Flying high on deceit

| Updated on January 27, 2018

Title: Kingfizzer: The Mallya Story Author: Kingshuk Nag; Publisher: Harper Collins India. Price: ₹399

Kingshuk Nag’s book depicts how Vijay Mallya took banks and employees for a ride

“The new loans did nothing to revive Kingfisher and the airline stopped flying in October 2012. In another month’s time, lenders like BNP Paribas of France filed a petition in the Karnataka High Court to wind up Kingfisher Airlines and UB (Holdings), the company through which Mallya controlled his other companies. BNP wanted the ₹146 crore that it was owed. The petition was accepted by the high court after a year, in November 2013, and is still Kingfisher Airlines 39 being heard.

Over the years, many other lenders have also become party to the winding-up petition. This includes SBI and aircraft lessors and engine makers such as Rolls-Royce and IAE.

As of March 2016, Kingfisher Airlines owed eighteen Indian and other banks ₹6,939 crore in principal and interest dues. Of this, ₹1,600 crore was owed to SBI and ₹800 crore each to IDBI Bank and Punjab National Bank.

A relook that mattered

In August 2013, perhaps realising that Vijay Mallya and Kingfisher had taken the bank for a ride in offering the brand as collateral, SBI and some other banks decided to take a relook at the brand value. The new valuation — by a new agency — came up with a figure of ₹200 crore (down from ₹4,100 crore in 2010, on the basis of which the banks had given further loans to the airline).

Two years later, in September 2015, the brand value of Kingfisher was down to ₹100 crore. In November 2015, after a Herculean effort that had to be cleared by the Bombay High Court and the Supreme Court, SBI was able to tag Vijay Mallya, Kingfisher Airlines and United Breweries Holdings as ‘wilful defaulters’.

Under RBI norms, a person or company is declared a wilful defaulter if he/it meets one of four conditions: his loans are not repaid when he has the capacity to do so; he has not used the loan for the purpose for which it was borrowed and diverts the money elsewhere; he siphons off the funds and money is not available with him in any asset form; and he sells off the assets given as security against loans without informing the lenders.

SBI had contended before the courts that funds were diverted from Kingfisher Airlines to various UB group companies and other firms. SBI made the claim after a forensic audit of Kingfisher Airlines. Mallya denied all allegations. SBI also said that UB (Holdings) had deliberately avoided paying its lenders.

Three months after the SBI action, Punjab National Bank on February 16, 2016 also declared Mallya, Kingfisher Airlines and UB (Holdings) wilful defaulters.

Chairman and Managing Director of PNB Usha Ananthasubramanian declared: ‘When people have the wherewithal to pay, they must pay,’ adding that the bank had gone to the DRT and had sought other legal powers before describing Mallya as a wilful defaulter.

The United Bank and UCO Bank had also earlier declared Mallya and Kingfisher Airlines as wilful defaulters. Many government agencies like the CBI and the ED are on the trail of Vijay Mallya, Kingfisher Airlines, some of its executives, and the UB group.

The CBI has already got an FIR registered in the Kingfisher matter and is investigating a case regarding a loan of ₹800 crore it took from IDBI Bank in 2009. Besides investigating the manner in which the loan was given, the CBI is also investigating whether the loan was used for the purpose for which it was granted.

The agency, say newspaper reports, seems to suspect that a substantial chunk of the loan was misused to partly pay off other debts that had accrued to Kingfisher Airlines.

Part of the funds was also transferred overseas under false pretexts and stashed away in foreign havens. The ED is also investigating the money laundering angle. Mallya, before he left India on a diplomatic passport in March 2016, was questioned by the CBI in December 2015.

Some key officials of the UB group, like its long-time Chief Financial Officer Ravi Nedungadi and the CFO of Kingfisher Airlines A Raghunathan are still being investigated by the law Kingfisher Airlines enforcement agencies. The CBI has now decided to extend the ambit of its probe to look into a staggering 6,00,000 transactions made by Kingfisher Airlines. It is going to be a long while before the investigations wind up and the Kingfisher saga is finally over.

The other losers

The collateral damages were many, not least of them the indignities the staff of Kingfisher Airlines had to endure as their company went under. Many were literally left on the roads when the airline closed shop. The Economic Times reported on March 10 2016 that the company still owed salary arrears of ₹300 crore to 3,000 employees.

Some of the staffers started to get income tax notices much after the airline had stopped operations. Although the airline had made tax deductions from their salaries, it had not deposited the money with the tax authorities, and the tax sleuths were now demanding the money from the employees.

This was a double whammy for them, as they were not getting their salaries in the first place. The pilots at the company were able to bag jobs in rival airlines, but many of the cabin crew and technicians found it hard to find work. Many of the cabin crew joined the hotel industry and some of them even malls. Newspapers reported cases of technicians who had taken up odd jobs.

A news story on a Kingfisher technician who was making a living selling garments sewn by his wife was particularly poignant, while in October 2012 the wife of a Kingfisher employee committed suicide in Delhi as her husband had not been paid his salary for six months.”

Extracted with permission from Harper Collins India


Kingshuk Nag was the Times of India’s resident editor in Hyderabad. He is the author of The Double Life of Ramalinga Raju: The Story of India’s Biggest Corporate Fraud and Battleground Telangana, among others.

Published on July 30, 2017

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