The case against GVK and its promoters: exclusive details from the CBI FIR

The FIR lodged by the Central Bureau of Investigation (CBI) in the GVK Airport Holdings case alleges that the company siphoned off ₹705 crore through bogus contracts, underreported revenues, misuse of reserves for the holding company; by allowing premium retail spaces to family and relatives at lower rates; by booking “exuberantly expensive” air and train travel for employees and those close to GVK Holdings.

The FIR has been registered against GVK Holdings, its founder Gunupati Venkata Krishna Reddy, his son, Venkata Sanjay Reddy, Managing Director of Mumbai International Airport Ltd (MIAL) along with eight other people, including public servants of the Airport Authority of India (AAI), for alleged siphoning off of ₹705 crore from the operations of the Mumbai airport.

The FIR, a copy of which BusinessLine has accessed, alleges that the amount was siphoned off for the promoters’ personal or their holding company’s use by creating of a loss of revenue share to the AAI.

In addition, the FIR alleges, the accused have also caused huge unquantified loss to AAI by inflating the expenditure of MIAL and by underreporting the revenue earnings by entering into related party contracts and meeting their personal expenses through MIAL funds.

The FIR has been booked under multiple sections of the Indian Penal Code (IPC), including that of fraud, cheating, forgery, and criminal misconduct between 2012 and 2018.

The FIR stated that the GVK Group promoters and “unknown officials” of the AAI “connived and deliberately committed fraud” causing a loss to the government exchequer by “fraudulently siphoning the funds meant for the development of Mumbai Airport.”

In 2006, the AAI formed a Public Private Partnertship (PPP) JVC for modernisation and upgradations, operation and maintenance of the Mumbai Airport. GVK Airport Holdings, promoted by the GVK Group, owned 50.5 per cent shareholding in the JVC; the AAI owned 26 per cent; and foreign entities owned the rest.

The AAI also signed an operation, management and development agreement (OMDA) with MIAL. As per the OMDA, Mumbai airport would be run by MIAL and would share 38.7 per cent of its annual revenue with the AAI. The OMDA states that the revenue share has to be given first to AAI and the balance earnings of MIAL shall be used for modernisation and upgradation, and maintenance of the MIAL airport. The OMDA was intended to create a world-class facility and protect the Indian government’s interest.

The FIR alleged that despite there being a clear-cut understanding in the OMDA, the GVK Group promoters in MIAL, in connivance with their executives and unknown officials of the AAI, siphoned off the funds fraudulently.

It gave further details of the allegations against the accused: bogus contracts, underreported revenues, misuse of reserves by the holding company, allowing premium retail spaces to family and relatives at lower rates, booking “exuberantly expensive” air and train travel for employees and family of those close to GVK Holdings.

The AAI gave around 200 acres of undeveloped land parcel in Mumbai to MIAL for development. The FIR alleges that MIAL entered into “bogus” work contracts during 2017-2018 with nine companies “on the pretext of real estate development”. It further alleges that MIAL transferred the funds to the companies, but these contracts were never executed and that the transactions were only on paper.

The FIR alleged that using this modus operandi , ₹310 crore was “fraudulently siphoned off”, resulting in a wrongful loss to the AAI. The nine companies, it stated, had also availed of fake Input Tax Credit (ITC) and caused further revenue loss to the government exchequer based on “fake invoices”.

The FIR further alleged that MIAL had entered into “many more such fake bogus contracts” with “non-existing/ non-functional entities”.

In the FIR, the CBI further alleged that “from 2012 onwards, the promoters of GVK Group with criminal intention to cause loss to AAI used the surplus funds of MIAL to the tune of ₹395 crore to finance their other group companies.” It said that the accused “fraudulently created forged Board meeting resolutions of MIAL authorising it to keep the reserve/surplus funds of MIAL as FDRs with PSU banks at Hyderabad.”

The airport arm of the GVK Group, founded by GVK Reddy, transferred employees “who were not at all connected to the operation of MIAL”; they were then paid for all these years, causing revenue loss to the AAI, the CBI said.

The FIR further alleges that GVK Group connived with family members/relatives and employees to give undue monetary advantage to them and to cause a loss to the AAI.

“They also assigned the premium retail area of Mumbai Airport to companies owned by their family members/ relatives and employees at exorbitantly low rates thereby reducing the revenue of MIAL on account of earnings in the form of rental and sales. Some of these companies are Rockline Solutions Private Limited, International Airport Hotels & Resorts Pvt. Ltd etc,” it said.

All of these allegations under the Indian Penal Code (IPC) commission of the offenses of fraud, cheating, forgery & criminal misconduct by public servant punishable under sections 120-B r/w 420, 467, 468, 471 of PC and 13 (1) (D) of PC Act.

(This is a developing story, CBI and GVK have been contacted for comments)