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CBI likely to widen probe against Vijay Mallya’s defunct airline

business Updated: Mar 08, 2016 10:46 IST
Abhishek Sharan
Abhishek Sharan
Hindustan Times

Central Bureau of Investigation will check records connected with the recent categorisation of KA as an alleged “willful defaulter” by three public-sector banks - State Bank of India, Punjab National Bank and United Bank(IANS)

The CBI is likely to widen its probe against liquor baron Vijay Mallya’s long grounded Kingfisher Airlines (KA) by taking alleged defaults on additional loans worth Rs 3100 crore from 10 public sector banks under its scanner.

“The CBI has been probing just one case of alleged loan default against Mallya’s now defunct Kingfisher Airlines (KA) since last October, but it could soon register more cases to examine further non-return of loans up to Rs 3100 crore,” a CBI source said.

According to the source, the Central Bureau of Investigation will check records connected with the recent categorisation of KA as an alleged “willful defaulter” by three public-sector banks - State Bank of India, Punjab National Bank and United Bank.

Read more: Double blow to Mallya: ED files case, tribunal blocks Diageo payout

The CBI is also likely to seek help from overseas authorities to verify allegations of “unspecified diversion” of a portion, equivalent to around $200 million, of the total loan sum to tax havens. Cayman Island and Mauritius are among the tax havens in the agency’s scanner, according to a CBI source.

The agency will seek details from concerned overseas authorities on the suspicious financial transactions through Letters Rogatory or formal requests that are sent via judicial channels.

Last October, it had registered a First Information Report naming Mallya and former KA chief financial officer A Raghunathan for allegedly not returning a Rs 900 crore loan taken from the Mumbai-based public sector IDBI bank. The FIR also mentioned unknown IDBI officials who allegedly colluded with the accused defaulter.

The central agency’s probe revealed that IDBI allegedly gave the loan despite KA’s negative credit ratings and financial troubles.

Enforcement Directorate’s Mumbai unit on Monday registered a Prevention of Money Laundering Act (PMLA) case against Mallya and others in connection with the IDBI loan default case, based on the CBI’s case. The ED has sought loan transaction-related details from the bank and may question the airlines’ officials soon.

The CBI is verifying whether IDBI gave the loan to the airlines against the value of its trademarks alone and despite the opposition of a board member. It will also examine if the loan could have been diverted to unspecified purposes including management of T-20 cricket teams in the Indian Premier League and the Caribbean Premier League.

Mallya’s UB Group, however, has denied any wrongdoing so far.

“The company co-operated with the officials and provided the necessary documents and will continue to offer co-operations,” a UB Group spokesperson had said after the CBI registered the FIR in the IDBI case.

Rise in loan fraud cases

According to CBI director Anil Sinha, there is a perceptible rise in cases of bank frauds and financial crimes taken up by the CBI.

“In 2015, CBI took up 171 cases involving funds of Rs 20,646 crore,” Sinha had said at a recent meeting with heads of public sector banks and financial institutions to finalise a plan to tackle Non-performing Assets.

A prominent loan-default case, apart from the KA case, is against REI Agro Limited, a private rice producing firm that was once listed at the stock exchanges in London and Singapore along with the Bombay Stock Exchange.

The firm is accused of not returning loans worth Rs 3814.3 crore borrowed since 2013 from a consortium of PSU banks led by UCO bank. The case was lodged on a complaint by the UCO bank. The agency suspects that the loan amount was irregularly “diverted” to other ventures of the accused firm.

Last month, CBI also registered an FIR against a Chennai-based Best and Crompton Engineering Projects Ltd for allegedly defaulting on a Rs 124 crore loan from public-sector Central Bank of India.

Read more: ED registers money laundering case against Vijay Mallya, IDBI officials

In August 2014, CBI had booked an Ahmedabad-based firm Electrotherm (India) Limited for its alleged default on a Rs 436.74 crore loan from the Central Bank of India. Last September, CBI had booked a Mumbai-based firm for alleged default on a Rs 231-crore from another PSU bank.

In the KA case, the CBI had registered a preliminary enquiry in the IDBI case in 2014 to examine the alleged IDBI bad loan. The agency has asked IDBI to explain why it gave the loan to the airline, ignoring its own internal report that had allegedly warned against such a step. The debt-laden airlines stopped operations in October 2012.

‘Weak and diffused’ accountability of banks

At the Mumbai meet, CBI’s Sinha said criticised the “weak and diffused” accountability mechanisms in banks and financial institutions along with “the unduly slow and long process by which such loans and advances are red-flagged, declared NPAs, then wilful defaulters and finally fraudulent.”

It “allows large borrowers ample time to walk with the funds… to tax havens,” he had said.

Talking about the KA case, Sinha said, “The CBI has recently registered a case of cheating and fraud against Kingfisher and its erstwhile management. The loans and advances were taken during 2004 to 2012.”

“However, despite our repeated requests, the banks did not file a complaint with CBI. We had to register the case on our own initiative.”

According to government figures, gross NPAs of 39 listed banks stood at Rs 4.43 lakh in December 2015, nearly 10 times the level prevailing in 2009.

Rising NPAs have significantly eroded the profitability of banks and adversely affected economic sentiments.