Fugitive liquor baron Vijay Mallya, whose written application for permission to appeal an order for his extradition to India was rejected by the United Kingdom High Court last week, and his failed venture Kingfisher Airlines Ltd, are under investigation by the Enforcement Directorate (ED), Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFIO), and Securities and Exchange Board of India (Sebi) for loan defaults of over Rs 10,000 crore to a consortium of Indian banks led by the State Bank of India (SBI).
Mallya faces charges of cheating, criminal conspiracy, money laundering and diversion of loan funds. 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.
Mallya has denied any wrongdoing. He has the option to apply for an oral consideration of his appeal, followed by a representation to the United Kingdom Home Secretary, invoking his human rights.
The ED has charged Mallya under Sections 3 and 4 of the Prevention of Money Laundering Act (PMLA). The agency has alleged that the now defunct Kingfisher Airlines “diverted” at least Rs 3,547 crore of the loan that it received.
The ED’s complaint has listed five instances of alleged diversion of loan funds granted to Kingfisher Airlines by lenders: (i) the diversion of Rs 3,432.40 crore through “over-invoicing” of lease rentals of aircraft between April 2008 and March 2012; (ii) the diversion of Rs 45.42 crore “for making payment towards the rental lease” of a corporate jet which was used “exclusively” by Mallya; (iii) the diversion of Rs 50.90 crore from Kingfisher Airlines to the Force India Formula One team that Mallya controlled; (iv) the diversion of Rs 15.90 crore from Kingfisher Airlines to Mallya’s firm that owned the Indian Premier League cricket team Royal Challengers Bangalore; and (v) the diversion of Rs 2.80 crore to ICICI Bank as repayment of an earlier loan to Kingfisher Airlines.
The ED has accused Kingfisher Airlines and Mallya of “concealment, possession, acquisition, and use of proceeds of crime”. It has also accused United Breweries Holdings Ltd of assisting Mallya in money laundering by not honouring a corporate guarantee that the company gave to the banks, which was to be invoked in case of a loan default by Kingfisher Airlines.
Both the ED and the CBI have alleged that Mallya did not fully disclose his assets while executing a personal guarantee agreement with lenders when the loans of Kingfisher Airlines were restructured in December 2010. The agencies have also claimed to have found that Mallya had “amassed huge properties outside India, especially in United Kingdom, USA, France and Africa” and that he “has got interest in various companies which are created/incorpoporated outside India”.
The CBI has charged Mallya under Sections 120B (criminal conspiracy) and 420 (cheating) of the Indian Penal Code, and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act.
The CBI has accused Kingfisher Airlines, its corporate guarantor, United Breweries Holdings, and personal guarantor, Mallya, of giving “several glaring misrepresentations and false information” to lenders. It has claimed to have found oral and documentary evidence to show Mallya’s “intention” to cheat the bank.
The capital markets regulator, Sebi, has banned Mallya from accessing the securities market until January 2021 for alleged “diversion of funds perpetrated in a listed company by way of dubious and concealed financial statements/projections or false books of accounts”.
Fugitive Economic Offender
In January, a special court in Mumbai declared Mallya a fugitive economic offender, the first such designation under the Fugitive Economic Offenders (FEO) Act, 2018.
The Act defines a fugitive economic offender as “any individual against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in India, who (i) has left India so as to avoid criminal prosecution; or (ii) being abroad, refuses to return to India to face criminal prosecution”. A “Scheduled Offence” is one which is “specified in the Schedule, if the total value involved in such offence or offences is one hundred crore rupees or more”.
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