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IL&FS scam: ED searches premises of two former auditors
The agency’s action came a week after the Supreme Court set aside the Bombay high court verdict quashing the SFIO (Serious Fraud Investigation Office) probe against the two audit firms over alleged financial irregularities. IL&FS was earlier embroiled in a payment crisis and had filed for bankruptcy in 2018. SFIO is under the Ministry of Corporate Affairs and probes and prosecutes financial crimes.
Mumbai: The Enforcement Directorate (ED) on Wednesday conducted searches at five locations in the city related to two audit firms – BSR and Associates and Deloitte Haskins and Sells – as part of its money laundering investigation into the alleged financial irregularities at the debt-hit Infrastructure Leasing and Financial Services (IL&FS).
The two firms were former auditors of IL&FS.
The agency’s action came a week after the Supreme Court set aside the Bombay high court verdict quashing the SFIO (Serious Fraud Investigation Office) probe against the two audit firms over alleged financial irregularities. IL&FS was earlier embroiled in a payment crisis and had filed for bankruptcy in 2018. SFIO is under the Ministry of Corporate Affairs and probes and prosecutes financial crimes.
ED’s probe began in February 2019 based on a Delhi Police Economic Offences Wing (EOW) case filed against IRL, ITNL (group companies of IL&FS), its officials and others. ED had also taken cognisance of a complaint filed by the SFIO against IL&FS Financial Services (IFIN) and its officials.
When contacted by HT, Deloitte’s spokesperson said, “This routine inquiry is in respect to an ongoing matter regarding a former client and we continue to extend our full cooperation to the authorities.”
ED had in its probe arrested Arun Kumar Saha, one of the former members of the committee of directors of IFIN, and Karunakaran Ramchand, former managing director of ITNL. The agency had subsequently filed a chargesheet before a special PMLA court in Mumbai, alleging that the senior management of IL&FS had indulged in acts of commissions and omissions, leading to illegal personal gains to them at the expense of the firm. It was alleged a few IL&FS former officials had allegedly disbursed loans through various private firms without conducting due diligence.
The IL&FS group companies had an aggregate debt burden of more than ₹91,000 crore and a series of defaults had taken place between June and September in 2018, which endangered the money markets and led to action against the firm and its auditors. The Centre took management control of IL&FS and appointed a new board in October 2018 to control the defaults.
“During the course of the investigation by ED, it is revealed that the statutory audit of the IL&FS Financial Services Ltd or IIFIN, a group company of the IL&FS Group, has been made by Deloitte Haskins & Sells LLP for the period from 2008-09 to 2017-18, and by BSR & Associates for the period from FY 2017-18, “ an ED source said.
“They were appointed by IFIN to make a statutory audit of IFIN and to identify errors, omissions and irregularities in the books of accounts of the company and to ensure that the financial statements of the company were in compliance with the widely - accepted accounting rules,” the source added.
ED is also probing alleged funding provided by IFIN to defaulting borrowers through their group companies repeatedly and is verifying the role of individuals and entities that could have been aware of such transactions, the source said.
The ED is verifying if the auditors were aware of the alleged dubious and illegal practices adopted by the key managerial personnel of IFIN but did not report the same, despite being statutorily obliged to do so, the agency source said.
