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State Bank of India is set to appoint Deloitte to conduct a forensic audit of Mumbai International Airport Ltd’s accounts for the past 10 years. This comes after the Central Bureau of Investigation started a probe against the company and its parent company GVK Holdings. SBI is the lead lender for the company and is required under law to examine the allegations of fraud.
It is not unusual for lead lenders to seek a forensic audit for companies facing allegations of fraud. State Bank of India had earlier asked EY to carry out a forensic audit of Jet Airways financials for the fiscal years 2014 to 2018. Bankers to Reliance Home Finance had appointed Grant Thornton in August 2019 to conduct a forensic audit.
But usually, banks order a forensic audit when the case is related to a loan fraud when a borrower intentionally deceives a lender by providing false information, or by omitting important information during the loan application process or during the currency of such loan.
GVK Airport case
The FIR lodged by the 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; and 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 Airports Authority of India (AAI).
In addition, the FIR alleges that the accused have also caused huge unquantified loss to AAI by inflating the expenditure of MIAL and by underreporting the revenue.
The Enforcement Directorate (ED) has also filed a preliminary money laundering case against MIAL and GVK Holdings.
In July, the board of MIAL had asked its audit committee to take legal advice on the future course of action in the matter related to the FIR registered by the CBI Central Bureau of Investigation.
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