The court cases involving Vijay Mallya, former chairman of United Spirits Ltd and founder of the now defunct Kingfisher Airlines, are likely to become dismal case studies of how India deals with crony capitalism, corporate fraud and compromised public sector banks (PSBs), through lax policing and a crawling judicial process. Just on the day, March 2, that 17 PSBs approached the debt recovery tribunal asking for his passport to be impounded, Mallya is believed to have flown to the UK, nonchalantly tweeting about Chris Gayle, the West Indian cricketer, enjoying his “time in the nets”. Yet, even the information, that he had left India, was known publicly only on Wednesday, March 9. If it was not a question of the hefty sum of Rs 9,000 crore that Mallya and his companies owe these banks, this would have been a comical saga featuring a bumbling state and a fleetfooted businessman.
The trouble reportedly began in 2009 when large sums of money were loaned to Mallya’s companies in lieu of assets, such as the Kingfisher brand and logo, which were not worth more than one-tenth of the total loan amount. With a recession setting in, the high cost airline faltered. As the IDBI Bank case shows, banks lent him money knowing well that there were serious risks. Unsurprisingly, by early 2012, the airline had started skipping payments across all fronts — airport fee, dues to oil companies, taxes to the government, and salaries to its own staff. In October 2012, the first warrants were issued, triggered by a bounced cheque. The airline folded up later in the year, leaving in its wake a clutch of PSBs with loans that would never be repaid. It has since been known that Mallya diverted funds internally, such as using loans for aircraft acquisition to pay for working capital. Yet, it has taken over three years since the first warrants were issued for the courts to be moved for impounding his passport. Investigations now are leading to old cases being dug up, such as a 17-year-old case under the now defunct FERA.
Mallya’s suspicious deals were public knowledge for a while and yet little action was taken. In the aftermath of his exit, the prosecuting and investigating agencies must be asked some serious questions, and the government must take steps to set right the decision-making in PSBs.