This article first appeared in The Edge Financial Daily on June 20, 2018
KUALA LUMPUR: AirAsia Group Bhd yesterday refuted “strongly” the allegations made in the Indian Central Bureau of Investigation’s (CBI) first information report (FIR), saying they are “baseless, unsupported and unjustified”.
“The board of directors of AirAsia Group refutes strongly all the allegations made in the FIR ... and will vigorously challenge these allegations. We question the motives of the unnamed person, persons or organisation that lodged this FIR, but we will cooperate fully with the Indian authorities in accordance with due process provided in law,” it said in a filing with Bursa Malaysia yesterday.
It was reported that the Indian police on May 29 filed a case against, among others, AirAsia Group, the airline’s group chief executive officer (CEO) Tan Sri Tony Fernandes, deputy group CEO Tharumalingam Kanagalingam (Bo Lingam) and its domestic entity AirAsia India Pte Ltd, over allegations of corruption and breaking rules in obtaining a flying licence.
“AirAsia Group would like to reiterate in no uncertain terms that all the allegations in the FIR are unfounded and are without any rational basis and are wholly inconceivable in the context of corporate governance norms in Malaysia. Accordingly, AirAsia Group denies all allegations of wrongdoing and will pursue all legal remedies available to address these allegations,” it added.
AirAsia Group said one of the allegations that AirAsia India, a joint venture between Tata Sons Ltd and AirAsia Investment Ltd, was indirectly controlled and operated by AirAsia Group via a brand licensing agreement (BLA) that has been nullified by the director-general of India’s Directorate General of Civil Aviation in a report last year filed in the High Court of Delhi, which stated that he did not find that the terms and conditions laid down in the BLA “dilute the substantial ownership and effective control of AirAsia India being vested with Indian nationals”.
AirAsia Group also maintained that all required approvals to set up a low-cost carrier in India were obtained through normal channels and it took more than a year to get these approvals.
“Given Tata’s more than 100 years track record and that of AirAsia’s reputation, we refute any inference of impropriety in obtaining these approvals,” it said.
While the group admitted that AirAsia India as with others in the aviation industry lobbied the government of India to remove the 5/20 rule, it added that this was done in compliance with the law and certainly without any unlawful payments.
Under the 5/20 rule, an airline must have at least five years of domestic experience and 20 aircraft to get an international licence. In 2016, the Indian government removed the five-year clause.
The airline also clarified that apart from its contract with HNR Trading Pte Ltd, the contracts referred to in the FIR were entered in the ordinary course of business for services rendered on normal commercial terms.
“All contracts entered into by AirAsia India at the relevant time were under the watch of then CEO Mittu Chandiliya. AirAsia India lodged an FIR against Mittu Chandiliya in 2017 over the contract with HNR Trading, which was unauthorised by the company.
AirAsia India has also submitted a forensic audit report by a leading accounting firm in India to show that funds were illegally siphoned out of the company through that unauthorised contract. We believe that the Bangalore police are still investigating, although much time has lapsed,” it noted.
AirAsia Group also pointed out that an FIR is a written document prepared by police organisations in India when they receive information about the commission of a cognisable offence.
“It must be noted that anyone can make such a report either orally or in writing to the police and investigations by police begin after an FIR is recorded. Once an FIR is registered, police are duty-bound to investigate the case, record statements of all witnesses, and file a final report.
“If the police eventually conclude that there is no basis for the complaint or no evidence available to prosecute the case, further action is dropped,” it added.
Shares in AirAsia Group took a beating on May 30, falling by 7% to close at RM3.08, after news broke that Indian police were investigating AirAsia Group, Fernandes and AirAsia India over the allegations.
The counter closed down 10 sen or 3.13% at RM3.09 yesterday, bringing it a market capitalisation of RM10.49 billion. Year to date, the stock has fallen 7.5%.