THE ENFORCEMENT Directorate (ED) has said that the current Chief Executive Officer of IL&FS Transportation Networks Ltd (ITNL), Dilip Bhatia, not only helped IL&FS Financial Services (IFIN) fund ITNL despite a Reserve Bank of India (RBI) directive, but also earned commission for placing the funds with ITNL and its subsidiaries.
Bhatia has denied the charge.
In April this year, Bhatia was elevated to the post of CEO at ITNL by the new board of IL&FS headed by banker Uday Kotak. Bhatia was the Chief Financial Officer (CFO) at ITNL before the collapse of the IL&FS Group.
A prosecution complaint filed by the ED in a special court in Mumbai on August 16 said Bhatia had, in March 2018, “structured” a deal that involved financing of two firms — Empower India Ltd and Avance Technologies Ltd that had no business activity — by IFIN to the tune of Rs 320 crore, at an interest rate of 12 per cent per annum. These two firms were then made to transfer the loan availed to ITNL and its subsidiaries at an interest rate of 13.5 per cent.
Of the difference between the cost of borrowed funds and deployed funds, Empower and Avance paid tax deducted at source of 1 per cent and made a profit of 0.35 per cent. According to the statement given by Devang Master, owner of Empower India and Avance Technologies, to the ED, 70 per cent of the profit of the two companies were routed to Bhatia and an IL&FS consultant, Padam Singhania, as commission. Devang Master’s statement in July is a part of the ED’s prosecution complaint.
“On being asked, he (Devang Master) stated that it was decided that from the profit earned by EIL and ATL, 70 per cent of the said profit to be given to Padam Singhania and Dilip Bhatia as commission,” the ED said in its prosecution complaint.
The ED said that IFIN loaned money to ITNL using third parties like Empower India, Avance Tech and many others to bypass the injunction issued by the RBI in November 2017, directing IFIN not to finance its Group companies. The ED has termed this routing of money to ITNL as proceeds of crime under PMLA.
Denying the charge, Bhatia, in an email response to The Indian Express, said: “I vehemently deny any such allegation against me and categorically state that the same is incorrect and false. There has been no discussion at all of any such kind and I will be immediately taking up the matter with appropriate forum to get the same clarified. This statement is being made in my personal capacity.”
An IL&FS spokesperson declined to comment on the issue in an email response.
“Investigation has revealed that IFIN was fully aware that loans given to the aforesaid third parties would be transferred to ITNL or its SPVs (special purpose vehicles),” said the ED report.
The ED complaint said the committee of directors (CODs) of IFIN “siphoned” money from the IL&FS Employee Welfare Trust (EWT) “in the garb of distribution of shares of IL&FS and other Group concerns and also sale of shares and distribution of profits to the employees” at a time when the Trust was running in operational losses.
It said that Ravi Parthasarathy, former chairman of IL&FS, made Rs 20.86 crore from the EWT, while vice chairman Hari Sankaran made Rs 15.34 crore. Other CODs – Arun Saha, K Ramchand and Ramesh Bawa – made Rs 14.42 crore, Rs 13.07 crore and Rs 11.40 crore respectively. The ED has issued lookout circulars (LOCs) against these five directors of IFIN.
According to the ED complaint, the agency has provisionally attached two properties of Parthasarathy in Mumbai and Brussels together worth Rs 50 crore, three properties of Hari Sankaran of about Rs 68 crore, six Mumbai properties of Saha worth Rs 24 crore and three properties of Ramchand worth Rs 8 crore.
On June 19, ED arrested Saha and Ramchand in connection with its money laundering investigation. The two officials are currently in judicial custody.
The IL&FS Group, that has total liabilities of Rs 91,000 crore, has also come under the scanner of the Serious Fraud Investigation Office (SFIO). The SFIO has found several irregularities across corporate governance and financial parameters that led to a default crisis at IL&FS. It also arrested Hari Sankaran and Bawa in connection with the case. Both are in judicial custody.
The alleged financial irregularities at IL&FS came to light last September, after some Group entities started defaulting on debt repayments. The entire Group has been defaulting on repayments since then. The government subsequently superseded the company’s board, and appointed a new management to work on a resolution plan.