ED summons Kingfisher Airlines CFO, IDBI Bank officials

by / Wednesday, 20 April 2016 / Published in News & Updates

The Enforcement Directorate (ED) on Thursday issued summons to the chief financial officer (CFO) of the defunct Kingfisher Airlines Ltd, A. Raghunathan, and a few officials of IDBI Bank Ltd as part of its probe into a money laundering case.

The ED had on Monday registered a case under the Prevention of Money Laundering Act to trace the diversion of the Rs.950 crore loan granted to the airline by the bank.

Since August 2014, the Central Bureau of Investigation (CBI) has been probing the alleged collusion between the airline and a few bank officials in granting loan to the airline despite its negative credit ratings and net worth. The ED will begin questioning in a couple of days, a senior official said. “We are examining the transactions and documents. We are yet to issue summons to UB Group chairman Vijay Mallya. We are seeking information from other lenders as well,” the official said.

The ED is mandated with the task of enforcing the provisions of two special fiscal laws—Foreign Exchange Management Act, 1999, and Prevention of Money Laundering Act, 2002.

A UB Group spokesperson declined to comment.

The development comes three days after Mallya said he was trying to reach a one-time settlement with banks while adding that payments from his deal with Diageo Plc announced last month are towards his personal non-compete obligations.

The Supreme Court on Wednesday issued a notice to Mallya following a plea from a consortium of creditor banks seeking to stop him from leaving the country. Attorney general Mukul Rohatgi, representing 17 banks, informed the court that Mallya left the country on 2 March, according to the CBI. He is likely to be in London, Rohatgi added. To be sure, Mallya was not stopped from leaving India by any court on 2 March.

India’s largest lender, State Bank of India (SBI), declared Mallya a wilful defaulter in November. Mallya’s Kingfisher Airlines, which was grounded in 2012, owes around Rs.9,091 crore to the consortium of banks.

Mahesh Singhi, founder and managing director at Mumbai-based investment bank Singhi Advisors, said wilful defaulters must be stopped from leaving the country at any cost.

A wilful defaulter is a firm or individual who borrows money and has no intention of paying it back, has diverted the money to some other purpose than the one for which it was borrowed or has sold the asset acquired or developed with the money without the lender’s knowledge.

“Wider autonomy and sweeping powers need to be given to banks and other financial institutions to deal in a time-bound manner with such wilful defaulters and initiate their loan recovery process through sale of assets or forced change of management before it gets too late and quality of assets and business deteriorates,” Singhi said.

“Vijay Mallya is in the news for the right reasons now. It is high time that large corporate defaulters who have the means to lead a most luxurious life are questioned on the financial impropriety,” said Rajesh Narain Gupta, managing partner, SNG and Partners, a Mumbai-based law firm.

Meanwhile, investigative agencies are tightening their grip not only on firms but also on lenders. Last week, CBI director Anil Sinha said that while banks and financial institutions should work fearlessly, fraudsters and public officials who collude with them must be brought to book.

“The issue of delay in identifying and reporting frauds, allowing buyers to siphon off funds before investigations are taken up, needs serious thought. The monitoring of end-use of funds, specially in large value accounts needs a relook to check diversion of funds for non-sanctioned purposes,” he said.

Sinha added that there is a growing sense of anguish among the public that while banks are strict on retail borrowers, big borrowers and large scale fraudsters are able to evade the law.

See Article: http://www.livemint.com/Companies/Otf7ub4tt1y8G62lokgstK/ED-summons-Kingfisher-Airlines-CFO-IDBI-Bank-officials.html