IL&FS Auditors raided in Money-Laundering Probe

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Enforcement Directorate (ED) officials conducted raids on the premises of two former auditor firms of IL&FS as part of a money-laundering investigation into alleged financial irregularities at the company. The raids targeted BSR and Associates and Deloitte Haskins and Sells under the Prevention of Money Laundering Act (PMLA). The Supreme Court recently overturned a Bombay High Court verdict that had halted an SFIO probe against the two companies, enabling action to be taken against them under the Companies Act and allowing the National Company Law Tribunal (NCLT) to proceed with its inquiry.

The ED’s money-laundering investigation into IL&FS began in 2019 after the agency took note of a Delhi Police Economic Offences Wing (EOW) FIR against IL&FS, ITNL, and other group companies, as well as their officials. The ED also considered a complaint filed by the SFIO against IL&FS Financial Services (IFIN) and its officials. In the past, the ED had already seized assets of various entities involved in the case. Two former members of IFIN’s committee of directors and the former managing director of ITNL were arrested by the ED, which subsequently filed a chargesheet.According to the ED, the senior management of IL&FS engaged in actions that resulted in personal gains at the expense of the company.

The directors allegedly falsified accounts and conducted “circuitous transactions” to artificially inflate the IL&FS group’s balance sheet, all while causing further losses to the group. IL&FS group companies had accumulated a debt burden of over Rs 91,000 crore, leading to defaults between June and September 2018, which had significant implications for India’s money markets. As a result, the government assumed control of IL&FS and appointed a new board to address the defaults and restore confidence in the capital markets.

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