India writes to UK to deport Vijay Mallya; 6 crucial facts in the case

The Vijay Mallya-saga has evidently emerged beyond the definition of a typical banker–borrower dispute. With the Narendra Modi-government revoking the passport of the liquor-baron and the Supreme Court stepping up pressure on Mallya, the whole episode has gained more political attention.

 Vijay Mallya. AFP

Vijay Mallya. AFP

For Indian banks too, this case is critical in the backdrop of the big bad loan problem the industry faces.

At least 11 per cent of the total loans given by lenders are currently in the stressed category (meaning they have gone bad or have been recast) and, more importantly, majority of these bad loans have emerged from the loans given to corporations. To be sure, the Rs 9,000 crore Kingfisher loan is just one of the large-ticket bad loan cases.

There are several other accounts where banks have been struggling for years to recover money and the chances of recovery is almost nil. Bringing Mallya before the law and making him pay back the last penny to banks will send a strong message to other defaulters that there isn’t any free-lunch with public money anymore. That’s precisely the reason why there is tremendous media attention on this case.

On Thursday, the Ministry of External Affairs (MEA) said it has already written to the UK government for the deportation of Vijay Mallya.  But, the challenge before the government, as Firstpost has highlighted in this article , is to make a watertight case against Mallya to nail him in the court of law, even if the government manages to get Mallya deported from UK. Mallya left the country on March 2, shortly before non-bailable arrest warrants have been issued against him by separate courts.  If one takes a closer look at the Mallya case, there are several lesser known facts:

One, Vijay Mallya is shown to have funneled around Rs 3,251.85 crores from 2005-2014 to the Kigfisher Airlines Ltd through 62-odd companies. Though some of these companies work for the infrastructure development, much of the fund came from Mallya’s own companies. How did Mallya acquire so many companies across the country? The CBI investigation came across an interesting story. During Morarji Deasai’s time when there was a total prohibition, Vajay Mallya’s father,Vittal Mallya, acquired 50-odd companies dealing with beverages across the country. That was the time when manufacturers of liquor and beverages were involved in distress selling of their assets. Other’s losses proved to be Vittal Mallya’s gains in subsequent year when the prohibition was lifted. In less than four decades of his opulence accrued by policies of a prime minister from Gujarat, Mallya seemed to have frittered away his wealth and goodwill at a time when India is once again ruled by a man from Gujarat. The clock seems to have turned full circle.

Two, On July 29, 2015 when the CBI filed a case against Mallya of “suspected fraud”, sleuths were confident of getting support from top bankers. But soon they realized that they were hitting against a wall. Bankers consistently refused to carry out forensic audit of Mallya’s account which is commissioned to an outside agency. Of the 8 lakh accounting entries sifted through by sleuths, they are still tentative to arrive at a conclusion. As far the bankers are concerned, they still maintain that Mallya’s episode is bonafide case of bad decisions by bankers. The government however does not agree with this view and unleashed the Enforcement Directorate (ED) to find out diversion of fund to foreign land.

Three, In one of the helicopter purchase from the United States, the CBI requested cooperation of the federal bureau of investigation (FBI) to trace the trail of money. The FBI conducted its own investigation and gave a clean chit to Mallya. At the end of it, the agency could not find anything dubious in the deal.

Four, is the enforcement directorate’s (ED) argument that it has found a huge sum of money was salted away to abroad from the Rs 900 crore IDBI loan, strong enough to stand in the court of law? There have been several cases in which the ED makes tall claims that fall flat in the court of law. This is the precise reason why the success rate of the ED is very low. What gives strength to such belief is the fact that the ED is at present headed by an IPS officer Karnail Singh on temporary basis. This is the first time that the ED has a police officer as its head.

Five, Anil Sinha, director of the CBI, was keen to freeze Mallya’s foreign accounts. During the proceedings, the CBI is learnt to have been directed by the court not to initiate any such procedure unless criminality in the case is proven through evidence. This is the precise reason why the CBI has decided to go ahead with the plan to send letter rogatory (formal request letters) to UK,Ireland, France, US and Hong Kong in order to seek cooperation in the ongoing investigation. Till then, the CBI still calls it a “suspected fraud”. As of now, the sifting through accounting entries has not revealed any diversion of funds to foreign countries.

Six, Till March 2, 2016 when Mallya took flight abroad, the CBI had been deliberately keeping the case at a very low profile. Mallya was returning to India quite frequently and appearing before the agency to assist in the investigation. The case is learnt to have become high-profile when a top official of the PMO started getting routine briefings from chiefs of the CBI and ED regularly and gave directions to launch a vigorous campaign. As of now, top sleuths in the agency feel that the entire case may recoil on the government in absence of a credible evidence to arraign Mallya in the bank fraud. Obviously the agencies seem to be working more for perception management than investigating the truth.

The logical questions are these: Did the government act in haste by revoking Mallya’s passport even before gathering foolproof evidence in this case? Does the ED have strong evidences against Mallya that would stand in the court of law?

One needs to wait and watch how the case evolves from here.

(Updating with latest developments)

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Updated Date: Apr 29, 2016 08:51:51 IST

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