1 Lakh Crore Scam: Chennai police arrest former IL&FS Chairman Ravi Parthasarathy

Move over multi-crore scamsters recently discovered like Vijay Mallya (9000 Crores) or Mehul Choksi – Nirav Modi combine (13,500 Crores), Chennai Police has caught an ex-banker in connection to a Rs. 1 lakh Crore scam. The biggest scamster probably whose illegal and nefarious actions where happening during the current PM Narendra Modi’s regime, Ravi Parthasarathy, has been arrested.

Chennai Police’s Economic Offences Wing (EOW) has arrested Ravi Parthasarathy, the former Chairman of IL&FS Group, in the Rs 1 lakh crore scam which had even triggered a liquidity crisis in the Indian financial services market in 2018.

Senior Chennai Police sources confirmed his being taken into police custody for a period of 15 days, post his arrest. After DMK has come into power, swift action has been taken against Parthasarathy in connection with Crime No. 13 of 2020, dated September 20, 2020.

"The accused, Ravi Parthasarathy, is the former Chairman and Managing Director of the entire IL&FS Group. The IL&FS Group, which consists of more than 350 group companies, was used as a vehicle to perpetrate fraud by then management of IL&FS Group which was headed by the then Chairman and MD-CEO Ravi Parthasarathy," said Chennai Police in a statement.

Police stated that the FIR had been registered subsequent to a complaint filed by 63 Moons Technologies Ltd, which lost a sum of Rs 200 crore. Complaints from various other depositors have also been received. Police has further asked other aggrieved depositors and investors of IL&FS Transportation Networks India Ltd (ITNL) to forward their claims to EOW.

Anticipatory bail petition filed was also dismissed by the Madras High Court.

It is noteworthy that Enforcement Directorate (ED) has not taken any action against him till date. Usually ED takes swift action against those who are believed to be from opposition, or close to opposition’s leaders. Even though, Parthasarthy allegedly a close confidant of former Finance Minister P Chidambaram, was still on a long leash by the Central government’s ED is confusing experts. Does it mean that he has connections in BJP too?

Parthasarthy is accused of fraud with intent to injure the interests of the company, its shareholders and lenders. This resulted in wrongful loss to the company. Trouble surfaced at IL&FS in the 2nd quarter of 2018, when two of its subsidiaries defaulted on repayment of loans and deposits to lenders. Subsequently defaults increased, triggering a systemic problem with many non-banking finance companies (NBFCs) running into financial issues.

In October 2018, the Union government took steps to take control of IL&FS through a directive by the National Company Law Tribunal (NCLT). To further arrest the spread of the contagion to other companies a new board under Uday Kotak was constituted.

Then, the Union Government had said, "Ravi Parthasarathy and his team were responsible for the negligence, incompetency and misleading the public by presenting rosy financial statements. IL&FS was camouflaging its financial statements by hiding a severe mismatch between its cash flows and payment obligations. It was also hiding total lack of liquidity and glaring adverse financial ratios."

In addition to the premier investigating agency, the Serious Fraud Investigation Office (SFIO), the Reserve Bank of India, the Ministry of Corporate Affairs, the Registrar of Companies (RoC), the NCLT, along with the Grant Thornton forensic report have made adverse findings against him. Also, the RoC has observed mismanagement and compromise in corporate governance norms.

There is another FIR registered by the EOW-New Delhi against Parthasarathy and Hari Sankaran under various sections of IPC. But the Central Government run Delhi Police has taken little action against the accused.

IL&FS’s most serious offence was connected with creating a trust where Parthasarathy and certain other senior IL&FS personnel were major beneficiaries. This was known as Employee Welfare Trust but used as an instrument to enrich its directors at the cost of the Company. This trust, which owned 12 percent of IL&FS Limited, was used to perpetrate fraud on IL&FS and its group companies.

RBI in its March 22, 2019 report said that the major role in perpetrating fraud and financial irregularity was played by Parthasarathy as the Group Chairman of IL&FS. The report says indiscriminate sanctioning of loans, flouting of RBI norms, fraudulent transactions to certain accounts, showing inflated numbers of subsidiaries, conflict of interests, and the concentration of power in the hands of few, which included Parthasarathy – were the primary reasons.

Later a SFIO report named Parthasarathy as the prime accused. Adding Parthasarathy was the key decision-maker in IL&FS Group and used the group as his fiefdom. Being the Group Chairman and Director of its various subsidiaries, the coterie led by him abused their position and diverted funds of group companies.

It was only after Supreme Court order which upheld Union Government’s stand that the NCLT-Mumbai order to recast the accounts of the Group was possible. The forensic audit by Grant Thornton also revealed numerous illegal practices, fraudulent practices including bribing of credit rating agencies, indicating clearly the involvement of Parthasarathy - the then IL&FS Group Chairman.