Blatant disregard of RBI's CAR rules made IFIN island of corruption ( Exclusive)

In a flagrant disregard for RBI's CAR rules, it tried to remain an island and did pretty much what it wanted. The rules are a pre-requisite and a basic industry requirement. The RBI had, as part of its inspection, calculated and conveyed the CRAR in accordance with the directions. For the year 2016-17, IFIN neither recalculated nor disclosed the full details on the discrepancies, which was material information. It shows that the closed user group, which ran the shadow bank like a personal fiefdom, chose not to conform to standard practices in the banking industry and instead went about its merry ways leading to widespread corruption, nepotism and chicanery. The tale of woe has imperilled the Indian financial system since last September when the news of its going belly-up first emerged.

The SFIO probe reveals that the management had not disclosed the CRAR as assessed by the RBI in the disclosures forming part of financial statements. For FY 2017-18, the CRAR had been disclosed as per the existing practice norms despite the regulator's instruction on calculation of NOF and CRAR. The financial statements don't show true and fair view as the CRAR (a material fact/information) represented in the financial

statements is misstated.

Moreover, the Investigation team also found instances of funding the overdue loans to financial year 2013-14 which was governed by the provisions of the Companies Act, 1956. This included a loan of Rs 15 crore to Parsvnath Group as fresh loans in the month of August 2010 and March 2013 which were used for the purpose of payment of previous loan amount. Similarly, in March 2013, loan amounts of Rs 240 crore were sanctioned to Grevek Investment & Finance Pvt Ltd (GIFPL) and Rs 230 crore to SKIL Infrastructure Ltd and these used for the purpose of the payments of existing loans.

In an indictment of the all-round calumny and falsehoods which the management lived by, the signatories of these accounts, including statutory auditors of the IFIN, suppressed the information of various loans for which provisioning should have been made in the financial statements. They knowingly avoided these provisioning in the books of

accounts of the company which led it to fraudulently inflate the profits of the company to present a rosy picture.

The above financial statements were also audited by the statutory auditors who performed the important task of providing an assurance to the outside investors/stakeholders on its financial reporting. They are required to check the accounting records and all other relevant sources of data and information to ensure that the financial statements of a company give a true and fair picture. On account of the critical function performed by the auditors, safeguards to ensure their independence are embedded in the Companies Act.

Statutory auditors are independent from the management of the company and are employed by the shareholders and not by the directors. However, in the case in hand, the statutory auditors also failed to discharge their duties and knowingly signed false

statements. This perhaps shows how the malaise had spread beyond the management which managed to make the statutory auditors complicit by providing favours.

In another charge, IFIN Director Ramesh Bawa failed to disclose his interest, as required under Section 184 of the Companies Act in "AAA Info Systems Private Ltd" and "AAAB Infrastructure Private Ltd", in which his wife and daughter are directors. Bawa was also a shareholder in the said companies but he had not disclosed his interest in the said companies in Form MBP-1 submitted by him to the Board of Directors of the Company.

Bawa, now arrested, was aware of the manner of filing MBP-1 as he was reporting his interest in 20 different entities. The act of not disclosing the names of the companies where he had interest in the companies was deliberate and intentional misstatement in a form required to be submitted under Section 184(1) of the Companies Act.

It is pertinent to mention here that AAAB Infrastructure Private Ltd had entered into transactions of approximately Rs 12 crore with Unitech Ltd, one of the defaulting borrowers of IFIN.

( With inputs from IANS )