Has the noose really tightened around Vijay Mallya?
The quiet, green village of Tewin has been Vijay Mallya’s home for over two years. His fortified mansion hires locals and provides an economic fillip to this Hertfordshire county that is prosperous, but like the rest of Britain looking anxiously at an uncertain post-Brexit future. Mallya’s presence is not entirely unwelcome. His Force India Formula 1 team has many local followers.
The protracted battle waged by the Indian government to bring Mallya to justice took one small step forward with the British High Court allowing 13 Indian banks to enter several of his British properties (including his Tewin mansion) and, following approval from the appropriate authority, seize the goods and other material in them.
Does the order bring Mallya any closer to being extradited? The short answer: no.
First, Mallya has appealed against the court order. Till the appeal is heard, it’s status quo. If Mallya loses his appeal, he can move Britain’s Supreme Court and after that the final arbiter, the House of Lords.
British justice is relatively swift, but it does not move at the speed India would like it to — potentially depriving the Narendra Modi government of a key victory over an economic offender by bringing him back to India before the 2019 Lok Sabha election.
More promising for the Modi government is the order passed by India’s Prevention of Money Laundering Act (PMLA) court under the new fugitive ordinance. The court has ordered Mallya to be present in the court on August 27. If he doesn’t comply, his assets in India will be seized without further notice.
This is the order that worries Mallya, not the British court’s seizure judgment. His Indian assets are far more valuable than his British assets most of which (including the Tewin mansion) are anyway not on his name.
What the PMLA court judgment does is give Mallya the option to appear before it on August 27, and voluntarily allow the sale of his Indian assets. If Mallya fails to appear before the court, those assets (amounting to over Rs 12,500 crore) will be sold under the supervision of the court.
Mallya knows this. It is no coincidence that he filed an application before the Karnataka High Court on June 22, 2018, to pledge the sale of his “available assets” totalling Rs 13,300 crore.
What Mallya wants is to avoid returning to India and being arrested. He has accepted that he will have to pay the banks what he owes then — a principal amount of over Rs 6,200 core which, with several years’ accumulated interest, totals just under Rs 10,000 crore. In addition, he will have to pay (again with accumulated interest) employees’ salaries, TDS and service tax dues, airport rentals, vendors’ outstandings and myriad other debts associated with Kingfisher Airlines.
Defenders of Mallya say he has been singled out for harsh treatment. Under the Insolvency and Bankruptcy Code (IBC), banks have given other defaulting promoters debt haircuts ranging from 10 per cent to 83 per cent. Mallya has been given no concessions.
The reason for this is obvious: Mallya fled India; other defaulting promoters submitted themselves to the IBC process. Despite being given several opportunities to return to India and negotiate a settlement with banks, Mallya refused to do so. Instead he offered two years ago to pay just over Rs 4,000 crore, refused to return to India to face criminal cases filed against him and confined himself to writing open letters to the prime minister and finance minister.
In Britain, meanwhile, Mallya leads an extravagant, even ostentatious lifestyle. In India, his unpaid employees remained unpaid. One family member of a former Kingfisher employee, facing a severe financial crisis, committed suicide.
How will the Mallya story end? And what impact will its outcome have on the status of other economic offenders like Nirav Modi, Mehul Choksi and Jatin Mehta?
Mallya will resist returning to India. He will allow his assets to be seized. Those pledged by him as collateral personal guarantees to banks have already have been attached. They will now be sold under court supervision. Banks and other creditors, including employees, will receive their dues with interest. But Mallya may not return to India — yet.
Once the recovery process is over though, he will attempt to extinguish his fugitive tag. That could pave the way for his return to India. He may, however, still face criminal charges pending against him for being a wilful defaulter. Tewin might host him for a while longer.
Mallya’s key assets that will be used to pay bankers and other creditors are his liquid shares in United Spirits Ltd and United Breweries Holdings Ltd. Both companies are now run by multinationals Diageo and Heineken respectively. Their market value has more than doubled since they took over management control form Mallya.
Ironically, Mallya’s ability to pay off his creditors is due to the rise in the market value of his two flagship companies where he has ceded control.
Does that make Mallya a pauper? Not by a long shot. His non-pledged assets in India are still substantial. His overseas assets include breweries and the Force India Formula 1 team. At the end of the protracted battle, Mallya will still be a billionaire with a net worth of around $ 1 billion (Rs 6,900 crore) even after paying off his entire debt of around Rs 13,000 crore.
More importantly, how will the resolution of the Mallya case affect the ongoing prosecution of Nirav Modi, Mehul Choksi and others? The red corner notice issued by Interpol will restrict Nirav’s movement, but extradition may be far trickier. Even in Mallya’s case, extradition — despite concerted efforts by the Indian government through the Crown Prosecution Service (CPS) – is unlikely to succeed.
The laxity shown by Indian investigation agencies that allowed fugitives like Mallya, Nirav Modi and Choksi to flee India is a systemic flaw. Rich offenders get away. The poor often stay in prison as undertrials for longer than even the maximum sentence they would have received had they been convicted.
The Modi government needs to show results in its fight against corruption with a high-value captive like Vijay Mallya, or a Nirav Modi.
India’s rusted, slow-moving, unreformed judicial system could yet deny it that prize.