New Delhi, Feb 7 (IANS): A report highlighting fraudulent and irresponsible conduct by the top executive of IL&FS has claimed they used the Employee Welfare Trust (EWT) for personal gains at the cost of the company by carrying forward amendments in trust contracts without the approval of the Board of Directors of IL&FS Ltd.

The report of Serious Fraud Investigation Office (SFIO) said that EWT, set up to cater to the medical, housing and to subsidise loans taken by the employees, was used to invest in the securities of IL&FS and its group companies and "thereafter distributing these shares at very nominal price in differential manner to a third party".

The sale proceeds from such transactions went to select management personnel.

The report said since the inception, especially after 2006, the trustees were dominated by nine top executives, including Ravi Parthasarathy, MD and Chairman of IL&FS group, Hari Sankaran, VC and MD of Subsidiaries of IL&FS group, and Arun Kumar Saha, Joint MD and CEO of IL&FS Ltd and Director.

The SFIO dossier has also taken special note of the fifth amendment carried out in the contract laid out for the trust without the approval of the IL&FS Board of Directors.

According to the report, the "fifth supplemented indenture" passed in 2006 was "made to include that the trustees shall have the power to sell the trust investments" having absolute discretion and without being answerable for any loss cased by it.

The mess at IL&FS came to light last year when a sudden default by few group companies enlivened threat of a complete collapse of the infrastructure conglomerate.

Last year, the Central government superseded the management of the beleaguered company via an NCLT order and appointed a six-member board led by Uday Kotak, MD & CEO of Kotak Mahindra Bank, to restore its financial solvency.

Key public sector lenders and undertakings such as the LIC and the SBI have a 25.34 per cent and 6.42 per cent stake, respectively, in the firm which has around Rs 91,000 crore in long-term debt. The credit crunch has led a few of the company's subsidiaries to default in servicing some inter-corporate deposits.

Consequent to defaults, significant impact was felt in the capital market on account of the contagion effect of the IL&FS problem, prompting the government to replace the Board.

IL&FS Ltd is a core investment company and serves as the holding company of the IL&FS Group, with most business operations domiciled in separate companies which form an ecosystem of expertise across infrastructure, finance and social and environmental services.

Initially promoted by the Central Bank of India (CBI), Housing Development Finance Corporation Ltd and the Unit Trust of India, IL&FS was incorporated in 1987.

Over the years, it has inducted institutional shareholders including the SBI, LIC, ORIX Corp of Japan and Abu Dhabi Investment Authority (ADIA).

As on March 31, 2018, the LIC and ORIX Corp were the largest shareholders in IL&FS with their stakeholding at 25.34 per cent and 23.54 per cent, respectively. Other prominent shareholders include the ADIA (12.56 per cent), HDFC (9.02 per cent), CBI (7.67 per cent) and the SBI (6.42 per cent).