India: Debt-laden Lawmaker Faces Willful Defaulter Charge

BenarNews Staff
2016.03.09
New Delhi
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160309-IN-mallya-debt-620.jpg Vijay Mallya poses with models during the launch of the Kingfisher 2014 calendar in Mumbai, Dec. 21, 2013. On Wednesday, lawyers told India’s Supreme Court that he had fled the country, as banks try to recover more than $1 billion in unpaid loans.
AFP

India’s top court Wednesday gave a parliamentarian, whose defunct airline owes banks more than U.S. $1 billion (67.15 billion rupees) in unsettled loans, a two-week ultimatum to respond to a petition from a consortium of state-run lenders.

The Supreme Court served notice to Vijay Mallya, former chairman of Kingfisher Airlines (KFA), a day after 17 public sector banks appealed to the apex court to prevent the one-time billionaire from leaving India by freezing his passport. The country’s largest bank, the State Bank of India (SBI), leads the consortium.

But Attorney General Mukul Rohtagi, who is representing the banks, informed the court that Mallya, a member of the Indian parliament’s upper house, Rajya Sabha, had left the country on March 2 in a suspected bid to evade having to reimburse lenders.

“Today, I submit, he (Mallya) should appear before you. We want disclosure. We want to recover money, which is public money,” Rohtagi told justices Kurian Joseph and Rohinton Nariman.

“We want to sit across him and get back our money. We want to settle the loans,” Rohtagi said.

After Rohtagi informed the court that Mallya may have fled to Britain – where the flamboyant industrialist allegedly has assets valued at millions of dollars – the judges directed that the notice be sent to Mallya through the Indian High Commission in London and his parliamentary email account.

Mallya his till March 30, the scheduled date of the next hearing, to respond.

Trail of debt

Bengaluru-headquartered KFA, once one of India’s leading commercial aviation firms, closed in October 2012, leaving behind a trail of unpaid creditors, suppliers and employees.

As of January 2014, the airline owed banks nearly 70 billion rupees (U.S. $ 1.03 billion), which has grown to about 90 billion rupees ($1.36 billion), including interest and penalties, Rohtagi said, adding that Mallya had personally guaranteed the debt.

Mallya’s assets abroad are far in excess of the loans taken by him, Rohtagi said. “Only a fraction is in India … maybe one-fifth,” he added.

News portal Firstpost.com reported that Mallya has assets valued at more than $1 billion in India alone.

“Then how did you give these loans? Was there no secured assets on these loans,” Justice Kurian asked.

At the time of the loans, KFA was at its peak with assets worth several billion dollars, but then “it suddenly crashed,” Rohtagi replied.

“We had secured some assets for the loans advanced,” he said.

Money laundering

On Monday, the Enforcement Directorate (ED), India’s economic intelligence agency, booked Mallya on charges of money laundering.

KFA allegedly diverted 40 billion rupees of the 70 billion rupees taken in loans to off-shore tax havens such as Mauritius and the Cayman Islands, according to the charges.

The directorate brought the charges against Mallya hours after a Debt Recovery Tribunal in Bengaluru blocked a $75 million settlement, which he was due to receive from British spirits giant Diageo PLC for stepping down as chairman of United Breweries Group, KFA’s parent company.

Mallya’s reported exit from India last week, just a day before banks moved to declare him a willful defaulter, has raised speculation about the magnate.

“I am certain some people who benefit from Mallya tipped him off, so he can make an escape before the law catches up with him,” a former KFA employee who requested anonymity, told BenarNews.

He was among dozens of former employees who took part in a protest outside the firm’s locked office in Mumbai on Wednesday, demanding payment of almost two years’ worth of unpaid wages.

“We weren’t given any notice before the airline closed operations. One fine day, we went to work and found that the offices were locked up,” the former employee said.

‘Long rope to the rich’

The case has dominated local headlines and angered many Indians.

Biswajeet Samal, a farmer from north India’s Rajasthan state, told BenarNews: “It is shocking that banks hound the poor who are unable to pay back meager loans, but give such a long rope to the rich and mighty who are willful defaulters.”

Samal’s brother Girish committed suicide in January, claiming harassment by debt recovery agents after he skipped some monthly installments on an agricultural loan of 90,000 rupees (U.S. $1,341).

While calls to the United Breweries Group went unanswered, Mallya issued a statement Sunday from an undisclosed location denying that he was absconding.

“I have neither the intention nor any reason to abscond. I have been a non-resident [Indian] for almost 28 years and the Reserve Bank of India has acknowledged this in writing,” Mallya said, adding that he had announced more than a month ago his decision to move to England to be closer to his family.

“I have been making efforts to reach a one-time settlement with the banks, and to that end I have had three meetings and follow-up calls in the recent past and my efforts will continue – this settlement would be based on additional payments to the banks.”

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