SFIO said its investigations revealed that IFIN, as part of its lending business, extended loan facilities to external entities (other than IL&FS group firms).
The Serious Fraud Investigation Office (SFIO), whose chargesheet against the IL&FS group subsidiary, IL&FS Financial Services (IFIN), was admitted by a Mumbai sessions court on June 7, has alleged that its ex-CEO and MD Ramesh C Bawa failed to disclose his interest in two firms where his wife and daughter were directors.
One of the firms in question had business transactions with the cash-strapped Unitech, which had defaulted on a loan taken from IFIN.
Bawa, a director in IFIN, had not disclosed his interest in two firms — AAA Info Systems and AAAB Infrastructure — in which his wife and daughter are directors, it is alleged. He was also a shareholder in these companies, but he had not disclosed his interest in the said companies in form MBP -1 (notice of interest by director), submitted by him to the IFIN board.
“Bawa was aware of the manner of filing MBP -1 as he was reporting his interest in 20 different entities. The act of not disclosing the names of the companies where he had interest in the companies was deliberate and intentional mismanagement in a form required to be submitted under section 184 (1) of the companies Act, 2013,” the chargesheet claims.
It further said it is pertinent to mention that “AAAB Infrastructure has entered into transactions of approximately `12 crore with Unitech Ltd, one of the defaulting borrowers of IFIN”.
In the chargesheet, SFIO has alleged that Bawa, Ravi Parthasarathy (former chairman of IL&FS group), Hari Sankaran (former vice chairman of IL&FS group), Arun Saha (former director) and Vaibhav Kapoor (former director) were “controlling the affairs of IFIN” and were the “decision-makers” in the “IL&FS group”.
Bawa was appointed CEO and MD of IFIN in 2008 and was also on the company’s board.
IFIN is registered as a systematically important non-deposit taking non-banking finance company (NBFC-ND-SI) with the Reserve Bank of India (RBI). More than 90% of its income was derived from fund based business, mostly lending. Its other businesses included debt syndication, corporate advisory and investment banking.
SFIO said its investigations revealed that IFIN, as part of its lending business, extended loan facilities to external entities (other than IL&FS group firms). “A number of these borrowers were not servicing their debt obligations timely. The top management of IFIN were aware of the potential problematic accounts which were getting stressed in the succeeding months from reports generated through the Management Information System (MIS) of IFIN,” it has alleged.
Since these stressed accounts would have adversely impacted the financial statements of IFIN, its top management adopted “fraudulent practices” so as to not let the credit or loan facility be classified as a non performing asset (NPA). This is besides making provisions for these defaulting loans, which would have been otherwise required under RBI norms.
“The above acts of the coterie were known to the independent directors and other directors including Deepak Pareek, who was the CFO of IFIN and one of the person who processes the loan applications,” SFIO has claimed.