Negative Blow for Jet Founder Naresh Goyal as Premises Searched
On Friday, the Enforcement Directorate (ED) carried out searches at approximately twelve locations belonging to Naresh Goyal, the founder of Jet Airways, and his associates in New Delhi and Mumbai. The searches were conducted as part of an investigation into alleged violations of foreign direct investment (FDI) regulations. The ED is looking into possible irregularities related to FDI norms in connection with the affairs of Jet Airways and its founder.
After the questioning of Naresh Goyal by the Serious Fraud Investigation Office (SFIO) in Mumbai on Thursday regarding allegations of financial irregularities, the Enforcement Directorate (ED) conducted searches at his premises on Friday. The ED’s actions are part of the ongoing investigation into potential violations of foreign direct investment (FDI) norms and other financial matters related to Jet Airways and its founder. The authorities are actively looking into the allegations to ascertain any irregularities that may have occurred during the operations of the airline.
After stepping down as the chairman of Jet Airways in March, Naresh Goyal’s airline faced a severe liquidity crisis, leading to the suspension of its operations on April 17. With its financial situation deteriorating, the company is now undergoing the resolution process under the Insolvency and Bankruptcy Code (IBC).
The investigation conducted by the Serious Fraud Investigation Office (SFIO) and the searches carried out by the Enforcement Directorate (ED) are part of the efforts to uncover any potential financial irregularities or violations that may have contributed to the airline’s downfall.
The Enforcement Directorate (ED) is conducting searches at Naresh Goyal’s premises to collect additional evidence related to alleged violations of the Foreign Exchange Management Act (FEMA). The provisions under FEMA are civil, which means that the proceedings focus on financial penalties and other civil remedies rather than criminal charges.
The investigation aims to gather the necessary evidence to ascertain whether there have been any breaches of FEMA regulations, particularly concerning foreign direct investment (FDI) norms, in connection with Naresh Goyal and his associates.
In addition to searching Naresh Goyal’s premises, the Enforcement Directorate (ED) also conducted searches at the residence of Hasmukh Deepchand Gardi’s son-in-law in the Usha Kiran building on Carmichael Road in Mumbai. Hasmukh Deepchand Gardi is a Dubai-based non-resident Indian who had invested in Tail Winds Limited, the parent company of Jet Airways, which Naresh Goyal founded in the Isle of Man, a tax haven island situated between Ireland and England.
Gardi had been linked to the Panama Papers, where his involvement with companies in India, UAE, and the British Virgin Islands was noted. The ED’s actions are part of their efforts to gather relevant information and investigate possible financial irregularities and violations of FEMA regulations related to Jet Airways and its parent company.
Jet Airways’ financial troubles have led to significant liabilities, amounting to approximately ~15,000 crore. A Ministry of corporate affairs (MCA) inspection report in July revealed substantial irregularities, including the diversion of funds, within the airline. These findings have added to the scrutiny and investigations being carried out by regulatory authorities like the Enforcement Directorate (ED) about alleged violations of foreign direct investment (FDI) norms and other financial improprieties.
The situation has also led the airline to undergo the resolution process under the Insolvency and Bankruptcy Code (IBC) after it was forced to suspend its operations in April due to severe liquidity challenges.
The Enforcement Directorate (ED) probe has expanded its focus to include alleged irregularities and inflated payments made to the Ireland-based firm that leased aircraft to Jet Airways. This investigation has moved beyond contraventions under the Foreign Exchange Management Act (FEMA) to encompass possible violations under the Prevention of Money Laundering Act.
The authorities are looking into financial transactions and activities that may have involved money laundering, as part of their efforts to unravel the complexities surrounding the airline’s operations and financial dealings.
According to ED officials, out of the approximately ~9,000 crores allotted to Jet Airways by various financial institutions, around 25%-30% of the funds are suspected to have been diverted. The searches conducted by the agency were also targeted at collecting additional evidence related to Etihad Airways’ investment in Jet Privilege Private Limited (JPPL).
The ED is investigating whether there were any violations of foreign direct investment (FDI) norms when the UAE-based airline acquired a stake in JPPL back in 2014. These efforts aim to ascertain the legality and appropriateness of financial transactions involving Jet Airways and its associated entities.
Court allows Goyal to withdraw plea
The Delhi High Court granted permission to Naresh Goyal, founder of Jet Airways, to withdraw his plea challenging the lookout circular issued against him. Goyal and his wife Anita were detained at Mumbai airport on May 25 while he was attempting to travel abroad, as mentioned in his initial plea. During the court hearing, Goyal asserted that he was cooperating with the authorities in an alleged fraud case.
However, the Centre’s advocate, Ajay Digpaul, opposed Goyal’s claim of cooperation. The court refrained from making any comments on the merits of the case and allowed Goyal’s application for withdrawal of the previous petition. In his plea, Goyal had expressed his dissatisfaction with not receiving a copy of the lookout circular despite repeated requests. He further contended that his name was not mentioned in any FIR, and therefore, he should not be considered an “accused” in the case.
