An SFIO investigation found that the Audit Committee went by the management’s version and did not inquire into the allegations made in the whistleblower's complaint.

The long-running fraudulent activities at the crisis-ridden Infrastructure Leasing & Financial Services Limited could have come to light much earlier in 2017, if it were not for a cover-up job done on a whistleblower’s complaint by the top management, an investigation by the Serious Fraud Investigation Office has revealed.

The detailed probe by the SFIO into the affairs of IL&FS Financial Services Ltd (IFIN) has revealed a plethora of lapses, violations, ever-greening of loans, deliberate delay in recoveries and even a whistleblower complaint brushed aside by the then management in 2017.

Analysis of e-mails as also information collected from personnel and other sources have revealed that a whistleblower complaint was received in early 2017, according to officials. However, the Audit Committee, which is required to have an oversight on the vigil mechanism at the company, failed to act properly with respect to the complaint.

Citing the SFIO investigation report, which is a part of a chargesheet filed by the State’s white-collar investigation agency in this case, officials said that the IFIN management was aware about the whistleblower complaint that was received in March 2017 but the audit committee discussed about it only in December 2017.

Further, the investigation found that the Audit Committee simply went by the management’s version and did not inquire into the allegations made in the whistleblower complaint.

The SFIO has filed its first chargesheet after inspecting accounts of nearly 400 entities, an extensive forensic audit, data collected from desktops and laptops seized from various IL&FS offices as well as e-mails extracted from IL&FS servers, among other sources.

According to the findings, incorrect half-yearly financial statements were of great significance as they were being used by the rating agencies for new as well as surveillance ratings. These statements were also used for market borrowings.

The officials noted that the Audit Committee did not raise any red flag even when there were instances of “disbursal and bullet recovery of loans” on same day or within a few days. The probe also found that the Committee overlooked numerous impairment indicators and actively connived with the management to present a good picture of the company’s financials to prospective investors.

The IFIN’s lending to group companies jumped to around ₹5,200 crore, which was 37 per cent of the company’s total loans and advances in 2017-18 fiscal.

The scam at IL&FS came to light last year after several group entities defaulted on repayments due to severe liquidity problems. Later, the government superseded the board of directors, which is now working on ways to revive the ailing group. IFIN, which has been found to be funding its own revenues for several years, was the main source of funds for the IL&FS group entities. The group had accumulated a debt burden of more than ₹90,000 crore.