Revision as of 19:47, 10 February 2017

Vijay Mallya's debt, some facts; Graphic courtesy: The Times of India, March 16, 2016

History

The Times of India, Mar 16 2016

Saurabh Sinha

Distinguished people who served as Kingfisher's independent directors; Graphic courtesy: The Times of India, Mar 16 2016

Vijay Mallya may be a pariah today with both the Congress and the BJP disowning him, but there was a time when who's who of India had served his Kingfisher Airlines (KFA) as its independent directors. The airline, founded in 2005, saw distinguished people such as heart surgeon Dr Naresh Trehan, tennis great Vijay Amritraj, former chairman of LIC and Sebi G N Bajpai, ex-finance secretary Piyush Mankad, Rediff India founder Diwan Arun Nanda and bankers of repute serving as its independent directors.

Bajpai introduced key reforms at Sebi and prepared LIC to face the onslaught of foreign insurance giants in India once the sector was deregulated. He was a member of the governing board of IIM Lucknow. He was also chairman of the NSE and Stock Holding Corporation of India, apart from being on the board of companies like ICICI Bank, Axis Bank, General Insurance Corporation, Jindal Steel and Tata Chemicals. But unlike these companies, Mallya's ambitious plans for KFA were taking it towards its doom. The fortunes of the airline, which never reported a profitable quarter, nosedived in 2007 when Mallya decided to buy Captain Gopinath's Air Deccan to fly abroad on its licence without waiting for five years as per rules.

“Suddenly , we had a fleet of 100 planes and frankly it was just too much for us to handle,“ said a person, who was among the people running KFA. Dec can founder G R Gopinath was on the combined airlines' board, but was eased out later as KFA subsumed his airline.

Then financial losses mounted, flights were slashed and payments to everyone -employees, airports, oil companies, tax authorities and provident fund -stopped. This was the time when KFA saw an exodus of its independent directors.

Among the first to sense trouble in KFA and leave the board was Dr Trehan. The eminent heart surgeon had joined in October 2008 and quit in September 2010. Amritraj quit in March 2012 on the ground that his travel schedule did not allow him to attend KFA board meetings. Within days, another independent director Anil Kumar Ganguly also quit, citing “indifferent health“.

Things came to such a pass that in the end, Mallya found it difficult to meet Sebi's listing norm, which requires that at least half of the board must be comprised independent directors. In a desperate attempt to meet the listing norm, KFA got the consent of three people in March 2012 to be independent directors. They were -former Vijaya Bank chief Manmohan Singh Kapur, corporate lawyer Lalit Bhasin and former MD of Kolhapur Sugar Mills Shrikant Ruparel.

The airline flew for just six months after this and was grounded in October 2012. As hope of KFA flying again diminished and then vanished, all remaining independent directors quit.

A profile

Mallya, was declared as 'wilful defaulter' by lenders following huge debts on his Kingfisher Airlines. He was ranked at 84th position in 2013, with a net worth of USD 800 million. Earlier, in March 2013, Mallya was dropped from Forbes global rich list, while he had moved out of the billionaire league way back in 2012. Amid huge debt burden and mounting losses at Kingfisher Airlines, Mallya's fortunes has been declining continuously over the recent years. The airline owes Rs 7,600 crore to 17 banks.

In February 2012, the banks had formally declared loan recall on KFA and began recovery process. They have recovered around Rs 2,000 crore by selling pledged shares. Already, United Bank of India has won a legal backing on its decision to declare Mallya and other top executives of the airline as "wilful defaulters".

India's largest bank SBI has also sent a notice to tag them as "wilful defaulters". State-run PNB and IDBI Bank, and private lenders Federal Bank and Axis Bank are also in the process of doing the same. Burdened with huge losses and large debts, Kingfisher Airlines stopped flying in October 2012 and its flying licence also lapsed about two months later. About Mallya Forbes India in October 2012 had said that the 'king of good times' is having nothing but bad times lately.

Business, as in 2006

India Today December 29, 2008

Vijay Mallya, hailed as India’s Richard Branson, acquired Glasgow-based Scotch whisky group Whyte & Mackay for £595 million in an all-cash deal in 2007, making him the second-largest spirits manufacturer in the world. It also restored partial peace with the Scotch Whisky Association which had argued that UB’s Indian-made products were not genuine whisky, as they were distilled from molasses. With W&M, the association invited him to be a member.

Loan disbursement by IDBI

Vijay Mallya's holiday meeting with IDBI bank's ex-CMD led to hasty sanction of Rs 350 crore loan: ED, Jan 29, 2017, The Times of India

‘’’HIghlights’’’

IDBI bank hastily disbursed loan to Kingfisher Airlines after a "holiday" meeting between liquor baron Vijay Mallya and the then bank CMD

The total loan sanctioned and disbursed by IDBI was Rs 860.92 crore

Two initial tranches of loan worth Rs 350 crore were hastily disbursed by IDBI bank to Kingfisher Airlines after a "holiday" meeting between liquor baron Vijay Mallya and the then bank CMD as both organisations "criminally conspired" to clear the entire deal despite weak financials of the airline, the ED has said.

