KFA loan default: CBI arrests ex-IDBI chief, eight others

Sources said all these officials were holding important positions at IDBI when the bank granted a loan of over Rs 900 crore to Kingfisher Airlines.

Three former executives of the airlines, apart from its then CFO, have also been arrested by CBI. They have been identified as the assistant vice-president Shailesh Borkar, the senior manager (accounts) AC Shah and then deputy general manager (finance) Amit Nadkarni.

Confirming the arrests, CBI spokesperson RK Gaur said, “The arrests have followed searches at 11 places including Mallya’s residence on Sardar Patel Marg in Delhi and three floors of UB towers in Bengaluru. Other places searched by the agency included premises linked to Aggarwal in Gurgaon and those linked to Raghunathan in Gurgaon and Mumbai.”

Sources said searches were also conducted at residences of some other IDBI bank officials in Mumbai including BK Batra, deputy managing director of IDBI Bank. Later, Batra who was was first questioned by the agency officials was also taken into custody .

CBI sources said the agency has found incriminating documents which are being scrutinised. Yogesh Aggarwal and some executives of Kingfisher Airlines have been questioned in the past by the agency.

It was on the complaint of IDBI bank that the probe on loan default against Kingfisher was launched by the CBI. IDBI complained to CBI about willful default on part of the airline.

CBI investigations have found that IDBI officials allegedly agreed to grant over Rs 900 crore to the airline at low interest rates in March 2009 at a time when the company’s financials were supposedly in dire straits and the airline had declared losses running up to Rs 1,600 crore.

At the bank, an internal note had flagged this deficiency of the company which would make it difficult to grant a huge loan to it. However, when the executive committee to screen the grant of loan application by Kingfisher Airlines sat, it gave a positive note, CBI sources said.

The agency found that the company at that time had a “BB” rating which is considered “risky” in banking parlance and that Kingfisher should have had a “BBB” rating to qualify for the loan.

According to CBI, the loan screening committee relied heavily on the brand value of “Kingfisher” deriving its importance from the beer brand. The executives involved had then had claimed that the brand had been pledged as a collateral qualifying Kingfisher not only for the loan but also a lower interest rate.

The screening committee also considered the “reputation” of the borrower while granting the loan. “Clearly, due dilligence was not followed by the concerned executives of the bank before granting the loan,” a CBI official said.

In his earlier questioning, Aggarwal had said that if his decisions were wrong then his successors would have raised a flag.

CBI is also investigating diversion of loan money to the tune of $200 million to tax havens by Mallya and Enforcement Directorate has registered a case of money laundering in this regard.