3. This Power Point Presentation is talked about money-
laundering case of Vijay Mallya.
A sincere effort have been made to scrutinize fraudulent
financial practices by Vijay Mallya to save his most
ambitious venture Kingfisher Airline.
The large part of Mallya’s default of over Rs.9000 crore
rest with his lenders, especially banks and that to the PSBs.
The unscrupulous businessman as well as the
consortium(board of directors) of banks led by State Bank
of India.
Moves of the government.
Regulatory bodies and the banking systems are also
analyzed to know the current status and possibilities of
recovery of dues.
4.
5. VIJAY MALLYA The KING OF GOOD TIMES, a
beer baron has always been on news. All
thanks to his over the top extravagant
lifestyle, Mallya & his companies have been
involved in financial scandals, and
controversies since 2012.
6. BORN ON 18thDECEMBER, 1955 in BANTWAL,
KARNATAKA.
FATHER’S NAME – Late Shri. VITTAL MALLYA
MOTHER’S NAME – Smt. LALITHA MALLYA
Educational Qualification –
La Martiniere for Boys School in KOLKATA ( WEST
BENGAL)
B.Com Degree in St. Xavier’s College, KOLKATA.
Doctorate of Philosophy in Buisness
Administration, Southern California University for
Professional Studies of Santa Ana California in
1997.
7. UNITED BREWERIES GROUP.
FOCAL BUSINESS AREAS ENCOMPASS
1. ALCOHOLIC BEVERAGES
2. LIFE SCIENCES
3. ENGINEERING
4. AGRICULTURE
5. CHEMICALS
6. INFORMATION TECHNOLOGY
7. AVIATION
8. LEISURE
8. Vijay Mallya became the Chairman of United
Breweries Group in 1983 at the age of 28.
Since then, the group has grown into a multi
national corporation of over 60 companies.
Mallya’s franchises, mergers, expansions all
proved effective until 2005.
When he established KINGFISHER AIRLINES
that landed him in big trouble.
9. Under Vijay Mallya’s leadership, UB Group
becomes world’s second largest liquor maker
selling 55 million cases, after Diago, a British
liquor giant, which sold 91 million cases in
2005. By 2007, he had grown his father’s
modest business empire into a corporation
with revenue of $2.1 billon. Banking on his
business foresight, Vijay Mallya has made a
record of sorts by entering and exiting more
than 34 businesses (ref. table 1) in as many
years.
10. Sr.
No.
Company Name In Out
1 United Communications Ltd 1985 2000
2 Pizza King 1986 1989
3 Berger Paints 1988 1996
4 Best & Crompton 1989 1995
5 UB Mysore Electro
Chemicals Batteries Ltd
Inherited 1991
6 Vijay TV 1994 1999
7 Kissan Products Ltd. Inherited 1994
8 Carbonated Beverages Ltd 1970 1990
9 Asian Age Holdings Ltd and
UB Publications Ltd
1997 2005
10 Hindustan Polymers 1961 1997
11 United Spirits Ltd. Inherited 2012(sold majority
11. Sr.
No.
Company Name In Out
12 Mines Exploration Pvt. Ltd.
and UB Mining Ltd.
1995 1999
13 UB Petrochemicals Ltd. Inherited 2001
14 UB Air 1990 2012(Dormant)
15 Shilton Hotels Pvt. Ltd. Inherited Merged in UB
holdings
16 UB Hoppeckke Energy
Products Ltd.
1989 2001
17 Face One Model Pvt. Ltd. Inherited 2008
18 UB Pharmaceuticals Ltd Inherited Not known
19 Dominion Chemical
Industries Pvt. Ltd.
Inherited Not known
20 Carews Pharma and Optrex
Ltd.
Inherited Not known
12. Sr.
No.
Company Name In Out
23 Blue Pearl Internet Group 1993 2002
24 UB Transit Systems Pvt. Ltd. 1994 2001
25 UB Healthcare Ltd. 1990 2015
26 UB Resorts Ltd. Inherited 2001
27 City Properties Maintenance
Company Bangalore
2007 Not known
28 Masonelian India Ltd. 1983 1997
29 UB Electronics Instruments
Ltd.
1985 2001
30 Kingfisher Sports Gear Pvt.
Ltd.
1999 2002
31 Sotiba Garments Inherited Not known
32 United Spirits Ltd. Inherited Not known
33 Cardboard Industries Ltd. 1998 Not known
13. One of his most ambitious ventures was KFA, a
full service airline, launched in the year 2005.But
KFA did not take off well and started bleeding
money. The main reasons were:
Provided high-end services (like baggage valet and free
giveaways) but charged passenger mid-to-low-end
prices.
