This article is written by Alankrita Singh of NUSRL, Ranchi.

It is claimed by the Central Bureau of Investigation that bribes were paid to get rules changed to get an international license and foreign investment clearance.

Facts

India’s Central Bureau of Investigation (CBI) has levelled allegations of bribery and corruption against the AirAsia India unit and several executives. Unnamed government officials were given bribe to obtain a flying permit for their joint wander airline with the Tata group to begin universal flights from the primary day of its task. The CBI on May 28, 2018, registered a case against the LCC (Low-Cost Carrier) for conspiring with the previous United Progressive Alliance (UPA) government to change India’s “5/20” rules and at the same time for violating effective-control regulations. The complaint was filed for supposedly campaigning the administration for abroad flight allows and damaging the standards that forbid foreign airlines from controlling Indian operators. The First Information Report by CBI, says that the violations occurred from 2013 to 2016 after which the government eased the restrictions on the Indian Airlines for starting overseas flights in June 2016. But bar on giving management control to foreigners is a rule which is in existence. According to CBI, the Group Chief Executive Officer(CEO), Tony Fernandes and also a few different administrators and the then government authorities were incorporated into the case.

According to FIR

• AirAsia India Ltd was indirectly controlled by AirAsia Berhad violating the FIPB rules.
• Tony Fernandes from the first day of operation of AirAsia India wanted to get it flying internationally.
• Government officials and others were paid bribes amounting to Rs 12.28 Crores.
• Tata sons lobbied to get government confirmation including FIPB clearance and amendment or removal of 5/20 rule.
• The violations took place between 2013 and 2016.
• Unknown officials from civil aviation ministry and FIPB entered into Criminal Conspiracy with officials of AirAsia India, AirAsia Berhad and others.    

List of People/Entities Named in FIR

And other unknown public servants of the Ministry of Civil Aviation, FIPB and private persons.

About AirAsia India

AirAsia is a low-cost Malaysian airline headquartered near Kuala, Lumpur, Malaysia which was initially a Malaysian government-controlled company established in 1993 and began operations on 18th November 1996. In Jan 2002 it was taken over by Tony Fernandes and was re-launched as an LCC (Low-Cost Carrier). It is the largest Asian no-frills airline and is a pioneer of low-cost flights. Its mission is to constitute a globally recognised ASEAN Brand and to earn the most reduced cost so that everybody can fly with AirAsia. It additionally plans to keep up the most noteworthy quality items, grasping innovation to diminish cost and improve benefit levels. Its objective is to be the largest low-cost airline in India and serve the general population who are presently underserved with poor availability and high charges. This was accomplished by providing only the requisite facilities and keeping the prices as low as feasible. Its strategy is to provide requisite safety and focus on simplicity.

Who Controlled AirAsia India?

AirAsia India was indirectly controlled and worked via AirAsia Berhad, which according to the CBI was in violation of the norms of Foreign Investment Promotion Board (FIPB). The government then dismantled FIPB in 2017. A ‘Brand License Agreement’ was marked between AirAsia Berhad and the Indian joint venture(Tata Sons) in April 2013 through which the structure was indirectly finalised. The Indian joint venture was, in fact, made a subsidiary by the pact rather than a joint venture.

According to CBI the shareholders and the Indian partners consciously violated the FIPB norms, as FIPB controls enabled foreign airlines to hold 49 per cent in a household bearer yet the administration control needed to remain with Indian partner however they disrupted foreign direct investment guidelines by giving successful control of the airline to a foreign entity.

Lobbying Allegations

According to CBI, the Malaysian airline led by Fernandes, from day one wanted the Indian joint venture to fly globally. All the administration endorsements including the FIPB approval and an adjustment in 5/20 rule was influenced by a Tata sons nominee on AirAsia India Board, Venkataramanan. The rule requires that an airline must be working in India for five years and have no less than 20 aircraft in its fleet before beginning international operations. The rule was discarded in 2016 by Narendra Modi Administration.

It has been asserted by CBI that bribe was paid to obtain a license to operate international flights by the joint venture of AirAsia India Ltd(AAIL) with Tata Sons Ltd. Also, in the FIR it was alleged that Sunil Kapur, who runs an in-flight providing food organization, along with Bo Lingam, gave over a bundle containing Rs 50 lakhs to help forward the removal of the 5/20 rule. Though it was not clear to whom the money was given.

