Former top executives of IL&FS Transportation Networks India Ltd (ITNL), Mumbai, were recently arrested by the Economic Offences Wing of the police on charges of cheating a Chennai-based private company.
According to sources, Ramchand Karunakaran, former managing director, and Hari Sankaran, former vice-chairman and director of ITNL, were arrested in Mumbai on January 27.
They were produced before the Special Court for cases under the Tamil Nadu Protection of Interest of Depositors Act and remanded in the Saidapet sub-jail.
Breach of trust
They were booked for alleged offences of cheating and criminal breach of trust in the repayment of ₹200 crore invested in debentures by the complainant, 63 Moons Technologies Pvt. Ltd., Chennai.
The complainant said that in 2014 and 2015, ITNL notified issuance of 1,000 and 2,000 non-convertible debentures with a face value of ₹10 lakh each, aggregating to ₹100 crore and ₹250 crore respectively, on private placement basis.
The complainant alleged that the information memorandum was supported with credit ratings by reputed credit rating agencies and highly inflated balance sheets by its statutory auditors, who falsely created a picture that ITNL and IL&FS were highly profitable.
To lure investors, ITNL falsely promised guaranteed annual return of up to 11.8% payable half yearly until redemption to its investors against their deposits with ITNL.
The complainant relied on the representations and assurances made by the ITNL and key managerial personnel and invested ₹200 crore in debentures.
Default in payment
In 2018, IL&FS defaulted on its financial obligations and subsequently, ITNL defaulted in the payment of interest on debentures.
Investigation by the Enforcement Directorate (ED) and the Serious Fraud Investigation Office exposed the alleged role of key management personnel in mismanagement in the lending business.
No due diligence
Money was lent to the entities without due diligence.
The complainant company alleged that it lost ₹200 crore due to fraudulent representations of the accused.
Acting on this, the Economic Offences Wing booked cases against the company and the accused under Sections 420 (Cheating and dishonestly inducing delivery of property), 409 (Criminal breach of trust by public servant, or by banker, merchant or agent) and 120B (Criminal Conspiracy) of Indian Penal Code and provisions of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act 1997.
