The Corrupt Eco-system That Created Vijay Mallya Also Helped Him “Escape”

by R Jagannathan - Mar 11, 2016 12:26 PM +05:30 IST
 The Corrupt  Eco-system That Created Vijay Mallya Also Helped Him “Escape” Chairman and CEO of India’s Kingfisher Airlines Vijay Mallya looks during a press conference in Mumbai on November 15, 2011. Kingfisher Airlines said it had doubled its losses in the July-September quarter, as its billionaire chief Vijay Mallya was set to announce plans to keep the Indian company afloat. AFP PHOTO/ Punit PARANJPE (Photo credit should read PUNIT PARANJPE/AFP/Getty Images)
Snapshot
  • It is worth asking three questions:

    • Why did Mallya think he could fool around with the system for so long, when Kingfisher stopped flying more than four years ago?
    • Why did Diageo let him go scot-free after claiming that Rs 2,100 crore had been diverted to various Mallya companies?
    • What can be done now that he has flown the coop? Can the Rs 9,000 crore (principal plus interest) owed to banks ever be recovered?

    Moreover, there are simply too many vested interests who have benefited from Mallya’s moolah. It won’t be easy to prosecute him.

    The eco-system will fight back and try to help Mallya, for if he trips, he may take them with him.

The political spat over Vijay Mallya between Congress and BJP – with the latter accusing the former of lending him unwarranted sums to run Kingfisher Airlines and the former holding the BJP responsible for allowing him to sneak out of India - is mere grandstanding. The mock horror of a Rahul Gandhi and the outrage in media channels about how he was allowed to “escape” is laughable. Asking “who” helped him escape also betrays a lack of commonsense.

The answer is simple. When everybody around Mallya has been metaphorically (if not literally) shouting “chor, chor” for months, it would have been an extremely incompetent “chor” to assume he was not at risk. He was bound to be making his “escape” plans well before 17 banks moved the Debt Recovery Tribunal (DRT) to block his money and impound his passport. In Mallya’s case, plans for an “escape” from India should be deemed to have been made from the day he began talks with Diageo for leaving United Spirits with a large booty.

If you want a simple answer to the question who helped him escape, the place to start asking questions is Diageo, which gave him a $75 million golden handshake, and even paid him $40 million upfront before any agency could block the transfer. So Diageo certainly knew Mallya was trying to disengage from India, and the fact that it is not pursuing its own claims of fund diversion from Mallya says something. It did not need a CBI or the Intelligence Bureau to know what was going on.

Clearly, Mallya had decided long ago that his game in India was up, and it did not need anybody high up in the Modi government to whisper in his ear that banks were going for him. He knew that well before any little bird told him about it. So the story that Mallya boarded a Jet Airways flight to London on 2 March with seven large suitcases and a “companion”, as The Times of India informs us, is little more than a juicy tit-bit.

However, it is still worth asking three questions: One, why did Mallya think he could fool around with the system for so long, when Kingfisher stopped flying more than four years ago? Two, why did Diageo let him go scot-free after claiming that Rs 2,100 crore had been diverted to various Mallya companies? And three, what can be done now that he has flown the coop? Can the Rs 9,000 crore (principal plus interest) owed to banks ever be recovered?

The answer to the first question is that the corrupt eco-system of crony socialism created by a Congress-dominated political system over several decades is more powerful than the endeavour of one government or some banks to change things. The eco-system is not just about politicians and bureaucrats, but extends to the courts and the media. And it’s not just Congress politicians, for Mallya had friends even in the BJP, and was elected an MP to the Rajya Sabha not once, but twice, with support from the Janata Dal (S) in Karnataka. That parliamentarians can fulminate about Mallya and not even turf him out of the Rajya Sabha tells its own story.

The courts too helped delay the process of recovering loans endlessly. For example, the United Bank of India declared Mallya a wilful defaulter 18 months ago, but several stays and delays ensured that action is happening only now. The Times of India says that the SBI, leader of the consortium that lent money to Mallya, and other banks have been fighting cases in more than 20 courts and faced 500 hearings and 180 adjournments. This is how the corrupt eco-system survives, by using the delays in a lethargic legal system to avoid justice.

That the media was compromised also seems likely, and Mallya himself made that clear in his tweets from London today (11 March). While railing against Times Now Editor for “libel, deceit, slander and absolutely sensational lies,” and that “he (the editor) needs to be in prison clothes and eat prison food”, Mallya tweeted: “Let media bosses not forget help, favours, accommodation that I have provided over several years which are documented. Now lies to gain TRP?”

Clearly, it was the eco-system that created him that helped him “escape” too.

The second question – why did Diageo play ball – is difficult to answer. Clearly, at some point Diageo must have felt that it was not possible to indulge in long litigation with Mallya and decided to buy him off and get him off their backs. The fact that the eco-system was helping Mallya would have become apparent to Diageo at some point, and this was why it cut a lousy deal where it not only gifted him $75 million to get him out, but also wrote off the Rs 2,100 crore fund diversion as collateral expense. So, Diageo’s extraordinary deal with Mallya may also be about the eco-system.

The last question – how to get Mallya to justice, and get the bank money back – is dicey, but not impossible to deal with. The simple answer is that his assets and properties in India must be frozen, including all the shares in companies he owns (including UB Holdings, the Royal Challengers IPL team, the Force One F1 team, and every other company or property he owns in India. The Reserve Bank should ensure that no company of his transmits any funds abroad. It should also be possible to turn the heat on Mallya abroad if the money-laundering probe against him is prosecuted aggressively. But that depends on political will, and the extent to which Indian and foreign courts are willing to help the banks go after him and his assets.

If Narendra Modi pushes it hard, it just may be possible. But there are simply too many vested interests who have benefited from Mallya’s moolah to presume that this is easy. The eco-system will fight back and try to help Mallya, for if he trips, he may take them with him. This is the significance of Mallya’s warning to media persons who are now baying for his blood. They might quieten down soon enough.


Jagannathan is Editorial Director, Swarajya. He tweets at @TheJaggi.
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