The company was meant to evaluate the performance of its board of directors, but it failed to do so in any critical manner.
The former top management of IL&FS Financial Services (IFIN), a wholly-owned subsidiary of IL&FS, continued to draw hefty salaries and commissions between the financial years 2014 and 2018, even as the company came under increasing financial stress, according to the probe report by Serious Fraud Investigation Office (SFIO).
Ravi Parthasarathy, former chairman of IL&FS, drew an annual salary of Rs 14.2 crore as on March 2018. There was also a performance-related pay component, which depended on the revenues and profits of IL&FS. Parthasarathy’s performance-related pay as of March 2018 stood at `6.24 crore. The same year in June, IL&FS first defaulted on inter-corporate deposits and commercial papers.
Ramesh Bawa, former CEO, K Ramachand, Arun K Saha, Vaibhav Kapoor and Hari Sankaran were also among the top paid, the probe found. “It was in the interest of this clique to bloat the revenues of IL&FS Limited for their personal gains,” the report said.
“IFIN was contributing to the revenue of IL&FS by payment of dividends and brand fees.” Committees, which were controlling the affairs of IFIN, had the presence of at least one of the directors from IL&FS, the probe found.
Earlier, FE had reported how the SFIO estimates showed that IFIN incurred losses between FY14 and FY18 but evergreening of loans and avoided provisioning for stressed assets helped the company show profits. Based on these spruced up financials, IFIN paid hefty dividends, to the tune of 50% annually to IL&FS between FY14 and FY17.
IFIN also continued to pay large commission to these individuals, despite its precarious financial condition. Parthasarathy earned a commission of Rs 43 lakh in March 2018 and a “sitting fee” of rs 2 lakh for FY18. Sankaran, Saha and Kapoor were also paid a commission of `10 lakh each in March 2018, while their sitting fees for FY18 ranged from Rs 3 lakh to Rs 5 lakh.
IL&FS had a nomination and remuneration committee to assign key management people and to decide on performance-related pay and remuneration of employees. The company was also meant to evaluate the performance of its board of directors, but it failed to do so in any critical manner. The pay component was also decided by the board, rather than the committee, the probe found.
The probe also found evidence through emails exchanged between the group’s former management and borrowers that IFIN’s officials enjoyed additional perks.
For instance, in 2014, S Sivasankaran of the Siva Group, one of the beneficiaries of IFIN’s circuitous transaction arrangements, arranged for helicopter tour, ski resort stays in Norway for Ravi Parthasarathy. Viren Ahuja of Flamingo Group arranged for an internship at Moet Hennessy for Akansha Bawa, the daughter of Ramesh Bawa, the probe found.