Can Mallya be let gone by courts if he repays? Is that fair?

SYNOPSIS

This Article aims to provide an indepth, detail analysis of everything you need to understand regarding the first Fugitive Economic Offender of India, Mr. Vijay Mallya’s scenario that is pressing in the media and creating sensational news. In light of the same, this Article will discuss the situation that led to Mr. Vijay Mallya’s escape to the UK, the reasons for the same, the reasons for the Indian Government seeking his extradition from the UK as well as the Indian Scenario and the effect of Mr. Vijay Mallya’s pending loan on the Indian Government, the Banks as well as the Legislature.

INTRODUCTION

Mr. Vijay Mallya is the former owner of the well-known brands United Spirits, Kingfisher, Kingfisher Airlines as well as the ex-chairman of United Breweries and the ex-owner of the Indian Premier League Team - Royal Challenger’s Bangalore.  The UB group is a well-established and successful group in the Indian Scenario as was the Kingfisher Airlines until it was forced into bankruptcy in the year 2012. The ‘king of good times’, owned a company that could not pay its own employees’ salary for almost 15 months and this was just the tip of the iceberg for what was to come with respect to Mallya’s frauds.

In 2016, when almost seventeen banks approached the Hon’ble Supreme Court of India to stop the then Rajya Sabha Member, Mallya from leaving the country is when the iceberg melted, and the facts came into light. Mallya and his companies, owed all the Banks a combined amount of a whopping 9,000 corer in loans which Mallya alleged used to gain stake in almost 40 companies. Mallya had already also evaded to the UK by then.

Post this, Mallya no longer remained a member of Parliament in the Rajya Sabha and investigations were launched into the same by the Enforcement Directorate, the Central Bureau of Investigation, SEBI, the Debt Recovery tribunal as well as the Courts and Police of the country in order to get Mallya to Court. By this time, Mallya had already been declared as a wilful defaulter by the then Finance Minister, Mr.ArunJaitely as well. Many summons were made in the Supreme Court, the High Court of Karnataka under various cases ranging from wilful default, fraud, money laundering, cheating, conspiracy among others.

THE INDIAN BANKS

The Indian Banks, consisting of public sector banks and mainly the State Bank of India, when questioned and investigated revealed the following -

1. Providing loans based on the goodwill and face value of the companies and the name “Vijay Mallya”
2. The assets that were given as collateral all depleted in its sources and were unable to be sold by the banks due to their negative value (Non – Performing Assets or NPAs).
3. The Industrial Development Bank of India provided Mallya with a loan of 900 crore, ignoring all the warnings against the same within a month to an Airline company which was already in financial distress by then.
4. The Brand Value of the company at the time of providing the loan, was at 3,500 crore and when re-evaluated for paying off loans was at 6 crore and without any buyer for the same.

The IDBI Bank’s former chairman and various executives have been arrested in the wake of their participation in the fraud committed by Mallya with the Banks. It is due to the above stated reasons, and the default of the loans that Mallya was rebranded as the “poster boy” for defaulters.

THE INDIAN SCENARIO

The Indian Courts when were moved in 2016, the Indian Media and the people went hay-wire latching on to this case as it was one of the largest amount of money that had been opened up to the country as a scam. The Indian Politicians took this topic for a joyride as Mallya was the MP in Rajya Sabha of the opposition. With the outrageous tweets put out by the Mogul and the breaking debates held on the topic, every voting citizen of the country was seeking answers. The biggest reasons for the Indian Government moving for Mallya’s extradition includes the widespread attention that this scenario was able to gather.

Further, the Fugitive Economic Offenders Act was also enacted after the evasion of Mallya to the UK and he was named as the first offender under this same Act where an offender is defined under Section 2(f) as any person against whom a warrant for a scheduled offence has been filed and has left India or already being abroad refuses to return to India to face the prosecution with a case filed against him for an amount exceeding Rs. 1 crore. Since Mallya fit both the criterion he was named the FIRST offender under the Act.

