A look into ‘management’ of IL&FS Group’s business by the previous Board has revealed several anomalies. For example, the new Board has discovered that companies in the IL&FS Group have had the “practice of leasing properties owned by select employees (or their relatives) as guest houses of group companies”.

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“Even as the new Board is undertaking further reviews of all such arrangements, illustratively, in relation to six such properties that were taken on lease, the monthly lease rent aggregated to Rs 15.1 lakh per month and with a deposit of Rs 2.26 crore. The new Board has initiated steps to terminate such leases,” said ‘Report on Progress and Way Forward’ submitted to National Company Law Tribunal and Ministry of Corporate Affairs.

The report goes on to present other discrepancies too.

There are certain entities which, in practice but not necessarily de jure, may have been considered part of the IL&FS Group for the purposes of funding. For instance, IL&FS Financial Services Ltd (IFIN) has an exposure in excess of Rs 900 crore to companies which are subsidiaries of associates or joint ventures of IL&FS such as HCPL and IL&FS Employee Welfare Trust. These do not get consolidated into the accounts of IL&FS, and at the same time have been treated by the previous management as “internal debt”.

Furthermore, a particular asset of IL&FS Group was transferred from one entity in the group to another entity in the group in June 2017 at a value of Rs 30.8 crore in cash based on an independent, fair valuation, and in just about a year, that is in June 2018, a committee of directors resolved to sell this to a third party at Rs 1 crore.

This means it was sold at a significant discount to the original intra-group purchase price, the reasons for which the recently nominated Board finds are inadequately supported.

“The new set of Board is unable to validate whether due processes and transparency have been followed by the previous management in pursuing various asset monetisation activities,” commented the nominated Board of Directors in their report.

Source: DNA Money