22 Sep 2023 4:30 AM GMT
Jet Airways founder Naresh Goyal has claimed that his family members received salaries in their capacity as employees of Jet Airways, countering Canara Bank’s allegation that he siphoned off funds from Jet Airways by paying for personal expenses such as salaries of staff, phone bills and vehicle expenses of the Goyal family.“Family members of the Petitioner were being paid salaries and...
Jet Airways founder Naresh Goyal has claimed that his family members received salaries in their capacity as employees of Jet Airways, countering Canara Bank’s allegation that he siphoned off funds from Jet Airways by paying for personal expenses such as salaries of staff, phone bills and vehicle expenses of the Goyal family.
“Family members of the Petitioner were being paid salaries and other benefits in their capacity as employees of the company for the relevant period. Necessary approvals, including approval of Audit Committee and approval of Central Government, as required, have been obtained. The same have also been disclosed in the Audited Annual Financial Statements of the Company for the relevant years under Related Party Transactions”, as per Goyal’s writ petition before the Bombay High Court.
Goyal has given this explanation in a habeas corpus writ petition challenging his arrest in an alleged Rs. 538 Crore money laundering case. The Enforcement Directorate case is based on an FIR registered by the CBI, which is based on a complaint by Canara Bank filed in November 2022.
Jet Airways India Ltd (JIL) allegedly borrowed over Rs. 848 Crores and defaulted, causing wrongful loss of Rs. 538 Crores to Canara Bank. Canara bank has alleged that the borrowed funds were siphoned off instead of being used for the stated purpose of the operation of Jet Airways. Canara Bank classified Goyal's and JIL's accounts as fraud in 2021.
In the FIR, CBI has relied on report of a forensic audit done by Ernst & Young LLP in 2018 at the instance of State Bank of India, leader of the consortium of lenders of JIL. CBI has alleged that Rs. 1410.41 Crores were siphoned off out of total commission expenses from JIL by paying it to related parties.
Goyal has claimed that these commissions and reimbursements were made to General Sales Agents (GSA) for services rendered to JIL, as per their agreements. He has claimed that the commission percentages were in line with industry standards and were only paid for revenue generated after passengers had paid for their journeys. Goyal has argued that these payments cannot be considered as siphoning off funds.
JIL allegedly wrongly bore expenses worth Rs. 403.62 Crores of GSAs, which, according to sample agreements, should have been borne by GSAs themselves.
Goyal has claimed that these were reimbursements made towards expenses incurred by GSAs while making payments to third parties, and no amount was received by him, directly or indirectly. He has claimed that as per industry practice, while the GSAs have to bear their own expenses, the carrier has to reimburse any expense incurred by the GSA on its behalf.
JIL allegedly diverted funds to its subsidiary Jet Lite (India) Ltd (JLL) in the form of loans and advances. Between 2011-18, Rs. 14,552.44 Crores were allegedly given as loans to JLL, with Rs. 13,529.62 Crores received from JLL. These transactions allegedly diverted borrowed funds to JLL instead of utilizing them for their intended purpose.
Goyal in his petition has claimed that these funds were advanced to JLL to support its operations, as it is a wholly-owned subsidiary of JIL and both companies faced financial challenges. The financial statements of JLL were consolidated into JIL's statements, he has claimed. He has claimed out that these transactions were carried out transparently and in accordance with accounting standards.
As per the FIR, Rs. 1,152.62 Crores were spent on professional and consultancy expenses during the review period. Out of this, suspicious transactions worth Rs. 197.57 Crores were identified with entities linked to JIL's Key Managerial Personnel. Additionally, Rs. 420.43 Crores were allegedly paid to entities with invoices not matching their stated services.
Goyal maintains that the services provided by professional and consultancy entities were genuine, and their invoices were accurate. All transactions were audited by internal and external auditors, approved by the Audit Committee, Board of Directors, and shareholders of JIL, according to Goyal.
Goyal’s petition states that the findings in the forensic audit report are irrelevant and have no bearing on the present case, as it covers a period before Canara Bank granted the loans.
Goyal in his petition has claimed that he was never provided the Grounds of Arrest in writing as required under section 19(1) of Prevention of Money Laundering Act, violating Articles 14, 21 and 22 of the Constitution. Further, the Sessions Judge authorised his detention without recording reasons for such detention, according to the petition.
According to the petition, before arresting him, ED did not have a valid "reason to believe" that he committed the offence, as required under Section 19 of the PMLA. The petition contends that the reason given in the remand application for his arrest, i.e., “for the purpose of identifying proceeds of crime”, is whimsical and arbitrary.
The petition contends that ED did not have jurisdiction to arrest him as the Bombay High Court has earlier stayed Canara Bank's order declaring Goyal’s and JIL’s accounts as fraudulent. “…if the predicate offence is stayed, then no consequential action can be taken by the Enforcement directorate in relation to the offence of money laundering arising out of the predicate offence, until the said stay is lifted”, the petition states.
The petition claims that there was a complete non-application of mind by the ED as there are no allegations of misrepresentation on part of JIL or Goyal while seeking the loans.
The petition asserts that the ED went beyond its jurisdiction by investigating the predicate offence. Further, the allegations mainly revolve around commercial disputes and do not constitute any criminal offense, the petition claims.
The petition claims that the ED did not comply with Section 19 of the PMLA, which mandates recording reasons for arrest in writing and providing them to the arrestee. The arrest order and memo were allegedly insufficient in this regard.
Given the Petitioner's cooperation, the ongoing Look Out Circulars, and the Corporate Insolvency Resolution Process, the arrest is unwarranted and excessive, the petition states.
A division bench of Justice Revati Mohite Dere and Justice Gauri Godse on Wednesday granted the ED two weeks to respond to Goyal’s petition against his arrest, observing that it could not pass any order until the ED had an opportunity to respond to the petition.
The court scheduled the matter on October 6, 2023, for further hearing and clarified that Goyal can approach the trial court for seeking bail.
Senior advocate Amit Desai, along with advocates Ameet Naik and Abhishek Kale from Naik Naik & Co. appeared for Naresh Goyal.
Advocate Hiten Venegavkar represented the Enforcement Directorate.