Enforcement Directorate (ED)'s chargesheet in the money-laundering case involving top brass of now-infamous IL&FS group has revealed that its financing arm IFIN indulged in a "circuitous and patently illegal transactions" resulting in an unpaid loan of Rs 2,270 crore from 14 firms.
"By this modus operandi, ILFS Transportation Networks Ltd (ITNL) and its SPVs received huge loans and Rs 2,270 crore (as per Grand Thornton Report) remained outstanding against those parties to IFIN who in turn funded to ITNL or its Special purpose Vehicles (SPVs)," the investigating agency probing the money-laundering case has said.
The 14 firms that received loan from IFIN include Prakash Constrowell Ltd, Attivo Economic Zone Pvt Ltd, Kalyan Sangam Business Credit Ltd, Sahaje-Village, Giridhan Projects Pvt Ltd, Vistar Financers Pvt Ltd and Wavell Investments Pvt Ltd.
As per scrutiny of documents by the ED, it appears that IFIN had executed loan agreement and sanctioned loans to the third parties and contractors without proper collateral securities. Subsequently, loan agreements were also executed between those third parties and contractors with SPVs of ITNL.
The rate of lending for these loans was 1.5% to 2% higher than rate of borrowing and thus there was a profit to those third parties and contractors and being non-NBFC they were not entitled for the same, it said.
"Investigation also indicates that the illegal profit thus earned, probably, were shared with ITNL officials and arrangers. Investigation has revealed that IFIN was fully aware that loans given to the aforesaid third parties would be transferred to ITNL or its SPVs," the chargesheet says.
In what suggests murkier deals, the committee of directors (CoD) of IFIN sanctioned a loan of Rs 320 crore to Empower India Ltd and Avance Technologies Ltd despite the last two firms having no financial activity for the last few years. The loan was subsequently transferred to ITNL.
The probe has found that Vinod Shinde who was working as a peon since 2003 and passed class IX recently was made director in the two companies.
The investigation has revealed that all the loans sanctioned to various entities were first transferred by them to bank account of ITNL maintained with Axis Bank. From this account, the amounts were transferred to various Special Purpose vehicle (SPVs) of ITNL.
"It is also observed that from the bank accounts bearing No. 028010200009072 of ITNL maintained with Axis Bank, interest was also paid to the said entities. Those entities, in turn paid the said interest to IFIN. Ultimately, ITNL and its SPVs failed to repay the principal amount of loan to the said entities and the same remained outstanding," the probe report said.
IL&FS Group, which has about Rs 91,000 crore in debt, is facing a severe liquidity crisis. During the period July 2018 to September 2018, two of its subsidiaries 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 crores taken from Small Industries Development Bank of India. Many of the 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 in October 2018, a new Board of Directors was reconstituted under the chairmanship of Uday Kotak.
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