Legislature is Epitomized by an Unproductive Parliament
Executive Power is Controlled by Politicians
Judiciary is Outdated and Backlogged
Media is Biassed and has no Freedom of Speech
While the Four Voices of democracy are Amoral
A '5th VOICE' is born. Voice By The People, For The People.
Infrastructure Leasing & Financial Services Limited (IL&FS) has over the past year rocked the market after its collapse with respect to a massive debt looming on its head. IL&FS operates through some 300 subsidiaries and the former AAA-rated company has a whopping Rs. 91000 crore debt outstanding since October 2018. In September 2018, news of two of IL&FS’ subsidiaries having trouble paying off its debts started making rounds and since then IL&FS has defaulted in making payments more than 7 times.
Institutions like LIC and SBI have huge stakes in IL&FS and they agreed to subscribe to Rs. 4500 crore rights issue in an attempt to bail out the company from its immense debt. In October 2018, NCLT citing mismanagement within the company and the protection of public interest directed the Centre to take over the Board of IL&FS and it was thereafter headed by the Managing Director of Kotak Mahindra Bank- Uday Kotak.
Investigation by SFIO (Serious Fraud Investigation Office) revealed that IL&FS had resorted to forging its financial statements in order to take loans. The first charge sheet filed by SFIO zeroes in on a single subsidiary of IL&FS- its Financial Services leg- IFIN. The malefactor in the probe has been revealed and the top management of the subsidiary including the auditors and independent directors are now under the microscope for having committed a financial fraud.
Quoting the SFIO with regards to the Auditors involved, "The statutory auditors failed to discharge their duties diligently and did not use professional skepticism to ensure true and fair disclosure of the state of affairs of the company. They, in fact, colluded with officials of the companies in order to conceal their fraudulent activities."
The England-based auditing firm Deloitte Haskins & Sells and BSR & Associates were found guilty of an accounting fraud by the NCLT after SFIO reported that the auditing firms were aware of the severe financial fraud that was committed by IFIN and turned a blind eye to IFIN who suppressed their non-performing assets and did not provide for their bad debts and further helped the company in defrauding its investors. This led to a five year ban on the two auditing firms which has been challenged by them.
Also, SFIO cited the failure of the audit committee with respect to a whistleblower complaint which seeked to flag the mismanagement and the fraud which was transpiring within the company. The SFIO has now reportedly started digging into the management and workings of the main holding company IL&FS and its other subsidiary IL&FS Transportation Network. This will further put roughly some 35 auditing firms under the probe and unravel the catastrophe which has been boiling under the garb of a AAA credited institution.
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