Mumbai/New Delhi: With the government seizing control of debt-laden Infrastructure Leasing & Financial Services (IL&FS), it is curtains for the cozy cabal that ran the firm since it was founded in 1987.

A tribunal’s decision to allow the government to oust IL&FS’s current board and replace it with a 6-member independent board raises serious questions about the top officials of the company as well as independent directors whose job it was to ensure the company adhered to the best corporate governance practices.

The lens is now firmly on IL&FS’s vice-chairman and managing director (MD) Hari Sankaran, who has been with the company for 28 years, and the company’s erstwhile chairman Ravi Parthasarathy, who stepped down in July citing health reasons and has also been with the company since 1987—first as its chief executive officer (CEO), then MD, then vice-chairman and MD and then finally as chairman and MD in 2004. The trio also included Arun K. Saha, joint MD and CEO, who joined IL&FS in 1988.

That these three executives have some answering to do is evident from the statement issued by the government on Monday: “The decision to supersede the existing board was taken after careful consideration of a report received from the regional director, Mumbai under the ministry of corporate affairs which clearly brought out serious corporate related deficiencies in the IL&FS holding company and its subsidiaries."

But the story doesn’t end with them. Many of the independent directors have been with IL&FS for decades. Sample this.

R.C. Bhargava, chairman of Maruti Suzuki India, has been on the board since August 1990; Michael Pinto, a former bureaucrat, joined the board in July 2004; Sunil B. Mathur, a former chairman of Life Insurance Corporation of India, joined the board in January 2005; and Jaithirth Rao, formerly country head at Citicorp, was appointed as director in August 2012.

“Over the years, IL&FS has done some good projects because there was no dearth of capital... the board should have assessed the evidence of productive capital. The board should have been cognizant of the fact that capital should have been properly used. It should have judged whether manager’s role and performance was up the mark. Did they ever ask why their compensation was so high?" said Shriram Subramanian, MD of proxy advisory firm InGovern.

On Monday, Sanjay Shorey, joint legal director in the ministry of corporate affairs, argued in the National Company Law Tribunal (NCLT) that Ravi Parthasarathy, along with CEOs and CFOs, were painting “a rosy picture of the company deliberately despite knowing the truth".

He also informed the tribunal that the Special Fraud Investigation Office (SFIO) had initiated an investigation into the matter.

The department of economic affairs (DEA) has also said in its report to the government that they had raised red flags to the company but despite that the board failed to perform its duty, Shorey told NCLT.

Shorey who was representing the government also said that IL&FS is critical to the financial stability of the country and despite that no meeting of risk management committee was convened, a statutory requirement for the company.

Subramanian of InGovern does not think that IL&FS can be compared with the Satyam fiasco. “This is actually a case of financial stress in the company. Shareholders continue to be the institutions. It continues to be a private company," Subramanian said.

“Satyam was the issue of fraud," he said. But, what if SFIO during its investigations find wrongdoing?

“There will be none," said a current board member, philosophically adding that “change is good". “Sometimes it helps... Sometime, change is a good thing. The new board will have new ideas...," he said.

Whatever the prognosis, it is clearly the end of the road for one of the longest serving Indian CEO and board members.

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