IDBI Officials Relaxed Loan Rules for KFA, Says CBI
New Delhi: IDBI Bank officials allegedly relaxed several norms to sanction loans to business tycoon Vijay Mallya’s Kingfisher Airlines (KFA), according to the Central Bureau of Investigation. The CBI’s charge-sheet, which runs into over 15,000 pages, was filed in a Mumbai court last week and contains allegations of a series of irregularities, including the delayed submission of guarantees and references made by KFA to meetings between Mallya and then IDBI Bank chairman Yogesh Aggarwal, purportedly to influence the sanction of loans.
The agency alleged that the bank’s demands for the pledge of unencumbered shares were turned down. Mallya, in an email dated November 12, 2009, instructed A Raghunathan, then the CFO of the airline, to inform the bank officials that non-pledging of unencumbered shares was an “ACCEPTED position.”
Following are excerpts from the CBI’s charge-sheet in the case:
GUARANTEES TO BE GIVEN WITHIN 15 DAYS FURNISHED AFTER OVER A YEAR
A corporate guarantee of United Breweries Holdings and a personal guarantee from Mallya, stipulated for a short-term loan of ₹ 150 crore sanctioned on October 8, 2009, were required to be furnished within 15 days from the date of disbursement. The guarantees were submitted to the bank in December 2010.
Further, a suggestion by the bank’s risk department to verify Mallya’s net worth was not independently validated. Mallya executed three separate guarantee agreements in favour of IDBI Bank between October 2009 and December 2009 but submitted his statement of assets and liabilities only with the first.
The charge-sheet contends that Mally- a’s statement does not contain details of his assets, especially VJM Resorts in South Africa, with an estimated value of $10 million (`49.75 crore), and his share in the Estates of Devi Mallya and Prema Mallya. Even the 100% stake in UNB-South Africa, valued at $150 million (`746.25 crore) was not independently verified.
REFERENCES OF MEETINGS BETWEEN MALLYA AND YOGESH AGGARWAL
The CBI said KFA referred to meetings between Mallya and Aggarwal, the then CMD of IDBI who is currently in judicial custody, to seek urgent release of loans. Sample this: After a meeting between Mallya and Aggarwal on October 6, 2009, CFO Raghunathan shot off a letter to the bank giving “reference of meeting dated October 5 and October 6.” Raghunathan sought sanction for a ₹ 150 crore loan for six months to KFA to meet “certain critical obligations” to overseas vendors and service providers. However, no documents were enclosed with the letter and the details of overseas vendors/lease rentals/service providers was not given.
Letters in possession of CBI reveal that the grant of the short-term loan was “pre-decided” during the meeting between Mallya and Aggarwal.
According to the charge-sheet, the claim is supported by the fact that the general manager of IDBI Bank processed the request on October 7, 2009, itself and submitted a “hastily drafted memorandum” to the credit committee, recommending sanction of the ₹ 150 crore loans to KFA. The committee approved the request the same day.
FALSE ASSERTIONS BY KFA BRASS, WAIVER SHOWN AS COMPENSATION
The CBI said that risk concerns raised in the rating report by bank officials and compensation said to be sought from M/s International Aero Engines were based on a mail dated November 12, 2009, received from accused Amit Nadkarni, a KFA official. In the letter, Nadkarni said that KFA’s capacity and revenue were reduced after the airline suffered 20 engine failures in the first half of financial year 2010. He said that discussions were on with engine manufacturers International Aero Engines for compensation, “which has not been reflected in the business plans or the financials.”
The CBI said it probed the matter and found that no compensation was ever paid by International Aero Engines to KFA. Instead of seeking compensation, KFA entered into five agreements with IAE for “waiver of claims; repayment of overdue, rework arrangements, etc.”