Table of Contents
INTRODUCTION
Vijay Vittal Mallya, popularly known as Vijay Mallya, is an Indian businessman and an ex-Member of Parliament (Rajya Sabha). He was born in Kolkata, on 18 December 1955. He can be commonly recalled as the former owner of the IPL cricket team of Royal Challengers Bangalore and the former owner of Kingfisher Airlines.
He expanded his business outside the country in many foreign countries and acquired Berger Paints in his name. He has also been elected as the Member of Parliament two times from Karnataka.
He decided to expand his business of liquor and Airlines but was advised by the company’s members. Without paying any heed to the advice, he sold one of his companies to collect funds for his airline business. He invested all the collected funds in the Airlines, as a result of which his Kingfisher Airlines became the most popular domestic airline in the country.
He also wanted to expand the airlines but the government imposed various restrictions and did not allow it to carry on with international flights. As a consequence of this, he manipulated his own United Breweries company to buy another company going in loss i.e. Deccan Airlines, and merged it with his own airlines but could not make profits as desired and indeed suffered a great loss.
Education
Mallya spent his school and college days in Kolkata. He was a student of La Martinière Calcutta, where he was appointed House Captain of Hastings house in the final year, following which, he went on to be admitted to St. Xavier’s College, Kolkata, where he graduated with an Honours in the Bachelor of Commerce degree in 1976.
Family
Vijay Mallya was born to an affluent business family as a son of the former chairman of the United Breweries Group, Vittal Mallya and Lalitha Ramaiah. Soon after his father’s death, Mallya succeeded his father to become the chairman of the United Breweries Group at the early age of 28.
Vijay Mallya married Sameera Sharma, an air hostess of Air India, in 1986, and their first son, Siddharth Mallya was born on May 7, 1987. However, his first marriage didn’t last long, and soon after they were divorced, Mallya married Rekha Mallya, who is his present wife, in June 1993. He adopted Rekha’s daughter, Leila during the time of his marriage and also has two daughters from his present wife, Leanne, and Tanya.
History
Vijay Mallya was born to humble parents, he never decided to settle for a quiet life like his father. He had soaring ambitions and a desire to exceed them. His journey started with United Breweries, which was already an MNC business conglomerate, comprising over 60 companies.
As soon as he joined the business, he worked hard to grow the business and managed to increase the overall turnover by around 64%, reaching US $ 11 billion in 1998-1999. He was already living a lifestyle of that of kings, being dubbed as the “King of Good Times” that eventually became the tagline of Kingfisher.
In the year 2005, Mallya launched his new airline company, Kingfisher Airlines to further diversify his business, which later on became the cause of his downfall.
How did the Vijay Mallya Bubble Burst?
In order to continue his business, he took heavy loans from various banks but was not paying it back. Many banks declared him bankrupt and did not provide further loans but he continued to take it from different banks using his influential position. Another unethical practice done by his airlines was that they were not paying any PF and salaries to their employees and taxes to the government. With such great losses continuously, he refused to pay the salaries of his employees and shut down his business.
Loans are taken by Vijay Mallya throughout the scam
He took loans from 17 banks in the country (total Rs. 9000 crores) and refused to repay the principal amount as a result of which they filed a court case against him
The various reasons for the failure of airlines could be:
- Bad business strategy
- Failure on the part of management
- High fuel prices
- Recession of 2008
- High cost of operation.
- High ticket prices.
How Banks Gave the Loan to Kingfisher?
Banks give loans based on the collateral of the same amount given in the loan. But these banks gave loans to Vijay Mallya on items like office stationery, boarding pass printers, folding chairs, computer screens, and wood tables as collateral. The bank’s willingness to provide loans based on current assets as capital created suspicions among the bank officials who passed their loans.
Also, the loans given by SBI were on the trademarks and Goodwill of Kingfisher Airlines kept as collateral.
SBI chairman OP Bhatt was involved in providing such fraudulent loans to him.
Banks lost their money because of the officials who granted and processed the loans, without checking all the collaterals and taking securities that were to be followed as per rules and regulations. They came under the pressure of their seniors who were bribed by Vijay Mallya. Also, he took the help of his political connections to process such big loans.
The loans taken in the name of Kingfisher Airlines and UB group weren’t used for its actual cause. Banks never knew that the loans taken by Vijay Mallya were laundered overseas to various tax havens. All this was done with the help of shell companies.
Mallya would have the bank loans moved to these shell firms, which were set up with sham directors for this reason. These companies did not have any source of income and weren’t active at all. The loans taken were only to further his agenda.
The directors placed in the shell companies would act according to the command of Mallya. The money was transferred to seven different countries including the United Kingdom, the United States, Ireland, Switzerland, France, and South Africa.
