Government may ask NCLT to freeze assets of former IL & FS directors: report

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Even though the top management of the crippled IL&FS group continues to face the heat from several probe agencies and regulators like the Enforcement Department, the Serious Fraud Investigation Office (SFIO) and, more recently, SEBI, the former directors do not did not come out unscathed. The buzz is that the Ministry of Commercial Affairs (MCA) will soon ask the National Company Law Tribunal (NCLT) to freeze the bank accounts and properties of some of the group’s former directors.

“The MCA will likely ask the court to extend past orders to cover former directors, possibly including some of the non-executive board members,” a senior lawyer told The Economic Times, adding that former auditors could also be included. Once the court issues an interim order freezing the assets, only a limited withdrawal of funds is allowed for the subsistence of the account holders.

In December 2018, the NCLT prevented nine former big bosses of the IL&FS group from mortgaging or selling their movable or immovable property as well as their jointly owned properties. The list would include former CEOs and CEOs of subsidiary entities such as Ravi Parthasarathy, AK Saha, Hari Sankaran, G. Ramachandran and RC Bawa. This development came two months after the court toppled IL & FS’s former board of directors and a government-appointed board headed by Kotak Mahindra Bank chief executive Uday Kotak took over. The direction.

This is not the first time that MCA has considered such a decision. Last year, the National Company Law Appeals Tribunal (NCLAT) upheld MCA’s request to freeze the assets and properties of around 70 directors – including independent directors – of companies owned by Nirav Modi and Mehul Choksi in connection with the Rs 13,000 crore Punjab National Bank Scam (PNB).

The buzz last month was that the IL & FS board was evaluating the option of recalling all bonuses and benefits paid to former directors – including nominees and independent directors – from the parent company as well as IL & FS) and two group companies, IL&FS Transportation Networks India (ITNL) and IL&FS Financial Service (IFIN) for the five-year period 2012-13 to 2017-18. The board is said to have planned to recover over Rs 10 crore from each director and up to Rs 2 crore from each independent director per year through the clawback of bonuses. The group is sitting on a pile of debts of over Rs 90,000 crore.

According to the daily, the tax authorities could also come soon, adding to the misfortunes of the juggernaut. The Income Tax Department had a meeting last week with its Investigations Division and is considering a possible investigation into suspicions that the costs of several IL&FS infrastructure projects have been inflated.

IL&FS Rail, a branch of ITNL, has already come under the spotlight and the investigation may now be broadened to focus on allegations that shell companies have been launched to award contracts and embezzle funds for a commission. . For example, according to a complaint from ED on IL&FS Rail, transactions made with several private companies, including Silverpoint Infratech, Suryamukhi Projects, NKG Infrastructure, Ethical Constructions and Prathyusha Resources & Infrastructure, were false.

“This would require an investigation into the affairs and books of ITNL and various special purpose vehicles that have been launched to build infrastructure projects – which could focus on the existence of bogus invoices, the role of auditors and the nature of the day-to-day documentation etc. While SFIO’s first chargesheet was on IFIN, it is currently working on the chargesheet on ITNL, the largest branch of the IL&FS group.

Meanwhile, offers for ITNL have been further delayed. IL & FS’s reconstituted board of directors had previously set May 15 as the deadline for finalizing interested party bids for its 22 projects for which it expected a divestment of Rs 26,000 crore. The delay is explained by the fact that the fair value of the projects has not yet been established, not to mention the lack of representation and guarantee granted by the board of directors.

The investigation into the financial mismanagement of IL & FS and its many subsidiaries also shed light on the role of auditors. According to files filed by the MCA last week, at least 22 breaches of auditing standards by Deloitte Haskins & Sells and BSR & Associates – a subsidiary of KPMG – have been detected at IFIN, Reuters reported. While both companies have denied any wrongdoing, the government is calling for a five-year ban against them. In the meantime, senior accountants from Mumbai, including a few partners from the Big 4 auditors, have formed a group to present their point of view to the MCA.

With contributions from the agency

Also read: Aid to ‘organized crime’: government alleges 22 audit violations by Deloitte, KPMG arm in IL&FS fraud case

Read also: IL&FS will file a contempt complaint against SBI, HDFC Bank, PNB for “unauthorized withdrawals”


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