Author: Shalini Shukla, S.S. Khanna Girls’ Degree College a Constituent College of the University
of Allahabad
- Abstract: In this article, I analyze an important case of scam i.e. State Bank of India v. Vijay Mallya, 2022, SC, Vijay Mallya is a famous businessman. He took heavy loans from various banks to expand his liquor and Kingfisher Airlines businesses but was not paying them back. After the scam, he fled to the UK and did not return to India. Vijay Mallya Scam is one of India’s economy-hampered scams and the 9,000 crore Vijay Mallya scam amount caused the Indian economy to drastically downfall. This article explores the origins of the scam, the systemic issues it revealed, and the legal actions taken to address the situation, providing a thorough analysis of the case. It highlights significant gaps in corporate governance, regulatory systems, and financial oversight.
- Background of the Vijay Mallya Scam:
Vijay Mallya is the chairman of United Spirits and continues to serve as a chairman of United Liquor Group and deals in various sectors of the economy such as beverage, alcohol, aviation, infrastructure, real estate, and fertilizer. Vijay Mallya was born to humble parents, he never decided to settle for a quiet life like his father. On the other hand, he had soaring ambitions and a desire to exceed them. His journey started with United Liquor Group and he became the company’s chairman at the age of 28 year and focused on the growth of his family business. He is also an owner of the IPL team RCB i.e. Royal Challenger He is a member of the Rajya Sabha.
The company initially managed to increase the overall turnover by around 64% in the year
1998-1999. He was already living a lifestyle of that of kings and was known as the “Kingfisher” which eventually became the tagline of Kingfisher his own brand for liquor and aviation. He also expanded his business outside the country in many foreign countries.
Later on in the year 2005, Vijay Mallya launched his new airline company, Kingfisher Airlines to further diversify his business which later on became the cause of his downfall. Kingfisher Airlines was launched at the peak of his career when he was living a lifestyle that most people cannot even afford.
Kingfisher Airlines later on started to face economic struggles from the year 2012. To continue his business, he took heavy loans from various banks, and as a consequence of the same he took loans from 17 banks in the country. The loan sanctioned to Kingfisher Airlines amounts to a total of Rs 9,000 crores. Mr. Vijay Mallya was a member of the Rajya Sabha when he applied for these loans and abused his power as a MP to the Rajya Sabha for obtaining the loans.
Even after multiple financial years, Vijay Mallya was unable to repay the principal amount as a result of which the consortium of banks decided to file a court case against him for failure to repay the loan, fraud, and criminal conspiracy.
The reasons cited for the failure of airlines that Vijay Mallya cited were high fuel prices and the recession of 2008. Mr. Vijay Mallya later on, flew to the UK without facing any friction of the authorities. The Supreme Court in 2017 ordered him several times to appear before the court but he ignored the order. As a consequence of the same, the court charged him with contempt of court, fraud, money laundering and ordered the government for his extradition.
The Government of India requests in the court of London for Vijay Mallya’s extradition. The court in London opined that the appellant would not get a fair trial in India due to political influence and pressure and found the extradition request by the Indian Government against the European Convention on human rights because of poor prison conditions in India to which the government of India ordered to improve the conditions and facilities in prisons. The Government of India assured a fair trial, and compliance of human rights, and an extradition agreement was derived between India and UK, where Vijay Mallya had been staying.
His evasion and the subsequent extradition battle have become emblematic of the challenges in prosecuting economic offenders across international borders.
- Legal Provision:
- In 1993, the UK and India signed an extradition treaty. The treaty requires both countries to extradite people charged with certain crimes in another country. Extradition is the formal process of one state surrendering an individual to another state for prosecution or punishment for crimes committed in the requesting country’s jurisdiction. Indian government filed extradition requests in the UK Court based on a bilateral extradition agreement. Although the UK’s Westminster Magistrates’ Court issued a positive decision in 2018, Mallya has filed an appeal to postpone his extradition. India also has the Extradition Act, of 1962.
- Criminal proceedings filed against Vijay Mallya in Indian Court. CBI charged Vijay Mallya under Section 120B (Criminal Conspiracy), Section 420 (Cheating) of the Indian Penal Code, 1860 and Section13(1)(d) and Section13(2) of the Prevention of Corruption Act, 1988. In addition to the above, ED also charged Mr. Mallya under Section 3 and Section 4 of the Prevention of Money Laundering Act, 2002.
- The SEBI barring him from trading in the securities market and associating with any listed company for three years.
- Judgment:
The Supreme Court has sentenced Vijay Mallya to four months imprisonment and imposed a fine of 2000 in connection with a contempt of court case from 2017. He was an accused in a bank loan case, having defaulted on over 9000 crores related to his Kingfisher Airlines, and was found guilty of contempt of court in 2017 for transferring $40 million to his children, Siddharth Mallya, Lyanna Mallya, and Tanya Mallya, in violation of a Karnataka High Court order. The bench, which included Justice Lalith, Ravinder Bhatt, and P S Narasimha, directed that the fine be paid within four weeks and noted that an additional two-month sentence would be imposed. The apex court also mandated that Mallya return the $40 million plus 8% interest to the designated recovery officer within four weeks, warning that failure to do so would result in attachment proceedings against his properties.
- Conclusion:
I conclude that the Vijay Mallya scam is an example of white-collar crime. Mallya willfully defaulted on loan repayments, misused funds, and fled India to evade legal action. He was declared a fugitive economic offender, with assets seized to recover debts owed to banks.
The implications of the Mallya case extend beyond just recovering funds; they also provide invaluable insights for creating a stronger and more accountable financial and judicial system.
- FAQ:
- What is the extradition treaty?
An extradition treaty is a formal agreement between two countries to transfer individuals accused or convicted of crimes from one nation to another for legal proceedings or punishment.
- What led to the Vijay Mallya scam?
Vijay Mallya’s Kingfisher Airlines defaulted on loans amounting to approximately ₹9,000 crore taken from various Indian banks. Investigations revealed allegations of fund misappropriation and financial irregularities, leading to charges of fraud and money laundering against Mallya.
- What is the current status of Vijay Mallya’s extradition?
As of now, Vijay Mallya remains in the United Kingdom. The Indian government has been actively seeking his extradition to face charges related to the loan defaults and associated financial crimes. However, the process has been delayed due to ongoing legal proceedings and certain confidential legal matters in the UK.
