New Delhi, June 4 (IANS) The Supreme Court on Tuesday gave a free hand to the Serious Fraud Investigation Office (SFIO) to reopen and recast the Infrastructure Leasing & Financial Services (IL&FS) books of accounts for last five years.
The matter is in connection with IL&FS' default on its interest payments last year, which eventually spiralled into a major a liquidity crisis in the country's non-banking finance company (NBFC) sector.
The apex court had earlier stayed a National Company Law Appellate Tribunal (NCLAT) order on reopening of the company's books, but vacated its stay on Tuesday.
The Corporate Affairs Ministry, represented by senior advocate Maninder Singh, had moved the Supreme Court seeking a vacation of the stay imposed by it on April 29.
The new management which has taken over the embattled infrastructure lending company, had contended before the top court for vacation of stay.
Last October, the government took control of the IL&FS board and a resolution plan is in the making for the debt-ridden company. Uday Kotak is currently managing the company and its subsidiaries.
The NCLAT had allowed the SFIO to reopen the accounts of IL&FS and investigate the former directors along with the CEOs of the debt-ridden companies. A vacation bench comprising Justice M.R. Shah and Justice Indu Malhotra observed that the court could not see any reason to interfere with the NCLAT order.
The ruling comes as a major setback for the previous management of IL&FS, including former Managing Director Hari Sankaran, who moved the top court challenging the NCLAT order on the grounds it was basically ex-parte and his version was not taken into consideration.
In September 2018, the group companies of IL&FS began defaulting and it brought to light one of the biggest debt crises by an infrastructure lender. The NCLAT is hearing a batch of petitions moved before the tribunal by several lenders who sought to recover from IL&FS and its subsidiaries.
Sankaran and IL&FS Financial Services chief Ramesh C. Bawa were arrested by SFIO in April this year during an investigation into loan defaults of IL&FS and the connected group companies.
The NCLAT had ordered reopening of the books of accounts and recasting financial statements of IL&FS Ltd, IL&FS Financial Services Ltd and IL&FS Transportation Networks Ltd for the previous five years.
IL&FS defaulted on loan repayment to the Small Industries Development Bank of India (SIDBI), and it has a consolidated debt of Rs 91,000 core, including of its subsidiaries.
The Ministry contended before the court that it was necessary to reopen the accounts in the interest of the on-going probe. Advocate Singh had argued that in order to develop a larger picture and then look deep into the flaws, it is essential to reopen the accounts regarding the financial position of IL&FS and connected companies.
IL&FS was once considered an epitome of public-private partnerships (PPPs). After the debt crisis came to the fore, the company was identified as a major defaulter by multiple regulators, and as a consequence, came under scrutiny for serious defaults on financial disclosures resulting in a flawed corporate governance model.
Fresh searches were reportedly were conducted last month in Mumbai by the Enforcement Directorate in connection with the money laundering aspects of the multi-crore IL&FS payment default crisis.
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