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<ul><li>India’s <keyword id="107956" type="ORGANIZATION" weightage="20" keywordseo="Serious-Fraud-Investigation-Office">Serious Fraud Investigation Office</keyword> (SFIO) arrested <keyword id="1827312" type="PERSON" weightage="20" keywordseo="Hari-Sankaran">Hari Sankaran</keyword>, the former chairman and the managing director of <keyword id="6357293" type="UNKNOWN" weightage="20" keywordseo="ILFS">IL&amp;FS</keyword> under Section 447 of the Companies Act, which deals with fraud. </li><li>The SFIO said in a statement to media outlets that it had arrested Hari Sankaran for abusing his powers in IL&amp;FS’s financial services unit by granting loans to companies that weren’t creditworthy. </li><li>In early February 2019, the SFIO alleged that the company’s directors had knowingly laundered funds meant for employee benefits and sanctioned investments in projects without guarantees. </li></ul> India’s Serious Fraud Investigation Office (SFIO) has made its first arrest linked to the default of IL&amp;FS. The body remanded Hari Sankaran, the former chairman and the managing director of the infrastructure lender, under <a href="https://indianexpress.com/article/business/companies/ilfs-crisis-hari-sankaran-arrest-sfio-5653790/">Section 447 of the Companies Act</a>, which deals with fraud. The SFIO said in a statement to media outlets that it had arrested Hari Sankaran <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/sfio-arrests-ex-chairman-of-ilfs-hari-sankaran-on-grounds-of-abusing-his-power/articleshow/68676550.cms">for abusing his powers</a> in IL&amp;FS’s financial services unit by granting loans to companies that weren’t creditworthy. These loans eventually became non-performing. The weak financial position of IL&amp;FS came to light in July last year when one of the lender’s subsidiaries, IL&amp;FS Transportation Networks, defaulted <a href="https://indianexpress.com/article/business/companies/ilfs-shell-companies-income-tax-investigation-5558580/">on a ₹4.5 billion payment </a>on commercial paper. The crisis eventually heightened as the lender was subjected to a series <a href="https://www.business-standard.com/article/companies/icra-downgrades-ratings-of-il-fs-loans-debentures-to-junk-status-118090900267_1.html">of credit downgrades</a>. In early February 2019, the SFIO alleged that the company’s directors had knowingly <a href="https://www.businessinsider.in/top-ilfs-execs-swindled-money-meant-for-employees-says-indias-serious-fraud-investigation-office/articleshow/67893939.cms">laundered funds</a> meant for employee benefits and sanctioned investments in projects without guarantees. It had previously declared that IL&amp;FS executives had <a href="https://www.bloombergquint.com/business/sfio-says-top-executives-led-ilfs-to-its-ruin">“window-dressed” </a>the lender’s books to prove eligibility for further loans. Furthermore, it came to light yesterday that the Indian government had <a href="https://www.moneylife.in/article/ilfs-shocker-govt-quietly-paying-up-on-sovereign-guarantees-to-adb-and-kfw-for-failed-groups-504-million-loan/56743.html">arranged a sovereign guarantee on behalf of IL&amp;FS</a> for loans from the Asian Development Bank (ADB) and KfW, Germany’s development bank. Once IL&amp;FS defaulted, the government was forced to pay back the loans itself but it do so quietly without disclosing the payments to the NCLAT, according to MoneyLife. IL&amp;FS had around <a href="https://www.businessinsider.in/after-idbi-bank-lic-now-has-to-bail-a-huge-infrastructure-lender-out/articleshow/65840416.cms">₹940 billion</a> in outstanding loans at the end of 2017-18, ₹573 billion is in the form of loans to Indian banks - most of which are state-run. The infrastructure lender, which invests in government projects like highways, ports, bridges and dams, reached its current state of high debt and illiquidity owing <a href="https://www.businessinsider.in/after-idbi-bank-lic-now-has-to-bail-a-huge-infrastructure-lender-out/articleshow/65840416.cms">to a lack of regulatory oversight and inadequate due diligence</a> before spending on projects. As the prospects for the infrastructure and power sector declined following the financial crisis of 2008-0, the company’s projects were either stalled or faced huge cost overruns. Hence, the returns for IL&amp;FS’s subsidiaries dried up and its debts continued increasing. In a bid to pay off its debts and avoid bankruptcy, the company has been selling of a range of assets, including its <a href="https://www.businessinsider.in/indias-largest-infrastructure-lender-is-selling-its-renewable-energy-assets-to-avoid-defaulting-on-its-debts/articleshow/66864194.cms">renewable energy business</a> and <a href="https://www.businessinsider.in/ilfs-has-no-option-but-to-sell-its-profitable-financial-services-unit-as-it-tries-to-avoid-bankruptcy/articleshow/65898283.cms">financial services unit</a>. The sales are part of a resolution plan that a government-appointed committee, led by Uday Kotak, submitted to the <keyword id="6354457" type="ORGANIZATION" weightage="20" keywordseo="National-Company-Law-Tribunal">National Company Law Tribunal</keyword> (NCLT), a special insolvency court, on 31 October. SEE ALSO: <a href="https://www.businessinsider.in/top-ilfs-execs-swindled-money-meant-for-employees-says-indias-serious-fraud-investigation-office/articleshow/67893939.cms">Top IL&amp;FS execs swindled money meant for employees, says India's Serious Fraud Investigation Office</a> <a href="https://www.businessinsider.in/even-ba-and-philips-lost-money-in-indias-biggest-financial-scandal-of-2018/articleshow/68613199.cms">Even British Airways and Philips stand to lose money in India's biggest financial scandal of 2018</a>

