Mallya's case should be made a test case for exposing crony capitalism

All those who allowed him to use the banking system as his personal ATM should be named and shamed

There is a full-blown blame game going on after it was found that Vijay Mallya had flown out of the country leaving behind exasperated bankers holding his IOU’s worth Rs 9,000 crore. Politicians are trying to milk the situation and the social media is abuzz with reminders of ‘If you owe the bank millions then you own the bank’.

Vijay Mallya owed many millions to the bank and yes he behaved as though he owned them. Till date he has moved around without letting the small incident of loan default and non-payment of employee salary affect his life. A few week ago, he threw a birthday party in Goa and a day before he decided to leave the country he even attended the parliament as a Rajya Sabha MP.

 

Mallya used to justify his lifestyle by saying that he has successfully created the liquor business but failed in keeping his airline business afloat. Even recently he was quoted as saying that he regrets that Kingfisher is not flying when oil prices are low. There was no sign of guilt of any wrongdoing.

If Vijay Mallya had suffered losses in the normal course of business, he could have been pardoned. Businesses lose money, and this is especially true in the airline segment. Further, the loan was taken by the business entity and not Mallya personally. Indian law gives business a separate entity and distinguishes it with the promoter, though in this case Mallya had given personal guarantee.

But the case against Mallya is of money laundering. He is alleged to have siphoned off money abroad. The case is not simply of losing money in business but of diverting it.

But diverting money and running around freely for so long could not have been possible without outside help. Fingers are being raised at almost everyone associated with the case. But the biggest blame has to be taken by the banks and the price has to be paid by the tax payers who ultimately pay for such negligence.

Banks have not been willing to bite the bullet in this case. Either they had been forced by the government of the day not to bother the Rajya Sabha MP or because they wanted to delay the issue as long as they can in hope of recovery someday. Nearly Rs 1,400 crore of debt was converted into equity at a 60% premium at Rs 64.48 when the market price was Rs 39.90. Banks generally convert at market price or at a discount.

What is appalling is that Vijay Mallya was able to take all 17 banks for a ride together, and not one of them complained. None of them even bothered to interact with the CBI. CBI Director Anil Sinha had, while addressing Indian Banks Association recently, said the case was registered in July 2015 through the loans or advances were taken during 2004 to 2012. "However, despite our repeated requests, the banks did not file a complaint with CBI. We had to register the case on our own," he had said.

Sinha said the question is the undue delay in identifying and reporting such a fraud has jeopardised the cause of justice to the offenders benefit giving them an opportunity to divert funds and destroy evidence.

Banks have been flogging a dead horse for over a decade and refuse to see the realty. They even gave the company further money, without any sizeable tangible collateral and agreed to convert their debt into equity at a huge premium.

It was only a week after he left the country that these banks rushed to the Supreme Court to seek his arrest. It was on Supreme Court’s questioning that the country came to know that Mallya had fled.

Rahul Gandhi has blamed the government of allowing Vijay Mallya to flee and rightly so. If CBI had filed a case against Mallya he should have been prevented from fleeing the country. There are options that the government can use to bring back Mallya and recover money from him. Unlike Sahara promoter Subrata Roy, Mallya has stacked up his money in various countries. Recovery of money also might be a possibility.

But the key issue here is exposing the crony capitalism. Banks could not have given Mallya the long rope without pressure from the government. Mallya’s case should be made a test case of naming and shaming all the crony capitalists in the present government who looked the other way when Mallya was leaving and the previous one who allowed Mallya to use the banking system as his personal ATM.