Funds were also channelled to Vijay Mallya’s other ventures n SBI, which ordered the forensic examination, sends show-cause notice to company
Manju AB @padinjatteyvila
Mumbai: The forensic audit by consultancy firm Ernst & Young has found diversion of funds by Kingfisher Airlines to Formula One and other ventures of promoter Vijay Mallya, lenders say. Officials from IDBI Bank and SBI said, “Prima facie, there seems to be diversion of funds. We now need to study the report and authenticate the mapping transaction trail undertaken by the consultancy firm.”
SBI chairman Arundhati Bhattacharya said: “We are studying the report and it would not be right to discuss the details.” However, the bank has sent show-cause notices to Mallya and three other directors following the audit report.
What’s a forensic audit?
When an external agency is called to map the flow of funds from and into a company’s accounts, it’s called a forensic audit. The audit maps every fund flow into and out of the company. They help banks decipher the funds and its end-uses. Bankers have to then validate it, after which only the final report is released. It’s a detailed evaluation of the firm’s financial information for use as evidence in court. A forensic audit can be conducted to prosecute a party for fraud, embezzlement or other financial claims.
So, what will happen to the airline now?
SBI, IDBI Bank and Punjab National Bank are planning to call a Grievance Redressal Committee (GRC), as per RBI guidelines. The GRC has the right to hear out the defaulter and declare him a wilful defaulter. Banks call a GRC only when all other recovery efforts fail.
Who ordered the forensic audit?
The audit was ordered by SBI, which has lent about Rs 1,600 crore to the airline. Altogether, Kingfisher has raised Rs 6,360 crore from a consortium of 17 banks, led by SBI. They have about 21 litigations in various courts seeking request to attach properties, winding up petition and other cases.
Isn’t Mallya already a wilful defaulter?
United Bank of India has declared Mallya and three of his directors wilful defaulters. Said a bank official: “There’s evidence that an account was created in HDFC Bank, from where the company was siphoning off money. We asked the company to reveal the transactions in and out of this account and it refused to do so.” Later, the Supreme Court refused Mallya’s plea to strike down the decision to declare him as a wilful defaulter.
What’s SBI doing?
In response to Ernst & Young’s forensic audit, SBI has already sent show-cause notices to Vijay Mallya and three company directors who have been skirting repayments despite concerted efforts from banks. While two of them have responded, the other two are yet to respond. Once all the replies are in, company officials will be called to the Grievance Redressal Committee of the bank.
What does the wilful defaulter tag mean?
Once a company is declared wilful defaulter, criminal proceedings can be initiated against its promoters and directors. Besides, it would not be allowed to raise fresh funds from banks and set up new ventures for five years.
What is IDBI Bank planning to do?
“We have already served Vijay Mallya and three other directors of the company with show-cause notices. We have got replies saying that they strongly repudiate the allegations of the bank. Now, we will call a GRC and give the company a final hearing,” a senior bank official said.
Why has PNB moved Delhi HC?
Punjab National Bank has filed an appeal in the Delhi high court after a lower court allowed Kingfisher to appear with a lawyer at the GRC of the bank. The bank’s contention is that external lawyers are not allowed into a GRC.
What is Kingfisher’s response?
Prakash Mirpuri, VP (communications), UB Group, said in an email to queries by dna: “There has been no external audit, forensic or otherwise, done on KFA. We are not aware of any Ernst and Young report. KFA has always upheld the highest standards of accounting and governance. Any allegations as you suggest will receive a robust and comprehensive response.”
Published Date: Sep 10, 2014
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