IL&FS Financial Services have laundered Rs 5,000 crores of shareholder funds, ED reports.

By Abhay Shah, Realty Quarter

On Thursday, The Enforcement Directorate told a Mumbai court that a subsidiary of the crisis-hit IL&FS Group called as IL&FS Financial Services (IFIN), alone had supposedly laundered more than Rs.5,000 crores of shareholder funds. In a remand application submitted to the special court, the ED asserted that the group was operated as a ‘private fiefdom’ by its directors who contributed to increasing sales to provide Group businesses with stronger credit rating, as well as bonus-like incentives.

Until 25 June 2019, the pair was sent to ED custody. The ED stated in its application that the total debt of IL&FS has inflated to Rs.91,000 crores because of unfair sanctioning of loans or credit facilities, including the handling of money by third parties. “About Rs.5,000 crores of shareholder money has been allegedly laundered in IFIN,” said the central probe agency and further research is ongoing.

The application indicated that the board of directors developed a “complicated scheme for artificially improved turnover,” showing inflationary profits and attracting funds from gullible sides. “The tasks were done to preserve the high credit rating,” he added, emphasizing that the directors were keeping an eye on performance-related achievements. While a complicated web of 232 companies exists, the application also says that a management board of the arrested pair and other officers, such as R Parathasarthy, Ramesh Bawa, Hari Sankaran, Vibhav Kapoor and Shahzaad Dalal, had overseen all the major problems, including the funding and policy for the entire group.

The government was required to replace the board of the group, and later research indicates weaknesses at credit rating agencies’ end, which had continued to rate Group companies at an extremely elevated level, resulting in an increase in economic industry exposure. In another revelation, ED claimed that the loss of Rs.2,000 crores also led in third-party loans by IFIN to companies such as the bankrupt SKIL and ABG Shipyard. An increase of bogus invoices by IL&FS Rail, IL&FS Transportation Network, quoting the FIR in the event, has shown the loss of Rs.74 crores, the ED stated.