Hats Off State Bank of India! You Have Made a Difference – FIRST BATTLE WON! THE WAR IS NOT OVER!!

 

Hats Off State Bank of India! You Have Made a Difference –

FIRST BATTLE WON! THE WAR IS NOT OVER!!

1)The recent decision of the Debt Recovery Tribunal handing over to the Indian Banks Consortium the sale proceeds of the shares held by Mr Vijay Mallya and the companies controlled by him, will bring about Rupees Six Thousand Five Hundred Crores to the kitty of all the lender banks. From and out of the recovery, SBI can appropriate around Rupees One Thousand Six Hundred Crores which they had earlier written off.  SBI , in the last financial year reported an annual profit of 23,000 Crores.This recovery of 1500croreswould mean an increase of 15% of the preceding Quarterly Profit. So, this recovery will add to the profit of this financial quarter in the SBI balance sheet. I am sure the banks and the Serious Frauds Office of the Union of India have identified other assets in South Africa and Europe. Mr Mallya himself would have other assets under his control in India which CBI or SFO would have thought fit to leave out of the scope of attachment by Indian courts for now. When Mr Vijay Mallya fled India, it was reported that he owed Indian banks, cumulatively, Rupees Nine Thousand Crores At the end of it, SBI had demonstrated that given a free hand, it will compel even an internationally powerful person and make him  pay his debts in the Country of his origin. In other words, one’s economic and political clout is of no consequence to a smart banker. The Bank of China had demonstrated it in the Mr.Anil Ambani case; SBI did the same in Mr.Vijay Mallya’s case. Let us wait and watch as to what Nissan and Renault will do to MrCarlos Ghosn.?

2. Actually, most of the modern-day capitalist icons use substantial public money for carrying on a global-scale business. They take investments from venture capitalists, pension funds, and borrowings from private banks who lent the money of the public to the Capitalist Entrepreneurs. Sometimes, even the best products fail in the market; Microsoft’s Iridium phone is a case in point. Nobody would hold a capitalist civilly and criminally responsible if the failure of the business is due to market reasons; but when the creditors find that the capitalist is guilty of illegal diversion of funds, then there is criminal misappropriation. Mind you, the law allows the promoter capitalist to decide his wage in consultation with the Board of Directors of the company. Earlier, Mr Mallya has made very generous financial settlements to himself, family members, got a hefty noncompetition fee from the company that acquired his Indian business. Yet he did not even pay his employees in full, despite promising them. Besides, Vijay Mallya, in India, is accused of:

a. Collecting Service Tax from the airline passengers and failing to deposit it to the Taxation Authorities and misappropriating it for financing the business activities of the firm.

b. Collecting TDS money from all his employees and not depositing the same to the IT Authorities on time.

c. Failure to pay many suppliers of goods and services such as Oil Companies, Airport Authorities and people who leased aircrafts. Cheques issued by the companies to many of the suppliers bounced and there were several proceedings under Section 138 of the Negotiable Instruments Act against the Company and its Board of Directors.

d. Besides, when KingFisher Airlines received further funds by way of loans from the banks, MrMallaya was accused of wrongfully diverting the funds for the activities unconnected with legitimate business activities of the company.The Extradition proceedings in UK courts originated from this cause of action.

3.  One must also compare  this matter with, earlier high profile, contested banking debts recovery case. That was a time when Mr Amitabh Bachchan was at his political best. He incorporated a company called ABCL and availed substantial financial facilities from Canara Bank. For various reasons, ABCL was not a commercial success. The accumulated interest on outstandings was so large then,(less than 100 crores) that Canara Bank even threatened to appoint forensic audit of ABCL accounts and unearth frauds such as diversion of the borrowed funds, etc. Amitabh Bachchan was smart enough to make the right political moves. Through Amar Singh, he became a supporter of the Samajwadi Party. Even today, his wife is a Rajya Sabha member of the Samajwadi Party. According to her affidavit to the Election Commission, her family is worth a thousand crores. , The companies controlled by Mr.Anil Ambani owe more money to banks and other operational creditors than Kig Fisher Airlines. So, if the debtors do not run away from the jurisdiction and show their bonafides by making periodic payments by the liquidation of valuable assets, they can continue their business in India. If you believe the news reports, Mr Anil Ambani’s wealth has doubled in the last two months but nowhere near what he owes to the banks. But he may not have personally guaranteed the loans or there would be a limitation on the Quantum of Guarantee when finances for ultra-mega projects are availed. Usually, the extra smart borrowers, after the diversion of their funds, park it in foreign banks, which do not even offer any interest. It is important for these promoters to leave India, assume a new identity, get access to the old ill-gotten wealth, change their looks by Reconstructive Surgery, take care of the people in Indian governments, live abroad in a place where the process or the Authority of Union of India does not extend. In fact, in the past the success rate of the Union of India’s extradition proceedings abroad is poor. Nirav Modi may be in jail. But Lalith Modi and Ravi Sankaran are free and unlikely to be brought to India in the near future. So, India, unlike the USA was perceived to be a Soft State in the pursuit of Fugitive Offenders. But, in the last 10 years, India’s success rate in getting better. Sometimes these trials against the brought back fugitives have resulted in acquittals thereby facilitating honourable integeration of the one time fugitive. It is in this context you have to consider afresh as to how the Union of India should handle the Vijay Mallya issue henceforth.

