SFIO Files Cheating, Criminal Conspiracy Charges Against IL&FS Directors, Two Auditors

The Serious Fraud and Investigation Office (SFIO) filed a chargesheet in the lapses at Infrastructure Leasing and Financial Services (IL&FS) on Thursday. Charges of cheating and alleged criminal conspiracy have been filed against 30 individuals including former directors and two auditors BSR and Co and Deloitte Haskin and Sells.

The IL&FS crisis started when in September 2018 the group of companies had defaulted on its debt obligations forcing the government to takeover and replace its board with its own nominees. Here is a low down on what are the charges.

Directors

Directors of IL&FS and ILFS Financial Services Ltd (IFIN) namely Hari Sankaran and Ramesh Bawa have been charged for violations of Companies Act and under Indian Penal Code (IPC) for cheating and conspiracy. SFIO alleged that the directors were aware that the crisis was building and they did an ‘alleged’ cover up job. A lot of the borrowers of IFIN were not serving their debt obligations.

The top management was aware of the potential problematic accounts which were getting stressed in the succeeding month from the reports generated through the Management Information System (MIS) of IFIN, said SFIO in the chargesheet.

The directors did not declare this non paying borrowers as non performing assets (NPA) and were lending money to borrowers of same group companies to pay the outstanding.

AUDITORS

The firms – BSR and Co and Deloitte Haskin and Sells have been charged with concealing of information by not raising red flags on the misstatements in the accounts.

The auditors colluded with the coterie to conceal material information and in fraudulently falsified the books of accounts and thereby financial statements from FY13-14 to FY17-18, SFIO said. Auditors did not report correct state of affairs on Net Owned Funds and CRAR.

The auditors in their defence had cited relying on Reserve Bank of India (RBI) inspection report. But SFIO dismissed the defence and cited that auditors did not follow the laid norms for auditing IFIN.

SFIO said that the auditors did not follow practices to bring out true and fair picture of the accounts and allegedly colluded with management to conceal alleged fraudulent practices.