Tony Fernandes is also charged with “putting pressure” on previous AirAsia India CEO Mittu Chandilya to constitute changes in administrative strategies for international aviation in India which would be beneficial to the company. Officials of Civil Aviation Ministry and FIPB were listed in a criminal conspiracy with Venkataramanan, Fernandes and others with the intention of helping AirAsia facilitate the approval process and alter the aviation policies to suit the company.

Bribery Crimes and Charges

Any individual who intends to give an elected official anything of significant worth in request to pick up an improper advantage in any official matter may be charged for bribery.

Further, bribery which may influence the prosecution and sentencing are:

• Bribery or the demand of bribery, to influence an official under official oath, which may also include contempt of court, charges of deceitfulness, etc, or
• Bribery for the performance of a public duty which may result in charges of public corruption, conspiracy, etc.

Both the parties who engage in bribery i.e. the party who gives and the party who accepts the bribery may be punished under federal bribery laws. Punishments for bribery incorporates fines, as well as additional detainment and the fine attached to the charge of bribery, is related to the amount of bribe.

Bribery cases

Some Bribery cases involving federal officials include:

• New York State Senator Malcolm A. Smith was arrested in April 2013, by federal authorities along with the City Councilman Daniel J. Halloran III, a Democrat furthermore, a Republican separately. Keeping in mind the end goal to get Smith onto the New York City mayoral vote, both of them were associated with taking and paying influences.
• In one of the cases, for understanding the difference between bribes and donations, three San Diego councilmen pled “not guilty” in 2003 to government corruption charges emerging from professedly receiving campaign contributions from a dance club proprietor in the wake of consenting to work toward the repeal of the city’s “no touch” ,which prohibits certain activities at nude entertainment venues.

How does the investigation affect the Aviation Industry?

In order to gain business advantage, companies and individuals face pressure and temptations to defy the law. The legal and business consequences of the airline corruption includes criminal examinations, prosecutions, convictions, punishments, reputations being destroyed, spewing of benefits, shareholder losses from the drop of share price, careers ruined, civil lawsuits launched by investors, loss of confidence by the investment community, legal fees, fines and jail terms for individuals involved. Though it includes these consequences it is not limited. There are some examples which delineate the genuine dangers and consequences of corruption in the global aviation industry.

• In May 2014 in an aviation-related corruption case, it was reported by Thomson Reuters that former Omani commerce minister was jailed for corruption for three years by paying bribes $ 1,000,000 for the development of the Muscat International Airport first, to the then Undersecretary of the Ministry of Transport and Communications for common flight contracts.
• Subsequently, in July 2016 the previous New Jersey attorney general was found liable for constraining United Airlines to operate a direct flight from Newark to South Carolina for his own comfort. United flew because Samson needed to travel to his house there.
• Later, in another aviation industry corruption case in December 2016 four Texas-based specialists conceded paying off Mexican authorities which helped them win flying maintenance, repair and redesign contracts for their Brownsville-based organization.

Conclusion

The Central Bureau of Investigation is investigating AirAsia because:

• It is claimed by CBI that AirAsia has paid fixes to get rules changed to get a global permit and Foreign Investment Promotion Board (FIPB) clearances and that chief Tony Fernandes has illegally tried to obtain operating licences.
• AirAsia group CEO and others have been accused, for professedly attempting to control government strategies through corrupt means to get a global permit for its Indian venture.
• It is also claimed by CBI that the director of Singapore-based HNR Trading Pte Ltd, went about as lobbyist in getting the 5/20 rule relaxed which is a prerequisite by the Indian Aviation Ministry under which national transporters are required to have five years of operational experience and a base armada of 20 aeroplanes to fly abroad. It is claimed that AirAsia officials paid bribes to circumvent the rules.
• There was a violation of the then guidelines as AirAsia group of Malaysia was indirectly allowed to control over its India’s arm.

References

• https://www.thequint.com/news/business/cbi-airasia-case-what-we-know-what-we-dont-know
• https://www.firstpost.com/business/airasia-case-cbi-to-question-airlines-boss-tony-fernandes-next-week-as-agency-probes-alleged-violation-of-fdi-rules-4491629.html
• http://whitecollarpost.com/corruption-aviation-industry-please-say-isnt/
• https://www.airasia.com/au/en/about-us/airasia-mission-vision-values.page
• https://thenewsminute.com/article/airasia-ceo-fails-appear-cbi-fresh-summons-be-issued-soon-82625