A powerful message is now going out that it will not be business as usual with cronies.
Businessmen will have to find kosher ways of doing business, whether it is Mallya, Chandra, or Roy.
Three arrests of businessmen – of Vijay Mallya in the United Kingdom in the Kingfisher loan fraud case yesterday (17 April), of Unitech Managing Director Sanjay Chandra in a real estate fraud case (earlier this month), and of Subrata Roy in the Sahara Group illegal funds collection case (three years ago, and now on tentative bail) - send a loud and clear message that crony capitalism is out of favour with both government and judiciary.
While the Unitech and Sahara cases have been discussed at length for some time now (with Sanjay Chandra being an accused even earlier in the 2G scam case), the Mallya case is unique since it involves not only loan defaults, but possible money laundering and tax evasion, which is why the UK government and courts are willing to play ball.
If the Central Bureau of Investigation (CBI), the Enforcement Directorate, and other Indian agencies focus on gathering the evidence and not on the politics associated with Mallya’s Kingfisher failure, there is a good chance that Mallya will be extradited by next year, once the evidence passes through various courts and legal processes in the UK. Even if he is extradited and brought to India, the effort should be focused on recovering his loan and tax dues, not humiliation of a businessman for failing in aviation.
To get him back, the Indian agencies must not show an eagerness to arrest him or generate media prejudice against him, but gather evidence of his alleged frauds that will stand up to the exacting standards demanded by the British justice system. Any attempt to gain political mileage out of his extradition will not only damage the case against him, but also give the British judiciary – never very helpful to India - a chance to claim that this is all about vendetta against Mallya, whose only fault was business failure.
One cannot, though, rule out the importance of political competence in the progress of the extradition proceedings against Mallya so far.
Both Narendra Modi, and Finance Minister Arun Jaitley have leaned hard on the British government to cooperate, and this is how the extradition case has even gotten this far. But progress henceforward depends on equal competence from the investigating agencies, who have to show that the IDBI loan default case involves mala fide actions on the part of Mallya (officials of the government-owned bank are said to have given undue favours to Mallya). The service tax authorities, who claim he hasn’t paid their dues, will have to establish that this failure was wilful, and criminal.
While domestic courts have obliged the law enforcement agencies and issued non-bailable warrants against Mallya and attached properties worth over Rs 9,000 crore in India, it is important to underline the fact that recovery of dues is more important than arresting Mallya. Any over-eagerness to arrest him will look like vigilante justice rather than just an effort to enforce the law against him neutrally, without fear or favour.
If Mallya is willing to pay up a substantial sum by way of settlement of his tax and loan dues in the meanwhile, the government should relent on seeking his extradition. The key is to see the colour of the money owed to banks and the taxman. Arresting him may satisfy some political urges, but will be counter-productive in the effort to recover dues.
But any which way one looks at this issue, a powerful message is now going out that it will not be business as usual with cronies. Businessmen will have to find kosher ways of doing business, whether it is Mallya, Chandra, or Roy.
The message that government will not easily bail out imprudent businessmen has already been sent, as is obvious from the rash of firesales and mergers and acquisitions in cement, power, airports, infrastructure and telecoms.