Advisory For ED

Enforcement Directorate and the Vijay Mallya case

Vijay Mallya, who escaped to the United Kingdom, has been in demand from India for fraud of 9000 crores that was loaned by different banks to Kingfisher Airlines (KFA), owned by Vijay Mallya. Vijay Mallya was CEO, chairman and controller of Kingfisher Airlines Ltd. The Enforcement Directorate has filed one of its longest chargesheet, of approximately 5300 pages, against Vijay Mallya, Kingfisher Airlines Ltd and United Breweries (Holding) Ltd under the Prevention of Money Laundering Act^[1] and hence the famous Vijay Mallya Case.

Introduction to Vijay Mallya

Vijay Mallya is a businessman of India and presently dealing with Vijay Mallya case as an accused of Money Laundering and fraud in our country. He has committed fraud with 17 Indian Banks of approximately Rs. 9000 Crores. 

He has been Rajya Sabha Member and was part of United Spirits as an ex-chairman. He has also served in Sanofi India and Bayer CorpScience as Chairman. Vijay Mallya inherited the UB Spirits from his father, and soon it became our country’s largest spirit maker. UB Spirits group is known for Kingfisher Beer Brand, and Mr Mallya is currently serving United Breweries as Chairman.

Out of all the companies he has connected with, Kingfisher Airlines Ltd has been most closely connected to him, but it has become a defunct company because of this Vijay Mallya case. 

Vijay Mallya was already facing pressure from the lenders, and then Kingfisher Airlines collapsed, so he fled to the United Kingdom in the year 2016. He came into the eyes of the Enforcement Directorate (ED), Central Bureau of Investigation (CBI), Serious Fraud Investigation Offices (SFIO) and Securities and Exchange Board of India (SEBI) after the failure of Kingfisher Airlines Limited and defaulted a loan of around Rs.10,000 crores from maximum numbers of Indian banks during 2013.  

Brief facts of Vijay Mallya case

Vijay Mallya became the Chairman of UB Group at the age of 28, and then in the year 2005, he started an airline company called Kingfisher Airlines Limited. But this Airline company turned out to be the biggest failure. Kingfisher started losing because of the rise in oil pricing, and in coming years, it started registering losses of 50% of its net worth. With the rapid increase in debt burden, it was impossible for Kingfisher Airlines limited to continue its business, and finally, it was grounded in 2012. 

There was an investigation started against the Airline for financial irregularities and suspected diversion of funds. And finally, on 2nd March 2016, the bunch of Indian Banks that had been defrauded by the Vijay Mallya and his Kingfisher Airline Limited moved to the Debt Recovery Tribunal against him. This made Vijay Mallya fly to another country, i.e., the United Kingdom (UK), on the same day. Then in January 2019, under the Fugitive Economic Offenders Act, Mr Vijay Mallya was declared a fugitive economic offender. After this, the case became famous, and so now it is popularly known as the Vijay Mallya case. 

Since that time, the Indian Government has been trying to extradite him from the United Kingdom, and in February 2019, the Home Secretary approved the said extradition. Vijay Mallya filed an appeal but even the UK. High Court has agreed to his extradition after three years long hearing. There is a confidential case pending in London High Court that is delaying the extradition, and so is the delay in the present Vijay Mallya Case. 

Vijay Mallya is on bail now on an extradition warrant issued on 18th April 2017 by Scotland Yard. 

ED’s take on Vijay Mallya case

The Enforcement Directorate has booked Mallya on the basis of an FIR filed by CBI in the Vijay Mallya case. It has filed a chargesheet against Vijay Mallya under the PMLA after investigation.

The ED has transferred assets worth 8,441 crores to Indian banks that have been victimized by the Vijay Mallya, Nirav Modi and Mehul Choski on 23rd June 2021. ED further clarified that Mallya has used dummy companies for rotation and siphoning off the funds given by the banks of India.

The ED has seized the assets and shares of the defaulter company so that banks can realize their debt by selling those shares. It has transferred assets as per the order of the Special Court constituted under the Prevention of Money Laundering Act. The ED further helped the banks sell United Breweries’ shares and recover Rs. 1357 crores.  

ED, at the end of the year 2020, seized the property located at 32 Avenue FOCH of Vijay Mallya in France in relation to the Vijay Mallya case. The net worth of this property was 1.6 million euros in France. The property was actually seized by French authorities, and they have taken this action as per the request of ED. In India, the value of this seized property will be equal to 14 crores.

The Chargesheet filed by ED in Vijay Mallya Case

The chargesheet of the Vijay Mallya case stated that Mr Mallya had used his Kingfisher to launder an amount of Rs. 9990 crores. The chargesheet further stated that he had entered into a criminal conspiracy and cheated most of the bank by fake invoices and misrepresentations in converting the remittances. He has been accused of intentionally and knowingly doing crimes related to money laundering, such as generating the proceeds of crime of property and also criminal activities or offences scheduled under the definition clause, that is under section 2(1)(u) of the Prevention of Money Laundering Act. The United Breweries has been charge-sheeted for knowingly involving itself in an offence related to money laundering as it has given corporate guarantees to many financial institutions or banks in case of default of payment of the loan by the Kingfisher Airlines Limited, and in the year 2014, it became wilful defaulter. 

Vijay Mallya has opted the way to siphon off the money to foreign countries by over-invoicing the lease amount and other payments. He invoiced these import services by at least 60%. He also used to transfer funds from his foreign bank accounts such as HDFC, London and other banks by providing false declarations about the purpose of remittances and diverting these amounts to Force India Formula One Team Ltd, owned by Waston Ltd. 

