Chennai Police Arrests former IL&FS Group Head Ravi Parthasarathy In 1 lakh crore IL&FS scam

The Economic Offences Wing of the Tamil Nadu Police has arrested Ravi Parthasarathy, 69, former head honcho of the IL&FS Group in connection with alleged cheating of a Chennai-based private limited company of ₹200 crore through IL&FS Transportation Networks India Ltd (ITNL), Mumbai.

"The king pin and the mastermind of the 1 lakh crore IL&FS scam Mr. Ravi Parthasarathy has been arrested by EOW in connection with Crime No.13 of 2020 dated 20.09.2020," said a statement issued by EOW Chennai.

"The accused, Ravi Parthasarathy, is the former Chairman and Managing Director of the entire IL&FS Group. The IL&FS Group, which consists of more than 350 group companies, was used as a vehicle to perpetrate fraud by then management of IL&FS Group which was headed by the then Chairman and MD-CEO Ravi Parthasarathy," said the EOW.

Parthasarathy had previously served as CEO of Housing Development Finance Corporation (HDFC) Bank for close to 25 years. Parthasarthy later founded IL&FS-a major infrastructure financing and construction company, which served as a 'shadow bank' or a non-banking financial company that provides services similar to traditional commercial banks.

Parthasarathy, who is said to be the close confidant of former Finance Minister P Chidambaram, was at the helm of IL&FS for over 25 years. He is accused of masterminding one of the largest financial frauds and systematically driving a behemoth of a financial institution to financial ruins.

The Economic Offences Wing of the State police had last January arrested Ramchand Karunakaran, former managing director, and Hari Sankaran, former vice-chairman and director of ITNL, who were also cited as accused in this case.

The scam at IL&FS came to light in 2018 after several group entities defaulted on repayments due to severe liquidity problems. Two of its subsidiaries defaulted on repayment of loans and inter-corporate deposits to lenders.

In October 2018, the Union government moved a petition before the National Company Law Tribunal (NCLT) seeking to supersede the board of IL&FS and appoint a new one chaired by the well-known banker, Uday Kotak. The petition was granted by the NCLT. A full-time vice chairman and managing director has since been appointed. The board was asked to submit a road map for the revival of the IL&FS

The Government in its petition has mentioned, "Ravi Parthasarathy and his team were responsible for the negligence, incompetency and misleading the public by presenting rosy financial statements. IL&FS was camouflaging its financial statements by hiding a severe mismatch between its cash flows and payment obligations. It was also hiding total lack of liquidity and glaring adverse financial ratios."

The forensic audit by Grant Thornton also revealed a bevy of illegal practices, bribing of credit rating agencies and other fraudulent practices, indicating clearly the involvement of the then IL&FS Group Chairman Parthasarathy.