India sees the first arrest in the country’s biggest financial scandal of 2018

<ul><li>Former IL&amp;FS directors, Arun Shah and K Ramchandra were arrested by the Enforcement Directorate (ED).</li></ul><ul><li>The arrest comes after the Serious Fraud Investigations Office (SFIO) filed first chargesheet in May.</li></ul><ul><li>The arrests were made under the prevention of money laundering act (PLMA). R C Bawa and Hari Sankaran were also arrested under the same act.</li></ul>The government has been moving fast to arrest financial criminals in India. As proof, the Enforcement Directorate (ED) arrested two former directors of scam-ridden Infrastructure Leasing &amp; Financial Services (IL&amp;FS). The ED arrested Arun Shah and K Ramchandra on June 19, under the Prevention of Money Laundering Act (PMLA), <a href="https://economictimes.indiatimes.com/news/politics-and-nation/two-directors-of-ilfs-arrested-by-mumbai-ed-reports/articleshow/69863036.cms">according to reports</a>. Arun Shah was the Joint Managing Director of IL&amp;FS Financial Services while K Ramchandra was the Managing Director of IL&amp;FS Transportation Networks (ITNL). The arrests were made after the Serious Fraud Investigations Office (SFIO) filed its first chargesheet in late May, as a special case. “Arun Shah and K Ramachandra, former directors of IL&amp;FS, were arrested today by the Mumbai branch of ED. Further probe is underway,” an ED official <a href="https://economictimes.indiatimes.com/news/politics-and-nation/two-directors-of-ilfs-arrested-by-mumbai-ed-reports/articleshow/69863036.cms">reportedly</a> said. This is the second set of arrests as former IL&amp;FS CEO R C Bawa and another former director, Hari Sankaran are in judicial custody, after SFIO arrested them. Another former chairman of the company, Ravi Parthasarathy could not be <a href="https://www.tribuneindia.com/news/business/former-md-of-il-fs-financial-services-arrested-in-fraud-case/757866.html">taken into custody </a>due to health reasons. The ED registered a case in February under the Prevention of Money Laundering Act (PMLA) against 19 entities including ILFS Rail, ITNL. The registration was followed by searches conducted by the agency in Mumbai and Delhi. The SFIO had later unearthed multiple counts of fraud and criminal conspiracy, after investigation. There were also instances of misreporting, dubious transactions, conflict of interest, and the ever-greening of loans. Personal enrichment of top level employees was also a part of the many things that went wrong at the non-banking finance company (NBFC). The scam surfaced in July last year as IL&amp;FS’ debt ballooned to ₹910 billion, of which ₹570 billion are bank loans. The huge amount of money it defaulted on, has left the country's banks and other lenders reeling under a cash crunch ever since. Government had superseded the board of IL&amp;FS in October with a new board under Kotak Mahindra’s head Uday Kotak’s stewardship, <a href="https://www.moneycontrol.com/news/business/ed-makes-first-arrest-in-ilfs-case-4116731.html">according to reports</a>. This case has also landed its auditors Deloitte Haskins &amp; Sells and BSR &amp; Associates in trouble, for not identifying its problems. The Ministry of Corporate Affairs wants to ban both the auditors for five years, for their involvement in the scam.

IL&FS case: The latest arrests in India's largest financial scandal of 2018 are for alleged money laundering

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India sees the first arrest in the country’s biggest financial scandal of 2018

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IL&FS case: The latest arrests in India's largest financial scandal of 2018 are for alleged money laundering

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