How many organisations turned a blind eye to Vijay Mallya's bad loans
It is no surprise that the self-crowned King of Good Times, Vijay Mallya, still does not get it. “Why am I being made the poster boy for bad loans of banks?” he asks peevishly. Well, because you were immature enough to flaunt your enormous wealth in the faces of India’s poor and your own unpaid employees of Kingfisher Airlines (KA), without any concern for their distress. While you tweeted about Formula 1 and the IPL, you had no word of sympathy for their struggles—not even when the wife of one employee committed suicide! And while you strut around the world and host obscene birthday parties, KA employees, who earned a relative pittance, were listed as ‘defaulters’ by credit information companies for failing to pay their EMIs (equated monthly instalments) on their precious loans. Many will remain defaulters and be forced to borrow from expensive private sources to keep their homes. You also allowed KA to default on crediting provident fund and tax deducted at source (TDS) to the government. This offence alone should have led to your arrest a couple of years ago, if our otherwise draconian investigation agencies were not specifically soft on you.
It is, indeed, true that Vijay Mallya’s bad loans of over Rs7,000 crore are just one big blob in the enormous mass of bad loans—estimated at over Rs8 lakh crore—mostly extended to India’s richest and most privileged people. On 9th March, on discovering that Mr Mallya had fled the country, the Supreme Court of India (SC) issued him a notice seeking a reply in two weeks. His response will probably dictate what happens next; but his skilful manipulation of judicial processes may have finally come to an end. Let us not forget that Mr Mallya was in a big financial mess even in 1990-91; he dug himself out of that hole, thanks to his vast realty assets (including those from new acquisitions) while his liquor business boomed post-liberalisation.
After that experience, Mr Mallya got himself power and near-immunity through a Rajya Sabha seat. He also learnt to manipulate the legal system to his benefit by filing cases in courts and tribunals across India. In May 2012, tax expert Vinod Kothari wrote in Moneylife about a case where commission was paid to one of Mr Mallya’s former wives claiming that she helped the business as a socialite; it was disallowed by the Chandigarh tax tribunal. In another case, money was siphoned from Punjab Breweries, through payment to a clearing and forwarding company which passed on the money as an interest-free personal loan to Vijay Mallya and his wife Samira Mallya (ITA 217 of 2002).
He also won a legal battle to pay himself a guarantee fee of over Rs50 crore for giving a personal guarantee for the loans of Kingfisher Airlines (UB Holdings provided another guarantee of over Rs1,600 crore). Why was this guarantee not ruthlessly invoked? Why has the Securities and Exchange Board of India (SEBI) failed to question KA’s board of directors for pathetic oversight and governance? Is it because it comprised a Union secretary, an ex-chief of a public sector company and SEBI’s own former chairman?
A simple look at Mr Mallya’s bad loan composition screams of crony capitalism. Every large lender is a public sector bank (PSB) starting with State Bank of India (Rs1,600 crore), which is the biggest, IDBI Bank, which controversially lent him over Rs900 crore even after Kingfisher had shut down, and 10 others. There are only two private banks with relatively smaller exposure.
Apart from banks and tax authorities, even the Election Commission of India failed to act on repeated letters from former Union secretary EAS Sarma about Mr Mallya’s false election affidavit. Mr Sarma says that Mr Mallya did not disclose his offshore accounts and vast properties abroad which are routinely written about in the media. This, too, is an offence punishable under the Indian Penal Code and would have ensured that Mr Mallya did not exploit his legislative privilege for access and arm-twisting lenders.
Now that the matter is before a Supreme Court bench, which seems genuinely disturbed at the loot of public funds, Mr Mallya’s manipulations will, hopefully, end and the SC will also be tough on the bankers who are projecting themselves as innocent victims. Making an example of Mr Mallya, and the bankers who bailed him out, will hopefully make other wilful defaulters see the writing on the wall and trigger real change.