Extending the loans caused the company a loss of Rs 26 crore.
The India Infrastructure Finance Company Limited (IIFCL), a registered Non-Banking Finance Company-Non-Deposit taking- Infrastructure Financing Company (NBFC-ND-IFC), a wholly-owned Government of India company, is in the dock for extending loans to at least two companies on terminated projects that caused the company a loss of Rs 26 crore.
According to the Comptroller and Auditor General of India’s (CAG) audit report that has been accessed by The Sunday Guardian, “IIFCL sanctioned and disbursed two loans under the Take-Out Finance Scheme without ensuring compliance of critical requirement of obtaining ‘No Objection Certificate’ from Concessionaire Authorities, and without ensuring required debt servicing capacity of the borrowers from their audited annual accounts.”
The CAG in its audit report also mentioned that appropriate action must be taken against IIFCL for giving out loans to such companies without following the laid down guidelines and procedures. In its report, the CAG noted, “Due to non-adherence of the provisions of its own Credit Policy, IIFCL extended loan in the projects which had already been terminated and resultantly suffered a loss of Rs 26.20 crore (Rs 13.59 crore plus Rs 12.61 crore written off). CAG recommends that responsibility may be fixed for the lapses pointed out by audit.”
According to IIFCL’s Credit Policy 2012, the company, for affecting Take Out finance, ‘The No Objection Certificate (NOC) from the lender(s), the Concessionaire Authority (CA) (if applicable) and the Consortium, is to be provided to IIFCL for extending the Take-Out finance under the Scheme. This NOC is to be arranged by the Borrower Company or Lender(s) before the Scheduled Date of Occurrence of Take Out.
However, IIFCL in its report to the CAG said that they had constituted two internal committees to investigate the involvement of its officials in the matter and had found “no lapses” on part of the IIFCL officials for punishment. However, the CAG had taken a strong objection to this comment from IIFCL and has said “reports of the two committees were not made available to them for further analysis leading to doubts about the credibility of such reports”.
In this case, IIFCL had sanctioned loans to two companies—Raipur Waste Management Private Limited (RSWPL) and Bhilai Durg Waste Management Private Limited (BDWPL)—both of which are registered in Chhattisgarh and both incorporated in 2012. Both these companies are also involved in sewage and refuse disposal, sanitation and similar activities.
It is also pertinent to mention here that both these companies have the same directors who are at the helm of affairs. The directors for both these companies are Vinod Kundukad Mani Kumar and Manoj Choolapurakal Venugopal, both of whom are also directors in multiple other companies together.
IIFCL had granted a loan of Rs 13.59 crore to RSWPL, while it also granted a loan of Rs 12.61 crore to BDWPL. Both these loans were disbursed on the same day by IIFCL. The loans granted and in question were granted to both these companies in December 2014. The two companies—RSWPL and BDWPL—were engaged by the Raipur Municipal Corporation and Bhilai Municipal Corporation for solid waste management in their municipal areas, respectively, but their contract with the respective municipalities were terminated before the disbursal of the loan by IIFCL that is on December 2013.
According to data, IIFCL so far has disbursed loans to more than 58 projects under the Take-Out Finance Scheme amounting to the tune of Rs 16,413 crore, out of which only in eight cases the loans disbursed amounting to a total of Rs 1411.64 crore turned NPA.
The Take-Out Finance Scheme was launched during 2009-10 by the Ministry of Finance to boost infrastructure projects. This scheme is run through IIFCL, which was created as a Special Purpose Vehicle (SPV) to finance infrastructure projects. The Government of India has infused Rs 500 crore in May 2019 and another Rs 5,300 crore equity in IIFCL through Recapitalisation Bonds in March 2020. The authorized capital of the company is Rs 10,000 crore and the paid-up capital of the company is Rs 9,999.92 crore as on 30 November 2020.