The Fall of Vijay Mallya
Created on 13 Apr 2020
Wraps up in 6 Min
Read by 6.3k people
Updated on 03 May 2022
Mallya was the only son of the successful but frugal beverage entrepreneur Vittal Mallya. While his father lived in Bangalore, running his breweries, Vijay was raised by his mother in Calcutta. But he was under constant pressure from his father, who threatened not to inherit the family's business and fortune unless he conformed and studied hard. Reports say that this paternal pressure created insecurity for the son, who was a spender from a young age. But Vittal died suddenly and, as his only son, Vijay inherited everything.
He immediately embarked on a commercial career that transformed what became the UB Group into a multinational conglomerate that held more than 50% of the Indian beer market and was the largest player in United Spirits' local spirits production. Its enemy was Kingfisher Airlines, which Mallya launched in 2005 as a "five-star hotel in the air", but seeking to emulate the low-cost successes of Ryanair and EasyJet in Europe.
The Fall of the Empire
As soon as the global recession occurred in 2007/8, its business model was in trouble. The cost of fuel went up, the number of passengers shrank and the airline, which never made a profit, went bankrupt in 2012. Creditors demanded Mallya's payment personally, the aircraft were seized and thousands of employees were left unpaid.
In 2010, under a special Reserve Bank of India scheme, Kingfisher's estimated to Rs 1,12,40,50,00,000 debt was restructured. Creditors converted rs 14,79,58,95,000 into debt into a 23% shareholding in the carrier - at a price per share 61% higher than the prevailing price. Mallya personally secured Kingfisher's loans. But, wounded by an industry tariff war and the sharp depreciation of the Indian currency, the airline - which had never made a profit - continued to bleed.
Mallya asked the Congressional government to reduce aviation fuel taxes or liberalize aviation to allow foreign airlines to participate in Indian carriers. He begged and he begged with all he also said, he had already made a deal with a foreign airline. But his efforts came to nothing.
Kingfisher was finally suspended in October 2012, when employees who had not been paid for seven months left their positions. Weeks later, New Delhi announced that it would allow foreign airlines to buy stakes in Indian carriers. Jet Airlines, which was also on the financial brink, sold a 24% stake for Rs 28,98,16,50,000 to Etihad Airways in the United Arab Emirates. But it was too late for Kingfisher.
The Aftereffects: Caught in legalities
Today Mallya, in the face of unpleasant choices, cuts a discouraging figure. He faces the prospect of digging deep into his pockets to settle with his creditors or possibly never return to India. In 2013, he filed a lawsuit in the Bombay Supreme Court, claiming that the personal guarantees he had given during the 2010 debt restructuring were extracted under duress when the State Bank of India threatened to withdraw from the deal on the last day.
After all the work, dismissals from the Central Bank of India and everything, leaving everything on the last day was not an option. However, before the airline's failure, Mallya had raised more than Rs 95,72,23,94600 in loans from a consortium of Indian banks. Indian banks and authorities claim he fraudulently misappropriated funds for interests abroad, including Force India, and never intended to repay the debts. For his part, Mallya has systematically denied any wrongdoing.
He said the funds were loaned to Kingfisher, not him, and that they intended to support the airline until conditions eased and it could successfully negotiate. He claims he was the victim of a genuine business meltdown, despite his best efforts to rescue the business. The allegations of fraud and money laundering took on a political tone when opposition parties claimed that Mallya's position as a member of the Indian Senate had been used to influence state banks to grant loans that, under normal circumstances, would never be considered.
Mallya also sought to raise money from the sale of assets. In a series of transactions, Diageo took a 55% stake in Mallya's United Spirits, but Mallya did not personally benefit as his shares had already been pledged as collateral to banks. But he temporarily remained president. The relationship with Diageo went sour quickly, however, and among them, Diageo and United Spirits, are trying to recover about Rs 20,80,61,66,717 from Mallya for accounting irregularities and breaches of agreements.
But despite protests that he has sufficient assets easily to pay his debts, pressure has increased in India's courts, where he has been declared a proclaimed offender and a fugitive economic criminal. He was also found guilty of contempt for the Supreme Court of India for not fully disclosing the assets.
Fleeing the Country
On 2 March 2016, Mallya fled to Britain after allegedly being told he was about to be arrested. He claims it came out as part of a normal lifestyle and business pattern. In April 2016, the DE requested a special court in Mumbai to issue an unavailable arrest warrant against Mallya. The DE requested a warrant against the baron for crimes under the Money Laundering Prevention Act, 2002. The court granted the warrant to ED.
Reports claim that Mallya had diverted about Rs 4000 crore from India. He was subsequently arrested by the Metropolitan Police on an international warrant and hearings on India's request for him to face charges of fraud and money laundering started in December 2017. He was given £ 650,005,40,87,856 bail and had to hand over his documents. The liquor baron owes more than Rs 6,86,13,75,00,000 to several Indian banks. He has lived in self-imposed exile in Britain since March 2016, after secretly escaping from India.
Separately, India has imposed a worldwide freeze on Mallya's assets, confirmed by a separate English court. His plane was seized and sold, along with his yacht and numerous other Indian properties. Force India entered the administration and Mallya lost its stake before being rescued. He has no more influence on the Royal Challengers Bangalore. Mallya has always claimed that he is the target of a political witch hunt by Prime Minister Narendra Modi's government.
A change of government can have significant implications for him. On April 10, 2020, Judge Michael Briggs of the Federal Supreme Court's insolvency division awarded Mallya compensation, stating that he must allow time for his petitions to the Supreme Court of India and his proposed settlement before the Supreme Court. Courts of Karnataka are determined, allowing time to pay their debts in full to the banks.
What does Mallya have to say?
Despite his repeated protests that he wants to settle with the banks, Mallya has no idea that he is willing to make a better offer and seems resigned to the possibility of a long exile from India. He would love to go back to India. "But if the government creates circumstances in which it is impossible to obtain justice, I must be content with what I have", he asks the banks with hands folded.
He withdrew 100% of their principal immediately and stayed out of the Royal Courts of Justice in London. "The Execution Board attached the assets of the complaint by the banks that I was not paying them. I did not commit any offense under the PMLA (Money Laundering Prevention Act) that the Executive Directorate of Execution should attach my property.", Mallya said.
"I'm saying, please, banks take your money. The DE is saying no, we have a complaint about these assets. So DE on the one hand and banks on the other are fighting over the same assets, ”Mallya said. Asked about returning to India, he noted that he should be where my family is, where my interests are.
Judge Stephen Irwin and Judge Elisabeth Laing, the two-member bench that presided over the appeal, concluded the hearing on the arguments and said they would deliver the verdict later, after considering the oral and written allegations in the “very dense” Case in the next few weeks.
On a day of heated discussions between Mallya's lawyer, Clare Montgomery, and the Crown Prosecutor's Office (CPS) lawyer, Mark Summers, arguing on behalf of the Indian government, both sides were shocked by the prima facie fraud case and deception against Mallya.
The fate of the trial is still hanging in the balance. If the judgment goes in favor of India then it will be a huge win for the government and will boost the morale of the agencies.
How was this article?
Like, comment or share.