5 reasons why Vijay Mallya has managed to hoodwink Indian agencies

Indian investigating agencies have failed to build a watertight case against Mallya

The UK government's latest reply to the Indian government expressing its inability to deport Vijay Mallya, instead offering to help with the extradition process, has raised several questions. Till now, unlike in past cases, the Indian govt was seen to be proactive in ensuring Mallya is brought back to the country and forced to pay his dues of over Rs 9,000 cr that he owes to Indian banks. 

But this latest development shows that enough ground work was not done by the investigating agencies to build a watertight case against Mallya. 

The Indian government will now have to follow the grinding route of an extradition which will be challenged by Mallya’s high-profile lawyers in the UK court. Not many are hopeful that the government will manage to extradite Mallya anytime in the near future. 

The entire episode raises questions about the bumbling Indian legal system, the government and the seriousness of the banks in handling the issue. At every stage of the ‘fiasco’, glaring loopholes were left open for Mallya to exploit and build his legal defence. We take a look at five such ‘oversights’.

1) History of avoding the courts

Mallya has a history of avoiding the courts and at the same time government agencies have a habit of not following it up when it comes to prominent personalities. Back in 1999, the Enforcement Directorate (ED) had summoned Mallya four times in a foreign exchange violation case, where he had failed to join the investigation in pursuance to the summons. The now-defunct Foreign Exchange Regulation Act (FERA) case was registered by the ED against him and summons were issued under Section 40 of the FERA, directing him to appear before the agency where it was alleged that Mallya had violated the FERA regulation in connection to a transaction with Flavio Briatore of Benetton Formula Ltd based in London. 

Mallya was summoned four times by the ED. After he failed to appear, the agency then moved the court seeking to prosecute him for ignoring the summons under FERA. The Delhi court, 17 years later, will now begin the final arguments in the case. It is ironical that a case was in abeyance for a period of 17 years and only when other cases are being filed, have the agencies woken up to the fact that an existing case is pending and needs a closure. Why is there no accountability on how this case was allowed to be delayed for nearly 2 decades even as Mallya went from strength to strength ultimately going bust, resulting in losses for a consortium of banks. 

2) Banks agreed to convert Kingfisher’s debt to equity at a hefty premium

Banks have been playing the victim card that Mallya has run away with their money, but in FY 11, banks willingly agreed to convert Rs 1,400 crore of debt at a hefty premium of 62 per cent. No one is heard complaining about the Rs 1,400 crore which is now equal to zero and cannot be recovered. Had the amount remained as debt, banks would have still had some hope of recovering it.

Banks would argue that conversion of debt to equity is part of a process to help revive a corporate, but months before the restructuring, Kingfisher sacked nearly 100 pilots and it was apparent that the airline would not be in a position to service the inflated equity. Even after 81 hearings since 2013, banks have not been able to commence the recovery process. Few will have sympathies with such banks that are just beating around the bush.

3) ED ‘mulling’ seizing Mallya’s assets

Even after Mallya has left the country leaving authorities red faced, ED is still ‘mulling’ to seize assets. What would it take for them to get into action? Also if the agencies have valued Mallya’s assets at Rs 9,000 crore, which is roughly what Mallya owes the banks, then they should have been immediately dealt with. But seizing is one thing and recovering money by selling these ‘toxic’ assets is another thing. Service Tax Department delayed the auction of Mallya’s jet to recover Rs 535 crore as only one bidder showed interest. Other authorities are also having problem in disposing off the company’s assets, including its ‘highly’ valued brands.

4) Mallya just strolls out of the country

What has left the govt deeply embarrassed is Mallya strolling out of India right under their nose, that too a day after attending the Rajya Sabha session. The Central Bureau of Investigation (CBI) said that there has been a lapse and they are looking into it, but is there any use of this exercise now? How can a government be so callous to allow a person, who has defaulted on loans and owes the banking system around Rs 9,000 crore, to just disappear? The government should have been more alert especially since they know that once a person moves out of the country it is very difficult to bring him back.

5) UK refuses to deport Mallya

Since the time Mallya left the country we have been hearing from the government that they will leave no stone unturned to bring him back from UK. At the request of ED, government even revoked his passport so that he cannot move out of the country. Government then asked for Mallya’s deportation but the UK government rejected it citing an old law which says that if a person enters the country on a valid passport and the passport has been canceled after that, he cannot be deported. 

Surely, the Indian government and their advisors should have known this law existed given their numerous failed attempts in trying to getting other people deported or extradited. Such acts give the impression that the government is either ignorant or biding away time in the hope that the matter would die down and media attention will be shifted to some other issue. Apart from the US, few other countries have been successful in getting their citizens extradited from UK.

It is very clear that the shrewd businessman has stayed one step ahead of the Indian govt and is constantly mocking the intelligence agencies. The only hope now is the case filed in the Supreme Court and if the top court is able to put substantial pressure on the government to find ways to either get Mallya back or ensure the dues owed to Indian banks are settled.