Vijay Mallya left India on 2 March: Why is pro-poor RaGa mum? Why is govt hesitant?

Why the politicians are largely silent on the Kingfisher issue? Are they under some oath not to speak? The desperate, late-fought battle of a clutch of 17 banks against liquor-baron Vijay Mallya to get back their about Rs 9,000 crore loans (including the interest amount) lent to his now defunct airline, Kingfisher, raises many more questions.

Vijay Mallya

Vijay Mallya

The whole episode is filled with high drama. A new act is unveiled every passing day — the latest being lenders, under the State Bank of India (SBI), moving the Supreme Court to prevent the ‘King of Good Times’ from fleeing the country with his $75 million (Rs 500 crore around) parting gift from Diageo. But, the man has already left the country. On Wednesday, Attorney general Mukul Rohatgi, representing the consortium of banks, informed the SC that Mallya has left the country on 2 March citing the Central Bureau of Investigation, adding that Mallya is likely in London.

Here is the case in a nutshell: A Bangalore-Debt Recovery Tribunal on Monday offered a partial relief to SBI and other lenders by temporarily banning Mallya from withdrawing his severance pay from Digaeo and postponed the case for hearing for March 28. The Kingfisher loan to lenders, about Rs 7,000 crore originally, turned non-performing asset (NPA) in late 2011 or early 2012. Mallya has cleverly avoided repaying his loan all these years by dragging the banks to court rooms across the country. Until recently, banks too have failed to put up a tough battle against Mallya for unknown reasons. Mallya always had an edge in the battle.

Arguably, there has not been another case in the history of Indian banking in which the entire system has turned helpless in battle against one defaulter. Perhaps, this is the biggest example of the so-called crony promoters taking the banking system (in turn risking the public money) for a ride. Mallya has openly made a mockery of the banking system, the judiciary and the investigating agencies by flashing his money-power in birthday parties, F1 rallies and in purchasing luxurious villas all over the world, even when the Kingfisher employees still have salary dues and the shareholders of the airline have lost a fortune.

What is missing is the strong political will to take action on Mallya.

As Firstpost has argued several times in the past, taking down Mallya and confiscating his wealth to recover the dues are important not only in this specific case but also to set a strong example for the rest of the large defaulters who have looted the banking system.

Had it been a salaried individual, who defaulted on his home loan or personal loan, an army of bank officials would be at his doorstep on the 91st day to harass him and ‘name and shame’ the individual. But, Mallya has always been a God, mighty, beyond their reach.

At this stage, there are a few important questions that need to be asked:

One, why the Congress party, the principal opposition, is totally silent on Mallya even as 17 large banks are fighting for Rs 9,000 crore public money? Even Congress Vice President, Rahul Gandhi, known for his emotional outbursts on public issues and jibes on the ‘suit-boot-ki-Sarkar’, has been largely silent on this issue. Is it that he does not consider this serious enough to be followed up with the Modi government by the opposition in the House or is it that he simply doesn’t understand the problem? Or, is the reluctance of Gandhi under some pressure not to target Mallya?

Two, why the Narendra Modi government has been hesitant to take stern action on Mallya even when the government-run banks have clearly made a point that around Rs 9,000 crore of money is at grave danger. It is surprising that the government has delayed taking steps to facilitate banks’ loan recovery even at a stage when a host of lenders have moved to the apex court seeking to bar Mallya from leaving abroad and two banks have classified Mallya as a willful defaulter. If the finance ministry is indeed concerned with the fate of Rs 9,000 crore public money, why not confiscate his assets and recover the money? After all, Mallya still has over Rs 7,000 crore of wealth in his shareholdings in various companies and more in fixed assets in India and abroad.

Third, now that  Mallya has left the country, things have got more complicated for the banks. The judiciary will have to share a good part of the blame in the event of Mallya refusing to return to the country. As Firstpost noted in an earlier article, despite having all the evidence on the Kingfisher case, why the Bangalore DRT postponed the hearing of the case by another 21 days to March 28 is a surprising factor, giving room for Mallya to think of his next step. The DRT is meant to be a special court for swiftly dealing with resolution of cases of large defaults as the name suggests. But in this case, the tribunal hasn’t lived up to its name.

What everyone conveniently forgets is the fact that Kingfisher is a four-year-old NPA case for banks, not something developed in last month or so. There have been investigations on Mallya by various agencies including the CBI and the Enforcement Directorate. At least two banks have classified Mallya as wilful defaulter. In this context, further delay in this case is against the interest of minority shareholders of the company, who have already suffered a lot.

Four, why the bank officials who sanctioned loans to Kingfisher fully knowing the risks associated with the company are not brought under the law yet? There have been, arguably, serious lapses while following the due diligence process in the Kingfisher lending process. An Indian Express report quotes the CBI raising concerns over the high valuation of the Kingfisher Airlines brand by its lenders and why banks used it as collateral while extending loans to Kingfisher.

“Lending on the brand value of Kingfisher Airlines is a major concern. We have questioned the banks. It is basically an intangible asset. We are digging into the issue,” the report quoted CBI sources. In its 2012-13 annual report, Kingfisher Airlines had said that at its peak it was the largest airline in India, with a five-star rating from Skytrax. A brand valuation by consultancy firm Grant Thornton put its value at $550 million (Rs 3,000 crore) on resumption of operations. The airline’s brand had been registered separately from the Kingfisher beer trademark. Why there is no action yet on the bank officials who violated the rules?

The general argument when a politician is silent on crony promoters is the give-and-take relationship between the political parties and cronies. Questions will be raised on those lines if the political will is absent in such a crucial issue, where thousands of crores of public money is at stake, especially in a country, where the source of a significant part of political funding for most of the political outfits, remain a mystery. Remember, NPAs also increase the capital requirement of banks, in turn putting more pressure on the public exchequer.

As it appears now, banks battle against Mallya will be a much more difficult exercise if he has indeed left the country with an intention to avoid the law of the land.  If banks fail this battle,  there are many who will be held answerable.

Updated Date: Mar 10, 2016 07:53 AM

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