Mumbai Special Court Issues Process Against 22 Accused In IL&FS Fraud Case, 7 Discharged For Lack of Evidence

Mumbai Special Court Issues Process Against 22 Accused In IL&FS Fraud Case, 7 Discharged For Lack of Evidence

SFIO had in May 2019, filed its first complaint against 30 accused in connection with the irregularities in operations of IL&FS and its group companies.

Charul Shah JoshiUpdated: Wednesday, November 29, 2023, 09:05 PM IST
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Image: IL&FS (Representative)

Mumbai: The special court on Tuesday issued process against against 22 accused booked by Serious Fraud Investigation Office (SFIO) for several violation and fraud allegedly committed by Infrastructure Leasing and Financial Services (IL&FS), its directors in connivance with their statutory auditor and others. The court however, discharged seven accused over lack of evidence.

SFIO's Complaint Against IL&FS and Accused Formally Accepted

SFIO had in May 2019, filed its first complaint against 30 accused in connection with the irregularities in operations of IL&FS and its group companies. The complainant was formally accepted by the court on Tuesday after several rounds of litigation up till Supreme Court against 22 accused and rest have been discharged for want of evidence.

While accepting the complaint of SFIO, the court said, "The entire coterie of individuals qua directors apparently operated in abuse of their position. The role of the accused person has been specifically stated pertaining to their association with the company owing to clout in their spheres of work. The directors, statutory auditors and being signing partners, independent directors and member of audit committee, Chief Finance Officer, on several instances have actively participated in such apparent siphoning of funds."

Directors and Auditors Abused Positions

It is order, while accepting the complaint of SFIO, the special judge DR AA. Joglekar observed, "On apparent perusal of the complaint it reveals that the investigating report state for abusive funding of non group entity along with abusive loan by IFIN to its group entities."

The court noted that the business of IL&FS is divided in various verticals and subsidiaries and IL&FS Financial Services Ltd (IFIN) is one of the subsidies of IL&FS. The agency began its probe with IFIN.

Violations Include Abusive Funding, Loan Irregularities

The court said that it was revealed in the probe that found that there was a monthly report after each calender month named as NPA and receivables report which was circulated with the management members of IFIN and while sanctioning such fresh loans IFIN has apparently found to have violated the credit appraisal and the monitoring policy qua provisioning and securitization etc.

"There were 88 instances wherein other group entity of the borrower were given a fresh loan in order to repay the group entity’s overdue loan to avoid its classification as NPA. It is stated that, the total loan disbursed for these instances are to the tune of ₹9,280.42 crore during the financial years commencing from 2013-2014 until 2017-2018," reads the order.

IFIN's Illegal Strategy for Lending to Group Companies Transgressed RBI Guidelines

The court has further noted that in case of lending to group entities i.e. IL&FS transport network limited (ITNL) the management of IFIN devised and illegal strategy for IFIN in transgression to the RBI Guidelines thereby lending the money to its group companies without carrying out any due diligence which was further transfer to ITNL to the tune of ₹2,797 crore along with fund trail.

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