CBI to seek diplomatic help in Vijay Mallya case, to send letter rogatory to five nations

After revoking the passport of Vijay Mallya, the government is all set to take the next step to intensify the investigation against the embattled liquor baron, facing charges of Rs 9,000 crore loan default and alleged financial irregularities. The government will soon send letter rogatory to five nations to seek their co-operation in the probe.

The Central Bureau of Investigation (CBI) has been asked to send formal requests through courts and diplomatic channels to UK (including Ireland), France, Mauritius, USA and Hong Kong, highly placed sources in CBI and government told Firstpost. Though the CBI was assigned the task of requesting through legal process to freeze accounts of Mallya, they developed cold feet as evidence collected thus far indicate not criminality in this case, the sources said.

According to sources in CBI quoted above, the government’s knee-jerk reactions in the Mallya episode seemed like pursuing a wild-goose chase that may end up investigators in a legal cul de sac. Officials involved with the case admit that the revocation of passport and subsequent letter rogatory would only raise the level of the din without any tangible result.

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Perhaps the ground for this wild-goose chase was laid on 1 March when director of the CBI, Anil Sinha, launched an attack on PSU banks in a conference in Mumbai for letting Mallya off the hook in spite of his defaults on loans, top bankers and CBI officials were rather bemused.

A file image of liquor baron Vijay Mallya. AFP

"Now, this case is going to drive us crazy” quipped an officer who was closely associated with the investigation. Since 29 July 2015 when the CBI registered a suo motu case against Mallya on “suspected fraud”, a group of top accountants assisted the CBI to go through nearly 8 lakh accounting entries to separate truth from gossips.

These officers were quite sure that the CBI chief’s indiscretion would cost them dearly. Lo and behold, Mallya who happened to be in the country decided to take the flight out of the country within 12 hours of Sinha's comments and rest is history. In one year investigation, the CBI has so far failed to discover even a single entry that sustains the charge of fund diversion. A statement of account prepared by the agency on the other hand reveals that Mallya had funneled Rs 3251 crore from 62 different companies through his own efforts.

CBI, ED contradictory stance weakens case against Mallya

The fact that CBI hasn’t so far found any strong evidences of fund diversion by Vijay Mallya, required to frame charges against the liquor-baron in the court of law, is in stark contraction to the findings of the findings of the Enforcement Directorate (ED), which is also investigating the case.

In total, Mallya’s airline Kingfisher, grounded in 2012, owes Rs 9,000 crore (as on date including interest accrued) to 17-banks including State Bank of India, which has an exposure of around Rs 1,600 crore. Banks are now fighting the case in Supreme Court. Besides wilful default, Mallya is also facing charges of financial irregularities and tax evasion.

“So far, CBI hasn’t found any single evidence of fund diversion,” sources said, adding the agency is examining some eight lakh financial transactions involving Vijay Mallya, Kingfisher, United Breweries and other related parties dating back to 2004. Due to the enormous size of the task, the agency has requested government more time to scrutinize the whole chain of transactions.

The CBI’s stance is crucial in this case. Lack of evidence is the primary reason why the CBI is largely silent on the Vijay Mallya case, even when the ED has initiated tough measures against Mallya including prompting the Ministry of External Affairs (MEA) to suspend Mallya’s passport, seeking his deportation from UK, where the industrialist is currently believed to be after he left the country on 2 March stirring up a hornet’s nest among banks and investigators.

The ED had found prima facie evidence of Mallya diverting funds taken as loans from banks abroad for purchase of foreign assets and other unstated end-use. The clear contradiction with the CBI stance, which has found no incriminating evidence against Mallya in this case so far, could weaken the case of investigators in the court of law to initiate action against Mallya and commence the recovery process. Earlier, CBI had changed its nature of looks out notice from ‘detention’ to merely ‘monitoring his travel plans’.

According to the CBI sources quoted above, ED is working more on assumptions rather than solid evidences in the Kingfisher case. This will weaken a foolproof case against Mallya when it reaches the court, the official said. Also, the ED might be under pressure by the government and due to the media attention to make swift progress in this case.

On Thursday, in his affidavit to Supreme Court, Mallya criticized the unseemly haste by the government in suspending his passport that created impediments in the ‘whole process and endeavor.” Mallya said he is ready to pay a token amount of Rs1,591 crore to prove his bonafides. The industrialist, however, didn’t disclose his current location or his plans to return to the country and face the law of the land, though the court had earlier asked Mallya when he planned to return to the country.

The CBI also observes that the Mallya, once known as the King of Good Times and the poster boy of India’s private civil aviation sector, has so far complied to the legal proceedings in Indian courts representing himself through lawyers and explaining his position. This makes difficult for the government to corner him alleging noncooperation to the law of the land. In short the CBI doesn’t feel it has a strong case, at least so far, against Mallya in the Kingfisher loan default case.

Air India Vs Kingfisher

As far as loan default is concerned, Mallya has vehemently denied that he is a wilful defaulter—a tag imposed on him by two leading banks—SBI and Punjab National Bank.

“The Kingfisher Airlines was a genuine commercial/business failure and it is vehemently denied that any loan advanced by any of the petitioner banks to the Airlines has been at all misused or otherwise Respondent No. 3 (Mallya) has amassed assets/properties in the names of his family members or relatives or friends with intention to defeat the purpose of recovery of alleged dues,” the affidavit said.

The Kingfisher loan turned NPA in 2012. Two banks — SBI and PNB have already tagged Mallya as a wilful defaulter. Kingfisher, once the second-largest airline in India, never made profit in its eight-year life. The company’s losses had widened to Rs 2,142 crore for its fiscal fourth quarter ending in March 2013, compared with a net loss of Rs 1,150 crores a year earlier. The accumulated losses as of March 2013 stood at a whopping Rs 16,023 crore.

One of the major reasons Mallya is personally targeted in this case, eventhough the default is by Kingfisher airlines, is the personal guarantee he submitted to banks to avail a restructuring facility and fresh funding when the airline’s balance sheet was bleeding. To be sure, the entire aviation industry has been facing heavy losses with state-run Air India itself has suffered massive losses to the tune of Rs30,000 crores. But, compared with the Vijay Mallya case, there has been hardly any uproar against the Air India losses, where taxpayer money has ultimately lost, the CBI has noted.