The investigation by the government's white-collar crime probe agency SFIO has already unearthed connivance of auditors and independent directors with the then top management of IFIN (IL&FS Financial Services Ltd) in defrauding the company.
IFIN and several other group companies
have been found to have indulged in multiple circuitous transactions involving several illegalities, including fast disbursals to some borrowers despite their bad track record in servicing existing loans and also delayed recoveries.
As per the investigation report, which is part of the first chargesheet filed by the Serious Fraud Investigation Office (SFIO), IFIN and other entities from the IL&FS group continued to enjoy high ratings from various rating agencies, including due to window-dressing of the company's books.
According to the report, part of a loan disbursed to SIVA Group was used by the borrower to pay IFIN for the liabilities arising out of a debt syndication fee.
This fee was paid by SIVA group to IFIN for services rendered by IFIN for debt restructuring carried out by the company.
The probe showed that in the year 2012-13, SIVA Ventures had an outstanding liability against Unitech and an outstanding loan of IFIN to Unitech was also overdue.
The SFIO probe has revealed that the IFIN top management decided to bail out SIVA group by funding the repayment of the liabilities of Unitech towards SIVA Ventures. Accordingly, sanction and disbursal of Rs 125 crore was done to Unitech group to help them clear their dues to Siva of approximately Rs 80 crore and consecutively Siva to clear loans of IFIN.
In this transaction, IFIN not only self-funded their advisory income of Rs 8 crore but also granted additional loans of approximately Rs 45 crore.
However, post completion of transaction, on Siva group's request, it was allowed to utilise a major portion of the loan, approximately Rs 40 crore, to close a loan of Union Bank of India. This was done in consideration of a mandate of restructuring from Siva group to IFIN with a fee of Rs 12.5 crore.
"Further, in the interim of this transaction, Ramesh Bawa (who was then CEO and MD of IFIN) also assisted a senior director in Fitch Ratings, Singapore, who appears to be involved in rating of IL&FS in buying a duplex villa of Rs 4.25 crore at a discounted price of Rs 3.25 crore," as per the probe report.
According to the website of IFIN, its borrowing programme was rated by renowned rating agencies -- Credit Analysis and Research Ltd (CARE), Investment Information and Credit Rating Agency of India Ltd (ICRA) and India Ratings & Research Pvt Ltd (Fitch).
It also said IFIN enjoyed "the top notch credit rating for its long term and short term borrowing programme".
The website further mentions Fitch had assigned a national rating of 'AAA(ind)' to Long Term Borrowing programme and 'F1+(ind)' to Short Term Borrowing Programme of the company, which denotes the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
It also lists various rating reports given to it by Fitch Ratings till 2011 and by India Ratings, as a Fitch Group company, for 2013-2014 period.
The website also lists high ratings assigned to it by CARE and ICRA.
The SFIO probe has also flagged that auditors of debt-laden IL&FS not only connived with the top management in their fraudulent activities, but also sought to sell them certain products and services.
While the government has appointed a new board at IL&FS as part of its efforts to revive the sprawling group, the SFIO has filed its first chargesheet after taking into consideration details about 400 entities and data collected from various sources, including computers and laptops, among other sources.
There was window-dressing of the asset book, ever-greening of loans and delayed recoveries for several years in connivance with the top brass.
Despite an end-use policy being in place, the investigation found, loans were not monitored for their proper end-use.
The massive scam came to light last year after various IL&FS group entities defaulted on debt repayments. The group owed more than Rs 90,000 crore as of March 2018. In October, the government superseded the board of IL&FS and appointed a new board.
In the chargesheet, the SFIO has accused 30 entities/ individuals of various violations and offences, including of financial fraud. Some of the accused persons, including Bawa, are already in judicial custody.