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CBI books GVK over Mumbai airport, says funds diverted for personal use

The CBI on Thursday conducted searches at two locations, in Mumbai and Hyderabad, in connection with the case. Sources said, based on the CBI FIR, the Enforcement Directorate (ED) would soon register a case of money laundering against the promoters of the company.

Written by Deeptiman Tiwary | New Delhi | Published: July 3, 2020 1:19:53 am
flights resume, domestic flights resume, maharashtra airport, maharashtra flights resume, maharashtra lockdown GVK Airports Holdings is the operator of the Mumbai international airport through Mumbai International Airport Ltd (MIAL), a joint venture between the AAI and GVK. (File)

The CBI has booked GVK Airports Holdings and its Chairman G V K Reddy for allegedly causing a loss of Rs 705 crore to the Airports Authority of India (AAI) by siphoning off funds and using them for personal purposes and to fund own group companies.

GVK Airports Holdings is the operator of the Mumbai international airport through Mumbai International Airport Ltd (MIAL), a joint venture between the AAI and GVK.

The CBI on Thursday conducted searches at two locations, in Mumbai and Hyderabad, in connection with the case. Sources said, based on the CBI FIR, the Enforcement Directorate (ED) would soon register a case of money laundering against the promoters of the company.

The ANI released a statement by MIAL, saying, it was “surprised to note registration of case by CBI against MIAL & others. MIAL would have provided every assistance had the agency sought explanation or any document even if a preliminary enquiry had been initiated”.

In its FIR, the CBI has made four sets of allegations against the GVK group. These include: “siphoning of funds by executing bogus work contracts, misusing the reserves and surplus funds of MIAL, inflating the expenditure of MIAL by diverting the funds, and under-reporting MIAL revenue by entering into related party contracts and meeting the personal expenses of promoters”.

Apart from G V K Reddy, the CBI has booked his son G V Sanjay Reddy, who is the MD of GVK Airports Holdings; MIAL; an unknown official of the AAI; and nine companies – some of them owned by Reddy’s relatives — which allegedly benefited from either bogus contracts or preferential allotment of commercial activity at low rates.
According to the CBI, around 200 acres of land around Mumbai airport was given to MIAL by the AAI for development and generating revenue. However, MIAL entered into “fake/bogus contracts during 2017-18” with nine different companies “on the pretext of real estate development”.

The CBI has alleged that “MIAL transferred the funds but these contracts have never been executed on ground and the transactions were only on paper”. In this way, the CBI has said, GVK siphoned off Rs 310 crore and the nine companies even fraudulently claimed input tax credit. The CBI has said there are more such companies, which it is probing.

The CBI has alleged GVK also misused Rs 395 crore of MIAL’s surplus funds by opening FDRs in PSU banks at Hyderabad and using them “for the benefit of GVK group companies”. They also used these funds to avail of loans and overdraft facility from PSU banks, the CBI has said.

According to the CBI, GVK also caused over Rs 100 crore loss to MIAL by shifting its employees onto MIAL payrolls even though they were actually not working for MIAL.

Explaining how the Reddy family made gains for itself, the CBI has said, “…they assigned the premium retail area of Mumbai Airport to companies owned by their family members / relatives / employees at exorbitantly low rates, thereby reducing the revenue of MIAL on account of earnings in the form of rental and sales. Some of these companies are M/s Rockline Solutions Pvt Ltd, M/s International Airport Hotels & Resorts Pvt Ltd etc”.

The GVK group thus abused the agreement with the AAI and misused funds “by entering into agreements \with a company owned by family members \ employees to book train, air travel tickets and hotel booking for all the personal as well as the group employees of GVK who are not connected with the affairs of MIAL”, the CBI has said.

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