United Bank of India (UBI), one of the lenders to Vijay Mallya-promoted Kingfisher Airlines Ltd, was the first bank to declare Kingfisher Airlines, Mallya and three directors of the firm as ‘wilful defaulter’ on September 1, 2014. The same year, the State Bank of India (SBI) issued a notice to tag Kingfisher Airlines, Mallya and United Breweries Holdings as ‘wilful defaulters’. The SBI notice of August 19 alleged diversion of funds by Kingfisher Airlines to UB Group of companies and other firms. Mallya challenged the decision of UBI and SBI in various courts.
Mallya, who was then Rajya Sabha MP, had been facing heat from courts and banks since January 2014. According to a report by the Serious Fraud Investigation Office (SFIO), internal emails of October 2, 2014, between top officials of the airlines showed that Mallya met a top Supreme Court lawyer in Goa to discuss ways to “restrict the liability” that arose on account of personal guarantees given by Mallya to secure loans from the banks. Mallya, according to the emails, had discussed a strategy with the lawyer to restrict his personal liability to Rs 248 crore, as declared by him in his affidavit filed in 2010 during his election to Rajya Sabha.
Five months later, in April 2015, Mumbai International Airport Private Limited (MIAL) sold Mallya’s personal aircraft for Rs 22 lakh to recover airport dues of the grounded airline. The same month, Mallya, after consulting “legal pundits”, decided that he and United Breweries Holdings Ltd (UBHL), promoter of Kingfisher, “will not oppose the liquidation of Kingfisher” in the Karnataka High Court initiated by the lenders as it was “the best option available” to Mallya, said the SFIO report. This move by Mallya, according to SFIO’s investigation report, was a “planned move by Mallya and UBHL to defraud the creditors”. The Karnataka High Court in November 2016 ordered liquidation of Kingfisher Airlines.
In May 2015, the Ministry of Corporate Affairs ordered SFIO to probe Kingfisher Airlines. Two months later, the CBI registered a case suo motu against Kingfisher Airlines after its public sector lenders did not file a complaint with the agency despite a loan default of Rs 7,000 crore by the airlines.
In October 2015, the CBI raided Mallya and Kingfisher Airlines in connection with its probe in the loan default. During the raids, the agency seized the main server of the airlines, which contained email communications of Mallya with top officials of Kingfisher, bankers, politicians and bureaucrats. These mails are a part of the SFIO’s probe into Kingfisher Airlines.
Subsequently, the CBI issued two lookout notices against Mallya in October and November 2015. Mallya, according to CBI and SFIO, cooperated with the investigations and was questioned by the two agencies multiple times in December.
In February 2016, Punjab National Bank, another lender, declared Mallya and Kingfisher a wilful defaulter. A month later, on March 2, Mallya left India despite the lookout notices of the CBI.