The CBI booked Tony Fernandes, the CEO of Malaysia-based AirAsia, on Tuesday for allegedly violating FDI norms and illegally securing a licence for the airline’s international operations.
The central probe agency’s actions come less than 48 hours before Prime Minister Narendra Modi is to briefly call on his Malaysian counterpart Mahathir Mohamad. Fernandes is a Malaysian national of lndian origin.
The FIR has also named Fernandes’ deputy, Tharumalingam Kanagalingam and V Ramchandran, Director of AirAsia (lndia). The list of accused also includes Rajender Dubey, Director, HNR Pte Ltd, Singapore; Sunil Kapur, Chairman, Traver/Totar Food Services; and Deepak Talwar, Principal & Founder, DTA Consulting. It also names AirAsia Berhad, Malaysia, Air Asia (India), HNR Pte Ltd, Singapore, and unknown government officials. Some charges relate to actions during the UPA regime, while one took place during NDA rule.
AirAsia India Limited (AAIL) refuted all wrong-doing and said it was co-operating with regulators and agencies to present the correct facts. “We hope to bring an early resolution to all such issues,” said an AirAsia statement.
AirAsia partners the Tata group to operate a low-cost domestic airline AirAsia India. It received the licence for Indian domestic operations in May 2014. Currently, Tata Sons and AirAsia, Berhad own 49 per cent each, while the other 2 per cent is owned by S Ramadorai and R Venkataramanan. Ramadorai is the Chairman of AAIL and represents the Tata Group.
Effective control
Foreign investment norms say a foreign airline can hold up to 49 per cent in a domestic carrier. An airline is given a flying permit only if it “is registered and has its principal place of business within India; the Chairman and at least two-thirds of the Directors are citizens of India; and the substantial ownership and effective control is vested in Indian nationals.”
This norm, the CBI’s FIR said, was violated. The FIR states that AAIL was indirectly controlled and operated by the AirAsia Group, particularly AirAsia, Berhad, violating the norms of the now-defunct Foreign Investment Promotion Board. This structure was indirectly formalised through a “Brand License Agreement” between AAIL (represented by Tony Fernandes) and AirAsia, Berhad (represented by Kanagalingam) on April 17, 2013. This “indirectly made M/s. Air Asia (lndia) Ltd a defacto subsidiary, rather than a joint venture.”
The shareholders and Indian partners of the JV, including the board members, were not only aware of these intentions, but also consciously ensured violation of the FIPB norms, the FIR states. “Violation of FDI norms were prima facie found to be giving effective management control to a foreign entity,” it said.
The CBI has also alleged that Fernandes wanted the airline to be able to fly internationally from day 1, and local partner Tata Sons, through its nominee R Venkatraman, would lobby to get all government approvals, including FIPB clearance and amendment/removal of the ‘5/20’ rule.
The ‘5/20’ rule was laid down by the Civil Aviation Ministry on April 29, 2004. It stipulates a minimum of five years’ experience of continuous operation of domestic services and a minimum fleet size requirement of 20 aircraft.
The FIR alleged that a criminal conspiracy was hatched to help AAIL expedite the approval process and change in aviation policies to suit the company. It was found during the investigation that Rajender Dubey played a role as a liaison agent and was instrumental in seeking appointments and facilitating meetings for officials of AAIL with various Indian government officials for clearance of various formalities.
Although the UPA government did get a Cabinet note ready to amend/remove the 5/20 rule, it was forced to leave the proposal for the new government.
Sham Contract
The FIR states that AAIL remitted about ₹12.28 crore to HNR Trading, Singapore, for a sham contract on the basis of a bogus agreement on plain paper, “which was utilised for paying bribes to unknown public servants of the Government of lndia and others for securing permit for operation of international scheduled air transport services through Deepak Talwar and Sunil Kapur who acted as lobbying agents.” Talwar made a presentation on the strategy to engage with officials of several ministries, for which he received a payment of approximately ₹17.5 lakh, the FIR said.
It also said that Kapur, in December 2014, had handed over a packet containing cash of ₹50 lakh to one Sriram, on the directions of Kanagalingam to facilitate the removal of the then ‘5/20’ rule. The CBI concluded that all these facts “prima facie disclose commission of offence punishable under various section of the Prevention of Corruption Acts and others”.
The Union Cabinet scrapped the 5/20 policy in June 2016. Interestingly, in 2017, the Directorate General of Civil Aviation said the agreement between AirAsia India and AirAsia Berhad Malaysia did not violate Indian laws.