The Serious Fraud Investigation Office (SFIO), that probes into complex economic offences, on Saturday arrested Ramesh C Bawa, former managing director and chief executive officer of IL&FS Financial Services Ltd.
The former chief of the non-bank lender has been arrested for allegedly abusing his powers and granting loans to entities with questionable creditworthiness resulting in loss to the company and its creditors, a government official informed about the development said on condition of anonymity. Bawa had quit from the company last September when the credit crisis in the IL&FS group came out in the open amid payment defaults.
The government had replaced the board of directors of Infrastructure Leasing and Financial Services Ltd (IL&FS) group with a state-appointed one last October and later ordered a probe by the SFIO on the failings of the group company. The investigating agency is probing into allegations of ‘excessive remuneration’ received by senior IL&FS officials while the company’s financial performance deteriorated. According to a second person familiar with the ongoing investigation, who also spoke on condition of anonymity, this could amount to diversion of funds.
IL&FS Financial Services Ltd. has borrowings of around 17,500 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 the first person quoted above.
The state-appointed board of IL&FS group is now exploring a turnaround plan for the group which involves sale of specific arms of the group which are into financial trouble.