From King of Good Times to Market Manipulator: Vijay Mallya Banned for 3 Years by SEBI

WHO IS VIJAY MALLAYA? 

Vijay Vittal Mallya is an infamous business figure who has been absconding from India due to his debts and various financial charges imposed against him. Being a former chairman of United Spirits and founder of Kingfisher Airlines, he was also a prominent political figure who served as a member of the Rajya Sabha for two terms. 
Kingfisher, which was a common household name back in the year 2008, gained massive popularity through its catchy jingles and unique advertisements. At the peak of his success, he also owned one of the prominent IPL teams of India called “The Royal Challengers Bangalore” in 2007.  
Everything was going well for this notorious billionaire until Kingfisher was declared bankrupt, drowning in loans and being incapacitated to pay employees serving his company. He fled away to his England estate in 2016 when he was called out by his creditors via judicial route in 2013. 
Additionally, he owes 9000+ crore debt to 17 Indian banks. In spite of numerous warrants, orders, and complaints registered and passed against him, his creditors are yet deprived of any further actions against him while the Government of India is still interacting with the English authorities to hand over this fugitive businessman to Indian authorities for further investigations.

WHY IS HE IN THE NEWS NOW?

Vijay Mallya, yet again for his fraudulent activities, became the news headlines.The Securities Exchange Board of India (SEBI) barred him from trading and associating with any listed company in India either by direct or indirect means. Involving in malicious schemes and practices, he was channelling funds through various overseas accounts. Matterhorn Ventures, a foreign-based institutional investor (FII), was used to veil his activities to trade shares of his former group of companies in India. These funds were found to be routed through an account named UBS AG, (Swiss Bank). 
He was masking his identity by working with other international entities, strategically webbing a complicated network with the intention of having his influence on the Indian Market. This was discovered when a suo moto investigation was pulled out in the year 2008.

LAWS ATTRACTED IN THIS CASE

Vijay Mallya who is termed as Noticee via order, was found violating various provisions of the SEBI Act, 1992.  The legal provisions involved are attached below. 
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 PFUTP Regulations. 
Regulation 3 

• Prohibits individuals from practicing fraudulent activities in the security market. 

Regulation 3(a)

• Forbidding a person or body from dealings in security which are a product of deception or manipulation

Regulation 3(b)

• Prohibiting usage of manipulative devices and deceptive schemes proposed in transactions regarding securities or proposed to be listed on stock exchange. 

Regulation 3(d) 

• No person shall engage in acts or practices constituting fraud or deceit in relation to security transactions.

Security Exchange Board Act, 1992

Section 12A(a)

• Power to issue directions and make inquiries to secure the interest of the investors or orderly development of the security market. 

Section 12 (c) 

• Empowered to issue directions for clearing persons, corporations or agencies, or to secure the proper management of bodies related to the stock exchange. 

THE ORDER BY SEBI 

• The order was passed on 26th July 2024 by the SEBI Chief General Manager, Dr. Anitha Anoop, who recognized Mallya’s fraudulent webbed network of trading in his own company by layering his identity as a foreign investor.
• Hence, the order bars him from buying, selling, or dealing with his securities directly or indirectly or forming an association with the market for the period of 3 years from the order issued against him.
• Mr. Mallya would be restrained from associating himself with any listed company or to-be-listed company either directly, indirectly, or through other means
• Furthermore, his accounts relating to mutual funds and other existing holding securities will be frozen until the restraining order collapses.
• The order, however, specifies that the transactions done with respect to the settlement of securities done in the cash segments are limited to pending or unsettled transactions. 

OTHER CRIMINAL CHARGED AGAINST HIM

1. Money laundering:- 
   The Enforcement Directorate, also running investigations against Vijay Mallya in a Money laundering case under various charges.
2. Willful defaulter:-

A Wilful defaulter is a person who on various pretexts, refuses to pay his dues to his creditors despite of having the capacity to do so. 
A wilful defaulter could be charged under 

• Section 403 and 415 of The Indian Penal Code, 1860 (Which is replaced by BNS,2023)
• Section 314 and Section 415 of the Bhartiya Nyay Sanhita, 2023

A proceedings can instituted against wilful defaulters as per

• Sarfaesi Act,2022
• Section 447 and Section 448 of The Companies Act,2013
• Banking Regulations Amendment Act, 2017
• The Fugitive Economic Offenders Act 2018
• Insolvency and Bankruptcy Code

Reflecting a cash crunch amid Kingfisher Airlines loans dues, he was traced buying properties worth Rs.330 Crores and more in Europe and England, through which he could easily repay his loans and debts which were taken up by him.

“A FUGITIVE ECONOMIC OFFENDER”

• Fugitive Economic Offender,  Section 2(f) The Fugitive Economic Offenders Act, 2018 
  The Special court in the Mumbai jurisdiction declared Mallya as “Fugitive” during its judicial proceedings in the year 2019. As per Section 2(f) of The Fugitive Economic Offenders Act, 2018 
  A Fugitive Economic Offender is a person against whom a warrant is issued for offences in any court within the Indian jurisdiction, who leaves the country or refuses to return to face criminal proceedings against him. This empowers the prosecuting authorities to confiscate the property of the offender.