The government has got the Serious Frauds Investigation Office (SFIO) to take charge of IL&FS’s servers in Mumbai and has started an audit. Unfortunately, the SFIO is a lame duck, with most of its investigations and findings unceremoniously buried by the Ministry of Corporate Affairs (MCA). Moreover, SFIO simply does not have the manpower to takeover any new investigation due to pendency of cases. Out of 186 cases assigned to SFIO during FY2018-19, it had completed investigation only in one case as on 20 July 2018 due to a 55% shortfall in staff strength, data from the Lok Sabha questions shows.
Earlier, in August 2017, in response to a question in the Lok Sabha, the Union Minister of State Arjun Ram Meghwal provided summary of 233 fraudulent finance companies and chit funds that the SFIO had investigated over the previous five years. He also admitted, “No money in these cases has been restored back to the investors”.
PR Senthilnathan, a member of Parliament (MP) had asked about action taken by SFIO against fraudulent companies and refund of money to victims by fraudulent companies and chits funds. As per the list, maximum number of fraudulent companies (132) were from West Bengal followed by Orissa at 31.
With many insiders starting to allege that top executives of IL&FS were gold-plating projects to create their own pot of gold, an investigation is clearly warranted. But unless the SFIO is asked to work in a time-bound manner and report directly to the Prime Minister’s Office (PMO), the outcome will be no different this time.
What is more shocking is as against a sanctioned strength of 133 posts, SFIO has only 45% or 59 officials working on various cases and use services of external consultants. Due to this, over the past three years, SFIO was even unable to spend budget sanctioned.
While during FY2018-19, its budget was increased four times to Rs62.22 crore from Rs17.37 crore past year, as on 30 June 2018, it could spend only Rs4.71 crore. This was informed by PP Chaudhary, Minister of State for Corporate Affairs while
responding to a question in the Lok Sabha on 20 July 2018.
Mr Chaudhary also told the Parliament that during the past three years, 94 complaints and prosecutions were disposed of by the various courts by levying a total fine of Rs5.9 lakh or Rs6,276 per case.
Since its inception in 2003, SFIO had investigated 312 cases till 2016-17. According to information provided by Ministry of corporate affairs (MCA) to a Parliamentary Panel, only six convictions, including those in the Satyam and Reebok case, had fructified out of 162 investigations completed till March 2015.
In short, over the past 12 years, the conviction rate of SFIO is just 3.7%. In contrast, the conviction rate of UK’s SFO on whose lines the former is modelled, was as high as 85% as per its progress report submitted on 23 June 2014.
Coming back to the IL&FS mess, the reconstituted board has to submit a resolution plan to the NCLT (National Company Law Tribunal) by 31 October 2018. Many Indian and international experts, point out that IL&FS has been largely and infrastructure play in the private sector and cannot be given special treatment just because it masqueraded as a quasi-government body. If the rating agencies or banks treated it as one, they ought to be hauled up.
Strangely, the regulator of rating agencies, Securities and Exchange Board of India (SEBI) is silent so far. How difficult is the new board’s job? It has to first understand the modus operandi of Ravi Parthasarthy, who ran the show with his cronies for over two decades. (
Read: How IL&FS Was Enriching Itself at Public Cost)
It holds assets of around Rs1,65,000 crore of which a whopping
Rs30,000 crore are at risk, according to data analysed by REDD Intelligence.
Banking analyst Hemindra Hazari has written about how the complete erosion of IL&FS’s networth has been disclosed in the consolidated balance sheet for several years.
In an article in
The Wire he writes: “A cursory analysis of the consolidated accounts however reveals a horrifying saga: IL&FS has been an insolvent company since at least FY’2014 (no disclosure of consolidated accounts prior to FY’2014).”
