Gift settlements: How Mallya kept Diageo deal's $40 mn away from India

Earlier this week, India had a sip of victory after liquor baron Vijay Mallya was arrested by the Scotland Yard in London, but eventually, he was let off within a couple of hours on conditional bail. This has put India in a precarious position. Enforcement Directorate officials claim that bringing Mallya back to India will take over 6-12 months. Meanwhile, in its dossier, the ED has said that Mallya transferred Rs 26 ($40 million) crore to his three children through gift settlements.

According to Money Control, in an affidavit submitted before the Supreme Court, Mallya stated that the money had been transferred to his three children—Siddharth, Leena and Tanya Mallya—who were US citizens and sole beneficiaries of the three respective trusts of which he had no control in his individual capacity.
 

Mallya had received a payment of $40 million out of a $75 million package from Diageo following his resignation as chairman of United Spirits Ltd.

Vijay Mallya has to pay a whopping 9,000 crore of loan taken from a consortium of 17 banks led by the State Bank of India. But only IDBI Bank lodged a complaint with the CBI. The ED case, however, concerns the entire default amount of Rs 9,000 crore. Government sources described Mallya’s arrest as the first major step in bringing Mallya back.

The ED has gathered evidence on how a major portion of bank loans given to KFA was moved abroad as operational expenses or lease rentals, sources told Moneycontrol.

Here are some other dossiers submitted by ED in the money laundering case against India's poster boy of loan defaults:

* Between 2007 and 2012, KFA remitted funds worth Rs 3,280 crore to foreign entities, shown to be payments made towards aircraft rental leasing and maintenance, servicing and spare parts, according to the ED’s provisional attachment order issued last year

* Funds were essentially loans raised from a consortium of banks, but were moved overseas under questionable conditions

* There are huge variations in the payments especially in the leasing payments even or the same class and type of aircraft for the same time period

* Of the Rs 3,200 crore claiming to be expenses for the airline’s operational expense, about Rs 1500 crore were allegedly remitted overseas through letter of credit and other instruments issued by State Bank of India (SBI), Rs 531 crore through Punjab National Bank (PNB), and about Rs 1230 crore through Axis Bank.

* Rs 423 crore of the IDBI Bank loan has been remitted overseas without appropriate supporting documents

* The ED has also made a case alleging that Mallya received $40 million (out of an agreed $75 million) on February 25, 2016, from London-based liquor major Diageo Plc, barely a week before he left India

* $40 million received by Vijay Mallya from London-based liquor major Diageo Plc was structured in a manner to receive the payments overseas with the intent of keeping this money out of reach of India. He left the country a week before he received the money.

* Mallya sold 264 acres of land in Coorg in January, the proceeds of which have been laundered overseas.