Trust deficit? Mallya may find few takers for his assets

Former liquor baron Vijay Mallya’s latest offer to repay creditors from the proceeds of the sale of his frozen assets — if the courts permit him to do so — is easier said than done. And that’s something he, more than anybody else, is aware of.

His letter to the media is a perfect example of playing to the gallery, an old habit Mallya has refused to shed in spite of the fact that he faces several criminal cases.

Apart from abandoning lenders, he faces cases which are far more serious, as the Enforcement Directorate (ED) documents submitted to the special court show. Whether these cases will hold is something time will tell but Mallya needs to come out with far more substantive evidence to refute the agency’s claims than those he has mentioned in his letter.

Show the buyers

His willingness to settle all dues should be taken with a bagful of salt. “While his gesture is noble, he needs to line up the buyers first before he can hope to dispose of his assets,” Vijay Belavadi, founding partner at law firm BRK Law Partners, told BusinessLine .

Citing the cases of Sahara’s assets and Kingfisher House, where the lenders are finding disposal difficult, Belavadi there is no guarantee Mallya will be able to find buyers for his assets.

And as far as disposing of shares in the secondary market is concerned, there is very less possibility of getting a fair value. The ED has already alleged that the assets are “proceeds generated out of criminal activities.” With that kind of a tag, even genuine buyers may not be bold enough to bid for them.

JN Gupta who heads SES, a corporate governance research and advisory firm, said the lenders should lap up the offer and recover the amount “in the larger interest of the public, as any further legal battle will not serve anyone.”

Diluted charges

He, however, said that all this should not be connected with other cases of laundering. “Even if it is related, let there be diluted charges provided there is a full settlement,” Gupta said.

Mallya has said that if the court permits him to sell frozen assets worth ₹13,000 crore, he will be able to settle all the dues. “But it will not be that easy to sell off the assets as there is a bit of a trust deficit as far as Mallya is concerned,” Belavadi said.

A partner with another law firm who did not want to be quoted, as the firm had previously worked with Mallya's companies, said the government will be wary of setting any precedents here, what with polls around the corner. “Assuming Mallya is able to sell a large part of his assets, he will still have to fight the cases filed by the ED which are quite serious as it involved money laundering,” the lawyer said.

Gupta said he would advocate exemplary punishment, but given the legal system in India, “it is better to finish the case in his (Mallya’s) lifetime itself.”

Mallya in his letter to the media has said the siphoning of funds allegation is adequately dealt with by the fact that the UB Group actually infused about ₹4,000 crore into the airline. “It cannot be assumed that funds were siphoned out on one hand and even more funding infused on the other hand,” the letter said.

While Mallya has tried to put up quite a defence, he still has to fight the extradition case in the London courts. What remains to be seen is whether the government would want to dilute its own case and give credence to Mallya’s offer, which may or may not yield the desired results.

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