Revealed: How IL&FS took Gurgaon Metro for a Rs 300-crore ride

The Enforcement Directorate today charged the former top brass of IL&FS, including its chairman Ravi Parthasarathy, Ramesh C Bawa, Hari Sankaran, K Ramchandaran, under the Prevention of Money Laundering Act (PMLA), and conducted searches across several of its offices.

The case of the ED, which filed an enforcement case investigation report (ECIR), is based on a first information report (FIR) filed by the Economic Offences Wing of the Delhi Police in December last year. The latter lays bare the modus operandi through which IL&FS siphoned out roughly Rs 300 crore over a period of several years through fake orders issued as part of the construction of the Gurgaon Rapid Metro.

IL&FS and its subsidiaries completed construction of both phases of the Gurgaon Metro, in 2013 and 2017, respectively.

According to the FIR, IL&FS’ subsidiary IL&FS Rail Infra issued work orders to a string of companies for non-existent work, namely Silverpoint Infratech, Suryamukhi Projects, NKG Infrastructure, Divyanshi Infra Project and Ethical Construction, among others.

“The task assigned to these bogus companies was to generate cash and hand over the same to the persons accepting those bogus invoices as genuine,” the FIR said.

The discrepancy was first noticed by the Income-Tax Department, which in May 2018, had issued a demand notice to IL&FS Rail, seeking clarity on unexplained expenditure.

For instance, in its I-T Department’s own investigation, it found that Silverpoint Infratech “did not have proper office or staff to execute such infra project.”

“The income tax raised concern that company having a gross receipt of Rs 251 crore would have the meagre expenditure of only Rs 22 lakh on salaries. In assessment of IL&FS Rail, they failed to provide even measurement book duly signed by site engineer,” the FIR says.

Moneycontrol also reviewed a copy of the FIR and the show-cause notice issued by the Income Tax Department to IL&FS Rail, which pegs the total amount of unexplained expenditure at Rs 980 crore.

The showcause notice says IL&FS Rail was not able to explain the expenditure.

The ED’s FIR says that Sanjay Kumar Drolia, Managing Director of Silverpoint Infrapoint (one of the companies working with IL&FS), categorically accepted that he and his company was involved in providing the accommodation entries to earn commission income to tune of 0.50 percent. Drolia was arrested by the ED recently.

“It is on the account of such fake invoices that the cost of the projects implemented by company are significantly higher than the comparable project of Delhi Metro and Rail Corporation,” the FIR said.

“Gurgaon Metro is incurring losses year after year. In the financial year ended 31^st March 2017, the aggregate income from operation of the company was Rs 46.41 crore and it paid interest cost of Rs 137.4 crore and even after taking into account non-operational income, it resulted in a loss before tax of Rs 116.27 crore”.

The FIR in this case was filed following a complaint by Ashish Begwani, Director of Enso Infrastructure Private Limited, which holds a 15 percent stake in IL&FS Rail.

Interestingly, the I-T Department in its notice said that “Ashish Begwani is well-known facilitator of accommodation entries as well as hawala services” and that even IL&FS Rail MD Rajiv Banga was not able to explain Begwani’s source of capital in Enso Infra.