On August 22, Maharashtra Navnirman Sena (MNS) Chief Raj Thackeray was questioned by Enforcement Directorate (ED) in relation to the Infrastructure Leasing and Financial Services (IL&FS) Group scam, as he became the first politician being investigated in the matter that shook the non-banking financial sector and its associated sectors in the economy.
This was in connection with the ED's probe into illegal transactions between IL&FS and a Mumbai-based company Kohinoor CTNL. A week after Thackeray's summoning, Unmesh Joshi, son of former Chief Minister Manohar Joshi and his former business partner Rajan Shirodkar were also summoned and questioned in relation with the same case.
As per media reports, Thackeray and Rajan were partners in a company named Matoshree Infrastructure, which, along with one company owned by Unmesh had invested in Kohinoor CTNL. The ED is trying to enquire about the actual investment they had made in Kohinoor CTNL through their companies and the profits gained. According to Times of India, during the initial investment phase, IL&FS invested Rs 225 crore in Kohinoor CTNL. However, as the construction company got struck in some litigation, IL&FS sold Kohinoor CTNL shares for Rs 90 crore, taking a loss of Rs 135 crore. It was the same time when Thackeray also sold his shares. But Suspiciously, later on, the IL&FS group had given around Rs 635 crore loan to Kohinoor CTNL.
Prior to these summons, the ED had also submitted its first chargesheet in a special court wherein the court is yet to take cognisance of the chargesheet. So far, ED has arrested two senior officials of the IL&FS Group – Arun K Saha and K Ramchand – in relation to the money laundering case.
According to IANS, the modus operandi of the Group’s irregularities mentioned in the chargesheet has been that: “The accused named in connivance and collusion with each other, indulged in initially locating and identifying dubious companies which claimed to have been engaged in infrastructure development and later issuing fictitious purchase orders for non-existent works.” Furthermore, the ED found that the “forte of such companies lay only in providing accommodation entries in the form of bogus billing including bogus share capital and advancing unsecured loans to the beneficiary in lieu of commission or kickbacks.”
In February this year, the ED registered a money laundering case against the former chairman of IL&FS Ravi Parthasarathy and former director Hari Sankaran. Following this, the probing agency has summoned top management of the Group and held several search operations across the country and seized questionable properties in possession them. Subsequently, in June, the ED also summoned senior executives of Auditing firms – Deloitte Haskins and Sells and BSR Associates LLP, for their alleged role in perpetuating the fraud at IL&FS Financial Services (IFIN), a subsidiary of IL&FS.
The IL&FS Group which had nearly Rs one lakh crore outstanding debt began defaulting in mid-2018 prompting the government to take control over the board and investigate the matter.
Since October last year, government agencies including Serious Fraud Investigation Office and Reserve Bank of India have been probing the group’s financial irregularities committed by the group’s management, auditors and rating agencies among others, while the government appointed board under Uday Kotak’s chairmanship is carrying out the resolution process under the monitoring of National Company Law Tribunal (NCLT).
Also, Ministry of Corporate Affairs has also asked NCLT, Mumbai to ban these auditing firms – Deloitte and BSR for five years for their alleged role in financial irregularities of IL&FS and later, recently, the government asked the NCLT to freeze the accounts of these auditing firms.