Furthermore, Vijay Mallya diverted the money he got from the loans to fund his IPL team Royal Challengers Bangalore. He bought the most expensive IPL team RCB at INR 476 Crore with money of public sector banks. Around 77 payments were done by the SBI bank account of Kingfisher Airlines to the IPL Vendors. He had spent massive amounts lavishly over cricketers from the borrowed money of the banks.
The various charges on Vijay Mallya and the legal provisions
The earlier conspiracy was a civil wrong but later it was made a criminal wrong on the basis of the gravity and nature of the cases. Section 120A of Indian Penal Code, 1860 deals with the offence of criminal conspiracy. Originally, it was punishable in 2 forms:
- By way of abetment.
- Conspiracy in certain offences.
An illegal act or omission was necessary to convict a person in the former but in later if a person is a member of the conspiracy, it was seen as sufficient ground to convict a person for criminal conspiracy.
However, with the amendment in the Code, Section 120A and Section 120B were inserted. It now deals with the offence of criminal conspiracy as
- Substantive offence
- Form of abetment under Section 107 of Chapter V.
- Wage or attempt to wage war against the Government of India (Section 121A).
In the case of State (C.B.I/S.I.T) v. Nalini (1971), it was held by the Apex Court that an agreement between two or more persons for commission of illegal acts amounts to criminal conspiracy. It is not necessary to prove that all the people accused of such crime gave their explicit consent in the conspiracy and participated in it.
Section 120A
- Agreement between two or more persons for a conspiracy;
- The agreement should be made for the purpose of:
- Illegal act
- A legal act to be done by illegal means.
Section 120B of the code gives the punishment for the offence of criminal conspiracy. If the conspiracy was done for the commission of serious offence, the person would be punished with death penalty, life imprisonment or rigourous imprisonment for 2 years or more, which is decide from case to case.
If they conspired to commit an offence which is punishable with fine then the punishment would be 6 months imprisonment or fine or both. Vijay Mallya has been accused of conspiring to defraud the members of the company and his employees along with various banks in the country.
Cheating
Section 420 of Indian Penal Code, 1860 deals with the offence of cheating and delivering property with dishonest intention. The established principle for the offence of cheating is that in order to convict a person for the offence of cheating, it is not necessary to show that he had dishonest intention when he made a promise to do something. But if he is not able to fulfil the promise, it does not merely mean that he committed the offence of cheating as dishonest intention must be there to prove the offence.
The Section provides that the punishment for the offence of cheating is imprisonment upto 7 years and fine. Vijay Mallya had the dishonest intention to defraud and thus, is accused of cheating.
- False representation made by the accused.
- Knowledge that the representation was false.
- Dishonest intention to deceive the person
- Induced a person to do something or omit to do something, which he would not have done.
Criminal misconduct and money laundering
If a public servant commits the offence of criminal misconduct in order to gain any monetary advantage or valuable thing by using his influential position and abuses his powers, he will be held liable under Section 13 of The Prevention of Corruption Act, 1988. He will be punished with imprisonment upto 7 years or fine or both.
Vijay Mallya used his position of Member of Parliament (Rajya Sabha) to obtain loans from the banks even when he was declared bankrupt by various banks. This shows that he used his influential nature and abused his power to gain monetary advantages and was thus charged under this Section.
He was also charged under Section 3 and 4 of Prevention of Money Laundering Act, 2002 for the fraud of money. Section 4 provides the punishment for the offence which is rigorous imprisonment extending upto 7 years and minimum 3 years along with fine.
SARFAESI ACT, 2002
This Act enables the lenders of the loan to recover their amount and interest by selling off the property and assets of the person who has taken the loan. In the present case, the lenders in various banks were permitted to recover the principal amount and interest by selling the assets and properties of Vijay Mallya’s company Kingfisher.
The auction was done through electronic mode but the recovery could not be done due to no buyers for the assets. The real estate market was already struggling and thus, the lenders could not find any buyer who could buy any asset or property of the company because of higher prices.
Extradition laws
Extradition is a process through which a country requests another country where the fugitive offender is hiding, to send him back to his own country. The laws are usually governed by treaties and relations between the countries. It is governed by the Extradition Act of 1962. The concept is based on 3 other principles namely, Dual criminality, Speciality and Political influence. However, these laws are not applied in certain cases. These are:
- If the principle of dual criminality cannot be applied or requirements cannot be fulfilled.
- If the crime is a political crime, extradition of such offenders is generally refused.
- If the country has strict human rights, then it can refuse the extraditionj on the ground og violation of these rights and torture to the offender in his country’s prison, as seen in the present scam.
- If there is no extradition treaty between the two countries, the foreign country where the offender escaped, can refuse his extradition.