EVASION TO THE UK

It was revealed in 2016, when the banks approached the Court that Mallya, the liquor tycoon had already left the country and had taken refugee in the United Kingdom, one of the many countries in which he possesses assets. However, the media and public outbreak caused by this scenario, the Indian government moved to extradited Mallya and make him pay for all his defaults. After a seemingly long trial where Mallya took defences such as “bad jails” in India (referring to the Arthur Road Jail in Mumbai), the UK Court ruled in favour of the Indian Government.

However, this battle is far from over since then Mallya moved the High Court against this order where he alleged that this is a witch hunt by the Indian Government and that he was put on trial by the media without any fairness and evidence. Since Mallya’s alliance was towards the Congress, and BJP was in power during this time, the same was also sited as a reason in his trial. However, the High Court also ruled in favour of the Indian Government.

Now, in 2020 Mr. Vijay Mallya in his last attempt after not replying to the various summons filed against him in various courts, moved the Supreme Court of the UK. On 14th May 2020, the UK Supreme Court in it’s Judgement stated that it is not for the extradition court to decide whether he is an offender or not, but merely whether there is a case that can be made based on the prima facie evidence. Since, the case made by the Government has the same, the appeal citing 6 grounds was denied and now during the trying time of Corona, Mr. Mallya has no options left.

IS IT FAIR

Coming to the topic of debate, whether he must be let free once he repays the amount. Firstly, in this respect it is to be understood that Mallya promises to pay the money and let the Government off his back, however, this money is merely the Principal amount he wishes to pay. The interest amount is where the banks make money and the amount that Mallya is liable to pay has accrued over the past 4 years from 9,000 crores to Rs. 14,000 crores. So, this is not a reasonable request to make.

Secondly, the Banks are not ready to let him off the hook by merely paying the principle amount and not facing the trial for all his crimes that he has committed under the Indian Law including but not limited to –

1. Cheating under Section 420 IPC
2. Money Laundering under the Prevention of Money Laundering Act of 2000
3. Criminal Conspiracy under Section 120B IPC
4. Section 13(1)(d) and 13(2) under the Prevention of Corruption Act
5. Economic Offender under the Fugitive Economic Offenders Act of 2018
6. Violating his duties as a Director under Section 166 of the Companies Act of 2013

In light of the above, any prudent man would seek that he is not made liable to pay for the loans and the legal expenses of the Banks but also be punished under the above-mentioned Sections as a white-collar offender.

Thirdly, the largest and oldest prison in Mumbai constructed a new hub that can meet International Norms on prisoner rights as this was cited as one of the reasons by Mallya not to be extradited. The cells in the new block have been provided with space for the prisoner to move, TV sets, fans among other amenities. It is to be noted that this refurbishment come from the tax-payers money. The UK Court has also provided for a 16 Lakh Luxury Lifestyle allowance on a weekly basis for Mallya which comes from his assets which have been seixed in the wake of this.

Lastly and most importantly, the economic and domino effect that the case of Mallya has on India and its citizens. A report by the IFC estimated that the debt gap in Indian businesses in 2.93 trillion. One such case has of default has a tremendous effect on the loan-providing capacity of the banks due to NPAs and piling of debts which in turn affects the lay-man who seeks a loan form such banks.

Additionally, the numerous lives of the employees and their families of the Kingfisher Airlines who have not been paid for years together now and the reduction in their tax paying ability as well as reduced purchasing power adversely affects the economy. The economy and the Indian suffer with –

1. Entrepreneurshaving liquidity issues due to lack of funds.
2. The string of suppliers, employees, creditors that have been left to dry by the company and Mallya and can hence no longer participate in the GDP of the country.
3. The reduced loan providing capacity of banks
4. The numerous other entrepreneurs who depend on the business of these firms that have now been ruined for instance, the entrepreneur providing for the paint of the Kingfisher Flights.
5. Finally, each citizen on an everyday basis who is part of the bank system in some way pays for the crimes of the Mogul.

Therefore, it will be unfair if the ‘king of good times’ is not punished and given appropriate deterrence other than repayment for all the ‘bad times’ the country, the business world and employees had to face.