Investigators may grill banks on closure of Jet Airways' forensic audit

Investigative agencies examining the books of Jet Airways are likely to seek an explanation from the State Bank of India (SBI)-led consortium after the lenders “closed” the forensic audit report on the basis of the “more-than-adequate” responses by the grounded airline. 

“Banks have shared the forensic audit report with the Enforcement Directorate (ED) and the Serious Fraud Investigation Office (SFIO). Since the lenders decided to close the forensic audit report despite some observations made by EY (forensic auditor), an explanation will be sought from them,” an official said. 

The SFIO is probing the Jet accounts for allegedly violating the Companies Act, while the ED is looking into the stake sale of the carrier’s loyalty programme. The SFIO recently questioned Jet founder Naresh Goyal after the Ministry of Corporate Affairs (MCA) referred the case to it.

A letter by SBI Chief General Manager Partha Sen to the bank’s chief vigilance officer on May 22 stated that the forensic audit report by EY, submitted on March 1, “had pointed to certain issues of provisioning, billing, and related-party payments, which though not substantial, required clarifications from the company”.

“The matter was subsequently discussed in a lenders’ meeting on April 23, 2019, and it was felt that the responses provided (by Jet Airways) so far were largely adequate in nature and accordingly, the lenders decided to treat the forensic audit report as closed,” Sen said in the communique, which was reviewed by Business Standard.

SBI Chairman Rajnish Kumar declined to comment on the matter. He didn’t respond to a set of questions sent to him over e-mail on Tuesday.

EY had flagged the issue of unverified invoices raised by Jet Privilege, which it said led to “excess billing” of around Rs 1 crore, monthly invoice of Rs 14.1 crore towards promotional activities without supporting documents, and fraudulent JPMiles worth Rs 46.3 crore, among others. Jet’s loyalty programme is managed by Jet Privilege Private Limited (JPPL), a subsidiary which is majority owned by Etihad.

However, Jet Airways pointed out that all these observations were drawn from the internal audit report of the airline that was provided to the forensic auditor. Significantly, the airline accepted the observations made by the forensic auditor on non-disclosure of related-party transactions.

Closure that wasn't

| SBI conducted forensic audit of Jet Airways to ascertain diversion of funds

| Auditor EY submitted its report on March 1, pointing out issues of provisioning and billing

| SBI said the issues were "not substantial" but sought clarifications from Jet

| On April 23, lenders discussed the airline's view and decided to treat it "closed" after "responses provided were largely adequate in nature"