Trouble seems to be mounting for the GVK Group with the Central Bureau of Investigations (CBI) on Wednesday registering a case against GVK Group Chairman G.V.K. Reddy and his son G.V. Sanjay Reddy on allegations that funds of over Rs 805 crore were siphoned off from the Mumbai airport by various means, including bogus work contracts, inflated expenses and under reported revenue.
The investigative agency has also carried out searches in relation to the case at GVK's offices in Mumbai and Hyderabad.
The CBI in its FIR has named 13 entities including GVK Airport Holdings, Mumbai International Airport Ltd (MIAL), GVK Reddy and GV Sanjay Reddy, who is the managing director of MIAL in the FIR.
“Information has been received from a reliable source against the promoters of GVK Group and unknown officials of AAI (Airports Authority of India) for having connived and deliberately committed fraud and causing loss to the government exchequer by fraudulently siphoning the funds meant for the development of Mumbai Airport,” the CBI said in its FIR.
MIAL is a joint venture between AAI, GVK and a few foreign companies. GVK took over the operations of the Mumbai airport in 2006. AAI had entered into a operations, management and development agreement (OMDA) to modernise and upgrade the airport with the GVK Group in 2006.
The CBI alleges that even as there was a clear-cut understanding in the OMDA, the promoters of GVK Group in MIAL, in connivance with their executives and unknown AAI officials fraudulently siphoned off the funds and various means.
For instance, around 200 acres of undeveloped land parcel in Mumbai, around the airport, was given to MIAL by AAI for development and generating revenue. MIAL entered into fake work contracts during 2017-18 with nine companies on the pretext of real estate development and transferred the funds to them, although the contracts have never been executed on ground. Using this modus operandi, Rs 310 crore was fraudulently siphoned off, resulting in a wrongful loss to AAI and wrongful gain to them, CBI said.
Furthermore, alleges the CBI that the nine companies also availed fake input tax credit, based on fake invoices, thus causing revenue loss to the government too.
The CBI further stated in the FIR that from 2012, with a “criminal intention to cause loss to AAI” promoters of GVK group used surplus funds of MIAL to the tune of Rs 395 crore to finance their other group companies.
“They fraudulently created forged board meeting resolutions of MIAL authorising to keep the reserve surplus funds of MIAL as FDRs with PSU banks at Hyderabad. GVK Group raised loans/OD facilities against these FDRs and used these funds for the benefit of GVK group companies at the expense of MIAL,” it said.
The promoters of GVK Group have also embezzled more than Rs 100 crore of MIAL by inflating the expenses of MIAL, it added. They also shifted their staff from GVK’s head office in Hyderabad and employees of group companies on the pay rolls of MIAL and thus all these years employees who were not at all connected with the operations of MIAL were being paid, the FIR states.
CBI also alleges that the promoters of the GVK group assigned premium retail areas of Mumbai airport to companies owned by their family members or relatives or employees at “exorbitantly low” rates, which reduced MIAL’s earnings from rentals and sales.
It said that all this was being done with the full knowledge and connivance of AAI officials.
“The unknown officials of AAI were aware of the above mentioned facts, but they deliberately chose to turn a blind eye and let these practices continue.”
CBI says the source information discloses commission offences of fraud, cheating, forgery and criminal misconduct.
According to a newspaper report, the Enforcement Directorate is also now likely to charge the promoters of GVK Group for alleged money laundering.
The GVK group was yet to respond to queries sent over email. A clarification sought by stock exchanges on the matter was also awaited.
Meanwhile, shares of GVK Power and Infra ended down 5 per cent on the BSE at Rs 3.23 on Thursday.