New Delhi, Jun 12 (IANS): Even as the IL&FS scandal blows up in our face, the overarching probe by SFIO at the behest of Ministry of Corporate Affairs reveals startling facts about the deep-set malaise in the shadow bank. The dubious role of the audit committee as a gatekeeper in sifting the wheat from the chaff is now under the microscope and the errant and deviant functioning of the board remains under suspicion.

Equally the unsavoury role of RBI in perforce maintaining adequate oversight over the board and its decision-making has come under question as IANS has reported in a series of stories. This may result in a turf war brewing between SFIO, which comes under the MCA which in turn is part of the Finance Minister's dual portfolio and the Mint Street which considers itself as an autonomous body in the very near future.

The newly appointed FM Nirmala Sitharanman may well be called out as an umpire with both sides on a short fuse and neither backing down. The last has certainly not been heard on this contentious issue since RBI is caught in a maelstrom viz IL&FS inspection and corresponding action.

The investigation has brought forth facts like Ravi Parthasarathy, the chairman of the board, having indicated that since the group was engaged mainly in infrastructure and banks were reluctant to fund the infrastructure projects, it would have been difficult to reduce the exposure of the group as per the observation of the RBI by March 2017.

The SFIO probe says: "The company had also written to Mr S.S. Mundhra, Deputy Governor, RBI in May 2017 about the difficulties by adhering to the definition of RBI and requested him to look into the issue. It was always informed to the audit committee/board that they were in regular dialogue with RBI and hopefully the entire thing would be sorted out.

Incidentally, the role of RBI much like Caeser's wife has to be above all suspicion. But when the inspection of 2015-16 was put up to the audit/board in December, 2017 that RBI had advised as under :

* No further exposure to the group as defined by the RBI.

* To reduce the exposure to the group as suggested by RBI and plan reduction thereof to be submitted by them.

* Group has submitted various options relating to reduction of group exposure either by 2020/2021 by selling of certain verticals, maturity of loans, refinancing of loans and recovery from the receivables.

In the light of the above facts as pointed out, the probe concludes that the audit committee failed to discharge the duties enshrined on it under the Companies Act read with the corresponding provisions of RBI with regard to the registered NBFCs.

The audit committee had failed to conduct itself in an independent and impartial manner. It had failed to conduct an independent enquiry into the affairs of the allegations which were made against the management of the company. It had failed to obtain any professional advice from the external sources. It had failed to comply with the directions of RBI and has blatantly followed the stand of the management which was illegal ab initio.