Vijay Mallya is Former two term Member of Parliament (Rajya Sabha), Chairman of The UB Group, Sports enthusiast, Veteran Formula One Team Principal, Championing Youth empowerment. On July 26, 2021, Mallya twitted, “ED attach my assets worth 14K crores at behest of Govt Banks against debt of 6.2K crores. They restore assets to Banks who recover 9K crores in cash and retain security over 5K crores more. Banks ask Court to make me Bankrupt as they may have to return money to the ED. Incredible.”
Indian businessman and two term Member of Parliament (MP) Vijay Mallya was declared bankrupt on 26 May 2021 by the Insolvency and Companies Court of the London high court. Though the order takes effect immediately, he has the option to seek permission to appeal from a higher court.
Mallya has been fighting against his extradition to India since 2017, a year after he fled the country. His venture Kingfisher Airlines Ltd failed and Mallya defaulted on loans worth over Rs 10,000 crore from more than a dozen Indian banks around 2013.
“There is no evidence he will go back to India to face trial so I find insufficient evidence he will pay the debt in full in a reasonable period of time. I shall adjudicate Dr Mallya bankrupt,” chief Insolvency and Companies Court (ICC) judge Briggs declared.
The 65-year-old chairman of UB Group, who lost all his court battles against extradition to India in May 2020 but has still not returned, now has to hand over all his assets, as well as his bank and credit cards to a bankruptcy trustee who will investigate his affairs and establish his true assets and liabilities, with a view to selling relevant assets and repaying creditors.
The person declared bankrupt must cooperate with the trustee. All his bank accounts will now be frozen, apart from money to buy essentials.
He is banned from acting as a director of a company or creating a company without the court’s permission or borrowing more than £500 without declaring he is bankrupt. His name will appear on the Individual Insolvency Register where billionaire steel magnate Lakshmi Mittal’s brother Pramod Mittal, too, is listed.
Philip Marshall QC, representing Mallya, had his application for a stay on the bankruptcy and permission to appeal rejected by Judge Briggs, who said they had no real prospect of success.
The State Bank of India-led consortium was seeking to make Mallya bankrupt for failing to clear the judgment debt of £1.05 billion (Rs 10,763 crore) determined by Karnataka’s Debt Recovery Tribunal in January 2017, which was subsequently registered in the English courts.
The debt derives from a personal guarantee Mallya gave on loans lent to Kingfisher Airlines.
Marshall argued in the Insolvency and Companies Court of the high court that the bankruptcy petition should be dismissed given that the Indian banks had received Rs 5,776.2 crore following the DRT sale of Mallya-owned UBL shares in India, the majority of which were sold on June 23, 2021.
A further Rs 770 crore by sale of shares had also been realised but not transferred to the banks yet, meaning a total of Rs 6,546.2 crore had now been paid off, or “realised in terms of assets”, Marshall said.
The Enforcement Directorate had attached Mallya’s shares under the Prevention of Money Laundering Act (PMLA) and they were then sold and transferred to the banks under an order from the PMLA court in Mumbai on May 24.
Marshall argued “there are a number of other assets which although not yet realised are held with the DRT officer and can be realised”.
He said the value of these was Rs 5,706.6 crore. “If we combine all that together you end up with a figure well in excess of the petition debt,” he said. He also pointed out Mallya had ongoing court proceedings in India to challenge the 11.5% interest rate on the DRT judgment debt. Mallya’s position is that “the banks themselves have inhibited payment of the petition debt by causing the ED to take action to attach assets”. In the interest rate challenge, he claims that the banks are not treating Mallya equally to other Indian citizens who owe the banks similar amounts, breaching Article 14 of the Indian Constitution.
But Briggs ordered bankruptcy as he ruled the banks had not received payment “unconditionally” and there was no certainty any sums recovered would be apportioned to the petitioners as the liquidator was not bound by PLMA provisions.
He said unless Mallya returned and faced criminal proceedings the banks could not use the money “freely”.
“My understanding is that he is resisting extradition. The petitioners could be made to return the money after trial as nine different parties, including Mallya, challenged the May 24 order and there are 40 creditors. There is a real risk the liquidator would require all the proceeds of the UBL sales to be paid to him to pay the creditors,” judge Briggs said.
“The only thing to bring this mess to an end is Mallya coming back to India to face trial and quite bizarrely his own lawyers are asking when is he coming back,” said Marcia Shekerdemian QC, representing the banks, instructed by TLT LLP in London.
Mallya, was the chairman of Bangalore-based United Breweries Holdings Limited (UBHL) and also owned Kingfisher Airlines, which was launched in the year 2003. The airline started operations in 2005, initially as a single-class (economy) carrier.
