(This article has been republished with latest updates.)
The Kingfisher-Vijay Mallya saga has taken a fresh turn with the apex court asking the 17 banks to respond to a plea made by Mallya seeking the recall of the notice of contempt for the alleged non-disclosure of assets.
Banks had on 25 July told the court that Mallya has not disclosed his full assets including $45 million received by him from Diageo as part of his sweetheart deal. The banks today again told the court that the liquor baron's non-disclosure was deliberate. However, it is not yet clear whether banks will manage to finally convince the apex court that Mallya had indeed furnished inaccurate details. If they do, the beer boss can get into deeper troubles.
But the point is no matter how the case evolves in the apex court, till the time Mallya refuses to return from UK, chances for any action against him appear less. Mallya is likely to have the last laugh in this battle.
It has been six months after Mallya, whose grounded Kingfisher Airline owes Rs 9,000 crore to 17 banks, left the country to the UK, the case hasn’t made any serious progress yet. This is despite several attempts by the bank consortium, the government and investigative agencies to nail Mallya to get him to repay the money and courts issuing warnings against Mallya. The case is pretty much at the point where it all started in 2012 when banks classified Kingfisher loan as a non-performing asset (NPA) and cried foul on Mallya’s financial conduct. Mallya has so far denied any wrongdoing.
On Thursday, banks yet again failed to find any takers for an auction that put Kingfisher brand logo (valued Rs 4,000 crore by consultancy Grant Thornton once), and its once-famous tag-line 'Fly the Good Times' on the block besides some immovable assets of the grounded bird. The auction itself seemed like a desperate attempt with banks putting even some of the movable assets worth a mere Rs 13.70 lakh lying at the Kingfisher House up for auction including eight cars — Toyota Innova and Corolla, and Honda City and Civic among others, the reserve price of each car ranging from Rs 90,000 to Rs 2.50 lakh.
Remember, this is the second failed attempt to auction Kingfisher assets by banks. Early this month, banks had failed to get any bidders for the 17,000 square feet Kingfisher House in Mumbai. The reason for the failure isn’t hard to imagine—no one wants to try their luck in a case that is in a major mess and also considering the erosion in their value, leaving banks helpless in recovery.
What is the progress made on the investigation-front? The attempts of the Narendra Modi government to deport Mallya from the UK and later to extradite him failed miserably since there wasn’t a strong case against the billionaire.
The cancellation of Mallya’s passport was done a bit too early giving him an excuse not to come back. As a last ditch effort the Narendra Modi government is now readying to invoke a 21-year-old bilateral treaty with the United Kingdom to get him back. That’s kind of unheard in cases involving well known businessmen in India at least in recent history. Under the 1995 treaty-- Mutual Legal Assistance Treaty (MLAT)-- countries can seek "transfer of persons, including persons in custody, for the purpose of assisting in investigations or giving evidence in proceedings".
Will the government make any major headway in getting Mallya back after invoking MLAT? One can hope, but it is unlikely. Sources in the banking sector said it is difficult to convince the UK government about the criminal offence against Mallya sufficient enough to invoke MLAT. The simple reason is that a section of banks haven't so far found any evidence of financial misappropriation or diversion by Mallya. Is there any likelihood for banks to get their dues now?
Chances for that appear very less too. A possibility for that arises only if the investigative agencies make a waterproof case to nab and bring him back to home soil. Early this month the CBI filed a fresh FIR in the case and two days ago the Enforcement Directorate (ED) filed a fresh case against Mallya. According to the banks, Mallya’s total dues to banks are over Rs 9,000 crore while Mallya has been claiming that the figure isn’t correct and he owes much lesser (around Rs 6,000 crore) to lenders post some repayments. A few months back, banks had rejected Mallya’s offer to make part payment of the loan saying they aren’t convinced about the offer.
The less discussed problem here is that there is an interest amount getting accrued on the defaulted amount, which makes the amount even bigger. On the other hand, the value of the underlying assets Kingfisher has pledged to banks has deteriorated, making recovery even more difficult for banks. The fact that even after tagging Mallya as wilful defaulter (a promote who wouldn’t pay back to banks even if he has the capacity), banks have miserably failed to make any progress on recovery, which raises questions on the efficacy of the much-hyped ‘wilful defaulter tag’ in corporate loan recovery. Remember, Mallya isn't the only one with that tag in India.
There are several large corporate default cases banks are battling with. The Kingfisher case has set a bad example for those borrowers. As it appears now, with almost half a year since Mallya left the country and banks in utter helplessness in making any meaningful recovery, the question arises: Has the government admitted a quiet defeat in the Mallya case?