In Vijay Mallya’s fairy tale, bewitched lenders are the actual and only victims

Vijay Mallya’s rise and fall ever since he became the chairman of UB Group in 1983, taking over the business empire from his father Vittal Mallya, and growing to become the head of a Rs 9,000 crore business empire to the point of his current exit does sound like a fairly tale. On Thursday, Mallya stepped down as the chairman of United Spirits—the company his family build over years. He also resigned from his post as a director of Royal Challengers Sports and Four Seasons Wines.

In Vijay Mallya’s fairy tale, bewitched lenders are the actual and only victims

Vijay Mallya. AFP

As part of a severance package, Mallya will get a $75 million payment from Diageo. According to reports, Mallya, who has turned 60, has decided to spend more time in England with his children. But in this whole story, one wonders what is the fate of a clutch of 17-lenders to whom Mallya (or his Kingfisher Airlines) owes over Rs 7,000 crore as loans and what will happen to their court cases if Mallya moves out to a different judicial jurisdiction in another country. Mallya is currently fighting his cases related to loan repayments with a host of banks in various Indian courts. Two prominent banks—Punjab National Bank (PNB )and State Bank of India (SBI) recently classified Mallya as a wilful defaulter or a borrower who wouldn’t pay back money to the bank even if he has the means to pay.

“We are taking action as per law to protect our interests,’ Arundhati Bhattacharya, chairman of SBI told Firstpost when asked where does banks stand in their battle with Mallya to recover the loan amount in the backdrop of the tycoon resigning from United Spirits and moving out of the country.

It was not so long ago that RBI governor Raghuram Rajan publicly criticized Mallya when he said loan defaulters shouldn’t flaunt their wealth in public as this can send a wrong signal. “If you flaunt your birthday bashes even while owing the system a lot of money, it does seem to suggest to the public that you don't care. I think that is the wrong message to send,” Rajan said on the sidelines of the World Economic Forum.

Mallya has cleverly used the legal system to his advantage to delay the loan recovery by banks. Before SBI finally tagged Mallya as a wilful defaulter in November 2015, the liquor baron had managed to force Kolkata-based United Bank of India to reverse its decision (to tag Mallya as wilful defaulter) getting a favourable court verdict on technical ground. The court ruled in favour of Mallya citing that instead of having three members, the grievance redressal committee of the bank had four members.

Mallya’s resignation from the USL, in fact, doesn’t make any material difference to banks since their chances of getting money back was anyway less on account of sharp deterioration of underlying assets of Kingfisher. Kingfisher shares, which were pledged to banks, have been reduced to an illiquid, penny stock now.

Mallya has the last laugh in this story
True, the liquor-baron had to eventually sell most of his family silver to pay the price to his life as the ‘King of Good Times’ . But Mallya still has his personal wealth across countries and has influential friends in power centers who will help him walk free where he wishes to go. The bewitched banks in this fairy tale, which are clueless on how to go about in recovering their money, are the ones who actually got fooled. They are the real and only victims in this story, not Mallya.

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Updated Date: Feb 26, 2016 15:36:29 IST