Mumbai Airport money laundering scam: ED carries out searches in Mumbai & Hyderabad

MUMBAI: The Enforcement Directorate (ED) Tuesday is carrying out searches in Mumbai and Hyderabad in connection with a money laundering case pertaining to alleged irregularities of Rs 705 crore in managing the affairs of the Mumbai airport.
In June, the Central Bureau of Investigation (CBI) had booked the promoters of Hyderabad-based leading infrastructure conglomerate, the GVK group and the Mumbai International Airport Limited (MIAL) for criminal conspiracy, cheating and fraud resulting in alleged losses to the state exchequer. Following this, ED registered a money laundering case in the said matter, sources in the know told ET.

Both GVK and MIAL told ET that they will share a press statement shortly.

“Based on the predicate offence registered by the CBI, an Enforcement Case Information Report (ECIR) has been registered and allegation of money laundering is being probed,” said an official privy to the development. “The ECIR has been registered under section 3 of the Prevention of Money Laundering Act (PMLA) which deals with the offence of money laundering and searches are being carried out at multiple locations in Mumbai and at the residence of GVK promoter in Hyderabad,” added the official.

According to the CBI’s FIR, the promoters of GVK group in connivance with unknown officials from Airport Authority of India (AAI) adopted various means to divert funds meant for the modernisation, upgradation, operation and maintenance of Mumbai airport through their joint venture company (JVC) Mumbai International Airport Limited.

The CBI in its FIR has pegged the alleged irregularities to the tune of Rs.705 crores.

The FIR, registered on June 27 evening, appears, at least in part, to be similar to a whistleblower complaint which was submitted to the Ministry of Corporate Affairs (MCA) last year. The MCA is currently probing the GVK group and Mumbai International Airport Limited (MIAL) for alleged violations of Company Law, based on the complaint. The complaint to MCA had mentioned some of the nine alleged “bogus entities" listed in the CBI’s). The FIR is "source based" a standard term used by CBI. According to the FIR these bogus entities were used to route funds, sources in the know told ET.

On July 1, the CBI carried out searches in Mumbai and Hyderabad at the offices of GVK group and MIAL. The FIR, registered on June 27,states that the state exchequer has suffered a loss due to alleged siphoning of funds meant for the development of Mumbai airport.

14 individuals and entities including GVK Airport Holding Ltd, MIAL, GVK group chairman Dr. GVK Reddy, his son Sanjay Reddy and others have been booked by the CBI.

“GVK Airport Holding Ltd, MIAL, Dr. GVK Reddy and others have caused wrongful gain of Rs 705 crores to themselves and corresponding loss of revenue to AAI,” the FIR states.

The accused have been booked under certain sections of the Indian Penal Code (IPC) including those for cheating, criminal conspiracy and forgery and Prevention of Corruption Act.

Earlier, reacting to the CBI’s FIR, the spokesperson for Mumbai International Airport Ltd (MIAL) on Wednesday said, "MIAL is surprised to note the registration of case by CBI against MIAL and others. MIAL would have provided every assistance had the agency sought explanation or any document even if a preliminary enquiry had been initiated. MIAL is a transparent and responsible corporate entity which is committed to co-operate with the agency in its investigation to arrive at the truth.''

According to the FIR, the accused floated bogus companies to which contracts were awarded by MIAL in 2017. “MIAL entered into fake/bogus contracts with nine companies on the pretext of real estate development. A loss of Rs 310 crores was caused to the exchequer. These companies also availed bogus Input Tax Credit (ITC) by raising fake invoices,” the FIR states.

The accused also allegedly misused surplus funds of Rs 395 crores to allegedly finance their other groups, the FIR claims. “GVK group has also misused funds by creating FDRs in Hyderabad based branches of other nationalised banks and availed loans/ OD facilities and used these funds for the benefit of the GVK group companies at the expense of JVC MIAL causing wrongful loss to AAI,” the FIR reads.

The accused firm also allegedly embezzled MIAL's funds by inflating its expenditure. It also under reported the revenue of MIAL by entering into related party contracts and for meeting the personal expenses of the promoters of the GVK group and their families, the FIR alleges.