The Central Bureau of Investigation (CBI) has registered a case against the GVK Group – the company that runs the Mumbai airport – its chairman Dr GVK Reddy, his son GV Sanjay Reddy and several other companies for alleged irregularities worth over Rs 705 crore in the development of Mumbai airport, officials familiar with the developments said.
The agency has named 13 persons including GVK Reddy and his son GV Sanjay Reddy who is the managing director of joint venture company – MIAL (Mumbai International Airport Limited). The agency has registered a case against them for criminal conspiracy, cheating under the Prevention of Corruption Act, 1988.
Officials familiar with the development said the CBI even carried out searches after registering the FIR.
The MIAL is a PPP (public-private partnership) between the AAI (Airports Authority of India), the GVK and foreign entities in the name of MIAL. The GVK has a shareholding of 50.5%, the AAI holds 26% while the remaining shareholding rests with foreign companies.
The AAI entered an OMDA (operation, management and development agreement) in April 2006 for the modernization and up-gradation, operation and maintenance of the Mumbai airport as part of the joint venture called the MIAL. As per the agreement, it was decided that the MIAL will share 38.7% of their revenue as annual fee with the AAI and that the government authority will have the first right on the revenue.
“The essence of agreement was to create a world-class facility and at the same time protecting the interests of the government of India, promoters and passengers,” the CBI stated in its FIR.
“Despite there being a clear cut understanding in the OMDA, the promoters of the GVK group in the MIAL, in connivance with their executives and the unknown officials of the AAI, resorted to siphoning of funds fraudulently adopting various modus operandi,” the CBI said.
For the project, around 200 acres of an undeveloped parcel of land was given to the MIAL around the airport so that it can develop the area and generate revenues.
“The MIAL entered into fake work contracts during 2017-18 with at least nine companies on the pretext of real estate development. the MIAL transferred the funds to them but these projects have never been executed on the ground and the transactions were only on papers. Using this modus operandi, Rs 310 crore have been fraudulently siphoned off which resulted in a wrongful loss to the AAI and corresponding gain to themselves,” the FIR stated.
These nine companies, CBI added, have also availed fake credit Input Tax Credit (ITC) and cause further revenue loss to the government exchequer based on these fake invoices.
“Source information has also revealed that there are many more such fake contracts which the MIAL has fraudulently entered into with non-existing/non-functional entities and have embezzled the funds of the MIAL,” the CBI added.
In another modus operandi, from 2012 onwards, the GVK used the surplus of the MIAL to the tune of Rs 395 crore to finance their other group companies. “They fraudulently created forged Board Meeting Resolutions of the MIAL, authorizing to keep the reserve/surplus funds of the MIAL as FDRs with public sector banks at Hyderabad,” the CBI stated.
Interestingly, the MIAL is a Mumbai based company but they chose to deposit the FDRs in Hyderabad branch of Bank of Baroda, the agency added.
“The GVK Group raised loans/overdraft facilities against these FDRs and used these funds for the benefit of their Hyderabad-based company at the expense of the MIAL,” it added.
It said that surplus funds have been deposited to other bank branches as well in Hyderabad.
The CBI said that the promoters of the GVK also embezzled funds by resorting to inflating the expenditure of the MIAL. For example, “they shifted the staff of their head office in Hyderabad and the employees of their group companies on the payrolls of the MIAL. So, in contravention of the agreement, employees who were not part of the MIAL were being paid for all these years,” the CBI stated.
Subsequently, the CBI FIR alleges that the GVK group connived with their family members, relatives and employees. They assigned the premium retail areas of Mumbai airport to their family members at exorbitantly low rates thereby reducing the revenue of the MIAL on account of rentals and sales.
The GVK group even used funds of the MIAL by entering into agreements with a company owned by family members, relatives, employees to book train, air travel tickets and hotel booking for personal interest as well as for group employees of the GVK who were not connected to the MIAL, it added.
The CBI further said that the AAI officials were aware of all the irregularities but turned a blind eye and let these practices of siphoning, diverting and misusing of funds of the MIAL to continue.
For now, the agency has estimated the loss to be around Rs 705 crore but officials – who didn’t wish to be named – said the figure could be much higher and may go over a few more hundred crores.