It’s official now. Vijay Mallya is India’s first official fugitive economic offender under the recently enacted Act.
This immediately does three things.
First, the tag empowers banks and investigators to lay their hands on each and every asset that is in the name of Mallya or even his benamis, both in India and abroad. This wouldn’t be as easy as it appears though since Mallya may still challenge the order in a higher court of law.
Second, the tag of an economic offender ostracises Mallya not only from the financial system but even makes access difficult for the baron from otherwise available civil rights to fight his cases. Third, this is a big setback for him in UK courts, where Mallya is currently fighting an extradition case with the Indian government.
Mallya’s assets, at least a good part of them, are in the names of his family members. For instance, according to The Times of India report, Mally’s estate and London house belong to his children and mother respectively. Mallya himself had said once that he didn’t own much in the UK apart from a ‘few cars and items of jewellery’.
Such clever handling of high-value assets by the tycoon had put bankers in a spot in their bid to sell and recover assets to make up for the money Mallya owes to them. That situation will change with the latest development. Mallya’s failed airline, Kingfisher, owes around Rs 10,000 crore (this is an estimated figure since interest amount keeps adding to the principal) to bankers and till date, banks haven’t managed to recover any meaningful amount yet.
The loans had become NPA on banks’ books in 2012, the same year Kingfisher was grounded. Mallya left India in March 2016 just before a clutch of banks moved to the Supreme Court to seek his detention after close to Rs 9,000 crore loans were given to erstwhile Kingfisher Airlines.
Since then, Mallya has been fighting a bitter legal battle with Indian authorities and investigative agencies after his passport was revoked and multiple courts in India issued summons to him.
Political gain for Narendra Modi
That India got its first fugitive economic offender in Mallya just a few months prior to the Parliament elections is a big boost to the Narendra Modi government, particularly given that there is no certainty yet on the final status of Mallya’s extradition process. This gives enough ammunition for BJP and Modi to claim in the election rallies that there is tangible progress in government’s much-hyped fight against absconding, large corporate defaulters.
The ruling of PMLA court has had an immediate impact with Enforcement Directorate initiating the recovery process.
Also, Mallya bagging the honour of first ever economic offender tag is a strong message to other high profile fraudsters who have fled the country after defrauding banks. It sends a message to them that the country has now a potent weapon to finish the battle in style.
The economic offender tag is a deadlier weapon than the wilful defaulter tag. The latter only barred the offender from the financial system but the latest weapon even strips them of their civil rights. Once a person is declared an economic offender, his property will be confiscated, managed and disposed of. Any offences involving funds over Rs 100 crore will be dealt with under this law.
Investigative agencies can even seize properties that are not only in the name of the offender but also the ones that are benami. But remember, Mallya is only one case and only a small fish among large loan defaulters and fraudsters thriving on the corporate-banker nexus.
There are bigger fishes out in the pond. For instance, one can argue that compared with what the uncle-nephew duo of Mehul Choksi and Nirav Modi did to the Punjab National Bank (PNB), Mallya’s charges would be less serious in nature.
What put the spotlight on Mallya was the way he approached the loan settlement issue with banks. So far, the embattled liquor king managed to put up a defiant face, refusing to return and openly challenging Indian authorities.
“By taking my passport or arresting me, they are not getting any money,” he said in an interview to London-based Financial Times. Such defiance turn him into media’s darling and a political headache to the ruling government, forcing action. Mallya has undoubtedly paid the price for his defiance and confrontational approach against the banks and the investigators.
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Updated Date: Jan 07, 2019 13:12:52 IST