Mumbai : The Serious Fraud Investigation Office (SFIO) on Monday arrested Hari Sankaran, former managing director and vice-chairman of Infrastructure Leasing and Financial Services, in connection with ongoing investigations into defaults at IL&FS and its subsidiaries last year. Sankaran was produced in a special court in Mumbai, which remanded him to custody till 4 April.

Sankaran abused his powers in granting loans to IL&FS subsidiaries, which were not credit-worthy or were declared as non-performing assets (NPAs), the SFIO said in a statement released after his arrest. His fraudulent conduct has resulted in wrongful losses to the company and its creditors, the statement added.

"It may be worth noting that IL&FS Financial Services Ltd had borrowings of more than 17,000 crore from debt instruments and bank loans. Provident funds, pension funds, gratuity funds, mutual funds, public and private sector banks, are among those who have invested in these debt instruments," said SFIO in a press statement.

According to its two interim reports to NCLT Mumbai, SFIO found that the practices followed by IL&FS flouted the prescribed banking and lending norms. SFIO has also found the auditors of IL&FS subsidiaries negligent in detecting financial discrepancies.

The IL&FS group companies owe nearly 17,000 crore to banks, mutual funds and insurance companies, among others.

Sankaran, who was ousted from IL&FS board on 2 October, in his submission to the NCLT had claimed that "there was no wrong doing on his part" and that untenable accusations were hurtful to his unblemished record of 28 years of service.

"All material acts of IL&FS were performed with the sanction and knowledge of the board and key shareholders of IL&FS and as per approved processes and procedures," he said in his reply filed in October last year.