ITNL did not list Rs. 2,570 cr loans as contingency liabilities: Fear of losing credit rating
As revealed by an audit report, IL&FS Transportation Networks India (ITNL) did not disclose loans amounting to Rs. 2,570.50 crores sanctioned by sister concern IL&FS Financial Services as ‘contingent liabilities’ to avoid decrease in credit rating. The audit report of the company suggests that these loans were issued to third parties who were also vendors to ITNL, did not follow the required procedures such as taking approval from the board of directors. This led to higher risk exposure of the company.
A contingent liability is a liability that may occur in the future. Potential lawsuits, product warranties, and pending investigation are some of the examples of contingent liability. Contingent liabilities are not part of the Company’s Financial Statements but have to be shown under the Notes on Account.
