The Enforcement Directorate (ED) is likely to summon Jet Airways founder Naresh Goyal to question him about alleged irregularities related to the stake sale of a wholly owned unit called Jet Privilege Pvt Ltd (JPPL) to Etihad.
The investigation agency is also looking into the Income Tax Department’s allegations of tax evasion of more than Rs 650 crore by Jet Airways and its units which could have violated provisions of the Foreign Exchange Management Act (FEMA).
The development has come after a preliminary Enforcement Directorate probe indicated that a stake sale deal of Jet Privilege Pvt Ltd to Etihad could have violated foreign direct investment (FDI) provisions due to Jet Airways classifying Jet Privilege Pvt Ltd as an “air transport service firm”.
Incidentally, Jet Airways had incorporated Jet Privilege Pvt Ltd as a wholly owned unit in 2012. Later, it was hived off as an independent entity and Etihad purchased a 50.1% stake in it in 2013.
Earlier in May, the Enforcement Directorate had summoned senior Jet Airways executives for questioning them about Jet Privilege Pvt Ltd’s USD 150-million stake sale to Etihad.
The Enforcement Directorate is in the process of verifying if Etihad had received all necessary approvals from the defunct Foreign Investment Promotion Board before it made investments in India.
Naresh Goyal was a major stakeholder when the Jet Privilege Pvt Ltd-Etihad deal went through, and hence the Enforcement Directorate might summon him to find out if the deal violated foreign direct investment (FDI) provisions because Jet Airways had classified Jet Privilege Pvt Ltd as an “air transport service firm”.
The Enforcement Directorate is likely to probe if Jet Privilege Pvt Ltd was shown as an “air transport service firm” merely to circumvent then existing FDI norms in order to get more foreign direct investment, since air transport service firms were allowed to receive more than 49% FDI through the automatic route.
According to an Income Tax Department probe, it alleged irregularities were discovered in transactions between Jet Airways and its Dubai-based group firms, allegedly in order to evade taxes to the tune of Rs 650 crore.
Allegedly, Jet Airways paid commissions every year to its general sales agent in Dubai, which was also part of a group unit. These irregularities too cropped up when the Enforcement Directorate probed the Jet Privilege Pvt Ltd’s USD 150-million stake sale to Etihad.
The Enforcement Directorate inquiry has also indicated that this could also amount to violation of the Foreign Exchange Management Act (FEMA) since fake invoices were allegedly floated and the money which ought to have reached India were routed abroad.