GVK group Rs 705 crore scam
CBI Files case against GVK group, the company that runs the Mumbai airport. The company is involved in Rs 705 crore scam in the development of Mumbai airport.
The agency has named 13 persons including GVK Reddy and his son GV Sanjay Reddy who is that the director of 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 conversant in the event said the CBI even administered searches after registering the FIR.
The MIAL may be a PPP (public-private partnership) between the AAI (Airports Authority of India), the GVK and foreign entities within the name of MIAL. The GVK features a shareholding of fifty .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 a part of the venture called the MIAL. As per the agreement, it had been decided that the MIAL will share 38.7% of their revenue as annual fee with the AAI which the govt authority will have the primary right the revenue.
“The essence of agreement was to make a world-class facility and at an equivalent time protecting the interests of the govt of India, promoters and passengers,” the CBI stated in its FIR.
“Despite there being a transparent cut understanding within the OMDA, the promoters of the GVK group within the MIAL, in connivance with their executives and therefore the unknown officials of the AAI, resorted to siphoning of funds fraudulently adopting various routine ,” the CBI said.
For the project, around 200 acres of an undeveloped parcel of land was given to the MIAL round the airport in order that it can develop the world and generate revenues.
“The MIAL entered into fake work contracts during 2017-18 with a minimum of nine companies on the pretext of land development. the MIAL transferred the funds to them but these projects haven’t been executed on the bottom and therefore the transactions were only on papers. Using this routine , Rs 310 crore are fraudulently siphoned off which resulted during 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 decrease (ITC) and cause further revenue loss to the govt exchequer supported these fake invoices.
“Source information has also revealed that there are 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 routine , from 2012 onwards, the GVK used the excess of the MIAL to the tune of Rs 395 crore to finance their other group companies. “They fraudulently created forged committee meeting Resolutions of the MIAL, authorizing to stay the reserve/surplus funds of the MIAL as FDRs with public sector banks at Hyderabad,” the CBI stated.
Interestingly, the MIAL may be 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 advantage of their Hyderabad-based company at the expense of the MIAL,” it added.
It said that surplus funds are deposited to other bank branches also in Hyderabad.
The CBI said that the promoters of the GVK also embezzled funds by resorting to inflating the expenditure of the MIAL. for instance , “they shifted the staff of their head office in Hyderabad and therefore the employees of their group companies on the payrolls of the MIAL. So, in contravention of the agreement, employees who weren’t a part of the MIAL were being purchased of these years,” the CBI stated.
Subsequently, the CBI FIR alleges that the GVK group connived with their relations , relatives and employees. They assigned the premium retail areas of Mumbai airport to their relations 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 getting into agreements with a corporation owned by relations , relatives, employees to book train, aviation tickets and hotel booking for private interest also as for group employees of the GVK who weren’t connected to the MIAL, it added.
The CBI further said that the AAI officials were conscious 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.