the financial statements of the past, now they are putting in their papers when they are faced with prospect of a reprimand similar to what happened in the case of IL&FS. Statutory audit is a farce. Can you point out a single instance where the auditors have helped unearth wrongdoing of the management? Their job is to prevent such financial frauds, but they actually help perpetrate them.

    Ramesh Poapt

    5 months ago

    Auditors and Rating Agencies wake after damage fully done!

    REPLY

    Jason Brown

    In Reply to Ramesh Poapt 5 months ago

    Too much bad press lately. Have to wait until regulations have been slashed a bit more?

    Domestic passenger cars sales down 26% in May
    Domestic passenger cars' sales continued to decline in May, the segment's off-take fell 26.03 per cent.
     
    According to industry observers, high base effect, along with low demand and high interest cost continued to dent purchases.
     
    According to the Society of Indian Automobile Manufacturers (SIAM), passenger cars sales in the domestic market dropped to 147,546 units from 199,479 units sold during May 2018.
     
    Among the other sub-segments of passenger vehicles, the number of utility vehicles sold in India went down by 5.64 per cent to 77,453 units in May 2019, while 14,348 vans were sold last month, down 27.07 per cent from 2018.
     
    Overall, passenger vehicle sales declined 20.55 per cent in May to 239,347 units from 301,238 units.
     
    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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    COMMENTS

    suneel kumar gupta

    5 months ago

    People should accept the fact that with the start of radio taxix, there was spurt in sales of cars. Now it has almost stagnated . We should stop blaming high interest rates for this.Interest rate was more lat year, then why drop in sales.

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