Modi Under Fire as Beer Baron Owing $1 Billion Leaves Indiaby and
Opposition slams government for allowing Vijay Mallya to leave
Creditors discover in top court that Mallya left on March 2
India’s Prime Minister Narendra Modi came under fire in parliament after a flamboyant former billionaire who owes creditors about $1 billion left the country amid efforts by policy makers to rein in rising bad loans in the nation’s financial system.
A group of 17 banks in India, fighting to recover dues from Vijay Mallya, chairman and founder of the now-defunct Kingfisher Airlines Ltd., found out Wednesday that their petition to bar him from leaving the country was filed a few days too late. Attorney General Mukul Rohatgi told the Supreme Court, in response to the bankers’ plea, that Mallya had left India on March 2.
As opposition parties criticized Modi’s government on Thursday for failing to impound Mallya’s passport and prevent him from leaving, Finance Minister Arun Jaitley told lawmakers that banks are taking every possible action to claw back their money. Mallya, 60, said last month he’d decided to spend more time in England closer to his children and later slammed the media for portraying him as the “poster boy” for bad loans plaguing local banks.
“Banks are going to certainly take every possible action to recover not only from him, but many other defaulters,” Jaitley said in parliament, referring to Mallya, who himself is a sitting member of the upper house. “Attachment orders have been passed by several courts, assets have been attached.”
The consortium of lenders, led by State Bank of India, had approached the judiciary to help recover 70 billion rupees ($1 billion) from Mallya, who has maintained Kingfisher Airlines was an “unfortunate commercial failure” caused by macro economic factors and government policies. The two-judge bench of the top court headed by Kurian Joseph ordered Mallya to respond in two weeks.
In a statement dated March 6, Mallya said he has been making efforts to reach a “one-time settlement” with banks. Mallya owed 90.9 billion rupees, including all interests compounded, as of Nov. 30, Jaitley told lawmakers.
Rahul Gandhi, heir to India’s most famous political family and a vice president of the opposition Congress party, told lawmakers that Jaitley’s long speech didn’t explain how someone “who stole 90 billion rupees from the government escaped.”
“I don’t think this case should be blown out of proportion,” Rohatgi said in an interview with Bloomberg Television India. “I am sure if Mr. Mallya comes back, he is welcome to sit across with the banks, work out a solution, and I think it can be worked out.”
Kingfisher Airlines, once India’s No. 2 carrier that redefined premium air travel, defaulted on the loans guaranteed by Mallya and United Breweries Holdings Ltd., according to SBICAP Trustee Co. Sumanto Bhattacharya, a spokesman for United Breweries, did not respond to an e-mail and two calls to his mobile phone.
Lenders are stepping up efforts to recover dues amid pressure from Reserve Bank of India Governor Raghuram Rajan to deal with 8 trillion rupees of soured debt. He has ordered them to clean up their balance sheets by March, 2017, by increasing provisioning, resulting in the largest-ever losses.
A 700 billion-rupee recapitalization program is under way to help state-owned banks as stressed assets at a 14-year high slow credit growth and threaten Modi’s development agenda for the country.
The nation’s top court last month told the RBI to share the list of the country’s largest defaulters in the last five years and directed the government to file an “action taken” report.
Mallya’s creditors will auction the Mumbai office of Kingfisher Airlines on March 17, more than three years after financial stress forced the carrier to ground its planes and default on payments to employees, airports, lessors and banks. SBICAP, in a notice published in the Times of India on Thursday, said it has taken possession of trademarks and brands such as ‘Kingfisher,’ and those who use it would invite civil and criminal proceedings.
Losing an Empire
Mallya has also been gradually ceding control of his beer and liquor empire to rivals.
After Diageo Plc bought United Spirits Ltd. in April 2014, Mallya struck a $75 million non-compete deal late last month with the London-based company and resigned as chairman. He was to get $40 million immediately as part of the agreement. Heineken NV is now the biggest shareholder of United Breweries, the maker of the nation’s best-selling Kingfisher beer, with a 42.4 percent stake. Mallya’s holding company has a 33 percent stake, though half of its shares are pledged with lenders.
In his statement, Mallya said he has neither the intention nor any reason to abscond, and personally he isn’t a borrower or a “judgment defaulter.”
“I have been most pained as being painted as an absconder,” he said. “I have been a non-resident for almost 28 years.”