Siva group gave dud shares of Tata Teleservices for funds from IFIN

SFIO has said that Sivasankaran arranged for foreign junkets, helicopter rides and paid for renovation of apartments of top IL&FS officials in Brussels

Chennai-based entrepreneur C Sivasankaran gave dud shares of Tata Teleservices (TTSL) as collateral to raise funds from IFIN, a subsidiary of IL&FS. 

And, as a quid pro quo, he arranged for foreign junkets, helicopter rides and paid for the renovation of apartments of top IL&FS officials in Brussels. The auditors of IFIN connived with the management and failed to raise red flag on the issue.

These are revelations made by the Serious Fraud and Investigation Office (SFIO), in its charge sheet filed before the additional sessions-cum-special judge (Companies Act) of Mumbai, on Thursday.

“The primary security for the loans advanced by IFIN, from December 2011 to December 2014, to the Siva group were the shares held by the Siva group in TTSL (an unlisted company). The security, valued at Rs 82 a share, was carried over for subsequent fresh lending till 2014. Keeping a constant quantum of shares without re-evaluating the value of such shares drastically reduced the security cover of such lending. Finally, the Reserve Bank of India (RBI) observed that the value of such shares should be treated as nil and IFIN should provide provision for total investment in TTSL,” the complaint said.

In 2014, while lending to the Siva group, another company Emerald Stones, was valued at Rs 59.62 crore and another loan was taken. However, no physical examination or documentation was undertaken for the security, the chargesheet said and IFIN relied on a letter of a chartered accountant of the borrower.

As on March 2015, the exposure of IFIN to the Siva group stood at Rs 184 crore and without any adequate cover.

During December 2015, IFIN subscribed to the optionally convertible debentures (OCDs) to the tune of Rs 190 crore of the Siva group, which are effectively interest free debentures. These debentures were unsecured for five years. The RBI recommended 100 per cent diminution of value on these investments upon inspection.

New loans were given to the Siva group which were actually a non-performing asset of IFIN. Few loans were closed pursuant to exercise of IFIN right over TTSL shares which had no value in the market. “Few other loans were closed by repayment which was funded by IFIN by way of subscribing to the OCDs issued by Siva Green Power Projects,” the charge sheet said.

The fraudulent circuitous transactions between IFIN and Siva group companies had aided to projecting a rosy picture of financial statements to defraud the lenders of IFIN, it said. In quid pro quo, email evidence shows that Sivasankaran was arranging hospitality for IL&FS chairman Ravi Parthasarathy, director Vibhav Kapoor, and vice-chairman Hari Sankaran. 

These include foreign travel, private jets and helicopter rides, booking resorts and arranging for interiors of their flats in Brussels, among others. IFIN had entered into 15 transactions of advancing loans to the Siva group but repayment was done only for four transactions, the charge sheet said.

The chargesheet was also filed against former Deloitte CEO Udayan Sen, Kalpesh Mehta, N Sampath Ganesh, and Deloitte Haskins, among others, for failing to raise red flags while auditing the account books of IFIN.

The chargesheet alleged that auditors concealed material information and fraudulently falsified the books of accounts and thereby financial statements from 2013-14 to 2017-18. It claimed the auditors knowingly did not report the true state of affairs of the company, particularly the negative NOF (net owned funds) and negative CRAR (capital to risk asset ratio), which have caused loss to the creditors and investors in the company's NCDs (non-convertible debentures).

When contacted, a Deloitte spokesperson said: ";We have not been served the chargesheet. DHS LLP is confident that its audits were performed in accordance with the applicable professional standards, and is cooperating fully with the investigative authorities."

A BSR & Associates official said they have submitted all the audit papers to the SFIO for the one year (fiscal 2018) they were the auditor of IFIN and cooperated fully with the probe. 

The independent directors on the board of IFIN remained mute spectators to the entire fraud and despite warnings sat on whistle blower letters.