IL&FS Financial Services Ltd (IFIN) gave out loans in exchange of favours and violated Reserve Bank of India (RBI) guidelines on lending to group companies among serious irregularities, a Serious Fraud Investigation Office (SFIO) charge sheet into alleged fraud at IFIN said.
Specifically, the 804-page charge sheet filed on Thursday said key management personnel at IFIN had a quid pro quo with C. Sivasankaran of Siva group of companies. Sivasankaran has been named co-accused along with 29 other entities and individuals under Section 447 of Companies Act and under provisions of Indian Penal Code for causing loss to the public.
Mint has reviewed a copy of the charge sheet.
If the charges are proven, it can lead to imprisonment of up to 10 years and a penalty of three times the amount of fraud if public interest is involved.
A special court in Mumbai will hear the case on 7 June.
“C. Sivasankaran was arranging hospitality for Ravi Parthasarthy, Vibha Kapoor, Hari Sankaran, including foreign travels, arranging private jets, helicopter rides, booking of resorts, arranging for interiors of their flat in Brussels," the charge sheet said. The investigative agency further said these favours were linked to loans disbursed to the Siva group of companies, apart from influencing decision-making on loan recovery and levy of fees.
A text message sent to Sivasankaran’s last known number for comment was undelivered, and an email sent to the compliance department of Siva group was not answered till press time.
In 2017, the RBI had directed IFIN to reduce exposure to IL&FS group companies. According to the charge sheet, IFIN’s directors even made false representations to the RBI that they had not extended any more loans to group companies beyond November 2017.
Funds were extended to Siva group of companies despite internal IFIN notings that the group was facing liquidity crunch, the charge sheet said. Interestingly, the primary security to lend to Siva group between December 2011 and December 2014 were shares held by Siva group in Tata Teleservices Ltd.
SFIO alleged that these shares were not revalued, impacting the security cover of such lending. Later, the RBI said the value of these should be treated as nil. The shares had no value in the market.
Total exposure to the Siva group stood at ₹182.45 crore on March 2015 without any security cover.
IFIN had entered into 15 transactions with the Siva group, involving advance of loans and investment in debentures of different Siva group companies. Repayment so far has been done only for the first four transactions.
The charge sheet also alleges that IL&FS’s land parcel was misused.
An agreement was signed on 19 November 2014 between Hill County Properties (an IL&FS entity) and Chennai Properties and Investments (Siva Group) to develop and monetize land parcels. Chennai Properties was then entitled to 20% of proceeds. Siva group benefitted to the tune of ₹2.8 crore due to the agreement in July 2017 but Hill County did not, SFIO claimed.
This money should have ideally gone towards paying outstanding dues to IFIN, which did not happen. Sivasankaran made personal financial gains, the charge-sheet claims, when he purchased two villas from Hill County at a discounted price. IL&FS had also given its own land parcels to Siva Group companies to bail out Sivasankaran who was allegedly in need of funds to pay IFCI.
The SFIO charge-sheet cites another example of IFIN personnel helping out Siva group: IFIN lent ₹125 crore to the beleaguered Unitech Group, which was already in financial distress, which helped Unitech repay its dues of around ₹80 crore to Sivasankaran.
In March 2017, RBI had recommended 100% provisioning of the ₹190 crore extended to Siva Group but IFIN wrote it off.
SFIO has alleged that IFIN directors also concealed critical financial parameters with an intent to deceive the regulator. While senior personnel committed to RBI that no fresh lending was advanced to other IL&FS group companies post November 2017, IFIN allegedly side-stepped the rules by extending loans to vendors and third parties for on-lending to other IL&FS group companies, such as ITNL and other subsidiaries.