The airline's Vigilance Department discovered serious irregularities and misuse of CFS while scrutinising the data between October 2011 to April 2012 for tickets issued at Delhi Airport.
Under the CFS, passengers buying first class or business class tickets or full fare economy class tickets are entitled to have one free ticket for their companion.
It was found that in a sample of 332 CFS tickets issued at Terminal 3 of the Delhi Airport, irregularities were found in respect of 196 tickets.
"Main tickets were cancelled after issuance or use of CFS tickets. For domestic CFS tickets the accompanying passenger should be spouse, child or parent - this stipulation was not followed. Main tickets and CFS tickets don't have the cross reference.
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"Outbound journey was not undertaken together by the passengers holding main and CFS ticket and CFS tickets were issued on a sector different from the main ticket routing," a Civil Aviation Ministry spokesperson said.
Taking a serious view of the irregularities, Civil Aviation Minister Ajit Singh has directed Air India CMD to stop the CFS with immediate effect, the spokesperson said.
He issued about 130 fraudulent CFS tickets in the sample check at Terminal 3.
An FIR has been lodged by Air India Airport Manager against him and he has been placed under suspension. Also he had been asked to lodge FIR against all other errant officials.
Apart from it, the Vigilance department had also advised the national carrier's Commercial Director to verify the CFS tickets issued on all-India basis and initiate action against erring employees.