The CBI on Saturday conducted searches on the residential and official premises of liquor baron Vijay Mallya and his now-defunct company Kingfisher Airlines at five locations in three cities in connection with alleged default of over Rs900 crore loan from IDBI Bank that was sanctioned ignoring the negative net worth and credit rating of the company.
CBI sources said searches were carried out on the offices and residence of Mallya in Mumbai, Goa and Bangalore. The agency conducted searches at five locations, three in Mumbai and one each in Bangalore and Goa on the official and residential premises of the accused persons.
The agency conducted the searches after registering a case against defunct Kingfisher Airlines, the company’s Director Mallya, the Chief Financial Officer of the airlines A Raghunathan and other unknown officials of IDBI Bank. The bank had allegedly sanctioned the loan to the airlines in violation of norms relating to credit limits.
Sources said the agency will soon summon Mallya for grilling as part of the investigation into the case. A case of criminal conspiracy under IPC Section 120-B, along with Section 109 (criminal breach of trust) and relevant provisions of the Prevention of Corruption Act, was filed in the matter, a CBI spokesperson said.
“It is alleged that officials of IDBI colluded with the Promoters/Directors and CFO of the said Airlines and sanctioned credit limits of Rs900 crore (approx.) in violation of banking norms, thereby causing loss to the said bank by such fraudulent act,” the spokesperson said.
Several incriminating documents found during searches are being scrutinised for further action, the official added.
The CBI sources said an FIR into the alleged violations was registered recently as part of its investigation into the criminality involved regarding bad loans and burgeoning non-performing assets of the public sector banks including IDBI.
There was no need for the IDBI to take the exposure outside the consortium of banks that had an outstanding loan of about Rs7,000 crore against the Airlines with State Bank of India alone having the highest exposure of Rs1,600 crore.
“It was first exposure to the bank. There was no need for the bank to take the exposure outside the consortium when already other loans were getting stressed,” officials said.
The FIR was registered after the bank officials failed to explain the rationale behind granting loan to the company, ignoring its own internal report which had warned against such a move.
The debt-laden airlines stopped operations in October 2012 after flying for nine years. The Kingfisher Airlines’ permit to fly was revoked in October 2012 with aviation regulator Directorate General of Civil Aviation (DGCA) suspending its Scheduled Operator Permit (SOP) following its failure to come up with a viable plan of financial and operational revival.
During the probe “we have found a quid pro quo between the company and some senior bank officials. KFA is also accused of misrepresenting facts regarding the company’s credit rating and net worth,” sources said.
The CBI sources said the agency has registered a total of 27 enquiries and cases with regards to “bad loans” given by public sector banks to various corporates in 2013.
“It’s shocking that the IDBI ignored the negative credit rating and negative net worth of the company and its own adverse internal report against the company and sanctioned such a huge loan to the airlines which was in the midst of worst financial crisis,” a senior CBI official said.
last year the agency had arrested SK Jain, chairman-cum-managing director of Syndicate Bank, one of the top ten public sector banks in the country, on charges of taking a bribe to extend the credit limit of some defaulting companies including two companies which are under the scanner in the coal block allocations scandal.
Neeraj Singhal, vice-chairman and managing director of Bhushan Steel, was arrested on charges of bribing Jain Rs50 lakh in lieu of granting credit extension to the said company as it had defaulted on the payment of loan installments amounting to crores of rupees to the bank.
“Several PSU banks are under scrutiny as we have found rampant illegalities and wrongdoing in their functioning resulting in bad loans given to corporates,” officials added.