After CBI, ED set to charge GVK Group for Mumbai airport 'irregularities'

Mumbai International Airport Ltd (MIAL) is a joint venture between GVK, state-run Airport Authority of India (AAI) and foreign entities.
The Enforcement Directorate (ED) is set to charge the promoters of the GVK group of companies and officials of Mumbai International Airport Ltd (MIAL), the company the group runs, with money laundering.

This came after the Central Bureau of Inves­tigation (CBI) unearthed a multi-crore scam of Rs 705 crore in managing the affairs of the airport.

The CBI on June 27 filed a criminal case against 14 persons including those of the GVK group, its chairman G V K Reddy, his son G V Sanjay Reddy, and officials of MIAL, the Airports Authority of India (AAI), and several entities for alleged cheating, fraud, and criminal conspiracy under the Prevention of Corruption Act.

The CBI alleged the promoters of the GVK group, who are also on the board of joint venture company MIAL, in connivance with their executives and officials of the AAI, caused a huge loss to the exchequer.

“After filing the case, searches were conducted by the central agency on Tuesday at GVK’s Hyderabad and Mumbai offices,” said a CBI source.

GVK group Chairman G V K Reddy and his son G V Sanjay Reddy (inset), who is managing director of MIAL, have been charged with cheating, fraud, and criminal conspiracy.
The agency estimates the sum involved in the scam could be even higher at Rs 1,000 crore. The spokesperson for MIAL said: “MIAL is surprised to note the registration of case by CBI against MIAL and others. MIAL would have provided every assistance had the agency sought explanation or any document even if a preliminary enquiry had been initiated. MIAL is a transparent and responsible corporate entity which is committed to co-operate with the agency in its investigation to arrive at the truth.”

According to the probe agency, wrongdoing started in 2012. It involved inflating the expenditure of MIAL; underreporting its revenue earnings and using it for meeting personal expenses of the GVK promoters and their relatives; misusing the reserve funds of MIAL; and siphoning off the funds sanctioned to it by the AAI by showing work that was not done.

“We are examining the CBI case and related evidence. The process of booking the accused under the Prevention of Money Laundering Act (PMLA) has been initiated and will be done in a day or two. 

Siphoning off funds through bogus contracts and the role of nine entities, allegedly belonging to promoter group firms, will be probed,” said a senior ED official.

MIAL is a joint venture of the GVK group, the AAI, and foreign entities. The AAI entered into an agreement with the two others for operating, managing, and developing the airport.

The agreement states Mumbai airport should be run by MIAL on a revenue-sharing model, where 38.7 per cent of the revenue is to be given as an annual fee to the AAI. The probe agency said the AAI gave GVK 200 acres of underdeveloped land for redevelopment. In 2017 and 2018, MIAL allegedly signed “bogus contracts” with nine companies, owned by the promoters’ relatives, for real estate development. It had also transferred Rs 310 crore to these firms even when the contracts were not executed. These companies also availed of fake input tax credit, which caused a further loss to the government, it said.

In another allegedly sharp practice, from 2012 onwards, GVK used the surplus of MIAL, of Rs 395 crore, to finance other group companies.

“They created forged board meeting resolutions of MIAL, authorising keeping the reserve surplus funds of MIAL as fixed deposit receipts (FDRs) with public sector banks in Hyderabad. MIAL is a Mumbai-based company but they chose to deposits the funds in the form of FDRs with a Hyderabad-based branch of Bank of India,” said the CBI in its probe report.

“They shifted the staff of the head office of GVK Group at Hyderabad and the employees of their group companies on to the pay rolls of MIAL, Mumbai. These employees who were not at all connected to the operation of MIAL were being paid for all these years by the AAI,” it noted.

Besides, they under reported the revenue of MIAL by entering into related-party contracts and meeting the personal expenses of the promoters of GVK and their families.

The group allegedly abused the agreement provisions and used the AAI funds to book train and flight tickets and hotel rooms of its group employees which were not connected to the airport company.

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