Kingfisher Airlines and its founder, Vijay Mallya, have taken a lot of heat for the Kingfisher Airlines closure debacle. However, Kingfisher Airlines isn't the first Indian company to go bankrupt, and it won't be the last. The failure of Kingfisher Airlines was not solely due to Vijay Mallya's omissions and commissions, though they might have been a major reason. Kingfisher Airlines was brought to its knees because of a series of bad decisions coupled with a hyper-competitive market environment and a cyclical downturn in the airline industry almost globally. Another big mistake Mallya made was to attempt to keep Kingfisher Airlines afloat for much longer by raiding his other companies’ treasuries. However, one might say that failing in one business and attempting to keep it afloat by using money from other companies controlled by him is not a grave crime, but indeed something that any person with little or no intent to cheat his creditors would do for the “greater common good” .
SBI, leading a consortium of 14 banks, advanced a large sum to Kingfisher Airlines against the pledge of the Kingfisher Trademarks as collateral which turned out to be a ‘dud’. Also, it is said that loans worth Rs,6,500 crores were converted to equity in a debt recast. This was in early 2016. In March, 2016, Mallya left India for the UK by a Jet airlines flight to Geneva, reportedly with 300 bags and huge quantity of cargo checked in. Nobody attempted to stop him. Mallya has recently alleged that he spoke to the then Finance Minister Arun Jaitley before he left. A day or two after him leaving India, a non-bailable warrant was issued against his name by the Supreme Court on a petition filed by 17 banks. By then, of course, he was safely in the UK. That could not have happened without at least some help from bankers who delayed moving the Supreme Court of India against him, it would seem.
Vijay Mallya led a profligate lifestyle – that much is too well-known to recount. To be unapologetic about being wealthy is not a crime. He also was devout - a Sabarimalai follower who undertook the 42 days’ fast every year, and a disciple of Sri Sri Ravi Shankar. He was known to give munificient donations to several temples including Tirupati and Kukke Subramanya.
He was immensely successful in the liquor and beer businesses until the airline company spun ut of control. Kingfisher beer was the world-leading beer brand, and hugely profitable. Few know that besides the flagship liquor companies in his fold, he was the Chairman of Sanofi India and Bayer Crop Sciences for over 20 years. He owned majority or significant stakes in several other companies like Berger Paints, Mangalore Chemicals & Fertilisers, and media houses Cine Blitz and Asian Age. He also owned a Formula 1 team called Force India.
His biggest mistake was setting up, and continuing to support, Kingfisher Airlines. In a business that globally only few companies have consistently succeeded at, he predictably failed financially much later than it should have, because he used funds from several other companies he controlled to keep the airline company afloat. He also made quite a bit of that money ‘disappear’. And that made him the most misunderstood white-collar criminal in India. Banks which have declared him a defaulter allege that Mallya has allegedly routed this money to gain full or partial stakes in about 40 companies across the world.
Several (17 at least) banks sued him in several countries and courts to recover money that was lost in Kingfisher Airlines. Enforcement agencies in India are after him and chasing his extradition from the UK. He was forced to cede management control of his flagship liquor companies to Diageo. However, Mallya has consistently maintained that he is an innocent victim of a witch hunt. He has more than once said that he is willing and able to pay off the dues of bankers, who have turned a deaf ear to the offers. It is plausible that they showed no inclination to accept Mallya’s offer because their misdoings would come to light.
On 9 May 2017, the Supreme Court of India found Mallya guilty of contempt of court and summoned him to appear before it. When he failed to appear, it said the contempt case would only proceed further after he is produced before the apex court.
Vijay Mallya's extradition trial began in a UK court in February 2018. He was wanted in India on charges of Rs 9,000 crores fraud and money laundering. The Crown Prosecution Service (CPS) on behalf of the Indian government, acknowledged that there may have been irregularities in the internal processes of the banks that sanctioned some loans, but India would need to address at a later date. This is a tell-tale sign that PSU banks improperly funded Kingfisher Airlines.
It was a time when the airline industry's state was bleak and in critical condition. Loan requests should not have been accepted by a PSU bank.
Even though the extradition case hearings are over and Mallya lost his final appeal against extradition in May 2020, Mallya’s extradition has strangely not happened. In October 2020, the Indian government was notified that Mallya could not be currently extradited due to an unspecified "confidential legal matter". This is obviously a story that cannot be made public now by the UK authorities! It seems we have bumped into a UK variant of “sealed cover justice” virus afflicting several Indian courts.
Rajesh is a qualified CA & CWA. He has served as a Director of PricewaterhouseCoopers, a Director of a large urban co-operative bank and Dean of a B-School over the years. He has taught Finance for over 20 years & trained participants from several Companies and B-Schools. He is an educator and a learner (he believes both are inextricably intertwined), and a knowledge product developer. Law Gyani, which he has founded to help Law Students with their exam preparations, and to understand nuances of the law.
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