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IL&FS top brass hushed up whistleblower's warning of fraud in 2017: Probe

The scam at IL&FS came to light last year after several group entities defaulted on repayments due to severe liquidity problems

Press Trust of India  |  New Delhi 

IL&FS

The long-running fraudulent activities at crisis-ridden IL&FS could have come to light much earlier in 2017, but for a cover-up job done by the top management in connivance with the independent directors on a complaint, an has revealed.

The detailed probe by the (SFIO) into the affairs of (IFIN) has revealed a plethora of lapses, violations, ever-greening of loans, deliberate delay in recoveries and even a complaint brushed aside by the then management in 2017.

As a multi-pronged strategy continues for revival of the ailing group and to bring to book the perpetrators of the fraud, the earlier audit committee of has been found at fault on multiple occasions.

Analysis of e-mails as also information collected from personnel and other sources have revealed that a complaint was received in early 2017, according to officials.

However, the audit committee, which is required to have an oversight on the vigil mechanism at the company, failed to act properly with respect to the complaint.

Citing the report, which is part of a chargesheet filed by the government's white-collar investigation agency in this case, officials said the management was aware about the whistleblower complaint that was received in March 2017 but the audit committee discussed about it only in December 2017.

Further, the investigation found that the audit committee simply went by the management version and did not inquire into the allegations made in the whistleblower complaint.

The scam at IL&FS came to light last year after several group entities defaulted on repayments due to severe liquidity problems. Later, the government superseded the board of directors, which is now working on ways to revive the ailing group.

IFIN, which has been found to be funding its own revenues for several years, was the main source of funds for the IL&FS group entities. The group had accumulated a debt burden of more than Rs 90,000 crore.

The company converted the funds of banks and public as profit with fraudulent lending activities, while the profits were also utilised for payment of managerial remuneration and dividend to the holding company.

The officials noted that the audit committee did not raise any red flag even when there were instances of "disbursal and bullet recovery of loans" on same day or within a few days.

IFIN's lending to group jumped to around Rs 5,200 crore, which was 37 per cent of the company's total loans and advances in 2017-18 fiscal.

The probe also found that IFIN's audit committee overlooked numerous impairment indicators and actively connived with the management to present a good picture of the company's financials to prospective investors.

According to the findings, incorrect half-yearly financial statements were of great significance as they were being used by the rating agencies for new as well as surveillance ratings. These statements were also used for market borrowings.

The SFIO has filed its first chargesheet after inspecting accounts of nearly 400 entities, an extensive forensic audit, data collected from desktops and laptops seized from various IL&FS offices as well as e-mails extracted from IL&FS servers, among other sources.

First Published: Sun, June 09 2019. 12:55 IST
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