Vijay Mallya saga: Banks are the hunted; the baron has already won this battle

The Kingfisher-Vijay Mallya case is slowly proving to be a dangerous trendsetter for Indian banks and investigative agencies, not just because of the inability of the banks to recover the Rs 9,000-crore loan from Mallya, but also because of the message it sends to other bank loan defaulters and habitual law-breakers. The message is that if you are a very rich person with sufficient hold in power centres, you can cock-a-snook at the system after defaulting a few thousands of crores to a host of banks. Worse, you can mock them from a safe distance with counter-arguments about why you are not paying your dues in full and also why you are not facing the law of the land. In this process, the banks become the bakras (or sacrificial lambs) and investigators turn out to be mere onlookers. That is precisely what billionaire Vijay Mallya is doing now. In an interview given to Autosport on Wednesday, Mallya spoke about a witch-hunt being waged against him in India. “So sadly in India, these investigative agencies are political tools that do not hesitate to go on a wild-goose chase, and in the process it is nothing but persecution. There is no other way I can describe what is happening other than a witch hunt. I just have to ride out the storm," said Mallya to the motor racing magazine. [caption id=“attachment_2885046” align=“alignleft” width=“380”]  Vijay Mallya. AFP[/caption] The liquor-baron still offers complete willingness to fully co-operate with any investigation. “They [the Indian authorities] have had access to many executives of Kingfisher Airlines, and they have had access to thousands of documents,” said Mallya. “If the missing link is only to interview me, come to London and interview me, get on the radio conference and interview me, send me an email with questions and I will reply. I have nothing to hide.” He continues, “it seems a bit contradictory and disconcerting, that just because I’m not physically present in India, that they should issue an arrest warrant and cancel my passport. What confidence does that give me about their real intentions?" Here, Mallya is smartly playing the psychological game to sway the public opinion in his favour, a game to show how he is being unfairly treated in the entire Kingfisher loan default episode. But, is it really the case? Take a closer look at the Kingfisher case. The Airlines stopped flying in October, 2012. The loans to 17 banks (about Rs 7,000 crore then) became Non-performing Assets (NPAs) on the books of banks in the same year. There were no serious efforts to repay the money (at least if one goes by the banks involved in the lending process) till late last year when the banks were pulled by the Reserve Bank of India (RBI) to dig out the dirt from under their carpets. Let’s be clear on one point. Till the time public pressure mounted on the case, neither the banks nor Mallya seemed to have any major problems. Everyone was in the bar and all were drinking with much bonhomie. So, neither Mallya nor the lenders can claim the highest standards of honesty or responsibility in this case. Banks were not even willing to approach the investigators till recently against Mallya. And finally, when all hell broke loose with the RBI opening the Pandora’s box, banks rushed to courts to seek detention of Mallya and cried foul in public. Just a week before banks could move the Supreme Court seeking Mallya’s detention, the liquor king boarded a flight to UK. If no one had tipped off Mallya about what was in store for him in the approaching days, he would still be here in the country. Possibly, all those stories of a ‘sixth sense’ and ‘guardian angels’ are indeed true and some power beyond the human senses worked in the favour of the beleaguered entrepreneur. But, plain logic would also say that the possibility of some mortals tipping off Mallya cannot be ruled out. As Mallya’s lawyers have highlighted in the past, he isn’t the one who owes the maximum dues to Indian banks. There are cases of bigger NPAs. But, Mallya’s case assumed significance since many other defaulters would well have been studying this case closely to decide their next course of action. That the Mallya case has the potential of sending a wrong signal to the defaulter brethren is something Firstpost had pointed out long back. There were several mistakes banks and investigators committed in the Mallya case. First and foremost, they acted very late in this case. Banks should have recognised the problem early and alerted investigators of Mallya’s wrongdoings (as evident from a few banks’ tagging Mallya as a wilful defaulter), which they failed to do at the right time. As for investigators, they failed to foresee the chance of Mallya leaving their jurisdiction (or simply ignored the warning signals?). The third mistake was cancelling Mallya’s passport prematurely. This happened when cases were going on in various courts against Mallya and courts have been issuing summons to him. By cancelling Mallya’s passport too early, the government gave him a good reason not to come back and face trial. The decision to request Mallya’s deportation from the UK was a wrong step since there were was no strong case against him in the homeland to warrant such an action, so is the request to the Interpol for a red corner notice and seeking extradition. It was an all-noise and no-proof case . In short, this is a classic case of both investigators and lenders acting late and bungling the case. Banks also rejected Mallya’s offers to partly pay the loan or go for a one-time settlement (OTS) for the right reasons. Mallya’s offer that sleuths can come and question him in UK is akin to mocking the system since courts have been issuing non-bailable warrants against Mallya or asking him to appear in person (read here and here). Mallya is personally responsible for the Kingfisher loan default (over Rs 9,000 crore to date adding the accrued interest amount) since he has given a personal guarantee to the loan. But, as it appears today, the Kingfisher-Vijay Mallya case has set a bad, dangerous precedent in the Indian banking sector. It puts at risk the very validity of a personal guarantee issue by promoters to banks against large corporate loans that are ultimately public money.