IL&FS crisis: SFIO may probe irregularities in inter-corporate deposits

The Serious Fraud Investigation Office (SFIO) is likely to probe irregularities in inter-corporate deposits (ICDs) related to Infrastructure Leasing & Financial Services (IL&FS).

 

IL&FS has defaulted on interest and principal on inter-corporate deposits (ICDs) of Rs 1.72 billion, which became due recently. For the first time, the company defaulted on ICDs in June. It also defaulted on Rs 10 billion raised from SIDBI in the ICD market.

 

The company has ICDs of Rs 14 billion. ICDs are part of unsecured borrowings from other corporate entities.

 

IL&FS has in aggregate Rs 38.5 billion of unsecured loans, with commercial paper accounting for the biggest chunk at Rs 20 billion.

 

Meanwhile, the SFIO might recruit more officers. Of the 133 posts in different categories in the SFIO, 69 are vacant.

 

The ministry of corporate affairs (MCA) has asked the SFIO to submit a report with “urgency” on vacancies.

 

While 75 posts have been sanctioned for recruitment on deputation, only 25 are in place, while the remaining 50 remain vacant.

 

The ministry had approached the Union Public Service Commission to fill 10 more posts. It had sought additional funding from the ministry of finance in the form of “investigation allowance”. This allows the corporate affairs ministry to invite officials of other ministries to help investigate cases.

 

However, this provision was scrapped by the Seventh Pay Commission, which stated that those on deputation were eligible for the deputation allowance.

 

Besides IL&FS, the SFIO is investigating high-profile cases such as those concerning Nirav Modi and Mehul Choksi, who are alleged to have defrauded Punjab National Bank.

 

The National Company Law Tribunal, Mumbai, has allowed the government to supersede the previous board of the company, which has a debt of Rs 12.6 billion, with a new one under Section 242 and 242.

 

Section 241 empowers the government to approach the tribunal if it thinks a company is not being run in the public interest. The other Section talks about what the NCLT can do.

 

IL&FS has a complex structure. While the ministry had said in its petition that IL&FS had 169 group companies under its structure, the new board said the group comprised 348 entities, which was “significantly larger than what we had originally been aware of”.

 

The new board is undertaking a process to ensure that the value of the group is preserved.