Acquired a loss-making Air Deccan at high price. Lack of
synergy between two.
Recorded high prices of aviation turbine fuel, high taxes
on the same.
Despite Mallya’s connections, airline was outmaneuvered
in terms of navigating the regulatory landscape.
Style over substance, a race to grab No. 1 slot as per
market share rather than focus on profitability.
18. Kingfisher, today owes over Rs. 9000 crore to
its lenders, employees and suppliers. This
includes borrowing of Rs. 6963 crore from
total 17 banks, of which major loan is from
PSBs.
He has reportedly diverted Rs.7200 crore of
United Spirit Ltd.’s (USL) funds to the airline,
which was again diverted elsewhere.
Apart from this, he has also allegedly tapped
off over Rs.1300 crore from his group firm
United Breweries (UB).
Despite the huge financial crisis and the
grounded airline, Mallya continued to be his
flamboyant self.
19. Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest
Act, 2002. Banks utilize this act as an
effective tool for bad loans ( NPA) recovery.
It is possible where non-performing assets
are backed by securities charged to the Bank
by way of mortgage or assignment.
The SARFAESI Act, 2002 gives powers of
“seize and desist” to banks.
20. Banks can give a notice in writing to the
defaulting borrower requiring it to discharge
its liabilities within 60 days. If the borrower
fails to comply with the notice, the Bank may
take recourse to one or more.
The SARFAESI Act also provides for the
establishment of Asset Reconstruction
Companies (ARCs) regulated by RBI to acquire
assets from banks and financial institutions.
21. Default means non-payment of a loan availed
by a borrower. A wilful defaulter is an entity
or a person that has not paid the loan back
despite the ability to repay it.
Mainly there are 4 conditions to be a Wilful
Defaulter
22. According to the hypothecation deed signed between SBI and
Kingfisher Airlines on August 10, 2010, SBI was given ownership
of all trademarks and goodwill if Kingfisher Airlines failed to
repay its debts.
These included Fly Kingfisher (label mark & word), Flying Models,
Fly The Good Times, Funliner & Kingfisher (label mark).
As on January 31, 2014, KFA owes banks Rs 6,963 crore. All the
banks had classified the loans as non-performing. Some banks,
including SBI and United Bank of India, have declared Mr Mallya a
wilful defaulter.
As per the notice, the borrower is Kingfisher Airlines and
guarantors are United Breweries (Holdings) Ltd and Vijay Mallya.
UB Group chairman Vijay Mallya, whose grounded Kingfisher
Airlines Ltd has not returned Rs.9,100 crore to a consortium of
banks led by State Bank of India, left for the UK on 2 March.
23. Kingfisher Airline Chairman Vijay Mallya has
offered to pay bank Rs. 4000 crore as partial
settlement of the carrier debts.
He also indicated the Supreme Court that the
atmosphere in India was to vitiated for him to
immediately return.
24. Banks so far have managed to sell about 4
lakh shares of United Spirits for Rs 104 crore
last year.
The lenders have recovered around Rs 1,600
crore from their original exposure of Rs
6,900 crore by selling pledged shares and
other monetisable collaterals.
Bankers led by SBI had sought bids for
movable assets — primarily vehicles and
assets related to the airline business — from
prospective buyers.
25. Among the medium-sized banks, Bank of India is
owed Rs 308 crore. The bank was mortgaged all
the current assets of the airline. It included items
like air conditioners, tractors and monetarily
unsubstantial items like folding chairs.
The SBI-led lenders consortium had taken over
the Kingfisher House near city airport in February
2015 worth around Rs 150 crore, after winning
the case in the local court.
They have also taken over the Kingfisher Villa in
Goa, worth around Rs 90 crore.
26.
27. Kingfisher House, measuring over 17,000
square feet in Mumbai's suburban Andheri
locality, which was given as a personal
guarantee by Mallya. The property was
originally hypothecated to Punjab National
Bank in 2010 and Kingfisher Airlines owes the
bank Rs 290 crore.
28.
29. It is mentioned that a various loopholes have come into
picture in regards to the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act, 2002 while dealing by the banks with a
major loan default case of Kingfisher Airlines and its
chief,Vijay Mallya.
The Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest (Sarfaesi) Act, a 2002
law, empowers banks to attach assets of defaulters.
In the Mallya case, the banks had moved the DRTs(Debts
Recovery Tribunal) in 2012. There have been at least 20
cases pending and hundreds of hearings and
adjournments at different DRTs, high courts and the
Supreme Court.