The total loan sanctioned and disbursed by IDBI was Rs 860.92 crore.

The agency, probing the case for money laundering charges, has said its investigation found that the processes deployed to structure and re-structure the loan by the bank to the now-defunct airline was planned to be defrauded and that Mallya and Kingfisher Airlines (KFA) had "no intent" to repay it.

"PMLA investigation indicates that the marketable value and quality of the collateral security offered by Ms KAL (KFA) and its promoters was not assessed. There is a complete lack of due diligence on the part of the bank coupled with the fact that undue haste was shown while disbursing the initial two tranches of loan amounting to Rs 350 crore.

"It is apparent that the said loans were disbursed post meeting of Mallya with the then CMD (Yogesh Aggarwal) of the bank on a holiday. It does not need an eagles' eye to decipher the cause of immediate disbursement of the loan amount of Rs 150 crore on October 7, 2009 and Rs 200 crore on November 4, 2009," the Enforcement Directorate (ED) probe report, accessed by PTI, said.

The report added this specific transaction, where "substantial amounts" were sanctioned to KFA, in an ad-hoc basis and without due diligence points to the "existence of a deep rooted criminal conspiracy between the bank officials and the promoters of KAL (KFA)".

The agency, in its report, has appended the statement of the Aggarwal given to ED on March 23 last year wherein he told the Investigating Officer (IO) of the case that in October 2009, Mallya made a telephonic call to his office and requested for an "urgent meeting the very next day".

"As the next day was a holiday, it was pointed out to him ... and he could meet at a later day. However, he (Mallya) informed that he was leaving Mumbai next day evening and as the matter was urgent, he would be grateful if he could meet the next day despite it being a holiday to which he (Aggarwal) agreed," the ex-CMD said, adding Mallya did meet him the next day along with a former MD and current advisor of the bank and an Executive Director of IDBI.

"Mallya informed that Ms KAL (KFA) was in a severe crunch and needed funds urgently to keep flying," Aggarwal said in his statement.

Mallya's financial misdeeds

March 2016: Ex-KFA employees to sue Mallya over Rs 800cr dues

The Times of India, Mar 10 2016

Former Kingfisher Airline employees have decided to take its owner Vijay Mallya to court. In a couple of weeks a petition will be filed in the Supreme Court against Mallya and Kingfisher Airlines for non payment of salaries worth Rs 800 crore. The process of filing the petition has begun with data being collected from employees who worked for the airline. Early in the day , on Wednesday , the employees, the worst hit in the financial crisis that took down Mal ya's empire, protested out side Kingfisher House in Vile Parle East.

The now defunct airline owes about 5000 of its employ ees dues in unpaid salaries “We were not paid our sala ries for a period of 18 months ill the airline finally shut down,“ said Anirud Ballal, a ormer Kingfisher official During the year and a half that the airline went down, the workforce of 5000 dwindled down to 2,000 employees.

While Mallya's Indian employees were left high and dry, he followed all the labour laws when it came to Kingfisher employees based in London, Hong Kong. “Those based in London were paid their salaries on time, they were given advance notice about the closure and were paid a compensation for loss of job,“ he said.

Meanwhile, Mallya, who owes banks over Rs 9000 crore has been reported to have fled the country .

Links to Virgin Islands firm

The Times of India, Apr 08 2016

Leaks show Mallya linked to Virgin Islands firm

Chethan Kumar & Sandeep Moudgal

The Supreme Court asked Vijay Mallya when he would come back to India, saying he should first return for any meaningful negotiation on his offer to settle the Rs 9,000 crore he and his companies owe 17 public sector banks, reports Dhananjay Mahapatra.The SC also asked him to reveal details of properties owned by him and his kin. P 25 Industrialist Vijay Mallya, who has been declared a wilful defaulter by Indian banks, figures in the offshore leaks by International Consortium of Investigative Journalists (ICIJ), whose Panama Papers have rocked the world in the last few days.

Details accessed from the ICIJ website showed a British Virgin Islands firm -Venture New Holding Limited -which has been operational from February 15, 2006, is linked directly to Vijay Mallya, and not to any of his companies.

Tax haven entities of Mallya, a non-resident Indian, have been in focus after TOI reported the Karnataka high court observations in January 2014 that “Mallya had not come to the court with cle an hands“ in reference to a possible diversion of Rs 4,000 crore to a subsidiary in British Virgin Islands.

The mention in the latest offshore leaks comes even as state-owned banks are battling to recover more than Rs 9,000 crore of unpaid loans from Mallya, who soaked up public debt for his defunct Kingfisher Airlines.

