IN THE DOCK

FROM HIR­ING TOP LAWYERS TO EXERTING DIPLOMATIC PRES­SURE, THE GOVERN­MENT IS PULLING OUT ALL THE STOPS TO EX­TRA­DITE FUGITIVE LIQUOR BARON VIJAY MALLYA

India Today - - INSIDE - By San­deep Un­nithan and Uday Mahurkar

Ef­forts to ex­tra­dite the ab­scond­ing ty­coon from the UK get a shot in the arm

MMonths af­ter the Cen­tral Bureau of In­ves­ti­ga­tion (CBI)started off the ex­tra­di­tion process for the fugitive liquor ty­coon, Vijay Mallya was for­mally ar­rested by the Scot­land Yard in Lon­don on April 18. But it all be­gan in In­dia on Jan­uary 31, 2017, with the is­sue of an ar­rest war­rant in a Rs 900 crore IDBI Bank loan de­fault case.

Mallya, who owes In­dian banks Rs 6,963 crore (Rs 9,000 crore with in­ter­est), fled the coun­try on March 2 last year. He ap­peared be­fore the Hol­born po­lice sta­tion in cen­tral Lon­don and was re­leased hours later by the West­min­ster Mag­is­trate’s Court on a £650,000 bail bond. Mallya will reap­pear be­fore the court on May 17, the next date for the ex­tra­di­tion process which le­gal ex­perts say could last up to a year.

The CBI and En­force­ment Direc­torate of­fi­cials feel Mallya’s ex­tra­di­tion could turn out to be a less tor­tu­ous process than ex­pected, de­spite the fact that he will have three lay­ers of the court to ap­peal to. Their op­ti­mism is grounded on two rea­sons. The Prime Min­is­ter’s Of­fice (PMO) wants Mallya back in In­dia to face trial with­out de­lay. The PMO has of­fered its un­stinted sup­port, play­ing a key role in kick­ing off the ex­tra­di­tion process and has not been averse to mount­ing diplomatic pres­sure on the UK govern­ment to speed up the trial.

In Novem­ber last year, Prime Min­is­ter Naren­dra Modi per­son­ally ex­plained to visiting British PM Theresa May why get­ting Mallya was im­por­tant for In­dia. Modi and his fi­nance min­is­ter, Arun Jait­ley, held a meet­ing on the Mallya case be­fore the lat­ter’s visit to the UK this Fe­bru­ary. Mallya’s ex­tra­di­tion was dis­cussed by Jait­ley when he met Chan­cel­lor of the Ex­che­quer Philip Ham­mond in Lon­don on Fe­bru­ary 28, a meet­ing where UK PM May dropped in.

Se­condly, Mallya’s case of al­leged em­bez­zle­ment doesn’t in­volve a cap­i­tal pun­ish­ment penalty as it did in the case of Nadeem who faced mur­der charges in the T-Se­ries Gul­shan Ku­mar case, and Hanif Tiger, who is an ac­cused in the 1993 Su­rat bomb blast case (the UK courts do not take kindly to ex­tra­di­tion cases where the ac­cused’s life could be at risk). This is why the agency be­lieves it can bring Mallya back to stand trial in just six months or more.

Al­to­gether, it was a fort­night from hell for the high-fly­ing Mallya. On April 8, a con­sor­tium of banks auc­tioned off his iconic King­fisher villa in Goa for Rs 73 crore. The three­acre prop­erty was the site of a lav­ish two-day 60th birth­day bash for Mallya in De­cem­ber 2015, with pop­star En­rique Igle­sias croon­ing for the guests. This, even as Mallya’s cred­i­tors cir­cled the courts to re­cover dues of thou­sands of crores.

In his Lon­don ex­ile, a plush home in Wel­wyn Gar­den City, Hert­ford­shire, 32 km from cen­tral Lon­don, the “fugitive from jus­tice”, as the In­dian au­thor­i­ties de­scribe him, has led a good life. In the past few months, he has at­tended For­mula One races and given the odd in­ter­view to the UK me­dia where he of­fered to re­turn part of the money he owed the In­dian banks.

The cir­cuitous path fol­lowed by the CBI court’s Jan­uary 31, 2017 ar­rest war­rant—from the home min­istry to the for­eign min­istry and fi­nally to au­thor­i­ties in the UK—gave the ty­coon time to pre­pare his de­fence. Mallya’s lawyers, it is be­lieved, had ap­proached the Crown Pros­e­cu­tion Ser­vice

(CPS) soon af­ter the CBI court di­rec­tive, and of­fered to sur­ren­der. The fallen ty­coon may have sought so­lace in the be­lief that the odds were against his repa­tri­a­tion.

Since In­dia and the UK signed an ex­tra­di­tion treaty in 1992, In­dia has man­aged to get just one na­tional ex­tra­dited, Gu­jarat riot ac­cused Samirb­hai Vin­ub­hai Pa­tel, last Oc­to­ber. Mallya’s case joins a list of 10 other high-pro­file pend­ing re­quests, in­clud­ing that of for­mer cricket czar Lalit Modi, also wanted for fi­nan­cial ir­reg­u­lar­i­ties.

“The CBI will have to sat­isfy the court that there is prima fa­cie a case against Mallya based on ad­mis­si­ble ev­i­dence,” says Ed­ward Grange, part­ner in UK law firm Corker Bin­ning. “This is where In­dia has strug­gled in the past in its ex­tra­di­tion re­quests. They have not been an ac­tive par­tic­i­pant, and when called upon to an­swer the court’s ques­tions, have been slow (if at all) in re­spond­ing,” Grange says.

