Ernst & Young (E&Y) was asked by the lenders’ consortium to carry out a forensic audit of Jet Airways books in April 2019. The audit report was not made public but it raised some doubts among the investors. In March 2019, the Government asked the lenders to share the audit reports of Jet Airways. This was around the time when Mr Naresh Goyal and his wife quit the board.
Mr Naresh Goyal and his spouse Mrs Anita Goyal on 25th May’19 were forbidden to leave the country. They had boarded the Emirates flight to Dubai when the immigration officials stopped the flight and escorted Mr Goyal and his wife out of the plane. This was due to a look-out circular (LOC) issued against them. A look-out circular (LOC) is a circular by the concerned authority to investigate the person boarding the plane is wanted by the police. This LOC was released by the Intelligence Bureau on the appeal of the Ministry of Corporate Affairs (MCA).
The MCA reported the LOC in reference to the continuing investigation against Mr Naresh Goyal. According to a report by the Registrar of Companies on 8th May 2019, there were instances of the promoter of Jet Airways, Mr Goyal diverging the funds. Furthermore, violation of the Companies Act and anonymous trails of funds were said to be there in the report.
The postponed Q4 results fiasco
In August 2018, during the release of Q1FY19 results, the airline delayed its update of the results. This was due to the then audit committee of BSR & Co., an affiliation with KPMG, refused to approve the airline’s quarterly results. It was alleged that the company is not a going concern and thus can perform any other tasks thereupon. This allegation by the auditors was then denied by Jet Airways. BSR & Co. and KPMG were also considering to quit the audit committee of Jet Airways. This postpones in the announcement of the airline’s quarterly results concluded a plunge in its share prices.
In April 2019, Jet Airways shut down its operation due to lack of funding. This was when the lenders of the airline declined to provide emergency funds required by Jet. Almost all the chief officials of the airline have resigned with the step down of Mr Naresh Goyal. The airline is going through a bidding process to revive itself. The international and local tariff rights of Jet have been temporarily given to other local airlines. Etihad has 24% stake in Jet Airways while Mr Naresh Goyal has pledged his 40% stake to the lenders.
The potential investors of Jet were not allowed to see the forensic audit reports by the lenders’ consortium. Though they were informally persuaded that any future legal reference to the audit reports will not harm the bidders. The Serious Fraud Investigation Office (SFIO) has been investigating the forensic reports to find any diversion of funds by the Promoter of the airline.
The debt-laden airways, on 30th May 2019, announced that they cannot release their FY19 results because of the ongoing debt resolution process. Due to the current bidding process, the airline reported that the company is not in the position to approve the year-end financial results. This is because of the recent resignations by the chief personnel of the board.