The flamboyant Vijay Mallya is in the news again, after the third arrest in his lifetime and a quick bail. The only time he spent a night in custody, way back in 1985, was in connection with the acquisition of a stake in Shaw Wallace through some dubious deals overseas. That was at the height of the draconian Foreign Exchange Regulation Act (FERA), so badly misused by government ministers and bureaucrats to victimise, torture and extort from business and industry, that it had to be defanged as part of India’s economic liberalisation.
That Indians are notorious for the vast wealth transferred to Swiss Banks is testimony to our extraordinary corruption levels. In 2005, Mr Mallya became the official owner of Shaw Wallace and merged it with United Spirits.
Let us look at how Indian investigation agencies are likely to fare in the UK court when Vijay Mallya’s extradition trial begins next month. Their success depends on presenting an ironclad case with all the evidence they can gather. Will that happen? For many decades now, industrialists in the dock have routinely influenced investigation agencies to present weak cases that cannot back up their charges. This time around, there is enormous pressure on the government to walk the talk on recovering black money and loans from defaulting industrialists. Mr Mallya’s case covers both categories. He was re-arrested on 3rd October, after the enforcement directorate (ED) followed up the Central Bureau of Investigation’s (CBI) attempt to seek his extradition.
It has filed a 5,000-page charge-sheet alleging that Mr Mallya had diverted over Rs3,000 crore lent by a consortium of 17 banks through 13 ‘multi-layered’ shell companies by creating fictitious invoices and inflated bills. These funds were allegedly transferred to several countries. Mr Mallya has called the charges wild and baseless. Meanwhile, it is important to remember that he has been formally charged only for defaulting on a Rs900-crore loan from IDBI Bank. Since he has been declared a proclaimed offender, investigation agencies have reportedly confiscated his unpledged shares worth around Rs4,000 crore and had them transferred to the Central government.
Are the latest charges enough to get an extradition? Mr Mallya is a skilled litigator and the record of Indian enforcement agencies is fairly pathetic; their charge-sheets are notorious for exaggeration and falsehoods that fall apart in court. Even today, with the country’s prestige at stake, there is no attempt to gather all possible evidence against Mr Mallya. Here is a case study on the selective approach of the Securities and Exchange Board of India (SEBI)) and its complete lack of accountability to people or Parliament.
On 2 February 2017, Arvind Sawant, member of Parliament (MP) from Mumbai (south), belonging to the Shiv Sena, wrote a letter to the prime minister captioned Deliberate and mischievous delays by SEBI (Mr UK Sinha) in probing Vijay Mallya for ‘round tripping’ despite specific information/ inputs received from Financial Conduct Authority of the UK (emphasis his).The letter exposes how two former SEBI chairmen have failed to act on explosive information received from the Financial Conduct Authority (FCA, UK) in 2008-09. And, they seemed disinclined to investigate even when there is nationwide outrage over Mr Mallya’s defaults and escape to London.
Mr Sawant writes that Mr Mallya diverted funds borrowed from banks to illegal foreign bank accounts and particularly to the London wealth management desk of Union Bank of Switzerland (UBS). He says that SEBI has received specific inputs about this from the FCA in 2009 in the form of an email dump of internal correspondence of UBS. This included information about Mr Mallya’s stock market transactions and a list of six bank accounts of Mr Mallya in UBS. These are: 364567 Highland Trading, 369939FG-Personal Account, Birchwood Hills (389458) Plc.; Suncoast Valley (389459) plc; Bayside Inn (389460) plc; Venture New Holding (138154).
The letter goes on to say that Vijay Mallya made a profit of $5.4 million from the purchase of 633,330 and sale of 408,333 shares on 24 May 2007. The FCA email had apparently provided the high, low and closing price of certain shares on a specific day which, on cross-checking, turned out to be those of United Spirits, a UB group company. This information pertained to 2006-08 and was received by SEBI in 2009 when CB Bhave was the chairman. One may recall that Mr Bhave had followed up the FCA inputs with regard to UBS and the Anil Ambani group. The matter was mysteriously settled through a sketchy consent order after the group paid up Rs50 crore and senior officials, including Anil Ambani, were barred from the market for a year as part of the deal.
We learn that while the FCA provided extensive information about the Anil Ambani group, there were details with regard to six other industrialists, which have not been investigated. Mr Sawant alleges that SEBI even misled the Bombay High Court and the SIT (special investigation team) investigating black money and asks for stringent action against those responsible for burying the issue.
Remember, in August 2009, FCA had imposed a £8-million penalty on UBS and also penalised four of its officials of whom three were Indians. The four were: Andrew Johnson Cumming, Jaspreet Ahuja, Sachin Karpe and Laila Karan. The last three orders were passed in 2012 based on disclosures of an elaborate scheme run by the employees to launder money. If these employees were laundering funds for Indian industrialists, why has the information not been handed over the SIT on black money?
Let us look at the basis of Mr Sawant’s allegations against SEBI and its then chairman UK Sinha. In August 2013, The Economic Times published an article which said that the FCA had provided inputs to SEBI on a number of promoters in the “liquor, mining, real estate, media and entertainment and infrastructure.” Soon after this, in October 2013, one Ramsagar Yadav filed an application under the Right to Information (RTI) Act seeking information on how corporate houses other than the Anil Ambani group about which the FCA had provided inputs and the action taken with regard to them.
On 25 November 2013, SEBI responded saying, “Information received from FCA is in confidence from foreign government/regulatory agency. Further, the information is held by SEBI in its fiduciary relationship.” Dr Anil Kumar Sharma, who signed the SEBI letter, claimed that such information was exempt from disclosure under the RTI Act. But this response clearly indicates that SEBI had, indeed, received information from the FCA. When nothing further happened, Indian Council of Investors filed a public interest litigation (PIL No 16 of 2014) in the Bombay High Court to direct the regulator to investigate the FCA inputs on UBS.
SEBI’s official response, in an affidavit to the court, was surprising. It flatly denied having received information other than that on the Anil Ambani group from the FCA. It also said that newspaper articles “cannot be the basis for levelling allegations” against SEBI. However, the PIL was withdrawn on 5 February 2015 after SEBI flipped its position and submitted that investigation into the issue had commenced. Did it really happen? Nobody knows, since SEBI is back to stonewalling queries. Who was SEBI protecting, under two different chairmen, and why? We have specific information about internal notes of those who have studied the FCA information.
SEBI is an independent regulator with enormous powers; can it get away by not sharing information received by it from international regulators under global treaties? What needs to be done to ensure that SEBI joins the PM’s effort to bring back black money? If the government cannot ensure action and investigation by its regulators, then its talk about loan recovery and the war on black money will continue to be mere rhetoric to fool the people.
On the other hand, a small man that defaults on his EMI for vehicle gets bouncers on his door step to take possession of the vehicle.
Mera Bharat mahaan?
where the Indian extradition treaty has not reached yet. But he did not make any such move and enjoying life with full vigour for which he is known "A Man Of Good Times".As for the Indian Intelligence agencies, less said the better.In broad day light and with a photo news item in Indian media , he had boarded a plane to London within knowledge of every Indian. Like Lalit Modi he can not be called a "Bhagoda"