In its dossier, the ED has also made a case against KFA and Mallya regarding the sale of a land of 264 acres in Coorg, the proceeds of which have been laundered overseas
India’s bid to bring back liquor baron Vijay Mallya from the United Kingdom is built around irregularities in the Rs 950 crore IDBI Bank loan to Kingfisher Airlines (KFA) and evidence about alleged illegal overseas fund funnelling of more than Rs 3,200 crore.
The Enforcement Directorate (ED), which tracks overseas transactions and money laundering deals, has gathered substantial evidence on how a major portion of bank loans given to KFA was moved outside India cloaked as operational expenses or lease rentals, sources told Moneycontrol.
Between 2007 and 2012, KFA remitted funds worth Rs 3,280 crore to foreign entities, shown to be payments made towards aircraft rental leasing and maintenance, servicing and spare parts, according to the ED’s provisional attachment order issued last year, reviewed by Moneycontrol.
Sources in the Indian investigations agencies say that these funds were essentially loans raised from a consortium of banks, but were moved overseas under questionable conditions.
“There are huge variations in the payments especially in the leasing payments even or the same class and type of aircraft for the same time period,” a source, who did not wish to be identified, said.
“Despite repeated reminders, the company (KFA), has failed to submit supporting documents such as lease agreements to show that the payments were bonafide. It is clear that the bank loan obtained, have been siphoned-off abroad under the ruse of lease payments, in a calculated pre-designed manner,” the source said.
According to the ED, of the Rs 3,200 crore claiming to be expenses for the airline’s operational expenses, about Rs 1500 crore were allegedly remitted overseas through letter of credit and other instruments issued by State Bank of India (SBI), Rs 531 crore through Punjab National Bank (PNB), and about Rs 1230 crore through Axis Bank.
Separately, the end-use of funds of the Rs 950 crore loan IDBI Bank gave KFA in 2009 is under question.
According to ED’s money trail analysis, Rs 423 crore of the IDBI Bank loan has been remitted overseas without appropriate supporting documents.
The ED has also questioned the IDBI Bank’s lack of due diligence in sanctioning the loan and accepting the valuation of Rs 3400 crore of the Kingfisher Brand done by Grant Thornton without verification.
“The brand valuation is done by Grant Thornton also varied much in the three reports submitted by them at different points of time to KFA,” the source, quoted earlier, said.
Mallya, under pressure from banks to repay Rs 9,000 crore loans owed by his grounded Kingfisher Airlines, left India on March 2 last year, was arrested in London on Tuesday. He was later released on bail.
The ED has also made a case alleging that Mallya received USD 40 million (out of an agreed USD 75 million) on February 25, 2016, from London-based liquor major Diageo Plc, barely a week before he left India.
According to ED, the transaction was structured in a manner to receive the payments overseas with the intent of keeping this money out of reach of India.
In November, Mallya’s lawyers told the Supreme Court that the USD 40 million has been transferred to his three children through gift settlements.
In an affidavit submitted before the apex court, he stated that the money had been transferred to his three children—Siddharth, Leena and Tanya Mallya—who were US citizens and sole beneficiaries of the three respective trusts of which he had no control in his individual capacity.
Mallya had received a payment of USD 40 million out of a USD 75 million package from Diageo following his resignation as chairman of United Spirits Ltd.
The ED has also made a case of money laundering against KFA and Mallya regarding the sale of a land of 264 acres in Coorg in January, the proceeds of which have been laundered overseas.
According to ED investigations, Endeavour Estates Pvt Ltd owned 291.31 acres of land in Biligeri village, Coorg. Of this 264 acres of land were sold in January last year. One of the directors of Endeavour Estates Pvt Ltd have given a statement to ED stating that the company and the assets belong to the UB Group, controlled by Mallya, sources said.
The ED is also pressing money laundering charges involving transactions among companies such as Pharma Trading, Kingfisher Finvest, Devi Investment Pvt Ltd, Mallya Investment Pvt Ltd, Gem Investment and Trading among others.According to the ED, these are “investment companies of the UB Group, or Vijay Mallya, or his family members or dummy companies in names of UB Group employees having no actual activities. These had no independent source of income and were being controlled directly or indirectly by Vijay Mallya”.