Hari Sankaran, the former vice-chairman and managing director of debt-laden IL&FS, has blamed Life Insurance Corporation of India (LIC) and the 'capital intensive' nature of infrastructure business for the problems faced by IL&FS group. Sankaran also denied all charges of corruption and wrong doing.
In a 34-page affidavit filed with the National Company Law tribunal (NCLT), Sankaran said that LIC's decision in 2015 to not go ahead with the proposed merger with Piramal group led to a cash crunch at the troubled company.
"It was anticipated that the merger (with Piramal), once completed would have generated around Rs 8,500 crore by way of investible funds in the merged entity," Sankaran said.
"The said term sheet contained standstill obligations on IL&FS, which were then anticipated to be in force for 3-4 months. However, this standstill period got extended to almost 9-10 months - largely because LIC took time to consider the proposal and ultimately did not agree with the merger valuation - with significant resultant adverse consequences on IL&FS as no additional finance could be raised by way of equity or debt throughout this period," he added.
According to Sankaran, the main reason or the problems was capital intensive nature of infrastructure business. "The business model of IL&FS was predicated on refinancing of projects as risks were mitigated and revenues stablished."
Calling for an independent forensic probe by a foreign agency, Sankaran said the appointment of an overseas agency, possibly from the UK, Israel or Singapore, would help prove that "there was no wrongdoing or mismanagement in the company.
"Such a course would avoid any hint of a conflict of interest, as over the years, the known experts/consultants having a presence in India or their associates would have done some work for Respondent No. 1 (IL&FS) and its group companies, having regard to the scale and breadth of their operations," he added.
Last month, the financial services arm of beleaguered infrastructure conglomerate IL&FS had defaulted on interest payments on commercial papers. Earlier, the crippled group defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary has also defaulted Rs 500 crore dues to the development finance institution.
The IL&FS group has a consolidated debt of Rs 91,000 crore with IL&FS alone having nearly Rs 35,000 crore, IL&FS Financial Services Rs 17,000 crore.
On October 1, the government had ordered an Serious Fraud Investigation Office (SFIO) investigation into the affairs of IL&FS and its subsidiaries. The debt-laden infrastructure financing giant was allegedly paying dividends and huge managerial pay-outs regardless of looming liquidity crisis.
The Centre had also superseded the board headed by former LIC chairman SB Mathur and replaced it with a seven-member board led by India's richest banker Uday Kotak. This was only the second time after Satyam Computer Services Ltd that the government has taken control of a company board.