New Delhi, Oct 1 (IANS) The government on Monday said that an investigation has been ordered into the affairs of the debt stricken IL&FS and its subsidiaries after "serious complaints" were received about the beleaguered company.
"There have also been serious complaints about some of the companies for which an SFIO (Serious Fraud Investigation Office) investigation has been ordered into the affairs of IL&FS and its subsidiaries," the government said in a statement.
The statement comes after the Centre superseded the management of the beleaguered company by appointing a six-member Board led by banker Uday Kotak to restore the financial solvency of the debt-stricken conglomerate.
"The decision to supersede the existing board was taken after careful consideration of a report received from the Regional Director, Mumbai under the Ministry of Corporate Affairs (MCA) which clearly brought out serious corporate-related deficiencies in the IL&FS holding company and its subsidiaries," the statement said.
According to the statement, it was noted that the consolidated financial statement of IL&FS holding company and its subsidiaries, associates and joint ventures projected a picture "through highly exaggerated depiction of non-current assets in the form of intangible assets amounting to over Rs 20,000 crore".
"Besides, a bulk of revenue was in the form of receivables, around 50 per cent, which was locked up in litigation and arbitration," the statement said.
"It has been noted that there is deep-rooted mismatch in the debt-equity ratio because of excessive leveraging, which has put a question mark in its ability to continue as a going concern if allowed to continue in the hands of the present management."
"The high debt stress was clearly visible in the company and its main subsidiaries for the last so many years, but was camouflaged by misrepresentation of facts."
On Monday, NCLT (National Company Law Tribunal) Mumbai ordered the supersession of the existing Board on a plea moved by the MCA to prevent any "further mismanagement in order to protect public interest".
Later in the day, MCA in a statement said: "The NCLT suspended the existing board and directed that the suspended members should not represent the company in any form with immediate effect."
"The NCLT approved the induction of six Directors recommended by the government, in the first instance, consisting of Uday Kotak, MD & CEO of Kotak Mahindra Bank as Non-Executive Chairman and Vineet Nayyar, IAS (Retd.), G.N. Bajpai, former Chairman, SEBI, G.C. Chaturvedi, Non-Executive Chairperson, ICICI Bank, Malini Shankar, IAS and Nand Kishore, IA&AS (Retd.) as Directors."
"The new Board shall take up its responsibility with immediate effect, after following due procedures."
According to government sources, the new board will meet within this week.
The board is expected to submit a report on the company's financial woes after assessing the liquidity position and reviewing the decisions taken by the previous management in the next 15 days.
As per some industry estimates, the company has an urgent liquidity requirement of around Rs 5,000 crore.
Key public sector lenders and undertakings such as LIC and SBI have a 25.34 per cent and 6.42 per cent stake, respectively, in the firm which has around Rs 91,000 crore in long-term debt.
Besides, institutional investors, infrastructure projects, mutual funds and other lenders were at risk from the collapse of the company. The crisis has dented equity investors' confidence in the entire NBFC (Non Banking Financial Company) space.
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