Fast-track courts too are needed in India to take these
cases to closure fast.
30. The assets specially the immovable properties being
disputed themselves do not attract buyers which
eventually decreases their value and keeps the banks
hanging and they are not able to recover their money.
Poor coordination among public sector banks (PSBs) is also
the main reason for the rise in their non-performing
assets,and it is necessary to direct them to join hands and
mandatorily seize the assets of “wilful and hardcore
defaulters”.Incoherency in Impounding of assets against
wilful and hardcore defaulters remains primarily because
of lack of coordination among the bankers,” which negates
the purpose of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act
(Sarfaesi Act), 2002.
While asset reconstruction companies (ARCs) have come
up, there is more supply of restructured assets than there
are buyers. The ARCs also pay very little against the
securitised receipts issued by them and consequently
there is no market for these receipts.
31. March 2016 :- The Enforcement Directorate of
INDIA also filed money laundring case against
him for allegedly sending abroad Rs. 900 cr.
Which was loaned for his airline.
June 2016:- PMLA(Prevention of money
laundring act) court declared mallya of
Proclaimed offender on the base of loan default
case.
April 2017:- Mallya was arrested by UK(United
Kingdom) Police extradition unit,on behalf of
Indian Authorities on base of accusation of fraud.
May 2017:- The supreme court of INDIA found
Mallya guilty of contempt of court & Court
ordered him to appear on 10th july.
32. The CBI had last July registered the case under
Section 409 (criminal breach of trust) read with
Section 120 B (criminal conspiracy) of the Indian
Penal Code and other provisions of the Prevention of
Corruption Act against unknown IDBI officials
pertaining to abuse of office to allegedly extend
favours to Mr. Mallya’s Kingfisher Airlines.
The bankers and KFA executives accused were
arrested under the Prevention of Corruption and
Criminal Conspiracy Act, Sections 13 (1) ,13 (2) and
420 of the Indian Penal Code, according to the charge
sheet. According to CBI, the bank officials entered
into criminal conspiracy with the KFA executives for
“misutilisation, misappropriation and diversion of
funds”.
33. CBI case on IDBI Bank loan to Kingfisher
Airlines:- Prevention of Corruption Act, 1988.
Enforcement Directorate case on money
laundering
Service tax evasion case
Provident fund investigation
GMR Hyderabad Airport cheque bounce case
AAI case
Case related to non-payment of TDS
Debt recovery tribunal case
34. 1) Did the government act in haste by revoking
Mallya’s passport even before gathering
evedence in the case?
2) Does the ED(Enforcement Directorate)
have strong evidences against Mallya that
would stand in the court of law?
3) On what Basis did the RBI even clear the
restructuring of Kingfisher?
4) How will the Banks recover their full money?
35. There are several other accounts where banks have been
struggling for years to recover money and the chances of
recovery is almost nil.
Mallya’s case is unique in the Indian banking industry ,the
government, legal system in many ways. It is both shocking and
demanding that an individual has successfully managed to take
some 17 banks for a ride.
Need to amend The SARFAESI Act.
Banks acting as charity house for lending loans to Mallya calls
people to question the credibility of authorities involved in credit
appraisal process.
The two major tools the regulators have introduced so far are
‘wilful defaulter tag’ and most recently the provision for
‘Strategic Debt Restructuring (SDR)’ power for banks to acquire
controlling stake in the companies, which fail to revive.But even
if banks apply these provisions on loan defaulters, court's
intervention prevents or delays any swift action by banks,
diminishing lenders' ability to act.
36.
37. Jayashee P Upadhyay, Vishwanath Nair, Bidya Sapam, “Mallya case: Sebi
probing allegations of round-tripping of USL shares”,
http://www.livemint.com, March 18, 2016
Dinesh Unnikrishnan, “A Mallya case study: Judiciary shouldn't play
spoilsport when banks deal with crony-raj”, http://www.firstpost.com,
June 11, 2015
PTI, New Delhi, “Vijay Mallya loan default case: Sebi to crack whip on
wilful defaulters”, http://www.financialexpress.com, March 11, 2016
PTI, New Delhi, “Vijay Mallya vs law: Sebi widens probe, finds prima-facie
lapses”, http://www.hidustantimes.com, March 20, 2016
ET Bureau, “Sebi bars wilful defaulters from markets, posts at listed
firms”, http://www.economictimes.indiatimes.com, March 12, 2016.
“From bang to bust: The Kingfisher story”, www.indianexpress.com
Pulapre Balakrishan,“Lessons from the Mallya case”,
http://www.thehindu.com, April 18, 2016.
