A probe by the Serious Fraud Investigation Office (SFIO) into the affairs of the now-defunct Kingfisher Airlines Ltd (KFAL) has found alleged conflict of interest of at least three independent directors on the board of the airline promoted by liquor baron Vijay Mallya.
In its report, the SFIO, the government agency which probes financial frauds, has alleged that certain private companies of three independent board directors of KFAL — G N Bajpai, former chief of Securities and Exchange Board of India; Diwan Arun Nanda, founder of rediff.com; and, Subhash Raghunath Gupte who has been on the board of several listed firms — had a “commercial relationship “ with the airline.
The report said Intuit Consulting Private Ltd, a firm in which Bajpai had interests, “was appointed on a retainer basis to provide management consultancy on competency building, good governance and economy by the UB Group/KFAL”.
In the case of Nanda, Rediffusion Dentsu Young & Rubicam Private Limited, Wunderman India Private Limited and Everest Brand Solutions Private Limited — these were firms where Nanda had interests — were handed advertising contracts with KFAL and the UB Group.
The SFIO report said UB Air P Limited, a UB Group company, acquired a 26 per cent stake in United Helicharters Private Limited where Gupte had interests. United Helicharters “used to charter the helicopters of UB Air regularly” and “used to hire the hangar of UB Air P Limited in Juhu Airport”.
“…some of the independent directors were masquerading as independent directors but were not really independent in the sense on account of business relationship they had with UB Group companies,” the SFIO report stated.
The report said Mallya “roped in persons of eminence” such as Bajpai, Nanda, former India tennis star Vijay Amritraj, retired IAS officer and former Finance Secretary Piyush Mankad, and leading cardiologist Dr Naresh Trehan to make banks “believe that corporate governance was not lax in KFAL (combined)”.
“The board of the company, including some of the independent directors, had other vested interests with the UB Group and they failed to protect the interests of the minority shareholders and stakeholders,” the SFIO report stated.
It cited the instance of some independent directors, who were to attend a board meeting of the airline in Paris, taking along their spouses. It said the trip expenses were borne by Kingfisher.
When The Sunday Express contacted Bajpai, he declined to comment on any issue pertaining to Kingfisher Airlines. A detailed text message sent to him after the phone call also did not elicit a response.
Emails and phone calls to Nanda remained unanswered.
Gupte said: “I was a non-executive director at Kingfisher and my wife did not travel to Paris. I have not received a copy of the report. As and when I get it, we will explain to the authorities concerned on the conflict (of interest) issue.”
Trehan told The Sunday Express he resigned from the board in August 2010. “At the time of the trip to Paris, there was only an advisory board of the company. My spouse did not go on the trip. I joined as an independent director on the board in October 2008 and my role was to advise the company on medical safety and corporate social responsibility. I may have been in the audit committee of the company but I had no participation in the financial aspects of the company. The moment I realised that things were not right at the company, I tendered my resignation,” he said.
Amritraj said: “I have never been a part of any of the trips of Kingfisher Airlines including the one in Paris. I joined the board after Kingfisher acquired Deccan Aviation and was there only for a year or so. I was not aware of any of the financial dealings of the company and I have hardly attended one meeting of the board due to my hectic travel schedule.”
Mankad could not be reached for comment. Mallya’s official spokesperson said they had no comment to offer.