The former vice-chairman and managing director of the beleaguered financial services firm Infrastructure Leasing and Financial Services (IL&FS), Hari Sankaran, was arrested here by the Serious Fraud Investigation Office (SFIO) on Monday. He was sent to police custody till April 4.
An official spokesperson said he was arrested “on the grounds that he abused his powers in IL&FS through his fraudulent conduct and in granting loans to entities which were not creditworthy or have been declared non-performing assets, and caused wrongful loss to the company and its creditors.” SFIO counsel Hiten Venegavkar sought his custody for five days.
The spokesperson said that in “granting loans to entities which were not creditworthy or have been declared non-performing assets (NPAs)”, Sankaran had caused wrongful loss to the company and its creditors.
Trouble surfaced at IL&FS in the July-September quarter of 2018, when two of its subsidiaries started defaulting on repayment of loans and inter-corporate deposits to lenders. A subsequent series of defaults caused a systemic problem with many non banking finance companies running into financial issues.
On October 1, 2018, the Central government took steps to take control of the company through a directive by the National Company Law Tribunal (NCLT) and arrest the spread of the contagion to the financial markets. A new board under the leadership of banker Uday Kotak was constituted as the earlier board was deemed to have failed to discharge its duties.
The SFIO was then asked to probe the procedural lapses at the firm and its subsidiaries as the top management was believed to be involved in diverting money.
The SFIO counsel Hiten Venegavkar sought Sankaran’s custody for five days “for ascertaining all the fraudulent activities carried out by him, to prevent him from influencing any witnesses and destroy the evidence, to examine him about the loan and advances approved without proper collaterals.”