Infrastructure Leasing and Financial Services Ltd. (IL&FS ) is a India based holding company that operates through 109 other companies that are either subsidiaries, group companies or joint ventures with others, set up to promote infrastructure projects in India.
The company is in serious financial mess due to serious corporate related deficiencies. The investors in the company include several leading banks and financial institutions in India such as State Bank of India (SBI) and Life Insurance Corporation of India (LIC) as well as Orix Corporation of Japan, Abudhabhi Investment authority and others.
IL&FS which has assets over Rs. 135000 crore and debt of Rs. 91,000 crore and has defaulted in repayments. As large public money is involved in this company and possible closure of this company would cause serious problems for several investors and mutual fund companies, Government of India is left with no alternative other than taking control of the management of the company. Government of India has dissolved the company board and appointed an adhoc board to manage the affairs until alternate arrangements would be made.
It is good that government of India has ousted the directors of IL&FS and appointed another board. It could have been done six months earlier.
Obviously, such mismanagement has happened since the erstwhile directors of the company have treated the company as a play thing and have shown extreme level of irresponsible attitude in managing the firm.
In all such happenings in the past, the companies suffer but the directors including the appointed directors and nominees of the government go scot-free.
The fact that even as the company was in such severe financial crisis , IL&FS remuneration committee headed by former LIC Chairman sanctioned Rs. 20 Cr. annual salary for Chairman Ravi Parthasarathy, and Rs. 7.8 Cr. for Vice Chairman and Managing Director indicate the callous attitude. IL & FS audit committee headed by Maruti Suzuki chairman and former shipping secretary of government of India seem to have been acting as silent spectators.
Public sector undertakings like LIC, State Bank of India, Central Bank of India who have sizeable equity just remained as passive observers.
Government of India has now ordered a probe. This is not alone enough. Until the probe is completed, it should be ordered that all the erstwhile directors of IL&FS as well as those who were members of the audit committee and those who were members of the remuneration committee should not be allowed to function as directors in any other companies whether private or public sector and their passports must be seized. They are not only inefficient but also appear to be dishonest, un professional and irresponsible.
What about the management of LIC, SBI and other public sector organisations who have equity in IL&FS? The top office bearers in these institutions have just closed their eyes and have allowed matter to drift to such chaotic state. They need to be held responsible and accountable.
There is so much of public investment and tax payers money involved. Government of India has a huge responsibility and has to create pubic confidence that Government of India will not allow such people holding top positions and enjoying enormous salaries and perks to go scot-free when such scandals of Himalayan proportion happen.
The fraud in Punjab National Bank and Vijay Mallya episode are still fresh in memory and the government has to convince the people that it would protect public interest at any cost.
Government of India should ensure that the country’s corporate bodies and public sector undertakings must be protected from such persons.
Public perceptions matter and one can be sure Government of India would be aware of this aspect.
The guilty persons who have failed in their duty and responsibility in managing public funds should not only be taken to task but should also be seen to be taken to task.