IL&FS may ask ex-directors to pay up
The board may invoke clawback option for bonus and benefits, file charges for fraud.
IL&FS expects to recover over Rs 10 crore from each director and as much as Rs 2 crore from each independent director per year, people familiar with the plans said.
However, the step is contingent on the restatement of accounts of the three companies, which the Supreme Court has stayed. The move, known as clawback, would be invoked under Section 199 of the Companies Act, which allows a company that’s required to restate its financial statements due to fraud or non-compliance with the law to recall any excess remuneration, including stock options, given to directors for the period reviewed.
WOULD INCLUDE ALL DIRECTORS
The option is being evaluated for IL&FS, IL&FS Transportation Networks India Ltd. (ITNL) and IL&FS Financial Service Limited (IFIN). It would include all directors, including nominees and independent directors.
Among the former directors are Hari Sankaran, former vice-chairman and MD of IL&FS, and Arun Kumar Saha, former joint MD and CEO of IL&FS. The former independent directors include RC Bhargava and SB Mathur. IL&FS declined to comment.
The infrastructure financier has accumulated over Rs 91,000 crore debt and defaulted on some payment obligations. Probes by agencies have uncovered alleged instances of financial mismanagement and fraudulent transactions.
The Serious Fraud Investigation Office had cited in a court application in April misdemeanours by former IL&FS board members that amounted to misuse of public money, including funding borrowers to prevent their loans from turning bad, getting personal favours in exchange for sanctioning loans and enriching themselves with hefty salaries and perks.
The clawback option can be invoked only after the company completes the reopening and recasting of its books of accounts, as proposed by the Ministry of Corporate Affairs and approved by NCLT.
The NCLT had approved the re-opening of the books of IL&FS and its subsidiaries for the five-year period under Section 130 of the Companies Act. The Supreme Court stayed the reopening and recasting of the financials on a petition by Sankaran because the NCLAT had ordered the reopening of the books ex parte. IL&FS has approached the vacation bench of SC with a plea for the order to be vacated so that the accounts be restated.