The operations of Venture New Holding were carried out from 3 Vittal Mallya Road in Bengaluru, which is Mallya's residential address. His offshore has a direct link to a firm named Porticullus Trust Net, which, according to ICIJ, is a `one-stop solution' for the setting up of offshore accounts.Porticullus Trust Net has its origins in Cook Islands -an island group in South Pacific. And, protecting Mallya's identity until the leaks was Sharecorp Limited, which operated as a nominee shareholder.

CBI investigations

On IDBI bank officials

`Mallya shrank his net worth by 80% in 9 days’, Jan 28, 2017: The Times of India

The Central Bureau of Investigation (CBI) in its chargesheet has said that IDBI Bank offici als, who ha ve been ar rested in the Kingfisher Airlines case, diluted the security requirements in respect to the Rs 950-crore loan in two stages -before and after the loan sanction -thereby facilitating disbursement. The chargesheet highlights several instances where the sanction process was weakened to allow loans to a company that was rated sub-investment grade and did not fall within IDBI Bank's own para meters for credit-worthy companies. Also, the bankers waived requirement for additional security while advancing this loan, the chargesheet said.

One indication of the dilution was that liquor baron Vijay Mallya shrank his declared net worth by 80% in nine days. While his statement of assets in respect of an earlier term loan gave Rs 1,395 crore as his net worth on March 31, 2009, at the time of offering a personal guarantee his net worth was shown as only Rs 285 crore. The agency has said that there was no intent on the part of Mallya to repay and there was a criminal conspiracy to this end.

Recovering bank loans

June 2016: 2 properties sold before ED attachment

The Times of India, Jun 13 2016

Neeraj Chauhan

Mallya quietly sold off 2 properties before ED attached Rs 1,411cr assets

Why did the Enforcement Directorate (ED) rush to attach Vijay Mallya's properties worth Rs 1,411 crore in a single day? The liquor baron, who is in London, sold off two properties worth several crores before the agency could attach them on Saturday , top sources told TOI. One of the properties sold Probe biased: Mallya, P11 by Mallya is located in Coorg, while the other is close by, though officials refused to share details. The ED is trying to find out whether Mallya received money from the sales and if it has been remitted to him or his firms aboad. The agency obtained details of sale during its investigation and this will find mention in its complaint to the adjudicating authority within a month.

After learning that Mallya is quietly disposing as sets in India to avoid their seizure by banks and investigation agencies, the ED swiftly approached a court on Friday and got the liquor baron declared a `proclaimed offender'. It then went ahead with provisional attachment of properties under the Prevention of Money Laundering Act (PMLA) on Saturday .

Sources said they had information about Mallya, who left for London on March 2, disposing assets so that the provisional attachment action could be “frustrated“.Officials termed Mallya's act “illegal“. “Indulging in such activities by Mallya clearly indicates he has no intention to repay bank loans or come back to India,“ an officer said.

Responding to TOI in an email from London, Mallya said the ED attached his properties and assets of United Breweries Holdings Limited (UBHL), which was a public company and not even the subject of an ED investigation. “The assets purportedly attached under PMLA date back to several years prior to the launch of Kingfisher Airlines. There is no rationale nor any legal basis for the series of actions initiated by the ED which is now making it more difficult to raise resources to pay the banks. Purely civil matters such as loan recovery are being connected with criminal allegations without any basis whatsoever.“

Property seized by ED: 6,630cr

The Times of India, Sep 04 2016

ED attaches fugitive Mallya's properties worth Rs 6,630cr

The Enforcement Directorate has attached additional assets worth Rs 6,630 crore belonging to Vijay Mallya and his defunct Kingfisher Airlines, taking the total value of attached properties of the fugitive businessman to over Rs 8,000 crore.

Mallya had fled to London earlier in 2016 after the ED and CBI asked him to join investigations. He was wanted by the agencies in a case of defaulting on loans to the tune of Rs 9,000 crore taken from half a dozen government banks and laundering a part of this money to his shell companies abroad.

The present attachments are based on an SBI case filed with CBI. The ED had later filed a case under the Pre vention of Money Laundering Act (PMLA) and attached properties.

An ED probe revealed that Mallya had deliberately kept shares worth Rs 3,600 crore ­­ pledged with UTI Investment Advisory Services Ltd and other financial institutions without substantial underlying liabilities ­­ hidden from a consortium of banks from which he had borrowed. His total outstanding principal amount with the consortium remains over Rs 4,900 crore.

According to ED, its inves tigation has revealed that Mallya had laundered more than Rs 3,500 crore out of the loan outside India on the pretext of payment of lease rentals, repairs, maintenance and so on.Mallya and his officials failed to provide any proof of lease agreements to the probe team.Irregularities were also detected in other major payments.

“Investigation revealed that Mallya created a complex web of shell or investment companies in the name of his family members and employees with dummy di rectors. These companies neither have business activities nor independent source of income, but hold substantial movable and immovable properties,“ ED said.

“He has not disclosed in full his properties in India and overseas, as well as his interests in these companies being controlled directly or indirectly by him,“ the agency said. There were substantial movable properties such as the shares of various public limited companies held by Mallya and his UB Holdings.