THE ENFORCEMENT Directorate (ED) has registered a case of money laundering against Vijay Mallya, who helmed the now-defunct Kingfisher Airlines, based on an FIR registered by the CBI last year, said officials familiar with the development.
In a separate development on Monday, the Debts Recovery Tribunal passed orders restraining multinational alcoholic beverages company, Diageo Plc, from paying Mallya Rs 515 crore as part of a settlement to exit Diageo-owned United Spirits Limited.
The move by ED, under the Prevention of Money Laundering Act (PMLA), comes after the CBI registered a suo motu FIR against Kingfisher Airlines in July 2015. The company owes at least Rs 7,000 crore to 17 banks; some of them such as the State Bank of India and Punjab National bank have already named Mallya and his company as a “wilful defaulter”.
The CBI had registered the FIR against Mallya. A Raghunathan, chief financial officer of Kingfisher Airlines, and unknown officials of IDBI Bank. It is alleged that the loans were sanctioned in violation of norms regarding credit limits.
Mallya’s spokesperson declined to comment. But ED sources said it will probe if the money lent to Kingfisher was diverted to tax havens abroad. “We have started investigating the case but as of now have no intention of interrogating Mallya,” said an ED officer.
In Bengalaru, Debts Recovery Tribunal judge C R Benakanahalli temporarily prevented Mallya from receiving the exit package while ruling on an interim application filed by a consortium of 15 banks led by the State Bank of India against Mallya in a debt recovery case from 2013.
Following the announcement last month of Mallya’s exit as chairman from United Spirits Limited in a $75-million deal with Diageo Plc, the banks who had loaned money to Kingfisher had approached the tribunal to stall the severance payment.
The tribunal had reserved its orders on March 4. On Monday, the tribunal also directed USL not to disburse the amount to Mallya until the debt recovery case is settled. “The dispersing of the bank amount is temporarily attached,’’ the order stated.
The DRT, however, did not up take three other interim applications filed by the banks for impounding the passport of Mallya, his arrest and a full disclosure of the liquor baron’s global assets.
The banks’ counsel sought early hearing of these pleas but the tribunal ruled that there was “no pressing hurry” and posted the matter to March 28.
The banks attempting to recover the “bad loans” granted to Kingfisher Airlines include State Bank of India, Bank of India, Bank of Baroda, Central Bank of India, Corporation Bank, Axis Bank, Federal Bank, Indian Overseas Bank, Punjab National Bank, Punjab and Sind Bank, Jammu and Kashmir Bank, UCO Bank, United Bank of India, IDBI and the State Bank of Mysore.
Besides, the service tax department has also moved a fresh plea in Bombay High Court seeking Mallya’s presence in India for ongoing prosecution, said sources. The service tax department has also sought the impounding of Mallya’s passport.
On March 6, Mallya had accused the media of running a “hysterical campaign” against him. He said Kingfisher Airlines had not defrauded banks and was in talks for a one-time settlement of debt. “All enquiries conducted have failed to find any evidence of misappropriation of funds by Kingfisher Airlines or myself for the simple reason that the allegations and the innuendo to this effect is plainly false,” said Mallya.
“My group directly invested over Rs 4,000 crore in Kingfisher Airlines itself which investment stands fully impaired. It is not as though it is only the bank debt that has suffered. The banks will recover a substantial part of their debt and my group’s loss is permanent,” Mallya added.
Mallya said Kingfisher was launched on the basis of a viable business plan vetted by SBI Capital Markets and renowned international aviation consultants. “But despite every effort, it was an unfortunate commercial failure caused by macro economic factors and the then government’s policies,” said Mallya.
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