The Westminster Magistrate court in the United Kingdom on Monday ordered businessman Vijay Mallya to be extradted to India in a case filed by the Central Bureau of Investigation. The judge refused to accept Mallya’s arguments that there were political motives behind the cases of fraud filed against him. In colourful language, judge Emma Arbuthnot tore into the claims made by Mallya’s team, calling describing the businessman a “glamorous, flashy playboy” who had defrauded banks. She has also criticised the banks for their failure to “abide by their own rules” in lending money. Excerpts from the order:
“On the one hand there is no doubt as can be seen from the chronology set out above that there has been a catalogue of failures of the bank at different levels. The failings were before the loans were sanctioned and afterwards. On the other hand, there is not a great deal of evidence from which I could draw inferences that various bank executives were involved in a fraud to defraud their own bank and that when they sanctioned the loans they intended Kingfisher Airlines not to repay the loans as agreed and required.
It is either a case that the various continuing failures were by design and with a motive (possibly financial) which is not clear from the evidence that has been put in front of me, or it is a case of a bank who were in the thrall of this glamorous, flashy, famous, bejewelled, bodyguarded, ostensibly billionaire playboy who charmed and cajoled these bankers into losing their common sense and persuading them to put their own rules and regulations to one side.
The bank’s failings include, as set out above, the failure to abide by their own rules when it came to a new client and an example of this was that despite the low rating the loan was waved through. In fact the first loan was granted even before the risk rating had been carried out. There was a failure to ensure that the guarantees were formally taken when they should have been and a failure to investigate the representations that Kingfisher Airlines made at various stages to obtain the loans. With a bit of care the worthless negative lien on the hire purchase aircraft would have been exposed.
There was a failure to obtain credit reports from other banks involved with Kingfisher Airlines. There was a failure to give proper consideration to the past failures involving loans granted to associated companies. Mrs Sinha [of CBI] said the funds were dispersed without complying with the sanction terms and conditions. IDBI if it had looked more carefully at the loan account would have been able to see where the money was going.
I find that there is a case to answer on which a jury properly directed could convict. The catalogue of failures set out above are so numerous and so fundamental, not just prior to the sanctioning of the loans, but also after the loans had been granted, that I consider a reasonable jury, on one possible view of the evidence, could reach a decision that particular co-conspirators such as Mr Agarwal, Mr Batra and Mr Sridhar [bank officials] in particular were involved in a conspiracy to defraud.
If the criteria for lending to Kingfisher Airlines had been applied, if the background checks had been carried out, the loans should not have been granted. If the end use certificates and all the other post sanction conditions applied, the loans would not have been misapplied in the way they were. The evidence as currently before me is not as strong as the evidence in relation to the other allegations being made, nevertheless I find a prima facie case of a conspiracy to defraud which involves not just the Kingfisher Airlines executives but also the named bankers in the IDBI.
On Money laundering
The Government Of India argues that this [loan defaults] sheds light on the Vijay Mallya approach to the loans in the first place. I have found that on the face of it, the Mallya was doing everything he could by using honest or dishonest means to keep the company going, possibly, and this is conjecture, until he could get a foreign company to invest in the business. He had been teetering on the edge of being grounded for a number of months before the loans were granted and once he had obtained them, was not above playing ‘round robin’ as he himself described, to keep the company afloat. At the same time, he was using the Kingfisher Airlines loans to fund anything that became due to be paid.
These payments included what some might say were two vanity projects, the formula 1 racing team and a corporate jet for his own use. In the case of Force India formula 1, IDBI’s loan proceeds were used to clear a bill discounting facility with the Bank of Baroda and to release credit facilities which were later used to fund sponsorship payments to Dr Mallya’s motor racing team in July 2010.
The timing of the payments were significant, in 2009 and 2010, payments were made by Kingfisher Airlines to Force India at a time it was struggling to remain in business. Money from the loans was transferred to Axis Bank then went to HSBC in London, they were said to be payments for operating expenses in relation to flights but the funds were transferred to the racing team. Essentially it appears as if Kingfisher Airlines was funding Dr. Mallya’s team. I have already referred to Margaret Sweeney’s evidence that formula 1 is valuable sponsorship to have and that in 2011 they voluntarily refunded Kingfisher Airlines.
I do not accept that the courts in India are there to do what the politicians tell them to do. As I have already said, the court will be under great scrutiny. I do not find any international consensus which would enable me to find that the judges in India are corrupt. The most the Professor [Martin Lau, a witness] could do was give me a handful of individual examples where the process appeared to be defective in one way or another. Such defective processes came to light and were corrected by the senior courts.”
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