CBI registers corruption case on IL&FS arm ITNL, its ex-directors

The Central Bureau of Investigation has registered a corruption case against IL&FS Transportation Network Ltd (ITNL), its former directors and incumbent chief financial officer on a complaint filed by state-run Canara Bank.

The agency also searched the premises linked to the accused in Mumbai, Delhi and Gurgaon, people in the know said.

This is the latest of cases being filed in connection with alleged financial irregularities at Infrastructure Leasing and Financial Services Ltd (IL&FS) and its group companies. The Serious Fraud Investigation Office under the Ministry of Corporate Affairs and the Enforcement Directorate (ED) that investigates money laundering have been probing the IL&FS group for over four years now based on complaints filed by public sector banks.

Two former auditors of another group company, IL&FS Financial Services (IFIN), are also under investigation.

In its petition, Canara Bank, the lead lender to ITNL, alleged that the accused had entered into a criminal conspiracy to cheat a consortium of 19 banks. They had misappropriated bank loans through diversion of funds, circular transactions among related or sister concerns, and misrepresentation of accounts, thereby causing a loss of Rs 6,524 crore to the lenders, the petition alleged.

According to the FIR, ITNL, a road assets owner, availed of credit facilities under multiple banking arrangements. Canara Bank sanctioned a rupee term loan of Rs 500 crore and external commercial borrowing of $75 million. However, the account became non-performing in March 2018. An audit conducted by Canara Bank revealed alleged fraudulent activities, following which the bank declared it as fraud in November 2021, it said. Incumbent CFO Dilip Bhatia was working at the company when the loans were arranged.

The FIR doesn't mention the delay over registering the offence - two years after the account was declared fraud. Under the existing framework, lenders need to report fraud to the Reserve Bank of India's Central Repository of Information on Large Credits within a week of the joint lenders' forum declaring an account fraudulent. The FIR doesn't say whether the bank had reported this to the RBI. The complaint said the bank conducted an internal investigation in the matter and observed no lapses on the part of its staff.

The bank, with its petition, attached the report of an audit conducted by Grant Thornton India, which claimed to have found several lapses under compliance, non-adherence to principles laid down by National Highway Authority of India and substantial fund transfers without accounting or bringing them under ERP software. It also found potential diversion of funds even when the company was under severe liquidity stress. "...the borrower company has made potential donations," the audit report states.

Also, some deals suggested that a contractor was probably assisting ITNL to circumvent RBI regulations, the FIR said, citing the audit report.