The man who once proclaimed himself to be the king of good times seems to have left the country in search of achhe din.
Industrialist Vijay Mallya left the country on March 2, the day public sector banks, to whom he owed an estimated Rs 9,091 crore in loans, moved the Debt Recovery Tribunal against him.
This was revealed by Attorney-General Mukul Rohatgi to a Supreme Court Bench of Justices Kurian Joseph and Rohinton Nariman on Wednesday.
Rohtagi was appearing on behalf of the banks who moved the apex court on Tuesday, March 8, to restrain Mallya from leaving India and seize his passport.
The banks also sought the issue of an arrest warrant against Mallya and a security deposit to ensure his presence at the debt recovery tribunal proceedings in Bengaluru.
When asked about Mallya's whereabouts, Rohtagi said that the Central Bureau of Information informed him that the Rajya Sabha Member of Parliament had left Indian shores a full six days before the banks approached the apex court.
But how did a business tycoon who seemed to be successful at one point end up being a “wilful defaulter” on the run?
Mallya’s story was never of rags to riches – and it’s unlikely to turn into one of riches to rags.
The flamboyant billionaire inherited UB Spirits from his father and turned it around into India’s biggest spirits maker.
The company, known for Kingfisher beer, among the highest selling brands across the world, is, however, no longer his – and his fortunes are all but gone.
He was hardly as successful in any of his other umpteen businesses, including a full service airline that’s now been grounded for four years and has dues of more than Rs 9,000 crore to pay to various banks.
Kingfisher Airlines was grounded in 2012 after failure to pay salaries to employees and a burgeoning debt burden which stopped the beleaguered airline to continue operating. The airline is now also being investigated for suspected diversion of funds and financial irregularities.
Mallya faces an enquiry for money laundering in a case registered by the Enforcement Directorate on the basis of a First Information Report filed by the CBI in relation to the Kingfisher Airline’s loans, which were allegedly granted in violation of norms pertaining to credit limits.
Once known for his steamy calendar shoots, Mallya admitted on Sunday that he had become the “poster boy” of bank defaults for his failure to pay his dues on the same loan.
In a separate development, the Debt Recovery Tribunal on Monday passed an order barring Mallya from accessing Rs 515 crore severance package that he received from the multinational spirits company Diageo in return for selling his UB Spirits.
How are Indian banks caught in this mess? Why didn’t they exercise restraint in lending him such a big amount?
The nation’s biggest public sector bank, the State Bank of India, is the leader of the consortium of 17 banks to whom Mallya owes more than Rs 9,000 crore.
Justice Kurian Joseph asked the most obvious question on Wednesday: "Was there no secured assets on these loans?”
Rohatgi replied that when the loans were granted, Kingfisher Airlines was a brand at its peak, with assets worth some thousand crores, and then “it crashed”.
“We had some assets [as security] for the loans advanced,” he said.
Rohatgi said the proceedings have been pending since 2013. There have been at least 500 hearings in the case before tribunals in Goa and Bengaluru.
In 2010, Mallya surrendered goodwill and trademarks of the Kingfisher brand to the bank as security in the event of non-payment of dues. At the time, the brand value was about Rs 3,500 crore which has now reportedly come down to Rs 6 crore and banks are struggling to find even a single buyer for trademark.
Mallya might be the poster boy of bank defaults now but he’s not the only one. Loans worth lakhs of crore rupees provided by Indian public sector banks are now classified as non-performing assets or NPAs and nobody knows for sure how much money will be recovered.
According to CBI, Mallya managed to get a Rs 900-crore loan from state-run bank Industrial Development Bank of India, which ignored warnings from some of its officers to hastily and unusually clear the massive amount in just a month in 2009. Kingfisher Airlines was already in acute financial distress by then.
What is Mallya’s response to all this?
Whataboutery and denial.
On Sunday, Mallya wrote an open letter defending himself.
"All enquiries conducted have failed to find evidence of misappropriation of funds by Kingfisher Airlines or myself," Mallya said. “Despite pledging blue chip securities and depositing significant amounts in court, a successful disinformation campaign has ensured my becoming the poster boy of all bank NPAs.”
Mallya claimed that he was willing to cooperate in the probe in his financials even as he worked out a one-time deal with the banks.
“Personally, I am not a borrower or a judgement defaulter,” Mallya said. He added that SBI has been fully aware of Kingfisher’s financial position for the last four years, indicating that the bank could not pretend to have been caught unawares now that the loans are proving to be irrecoverable.
Besides, he added that he was not the only one who owed money to banks.
“In fact, banks have NPAs of Rs 11 trillion and have borrowers who owe much more than the amount allegedly owed by Kingfisher Airlines to the banks – a fact never alluded to or widely reported by the media as in my case,” Mallya wrote.
He added: “None of these large borrowers (whose debt is significantly more than the KFA debt) have been declared wilful defaulters, but unfortunately, UB Holdings and I have been declared wilful defaulters by certain banks on technical grounds. I have legally challenged these declarations.”
Does this all mean that Mallya is no longer the prodigal billionaire that he once was?
Unlikely. Mallya has been more in the news for his lavish lifestyle than his business acumen and that’s something which almost everyone is expecting to continue – unless he ends up in jail. There’s an unmistakable pattern of ostentatious spending and Mallya’s own worsening financial wealth which many claim are interlinked.
In January 2016, when all this was still unfolding, Mallya spent a whopping Rs 9.5 crore to get Australian all-rounder Shane Watson to play for his Royal Challengers Bangalore Indian Premier League cricket team this season. He had bought this franchise back in 2008 for about US $111.6 million.
Mallya owns a 41.5% stake in the Force F1 team and allegedly, Kingfisher’s money was used to pay the F1 team in 2009 even though the airline’s losses were mounting.
What this means is that Mallya has never really cut back on extravagance, no matter what his financial position – and is unlikely to do so now.
What happens next?
Nobody knows for sure.
On Wednesday, Rohtagi told the court that Mallya is likely to be in London. “He has tremendous assets there," he said. "We know he would be there... most likely.”
The Hindu quoted Rohtagi as saying that some information about Mallya’s assets was gathered from social media sites, and this showed his properties were mostly abroad. “Only a fraction is in India... maybe one-fifth.”
“We are not after anybody’s blood. We want to sit across him and reach a settlement on getting back our money,” Rohatgi said. “The court should ask him to appear here and bring his passport. We also want a disclosure of his assets.”
“We’ll issue notice and then see,” the court said, while giving Mallya two weeks to respond.
Mallya has been issued notice through his through his company United Breweries (Holdings) Limited, his lawyers, his official Rajya Sabha email address and the Indian High Commission in London.
The court will hear the case on March 30.