Sivasankaran again as SFIO finds IFIN violated RBI rules
04 Jun 2019
1
IL&FS Financial Services Ltd (IFIN) lend money to undeserving persons and entities in exchange of favours and violated Reserve Bank of India (RBI) guidelines on lending to group companies, besides other serious irregularities, investigation by the Serious Fraud Investigation Office (SFIO) has found.
Charges filed by the SIFO in the IL&FS case on Thursday accuses the former top management of an IL&FS subsidiary of enjoying favours in lieu of approving loans that ultimately caused huge losses for the company.
Specifically, the 804-page chargesheet states that key management personnel at IFIN had a quid pro quo with C Sivasankaran of Siva group of companies. Sivasankaran has been named co-accused along with 29 other entities and individuals under Section 447 of the Companies Act and under provisions of Indian Penal Code for causing loss to the public.
The SFIO accuses C Sivasankaran of arranging for "hospitality" for top management, including Ravi Parthasarthy, Vibhav Kapoor and Hari Sanatan. This included arranging foreign trips, private jets and helicopter rides, resort accommodation and even interior decorations at their flats in Brussels.
Aircel founder and serial entrepreneur C Sivasankaran is better known for his role in the Aircel-Maxis case in which former finance minister P Chidambaram is also an accused.
Starting his career as a fabrication contractor for Madras Refineries Ltd (now Chennai Petroleum Corporation), Sivasankaran has, in the last two decades, built a $3-billion business empire that includes realty, telecom, project engineering, shipping, energy, commodities trading, agri exports and e-education and software.
In 1996, the NRI shot to fame in the US when he bought rapper MC Hammer's residence in Fremont, California.
Siva, as Sivasankaran is known among his friends, as chairman of the Chennai-based Sterling group and Siva Ventures Ltd, had acquired and exited a number of companies such as RPG Cellular, Barista, Tamil Nadu Mercantile Bank and Best & Crompton. He is also known for his networking prowess for developing resorts and even recapitalising banks in Thailand.
If the charges are proven, the former IFIN bosses face imprisonment of up to 10 years and a penalty of three times the amount of fraud if public interest is involved.
A special court in Mumbai will hear the case on 7 June.
“C Sivasankaran was arranging hospitality for Ravi Parthasarthy, Vibha Kapoor, Hari Sankaran, including foreign travels, arranging private jets, helicopter rides, booking of resorts, arranging for interiors of their flat in Brussels," the charge sheet said. The investigative agency further said these favours were linked to loans disbursed to the Siva group of companies, apart from influencing decision-making on loan recovery and levy of fees.
IFIN also overlooked an RBI directive in 2017 to reduce exposure to IL&FS group companies. IFIN’s directors even made false representations to the RBI that they had not extended any more loans to group companies beyond November 2017, the probe found.
Funds were extended to Siva group of companies despite warning and internal IFIN notes that the group was facing liquidity crunch. Interestingly, the primary security to lend to Siva group between December 2011 and December 2014 were shares held by Siva group in Tata Teleservices Ltd.
SFIO alleged that these shares were not revalued, impacting the security cover of such lending. Later, the RBI said the value of these should be treated as nil. The shares had no value in the market.
IFIN’s total exposure to the Siva group stood at Rs182.45 crore as of March 2015, that too without any security cover.
IFIN had entered into 15 transactions with the Siva group, involving advance of loans and investment in debentures of different Siva group companies. Repayment so far has been done only for the first four transactions.
The SFIO probe also found the misuse of IL&FS’s land parcel.
An agreement was signed on 19 November 2014 between Hill County Properties (an IL&FS entity) and Chennai Properties and Investments (Siva Group) to develop and monetise land parcels. Chennai Properties was then entitled to 20 per cent of proceeds. Siva group benefitted to the tune of Rs2.8 crore due to the agreement in July 2017 but Hill County did not, SFIO claimed.
This money should have ideally gone towards paying outstanding dues to IFIN, which did not happen. Sivasankaran made personal financial gains, the charge-sheet claims, when he purchased two villas from Hill County at a discounted price. IL&FS had also given its own land parcels to Siva Group companies to bail out Sivasankaran who was allegedly in need of funds to pay IFCI.
The SFIO charge-sheet also cites IFIN personnel helping out Siva group by lending Rs125 crore to the Unitech Group, which helped the beleaguered company repay dues of around Rs80 crore to Sivasankaran.
In March 2017, RBI had recommended 100% provisioning of the ?190 crore extended to Siva Group but IFIN wrote it off.
SFIO has alleged that IFIN directors also concealed critical financial parameters with an intent to deceive the regulator. While senior personnel committed to RBI that no fresh lending was advanced to other IL&FS group companies post November 2017, IFIN allegedly side-stepped the rules by extending loans to vendors and third parties for on-lending to other IL&FS group companies, such as ITNL and other subsidiaries.
