SC dismisses plea against reopening accounts of IL&FS

The Supreme Court has dismissed a plea against the Union government's decision to re-open the accounts and recast the financial statements of crisis-hit Infrastructure Leasing & Financial Services Ltd (IL&FS) and other two companies for the last five years, due to mismanagement of affairs involving thousands of crore of public money.

A bench of Justices Indu Malhotra and M R Shah saw no reason to interfere with the orders passed by the National Company Law Appellate Tribunal of January 31, which had rejected a plea by Hari Sankaran, an ex-director of IL&FS Ltd.

It was also contended that the SFIO has already begun its investigation into affairs of IL&FS group of companies and appellant has been arrested on April 2, 2019.

The tribunal has allowed the Union government to reopen and recast the accounts of a core investment company and NBFC, IL&FS, IL&FS Financial Services Limited and IL&FS Transportation Networks Limited for the last five years as there were allegations that they presented a rosy picture to raise long term and short terms loans and borrowings through Public Sector Banks and financial institutions.

The Union government led by senior advocate Maninder Singh sought dismissal of Sankaran's plea, arguing that the reports given by the ICAI, Registrar of Companies and the RBI indicated fraudulent accounts and mismanagement of corporate governance norms. New directors were appointed as board members for conducting the affairs of the IL&FS and group companies.

Following the NCLAT's order, a former Judge of the Supreme Court, Justice (Retd) D K Jain was appointed to supervise the operation of the “resolution process” of the IL&FS group companies.

“In the facts and circumstances and also in larger public interest, and when thousands of crores of public money is involved, we are more than satisfied that the Tribunal is justified in allowing the Union government's application under Section 130 of the Companies Act,” the bench said.