Naresh Goyal quizzed by ED over FEMA violations

New Delhi: The Enforcement Directorate (ED) on Friday questioned Jet Airways (India) Ltd founder Naresh Goyal at the agency’s Ballard Estate office in Mumbai, in a case related to alleged violation of foreign exchange laws, one person with direct knowledge of the matter said, requesting anonymity.

In August, the ED had carried out searches under the provisions of the Foreign Exchange Management Act (FEMA) across properties belonging to Goyal.

According to reports, the ED is probing foreign investment in the grounded carrier’s loyalty programme, Jet Privilege Pvt. Ltd (JPPL). The agency is also probing the airline’s promoter under the Prevention of Money Laundering Act (PMLA) and for alleged tax evasion.

JPPL was incorporated in 2012 as a wholly owned unit of Jet Airways, but was hived off as an independent entity in 2014 after Etihad Airways PJSC bought a 50.1% stake in the loyalty programme for $150 million, valuing the firm at $300 million.

Etihad Airways’ investment in JPPL was part of its $600 million investment in Jet Airways, which was announced in April 2013. At present, Jet Airways owns 49.9% stake in JPPL, while Etihad Airways owns the rest.

The ED and the corporate affairs ministry (MCA) are examining Jet Airways’ and Jet Privilege’s books, people in the know had earlier said.

In May, Goyal and his wife Anita Goyal were stopped from flying to Dubai by immigration authorities in Mumbai.

On 8 May, Mint had reported that the MCA was in the process of ordering a probe by India’s fraud investigators after the registrar of companies found instances of Companies Act violations and alleged diversion of funds by Jet Airways promoters.

The airline had suspended operations in April owing to a severe cash crunch.

A consortium of 26 banks led by the State Bank of India has approached the National Company Law Tribunal to recover dues of more than ₹8,500 crore.

The airline has had negative net worth for long and has run a loss of over ₹13,000 crore. Its total liabilities amount to more than ₹15,000 crore.

Shareholders of Jet Airways, who currently include state-run banks, are betting on the comparatively robust financials of JPPL to monetize the airline’s stake in the venture and use the money to partly repay its dues.

Goyal’s statement has been recorded under FEMA at the ED’s zonal office, the person mentioned above said.

A dozen premises, including Goyal’s Mumbai residence and group company premises, were searched by the ED on 23 August.

According to an ED official, the businessman’s empire had 19 privately-held companies, five of which were registered abroad.

The agency is investigating charges that these firms had allegedly carried out “doubtful” transactions under the guise of selling, distribution and operating expenses.

The ED suspects that the high expenses shown by these companies were achieved through dubious ways, and as a result, they “projected” huge losses.

Allegedly shady aircraft lease transactions with non-existent offshore entities are also under the ED scanner. It is suspected that Jet Airways made payments for lease rental to “ghost companies”, which purportedly routed ill-gotten money in Goyal’s firms.

Press Trust of India contributed to this story.