The image of a Mumbai jail cell could be haunting embattled liquor baron Vijay Mallya. Should his battery of high-profile lawyers fail to do their job in the courtroom, he might very well end up there sooner or later post-extradition. A UK court will deliver its verdict on 10 December on the Indian government's request for Mallya's extradition to India. There is no other trigger one can think of for the liquor baron hitting Twitter this morning with a fresh plea to banks that he will "repay 100% of the Principal amount to them. Please take it." To be clear, this is not a new offer but something Mallya has been proposing since 2016 (his tweet says this).
I see the quick media narrative about my extradition decision. That is separate and will take its own legal course. The most important point is public money and I am offering to pay 100% back. I humbly request the Banks and Government to take it. If payback refused, WHY ?
— Vijay Mallya (@TheVijayMallya) December 5, 2018
There are two important things Mallya needs to remember. First, there is no logic in offering merely the principal amount to banks and claiming freedom from the debt because there is something called the time value of money. The value of the owed amount doesn’t remain the same as times goes by.
Mallya's original default to a bank consortium of about 17 lenders headed by State Bank of India was around Rs 6,000 crore. But adding the interest component, the outstanding figure could well be over Rs 10,000 crore now. A businessman will not find this math hard to understand. Thus the question: What is the logic of asking banks to take a huge hit on what's rightfully theirs and what is actually public money? The point here is, Mallya shouldn't consider his willingness to pay the '100% principal amount' as a generous offer. It is not. By this logic, an individual borrower who has defaulted and is absconding, say for a decade, can appear one morning and offer to repay just what he borrowed and not what he actually owes the bank. Will the bank agree to forfeit the interest amount?
Two, in his tweet Mallya has presented Kingfisher Airlines' collapse as a case of business failure. He cites factors such as high crude oil prices coupled with government policies as the reason why the airline shut down. But, the point to remember here is that the former Kingfisher Airlines' chief is being investigated by Indian sleuths not just for a loan default but serious charges of financial irregularities. These include alleged diversion of bank money (in other words public money) to group firms and charges of money laundering. Multiple courts have issued summons against Mallya asking him to appear in person, but the orders have been ignored so far.
Three, Mallya talks about making an offer to banks, but completely ignores the right of former Kingfisher Airlines' employees who lament about unpaid salaries even after years of the airline terminating its operations. The financial and mental stress of these employees, once associated with the most glamorous airline in India and its flamboyant promoter, can't be ignored. Mallya seems to forget this.
Four, Twitter is a good place for publicity but not appropriate to make bank loan settlement offers or even give reminders. It is not clear whether Mallya has approached banks recently again to make a repayment offer. Again, just imagine what would happen if a home or car loan defaulter takes to Twitter and starts negotiating his loan details with banks on the social media platform. Banking institutions can’t treat two categories of defaulters differently, can they?
Mallya's desperation is understandable. Of late he has faced setbacks in courtrooms. A new law in India makes life very difficult for economic offenders. Also, with the approaching 2019 national elections, life will be even tougher for high profile loan defaulters in exile since the Narendra Modi government would love to get back at least one big corporate loan defaulter and exhibit him in their political rallies.
Vijay Mallya knows that his options are limited now. If declared an economic offender, that tag will ostracise him—taking away all his civil rights to make a case legally and will give the power to the authorities to attach his assets and initiate proceedings.
Mallya left India in March 2016 just before a clutch of banks moved the Supreme Court to seek his detention. Since then, he has been fighting a bitter legal battle in London with Indian authorities and investigative agencies after his passport was revoked and multiple courts in India issued summons to him.
If Mallya is serious about loan repayment, he should immediately put an end to 'Twitter banking' and show the willingness to return to his homeland and face the law, not wait for courts to order his extradition. Nothing else will be indicative of a real change of mind.
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Updated Date: Dec 05, 2018 12:13:10 IST