IL&FS Directors under the scanner, yet again

Mumbai, March 5 (IANS) After the Serious Fraud Investigation Office (SFIO) pointed fingers at top executives for siphoning off the welfare fund for personal gain, an interim audit report has found "potential conflict of interest" since the Directors of the IL&FS group were involved in diverting loans to their own accounts.

The interim audit report by Grant Thornton highlighted multiple irregularities in the operations of the company, one being the loans provided to such firms where an existing director one of the IL&FS group companies was the promoter.

Highlighting one such instance of conflict of interest, the report said that Siddharth Dinesh Mehta, one of the promoters of the group Bay Capital was also a current director in IL&FS Energy Development Company Ltd".

The report also noted that "it appears that the partial amount of loan was not utilised by the borrower for the purpose for which it was sanctioned".

The mess at IL&FS came to light last year when a sudden default by a few group companies posed the serious threat of a complete collapse of the infrastructure conglomerate.

Last year, the Central government superseded the management of the beleaguered company via a National Company Law Tribunal (NCLT) order and appointed a six-member board led by Uday Kotak, MD and CEO of Kotak Mahindra Bank, to restore its financial solvency.

Key public sector lenders and undertakings, such as the LIC and the 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.

The credit crunch has led a few of the company's subsidiaries to default in servicing some inter-corporate deposits.

Consequent to defaults, a significant impact was felt in the capital market. This also triggered what is now known as the NBFC crisis.