The Enforcement Directorate Thursday told a court here that the IL&FS Financial Services (IFIN), a subsidiary of the crisis-hit IL&FS Group, alone has allegedly laundered over Rs 5,000 crore of shareholder funds.
In a remand application submitted to the special court here, the ED claimed the group was being run as a "personal fiefdom" by the directors, who indulged in enhancing turnover for ensuring better credit rating for group companies and also bonus-like incentives.
The ED filed the application a day after arresting IL&FS's former joint managing director Arun Saha and former managing director of IL&FS Transportation Networks Ramachand Karunakaran. The duo was remanded in ED custody till next Tuesday.
The total debt of IL&FS has inflated to Rs 91,000 crore due to "arbitrary sanctioning of loans or credit facilities, including routing of money through third-parties", the ED said in the application.
"In IFIN, it is suspected that there has been laundering of more than Rs 5,000 crore of the shareholders money," the central probe agency said, adding further investigation is on.
The application stated the committee of directors had created a "complex system to show artificially enhanced turnover" and to show inflated profit to attract capital from gullible parties.
"It was done to maintain high credit rating," it added, while also stressing that the directors had an eye on performance-related perquisites while doing this.
The application further said while there was a complex web of 232 companies in the group, a management board consisting of the arrested duo and other officials including R Parathasarthy, Ramesh Bawa, Hari Sankaran, Vibhav Kapoor and Shahzaad Dalal had the full oversight on all critical issues including financing and strategy for the entire group.
The ED has arrested the duo under relevant sections of the IPC and the Prevention of Money Laundering Act. They are the first arrests in the case, which came to light late August last year following a string of defaults by the group companies on its loan commitments.
The government had to replace the board of the group and subsequent investigations have pointed towards shortcomings at credit rating agencies' end, which had continued to rate the group companies at a very high level due to which the exposure of the financial sector increased.
In one more revelation, the ED said third-party lending by IFIN to companies like the bankrupt SKIL and ABG Shipyard also resulted in a loss of Rs 2,000 crore.
A loss of Rs 74 crore has been ascertained due to raising of bogus invoices by ILFS Rail, IL&FS Transportation Networks, the ED said citing the FIR in the case.
The federal agency had filed a money laundering case in February and had twice raided a number of former executives to obtain additional evidence.
IL&FS has defaulted on payment of loans to Sidbi and along with its subsidiaries has a combined debt of over Rs 91,000 crore. The ED's case is based on an FIR filed before the Economic Offences Wing of the Delhi Police last December.
Ashish Begwani, a director of Enso Infrastructures, had filed the case against officials of IL&FS Rail for allegedly causing Rs 70 crore loss to his company by fraudulent means.
Begwani alleged that in August 2010, he was approached by two officials of IL&FS Transportation and he had invested Rs 170 crore in IL&FS Rail,a special purpose vehicle for the Gurugram Metro project, for a 15 per cent stake.