IL&FS money laundering case: ED widens probe, carries out fresh raids

The Enforcement Directorate (ED) has widened its probe into the money laundering case of alleged financial fraud in the Infrastructure Leasing & Financial Services (IL&FS). 

On Wednesday, the enforcement sleuths conducted search operations at the business premises and residences of four former directors of the cash-strapped IL&FS Financial Services (IFIN). 

According to an ED official, the probe agency is gathering evidence with respect to serious anomalies, multiple irregular transactions, and money involved.  

The business and residences of Rajesh Kotian, former executive director of IFIN; Shahzaad Siraj Dalal, who took IL&FS overseas, headed the funds floated by IL&FS Investment Managers, and had financed some real estate developers in India; Siddharth Mehta, one of the promoters of Bay Capital and director at IL&FS Energy Development Company were searched. IFIN Director Manu Kochhar and former managing director of IL&FS Engineering and Construction Company Mukund Sapre were also searched by the probe agency on Wednesday. 

The ED had earlier conducted similar searches in February after it had filed a money laundering case under the Prevention of Money Laundering Act.

Sources say the ED suspects the proceeds of crime at over Rs 13,000 crore, involving several overseas deals. Sources say the ED is probing instances of end-utilisation of loans, including money lent to borrowers of IFIN. There is evidence showing that the advances were given to entities linked with senior executives of the IL&FS and IFIN. 

For instance, Rs 30 crore was borrowed by a private equity firm Indus Equicap Consultancy, of which Rs 3 crore was given to Siddharth Mehta, director on the board of IL&FS Energy Development Company. Mehta, currently residing in the UK, has been summoned by the enforcement agency to join the probe. 

Dalal has also been restrained from selling his Mumbai property. A lookout notice has been issued against him. 

The enforcement agency suspects that some of these directors had played a key role in siphoning off the loan amount of the IL&FS and other subsidiaries. 

The cash-starved company has been defaulting on bank loans and other debt repayments since the last week of August. One of the subsidiaries of the IL&FS Group was unable to repay a short-term loan of Rs 1,000 crore taken from Small Industries Development Bank of India. Also, certain group companies have defaulted on repayments of various short- and long-term deposits, inter-corporate deposits, and commercial papers. Life Insurance Corporation of India, the single-largest shareholder with over 25 per cent stake, and Japan’s ORIX Corporation, which owns a little over 23 per cent. IL&FS Employee Welfare Trust holds 12 per cent in the company. 

The debt crisis at the infrastructure lender came to light after a series of defaults by its group companies from September 2018. In April, Hari Shankaran, former chairman of the IL&FS, was arrested by the Serious Fraud Investigation Office (SFIO) for alleged abuse of power in the company. The SFIO is also probing the role of auditors, including Deloitte, of the group firms. 

The government took control of the heavily indebted infrastructure financing and construction group in October last year, following a string of defaults on debt obligations. The IL&FS first shocked markets, when it postponed a $350-million bonds issuance in March 2018 due to demand for a higher yield from investors.

The ED’s case is based on a first information report filed before the Economic Offences Wing of the Delhi Police in December last year.

The director of an infrastructure firm had filed the case against officials of IL&FS Rail for allegedly triggering Rs 70-crore loss to his company by fraudulent means.