IL&FS Mess: Midas Touch Seeks CBI Probe, Forensic Audit of IL&FS Group

Moneylife Digital Team 15 October 2018

Economy & Nation

Midas Touch Investors' Association (Midas Touch), a well-known investor organisation, has requested Arun Jaitley, Minister of Finance, for detailed investigation in the Infrastructure Leasing and Financial Services (IL&FS) mess by Central Bureau of Investigation (CBI).

According to Virendra Jain, President of Midas Touch, the investigation ordered by Serious Fraud Investigation Office (SFIO) may not be able to cover the entire sweep of scam as IL&FS is a large systemically important non-deposit accepting core investment company of the country, and is regulated by Reserve Bank of India (RBI) and other regulators.

In such scenario, "…the remit of SFIO, in our view, is limited and would not encompass inquiry and investigation, which may be required under other areas of administration under the present scenario. In view of the present circumstances, it may be appropriate that an inquiry and investigation to be undertaken by CBI be ordered. The SFIO investigation already ordered may supplement CBI probe," Mr Jain says in a letter.

Midas Touch says there is a need to carry out forensic audit of accounts of entire 348 group companies of IL&FS and fix accountability for dereliction of duty by the board of directors, the auditors, credit rating agencies, subscribers to its debt paper and all the respective regulators as well as to retrieve money and assets by recovering ill-gotten wealth from its (erstwhile) chief executive officers, managers, personnel and all those who benefited.

Here are the demands made by Midas Touch in its letter to the finance minister...

1) To order an inquiry and investigation by CBI in the entire gamut of issues relating to IL&FS and its 348 subsidiaries, associates and joint ventures;

2) To fix accountability for dereliction of duty by the chief executives, board of directors, the auditors, the credit rating agencies, the subscribers to its debt paper and all the respective regulators;

3) A time-bound cash-in-cash-out statement of all the 348 entities in the IL&FS fold. This can be done by independent auditors. This will clearly identify the holes.

4) A forensic audit to follow the money trail from IL&FS and its 348 direct or indirect subsidiaries and associates, to establish the quantum and destination of siphoned funds and assets illegally transferred through any device.

5) A forensic audit to follow the money trail from IL&FS and its 348 direct and indirect subsidiaries and associates, to their chief executive officers, managing directors, directors, managers, key employees and their families, relatives and other entities to establish the quantum and destination of siphoned funds, ill-gotten gains and assets illegally transferred through any device.

6) Confiscation, recovery and restoration to IL&FS and its subsidiaries of all ill-gotten gains, funds siphoned off and assets diverted through any device.

7) An immediate impounding of passports of key management personnel (this number now should may be anywhere between 50 and 75 in the group) and get them to submit a list of their assets vide a sworn affidavit (which can then be prevented from alienation without the express permission of the court).

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