By Ravi Dutta Mishra
Mumbai, Aug 21 (IANS) The rot at IL&FS started right from the top. Fresh revelations show how the Managing Director of IL&FS flouted rules and whose corrupt practices pretty much triggered the liquidity crises in India.
The Reserve Bank of India (RBI) inspection report reveals several instances of corporate misgovernance, pointing the finger to the erstwhile head of the company Ramesh Bhawa.
"Abhshek Bawa, son of Ramesh Bawa was appointed in the London office of IFIN with hefty performance package which has been sanctioned by the father (GBP 15,631.91 vide letter dated August 4, 2014, Rs 1.4 million vide letter dated April 27, 2017 and Rs 0.90 million vide letter dated June 4, 2018)," revealed the RBI report.
Besides, Bawa spent millions on foreign visits on the pretext of arranging business for the company which "could not be substantiated", the report said. During 2015-16 and 2016-17, when the company was facing a massive financial crunch, IL&FS incurred travel expenses of Rs 24.70 million and Rs 19.30 million respectively.
The RBI report also showed that Ramesh Bawa had leased his own property at Bandra to IFIN at Rs 0.38 million from May 1, 2017 to April 30, 2018 and Rs 0.24 million from May 1 onwards and was also staying in the same flat.
"This was the case of 'direct' conflict of interest," the report highlighted.
On another occasions the report noted that, "It was observed that directors or IFIN were awarded high and imported vechiles for personal usage with cost ranging from Rs 2.6 million and Rs 12.30 million each."
In addition to the RBI report, the Grant Thornton report documented Bawa's misdeeds and misadventure which ran for pages after pages on the potential anomalies identified in loans lent to companies in which Ramesh Bawa had a potential indirect interest.
According to a report by Grant Thornton, after the Reserve Bank of India (RBI) advised IL&FS Financial Services (IFIN) against lending to the group firms, IFIN started buying shares from those companies, to provide them funds, circumventing the central bank's advisory.
In the inspection report for the financial year 2016, which was issued on November 2017, the RBI had advised IFIN to reduce its exposure to the group companies with no fresh lending to them as it impacted IFIN's overall ability to lend.
Grant Thornton, in its forensic audit report says that after November 1, 2017, IFIN purchased shares from IL&FS Transportation Networks Ltd (ITNL), IL&FS Energy Development Company and IL&FS Airports Ltd, "which were potentially held as long term investment and funds were provided to them as a consideration".
IL&FS Group, which has over approx. Rs 91,000 crore in debt, is facing a severe liquidity crisis. During the period July 2018 to September 2018, two of the subsidiaries of IL&FS Group reported having trouble in paying back loans and inter-corporate deposits to lenders.
In July 2018, the road arm of IL&FS was facing difficulty in making repayments due on its bonds. Further, in early September 2018, one of the subsidiaries of 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 in repayments of various short and long-term deposits, inter-corporate deposits, and commercial papers.
Based on the directions issued by the National Company Law Tribunal - Mumbai (‘NCLT') on 01 October 2018, a new Board of Directors was reconstituted under the chairmanship of Uday Kotak.
(Ravi Dutta Mishra can be reached at [email protected])
Source : ians