First arrest in IL&FS case, former vice chairman Hari Sankaran held by SFIO

The Serious Fraud Investigation Office (SFIO) on Monday arrested former vice chairman of crisis-hit IL&FS for fraudulent conduct and causing wrongful loss to the company and its creditors, official sources said.

This is the first arrest made by the probe agency in the IL&FS case. Sankaran was arrested in Mumbai in connection with the ongoing investigations into the affairs of IL&FS and its group entities.

Sources said Sankaran has been arrested on the grounds of abusing his powers in IL&FS Financial Services Ltd through fraudulent conduct and in granting loans to entities that were not credit-worthy or were declared as non-performing accounts. Such actions caused wrongful loss to the company and its creditors, they added.

The agency has been granted custody of Sankaran till April 4. IL&FS Financial Services had borrowings of more than Rs 17,000 crore through debt instruments and bank loans. Provident funds, pension funds, gratuity funds, mutual funds, public and private sector banks, are among those who have invested in these debt instruments, the sources said.

The alleged financial irregularities at the IL&FS came to light last year after some group entities defaulted on debt repayments. The government, which superseded the company's board, is working on a resolution plan.