On Monday (July 26), the Insolvency and Companies Court of the London high court granted a bankruptcy order against fugitive liquor baron Vijay Mallya, who has been fighting against his extradition to India since 2017, a year after he fled the country.
Essentially, Mallya will now have to hand over all his debit and credit cards as well as his remaining assets to a bankruptcy trustee. This trustee will investigate further and determine his assets and liabilities. This evaluation will be used to pay back the bad debts incurred by the consortium of Indian banks.
Mallya came under the scanner of the Enforcement Directorate (ED), Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFIO) and the Securities and Exchange Board of India (SEBI) after his venture Kingfisher Airlines Ltd failed and Mallya defaulted on loans worth over Rs 10,000 crore from more than a dozen Indian banks around 2013.
The banks include the Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd.
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Mallya, 65, was the chairman of Bangalore-based United Breweries Holdings Limited (UBHL) and also owned Kingfisher Airlines, which was launched in the year 2003. The airline started operations in 2005, initially as a single-class (economy) carrier.
In 2007, Kingfisher Airlines decided to purchase the low-cost carrier Air Deccan, which was under debt at the time. The purchase was finalised in 2008 when Kingfisher Airlines paid around Rs 550 crore for about a 46 percent stake in Deccan Aviation, the parent company of Air Deccan.
Soon after, in March 2008, Mallya’s airline started registering losses, mainly as result of rising oil prices. This is the point from where its debt began rising and in a couple of years, the airline recorded a debt worth about 50 per cent of its net worth. According to a 2013 case study presented by Globsyn Business School, Kolkata, the company never reported a profit since its inception.
By 2012, the airline ceased all operations since it could not afford them. In 2013, a consortium of Indian banks led by the State Bank of India (SBI) approached UBHL for the payback of loans amounting to more than Rs 6,000 crore. The loans were not paid back and in late 2014, UBHL, which was the guarantor of the airlines, declared it a wilful defaulter.
Soon after, in March 2016, Mallya fled India for the UK and in February 2017, India sent an extradition request. Since then, Mallya has been fighting against his extradition to India but remains on bail there. This is how the matter reached courts in the UK.
In April, 2020 a UK High Court dismissed his appeal against extradition. At that time, the judge said in the order against him, “We consider that while the scope of the prima facie case found by the SDJ [Senior District Judge] is in some respects wider than that alleged by the Respondent in India [Central Bureau of Investigation (CBI) and Enforcement Directorate (ED)], there is a prima facie case which, in seven important respects, coincides with the allegations in India”.
Mallya, who has denied any wrongdoing, is facing charges of cheating, criminal conspiracy, money laundering and diversion of loan funds in India. A few of his companies, including Kingfisher Airlines, face charges of violating The Companies Act, 2013, and norms laid down by the capital markets regulator.
Once his extradition case hearings began around 2017, Mallya said he was prepared to pay back the loans. After the bankruptcy order against him was released, Mallya tweeted on July 26, “ED attach my assets worth 14K crores at behest of Govt Banks against debt of 6.2K crores. They restore assets to Banks who recover 9K crores in cash and retain security over 5K crores more.Banks ask Court to make me Bankrupt as they may have to return money to the ED. Incredible.”
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