Investigative agencies have broadened the probe into the IL&FS scam by looking at circuitous transactions involving third party firms.
The enforcement directorate (ED), which is probing the financial irregularities of the IL&FS group under the Prevention of Money Laundering Act, is now planning to file a chargesheet by August, a top official told FE.
Last week, the ED arrested Arun Saha, former joint director, IL&FS Financial Services (IFIN), and K Ramachand, former managing director, IL&FS Transport Network (ITNL).
In May, the Serious Fraud Investigation Office (SFIO) had filed a criminal complaint against 30 parties including the auditors of IL&FS based on the findings of their investigation.
The SFIO in its probe found that since November 2017, IFIN fraudulently routed funding of over Rs 2,300 crore to IL&FS group companies through “external parties”, including companies associated with SREI Infrastructure Finance. This was done to circumvent the RBI’s directions, which in its inspection report for the financial year 2016, had asked IFIN to extend no fresh lending to group companies.
“A more detailed probe is underway to establish whether these external parties are culpable and how,” one official told FE. The SFIO will submit another report to the ministry of corporate affairs on the circuitous transactions between ITNL and other companies.
In its probe report submitted on May 28, the SFIO identified 14 external parties to which IFIN lent over Rs 2,300 crore. About Rs 1,060 crore was routed through entities of the SREI group, like Sahaj e-Village, Bharat Road Network, or companies “referred” to IFIN by the SREI group, the probe report shows.
Vistaar Financial Services, an NBFC with net worth of `5 crore, was given a loan of `205 crore from IFIN in March 2018, based on a referral letter by SREI Infrastructure, an ex-director of Vistaar told SFIO. Vistaar used the amount to repay their short-term loan worth `185 crore to SREI Infrastructure. With the proceeds received from Vistaar, SREI Infrastructure extended a `200 crore loan to Fagane Songadh Expressway Limited, a subsidiary of ITNL, Hemant Kanoria, chairman of the company told SFIO.
In case of New India Structures, IFIN extended `270 crore in three tranches over three days to the company in March 2018, which was then extended to ITNL within an hour of receiving the Sangam Business Credit, borrowed `150 crore from IFIN which was onward lent via Suchitra Finance Trading Co, an NBFC, to ITNL, the probe found.
In case of IFIN giving loans to Avance Technology and Empower India for onward lending, the NBFC’s management was aware that with the current level of operations and profit of these companies, the loan can only be repaid from “cash flows received from ITNL”. ITNL gave letters of request and assurances for these third-party loans, giving an undertaking to directly repay them to IFIN on behalf of the external parties.
A credit of Rs 305 crore extended by IFIN to Attivo Economic Zone, for the stated purpose of development of an industrial park, but SFIO’s probe found it was used for onward lending to ITNL.
The SFIO probe report shows that these transactions may not be genuine, since they were often given against adequate collateral and sometimes without proper approvals.
While such transactions may not seem bonafide, in each of these cases, probe agencies would have to now investigate the intent or ignorance of the third-party companies to establish their culpability in the fraud, a legal expert told FE.