The giant Infrastructure Finance & Leasing Services (IL&FS) scam shook the country and took many casualties down with it when it was uncovered in July of last year. It led to the liquidity crisis in the financial system which saw the stock market tank and was responsible for a contagion effect that crippled many NBFCs, some of which still feel the effect of it till date. IL&FS was deemed an institution that was “too big to fail” and when it started defaulting on its debt payments, which were in excess of ₹ 91,000 crore, including borrowings from public sector banks, institutions across the financial system began to feel the heat.
On investigation, agencies uncovered shocking details of wrongdoings, with instances of misreporting of income, dubious transactions, conflict of interest, ever greening of loans and personal enrichment of key employees. The first order of action by the government was to supersede its board of directors with a new board, with eminent banker Uday Kotak as its Executive Chairman so that no wrongdoings can be covered up.
And then started the process of holding those responsible accountable. After a thorough investigation, the Serious Fraud Investigation Office (SFIO) arrested the Hari Sankaran, former Vice Chairman of IL&FS and Ramesh Bawa, former CEO of IL&FS Financial Services (IFIN) in April. The Enforcement Directorate (ED) on Wednesday arrested Arun Kumar Saha, former Joint Managing Director (MD) of IFIN and K. Ramchand, former MD of IL&FS Transportation Network.
Auditors to the beleaguered firm were not spared as either, and rightly so. Charges levelled against two of the big 4 multinational audit firms Deloitte and BSR & Co. (which is an affiliate of KPMG) include failure to report ever greening of accounts, misrepresentation of facts, concealing of information and failure to draw attention to round tripping of funds and loans. A multitude of agencies are probing various wrongdoings by the auditors including SFIO, MCA, NFRA, ICAI, SEBI and ED.