ED files fraud case against GVK group
ED’s probe into the case under the Prevention of Money Laundering Act is based on a Central Bureau of Investigation (CBI) First Information Report (FIR) registered on June 27.Updated: Jul 08, 2020 00:41 IST
The Enforcement Directorate (ED) on Tuesday filed a money laundering case against GVK Group, its chairman, G V K Reddy, his son, G V Sanjay Reddy, and others for alleged irregularities worth over Rs 800 crore in the Mumbai airport development, officials familiar with the matter said. The group also runs the airport.
ED’s probe into the case under the Prevention of Money Laundering Act is based on a Central Bureau of Investigation (CBI) First Information Report (FIR) registered on June 27. The FIR named 13 people including the Reddys, the Mumbai International Airport Limited (MIAL), and companies that were given contracts at the airport. CBI searched the group’s premises in Mumbai and Hyderabad last week.
The officials said ED, which has powers to attach properties during investigations, will examine the accounts of the companies and their transfer of funds to ascertain the alleged money laundering.
A GVK spokesperson said they have not received any notice from ED and did not offer further comments.
In a statement last week, MIAL said it was surprised to note CBI has registered a case against the company. “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 cooperate with the agency in its investigation to arrive at the truth.”
MIAL is a joint public-private partnership venture between the Airports Authority of India (AAI), GVK Group, and foreign entities (LIKE). The GVK Group has a 50.5% stake in MIAL, and AAI 26%.
AAI entered into operation, management, and development agreement (OMDA) in April 2006 for the airport’s modernisation, up gradation, operation and maintenance as part of the joint venture. MIAL was to share 38.7% of its revenue as an annual fee with AAI as per the agreement.
“The essence of agreement was to create a world class facility and at the same time protecting the interests of government of India, promoters and passengers,” said the FIR. “Despite there being a clear cut understanding in the OMDA, the promoters of GVK group in MIAL, in connivance with their executives and the unknown officials of AAI resorted to siphoning of funds fraudulently adopting various modus operandi.”
MIAL allegedly got into fake work contracts during 2017-18 with at least nine companies on the pretext of real estate development. It allegedly transferred funds to them. These projects have never been executed on the ground and the transactions were only on paper. Using this modus operandi, Rs 310 crore have been fraudulently siphoned off and caused losses to AAI. The GVK Group also allegedly from 2012 onwards used Rs 395 crore MIAL surplus to finance its other companies.
CBI has alleged the group’s promoters also allegedly embezzled funds by inflating MIAL expenditure. The FIR alleges the group connived with the (Reddy?) family members, relatives, and employees they assigned premium retail areas of the airport at exorbitantly low rates and thereby reduced MIAL’s revenue from rentals and sales.