With the govern­ment now pur­su­ing the Mallya case with vigour, sev­eral changes are afoot. In past cases, the In­dian govern­ment has re­lied on the CPS rather than hire a lawyer of its own. That has changed. A joint team of CBI and ED of­fi­cials, most prob­a­bly ac­com­pa­nied by the solic­i­tor gen­eral or ad­di­tional solic­i­tor gen­eral of In­dia, will leave for the UK within a fort­night to hire a top lawyer.

On Jan­uary 24, 2017, the CBI ar­rested nine peo­ple in the IDBI Bank loan de­fault case. The ar­rested in­cluded King­fisher Air­lines Ltd (KFA) ex­ec­u­tives and of­fi­cials of the public sec­tor IDBI Bank, in­clud­ing the chair­man and MD Yo­gesh Ag­gar­wal. The loans were given in three tranches, in Oc­to­ber and Novem­ber 2009. The case it­self was based on an FIR filed by the CBI in Mum­bai on July 29, 2015.

In it, the CBI charged Mallya and un­known bank of-

A JOINT TEAM OF CBI AND ED OF­FI­CIALS WILL LEAVE FOR THE UK WITHIN A FORT­NIGHT FOR FOL­LOWUP AC­TION, IN­CLUD­ING HIR­ING A TOP LAWYER

fi­cials with crim­i­nal con­spir­acy in the case from 2009. The Rs 900 crore loans, said the chargesheet, were given de­spite the fact that KFA did not sat­isfy the bank’s loan pol­icy, had poor fi­nan­cials, a neg­a­tive net worth and a ‘BB’ rat­ing (mod­er­ate risk of de­fault). Sig­nif­i­cant parts of the loan, the CBI said, were trans­ferred by the air­line to other banks to set­tle debt. A por­tion of this loan was also re­mit­ted out of the coun­try on the pre­text of pay­ment of lease ren­tals and pur­chase of air­craft parts, while Rs 3.45 crore was paid into KFA’s bank ac­count in Lon­don.

For­mal in­ves­ti­ga­tions into these cases be­gan only af­ter CBI ad­di­tional direc­tor Rakesh Asthana took over in June as the SIT chief. Mallya may have fled the coun­try un­der the Modi govern­ment’s watch, but the PMO gave clear in­struc­tions to Asthana that the case for his ex­tra­di­tion must be wa­ter­tight. Rather than wait for the in­ves­ti­ga­tion in all the cases to con­clude, which would have taken months, the in­ves­ti­ga­tion agency pushed for ac­tion in the IDBI case, where the in­ves­ti­ga­tion was com­plete.

Cer­tain sig­nif­i­cant ma­noeu­vres strength­ened the govern­ment’s case against Mallya. In Novem­ber 2015, the State Bank of In­dia (SBI), the largest lender to Mallya (Rs 1,600 crore), de­clared him and two of his group com­pa­nies, KFA and its hold­ing com­pany United Brew­eries Hold­ings, wil­ful de­fault­ers. In March 2016, the SBI joined 16 other banks to ap­peal in the Kar­nataka High Court that the busi­ness­man be ar­rested and his pass­port im­pounded. In a sep­a­rate de­vel­op­ment, the ED also reg­is­tered a case of money laun­der­ing against Mallya in the IDBI case.

While there are strong po­lit­i­cal rea­sons to ar­rest Mallya, from a banker’s point of view, a public ar­rest, ex­tra­di­tion and pos­si­ble pun­ish­ment will set a big ex­am­ple for de­fault­ers, says a se­nior banker who did not wish to be named. “It is time pun­ish­ment is meted out to big de­fault­ers who feel they can take the sys­tem for a ride,” he says.

One of the car­di­nal mis­takes the banks made is to fund Mallya’s dreams to fly even af­ter sev­eral con­sec­u­tive years of losses, re­sult­ing in good money thrown in af­ter bad and the air­line be­ing grounded in 2012 with ac­cu­mu­lated losses of Rs 8,200 crore. Mallya had cre­ated a prod­uct which needed more money to sus­tain it­self than it was gen­er­at­ing. Au­di­tors of Di­a­geo, which took a con­trol­ling stake in Mallya’s United Spir­its Ltd (USL) in 2014, re­port­edly found that Mallya had di­verted Rs 7,200 crore of USL’s funds to the air­line, which again was di­verted else­where. Apart from this, he faces a probe for al­legedly si­phon­ing off over Rs 1,300 crore from group firm United Brew­eries.

The times were to blame too, the econ­omy was boom­ing and public sec­tor banks were in a high lend­ing mode, dis­burs­ing loans to big projects—in many cases with­out ad­e­quate ap­praisal of the busi­nesses. Net re­sult: sev­eral big-ticket loans turned bad. Add to this a le­gal sys­tem which while tough on re­tail bor­row­ers seemed to al­low large cor­po­rates to go scot-free.

The banks are un­likely to re­cover all their money from Mallya. When a com­pany goes into dis­tress, its un­der­ly­ing value gets de­pleted very fast. “Un­less swift ac­tion is taken for re­cov­ery of the as­sets, in such cases what you can ac­tu­ally en­cash is very lit­tle,” says a banker. The value of the air­line fell to noth­ing in a mat­ter of months, he points out. Apart from the Rs 73 crore from the sale of Mallya’s villa in Goa, banks have so far re­cov­ered only Rs 1,200 crore by sell­ing Mallya’s pledged shares and col­lat­er­als. An­other Rs 1,250 crore is de­posited with the Kar­nataka HC. For Mallya’s cred­i­tors at least, his ex­tra­di­tion could be a pyrrhic vic­tory.

OLI SCARFF/GETTY IM­AGES

PTI

DRY DAYS Mallya out­side West­min­ster court af­ter get­ting bail

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