The chargesheet stated that the main banks of India which were the victim of such fraud by Vijay Mallya and Kingfishers Airlines Limited in this Vijay Mallya case are State Bank of India, Bank of Baroda, Corporate Bank, Federal Bank, IDBI, Axis Bank, ICICI Bank, Indian Overseas Bank, Punjab and Sind Bank, Jammu & Kashmir Bank, Punjab National Bank, State Bank of Mysore, United Bank of India and UCO Bank, also the JM Financial Asset Reconstruction Co. Pvt Ltd. 

Mallya has concealed the facts related to his assets and diverted the monies to his son Siddharth Mallya and daughters Leanna and Tanya Mallya. 

Mallya’s reply to ED’s allegations

Vijay Mallya, in his reply to the application of ED at the special court of PMLA, said that ED is resisting him from paying the debts to the public sector banks which are upon him. He further said that ED had confiscated his assets and property, and that is against the public interest.

When the ED declared him a fugitive economic offender, he objected to it and said that he had been making efforts to support extradition proceedings and had submitted himself to the jurisdiction and courts of the UK. He said it was falsely contended by ED that he is refusing to come back to India.

Findings of the Vijay Mallya Case

On 14th July 2017, a final judgement came in the Vijay Mallya case that the allegations made by the Indian banks against Mr Mallya are correct, and he has been guilty of contempt as he has not paid the dues of 9,900 crores to the banks despite so many notices. He was also made accused of not disclosing his assets and trying to dispose of them for the purpose of defeating the court proceedings.  

On 9th May 2017, the Supreme Court issued an order on a plea by the State Bank of India followed by all the banks that Vijay Mallya had allegedly transferred USD 40 million received from a British firm Diageo to his children to violate the judicial orders. Vijay Mallya had filed a plea for seeking review of this order in the Vijay Mallya case in the year 2020, but the Supreme Court dismissed it.

In the year 2017, the Insolvency and Companies Court of the UK. High Court has declared Vijay Mallya bankrupt, and he has to give all his debit cards, credit cards and all remaining assets to the bankruptcy trustee; this trust will inspect and evaluate his assets to pay the debts of Indian banks. 

Current Scenario of the Vijay Mallya Case

In November 2021, the Supreme court asked the Central Government to file a report related to Mallya’s extradition status. The apex court also started proceeding with the Vijay Mallya case as per the judgment that came in July 2017. 

On 10th February, a two judges bench comprising Hon’ble Justices S. Ravindra Bhatt and U. U. Lalit of the Supreme Court of India gave him a final opportunity to appear in the court himself or through his lawyer in the matters related to the concept case filed by the banks, as he was found guilty. The Hon’ble Bhatt, J. said that he has been avoiding the court proceeding since so many times, but if he does the same again, then the court will pronounce a sentence in absentia. Adding to this, Hon’ble UU Lalit, J. stated that he had been given multiple opportunities, and now it has become intolerable for the court. 

Tushar Mehta, Solicitor General of India, made it clear that it is not the Indian Government to look out that there is a case pending in the UK against Mr Mallya; rather, it should be looked upon by the UK government because it is delaying the extradition process for the ongoing Vijay Mallya case in India. UK Government has told the Indian Government that the pending case is related to something confidential, and the same cannot be shared. 

Further, the bench stated that he had been given enough opportunity by complying with the principles of Natural Justice since 30th November 2021. 

Tushar Mehta informed the Supreme Court on 23rd February 2022 that Rs. 18000 crores have been returned by the ED to appropriate banks in the Nirav Modi, Mehul Choski and Vijay Mallya cases. 

Recently, Vijay Mallya was asked by the UK. High Court to evict the luxury Central London Home where he has currently occupied. This ruling was related to the dispute with the Swiss Bank USB.

The three judges’ bench of the Supreme Court, comprising of justices UU Lalit, S Ravindra Bhat and P S Narsimha, reserved judgement on the quantum of sentencing in the Vijay Mallya against the fugitive businessman. 

On 15th March 2022, it was notified by the central Government that Rs. 7,927 crores had been realised by a consortium of banks led by SBI by the sale of all the assets handed over to them by the ED. 

On 23rd March 2022, the Government has told that the assets of a net worth of Rs. 19,111 crores in Nirav Modi, Mehul Choski and Vijay Mallya cases have been attached under the Prevention of Money Laundering Act till now and out of which 15,113 crores have been submitted to the public sector banks. 

Conclusion

The Vijay Mallya case became famous because he flew to the United Kingdom after the consortium of Indian banks filed a plea of fraud and money laundering against him. His Airline company, the Kingfisher, became inactive after being in debt of a loan of 9,000 crores approximately. After the closing of the Kingfisher Airlines, an investigation started against it relating to its assets which came with a report that the fraud had been done. Another company, where he was chairman, UB, was declared as a wilful defaulter in the year 2017 by UK high court insolvency board when it defaulted on paying the debt amounts of the Kingfisher as a guarantor. The ED has filed one of its longest chargesheet against the accused Vijay Mallya after thoroughly investigating the case. ED has also seized the assets so that the public sector banks can realise their debts. Till now, ED has seized different assets and properties of Vijay Mallya though he has still not been extradited from the UK. The ED has declared him a fugitive economic offender. Vijay Mallya case is also gaining popularity because even after passing the extradition order, the UK government is not realising him and telling the Government of India that there is a confidential case going in London court related to some legal issues which cannot be shared. But recently, the Supreme court has reserved the quantum of sentencing against him and stated that the court has given him so many times and waited enough for him enough to appear personally or through his lawyer.

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