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Kingfisher Airlines case: Ex-chiefs of banks get summons from SFIO

A multi-disciplinary organisation, the Serious Fraud Investigation Office probes cases of financial frauds that are referred to it by the Ministry of Corporate Affairs.

Written by Khushboo Narayan | Mumbai |
August 28, 2016 4:01:48 am
kingfisher airlines, kingfisher, vijay mallya, vijay mallya fraud, Serious Fraud Investigation Office, sfio, kingfisher defunct, business news, india news (Representational Image)

The Serious Fraud Investigation Office (SFIO) has summoned all former chairpersons and managing directors (CMDs) of the 14 public sector banks which disbursed loans to Vijay Mallya’s now defunct Kingfisher Airlines as a part of its ongoing probe into loan default, two sources familiar with the development have told The Sunday Express.

The SFIO, according to sources, has already examined at least three former CMDs and recorded their statements. They are being questioned to ascertain the rationale behind extending loans to Kingfisher Airlines even when the company performed poorly and on the due diligence done by the banks before lending.

“It is necessary for the agency to examine the officials who were at the helm of affairs at the banks during the time the loans were extended to the company. The agency needs to ascertain if there were lapses in due diligence by the lenders,” an official said.

A multi-disciplinary organisation, SFIO probes cases of financial frauds that are referred to it by the Ministry of Corporate Affairs.

Most of the loans were granted to Kingfisher Airlines between 2007 and 2010. The company had a debt of Rs 934 crore at the end of March 2008. A year later, the debt had multiplied to Rs 5,665 crore. The net losses of the company widened from Rs 188 crore in 2007-08 to Rs 1,608 crore in 2008-09. At the end of 2009-10, Kingfisher Airlines had a debt of over Rs 7,000 crore. It was grounded in 2012.

Currently, Kingfisher Airlines owes over Rs 9,000 crore to 17 banks including State Bank of India (SBI), IDBI Bank, Punjab National Bank, Bank of India, Bank of Baroda, United Bank of India, Central Bank, UCO Bank, Corporation Bank, Indian Overseas Bank, Federal Bank, Axis Bank and Punjab and Sind Bank.

This is not the first time when an investigative agency has questioned top bank officials in connection with a wilful loan default. In April, to fix accountability, the CBI questioned several board members of the Punjab National Bank about its lending to Winsome Diamonds and Jewellery Ltd and its subsidiaries, which owe over Rs 6,800 crore to several banks.

In the case of Kingfisher Airlines, apart from probing financial irregularities, the SFIO is also inquiring into allegedly inflated brand valuation of the airlines of over Rs 4,000 crore. In this connection, the SFIO is examining the role of the consultancy firm that valued the brand. The agency also examined Mallya twice before he left India on March 2.

Kingfisher Airlines and Mallya have come under the scanner of multiple investigative agencies such as the CBI , Income Tax and Enforcement Directorate. On August 23, the ED registered a fresh case against Mallya and Kingfisher for loan default of Rs 6,900 crore. The new case is based on a complaint filed by a SBI-led consortium with the CBI. Earlier this month, the CBI had filed a fresh case under IPC sections related to criminal conspiracy and cheating against Mallya on the basis of a complaint received from the SBI-led 17-bank consortium.

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