4. Under the Penal Laws Offences are Classified Into 3 Major Types :

a. Compoundable offences: Where the victim can forgive the offender

b. Non-Compoundable Offences: In serious crimes, the State is the first aggrieved party. So normally, if an offence is punishable with a sentence of three years or more, then even if the victim desires, the offender cannot be pardoned. But in reality, if there is a compromise between the victim and the offender, the trial can be conducted in such a way that it results in an acquittal. Or a mild sentence coupled with the exercise of powers under the Probation of Offenders act can enable the convicts to honourably reintegerate themselves in the society.

c. Compoundable with the permission of the Court: As a general rule in matters involving money, if the offender is made to disgorge his illegal profits and when the offender has paid a hefty fine representing at least two to three times of the illegal profits he has made, imprisoning the offender is not normally insisted on. (Unless the statute in question imposes a Minimum Mandatory Sentence). But in the Rajat Gupta Insider Trading case, a stiff sentence was given by US Fedaral Judge despite his global stature  as a perfect citizen record.

d) The Cr.PC. provides for Plea Bargaining where the offender after compensating the victims of the offence, admits guilt, demonstrates repentance, then the prosecution in order to avoid a lengthy trial accepts a predetermined lower than usual sentence even if a higher minimum mandatory sentence has been prescribed for such offences. If the accused is a First Time Offender, after considering the recommendation of the State Probation and Corrections Board, the accused is given the benefits of the Probationary Offenders Act, which includes a suspended sentence and discharge of sentence by voluntary community service. In the normal course, all these options would be available to Mr Vijay Mallya.

d. It is true that Vijay Malaya availed all his options as a borrower. He claimed that he had already paid the principal amount to the banks by a Scheme which made the Bankers look stupid. A scheme where the banks agreed to convert a part of the outstanding loan into equity capital .On the date of the conversion of loans into equity, the listed King fisher Airlines share were worth 2X . After the Banks were given shares, the share value eroded to nothing.In he words of Mr Vijay Mallaya, the Banks were given a Haircut. He held out to the public,he has paid all the Principal or atleast most of it and what is outstanding is only interest, penal and compounded. He cannot be held responsible just because he was the promoter. In all fairness you should appreciate the fact more or less at the same time Mr Naresh Goyal of Jet Airways wanted to leave India; he was promptly informed that his name figures in the Exit Control List and the Serious Frauds Office are investigating allegations of diversions of Jet Airways funds by traditional under-invoicing, overpaying methods.  Mr Goyal did not offer any personal guarantee to the banks. Hence, he continues to live a life of luxury in Mumbai after coming up with an IPO where he sold Ten Rupee shares for a whopping Six Sixty Rupees, paid himself a fancy salary, doled out expensive sinecures to his near and dear.Over a period of time, Jet Airways accumulated substantial liabilities to the bank, hoping banks will have no other option but to lend continuously for Mr Goyal or his nominees  for them to runthe Jet Airways. It worked for some time. Now, Jet Airways under Naresh Goyal is liquidated and a new entity will take over the assets, while the banks will continue to press their claims against Mr Naresh Goyal for wrongful diversion of the borrowed and corporate funds. So, the moral of the story is, whatever you do, if you stay in India, even after a mega-corporate loan default, there is a good chance of there being no criminal case against the Defaulter/borrower.

b. In Banking Debts recovery cases, if the borrowed funds are repaid with nominal interest, the possibility of penal liability even if real is remote.Undetermined penal liablity sharply decreases the value of the secured assets that are in Bank’s custody.If the banker condones or forgives penal liablity, they would have expedious and better monetary realisation of the secured assets.Even if there is a penal liability, there are opportunities for plea bargaining, whereby the offenders can reasonably and lawfully escape the full consequences of their despicable criminal act. Senior Mahindra did not have to discharge a prison sentence for Negligent Manslaughter in the Bhopal tragedy. Recently, Kerala Govt chose not to execute a prison Sentence of senior civil servant under the Prevention of Corruption Act on the ground because of old age related mental health issues, he is not capable of understanding what is punishment and why is he being imprisoned!

5. We all know (though not officially confirmed by the UK Government) Mr Vijay Mallya has sought Political Asylum. Usually, British Government is reticent to grant Political Asylum when the British Courts have found that the fugitive would have to answer the Criminal allegations before the court in whose jurisdiction the offence was originally committed. But then Mr Vijay Mallya’s case is a special one. He has well-placed friends in the Conservative party. In India, he was very friendly with all the regional parties such as DMK, Janata Dal, National Congress Party, Telugu Desam, TRS and YSR Congress. He has friends both in BJP and Congress. He was originally from West Bengal and enjoyed a functional relationship with West Bengal and Odisha governments as well. Liquor trade in India is peculiar. States play an important role in the procurement and distribution of liquor. It is common knowledge that liquor manufacturers in India generate and distribute funds to political parties in the market they distribute liquor to have a level playing field. In fact, Scotch Whiskey Manufacturers Association petitioned WTO saying that in Tamil Nadu the companies that are unwilling to contribute to the political parties in power have no realistic chance of getting respectable orders from TASMAC,the State controlled liquor distribution company. Hence, in my opinion, the relative political and economic clout of Mr Vijay Mallya is much more in India than in the UK. In fact, in the UK he will be treated as any other celebrity accused and justice would be provided to him based on the evidence which is available before the Trial Court, uninfluenced by other considerations. I am not too sure whether the conditions in India will be the same in this case.

6. In the event of Mr Vijay Mallya not getting Political asylum in the UK, he will appeal against the decision to the European Court of Human Rights. This I think will take a couple of years at the maximum. If Mr Mallya gets political asylum in the UK, in my opinion, that is the best thing that can happen for countless employees who had become victims of Vijay Mallya’s style of doing business in King Size. Under International Law when Political Asylum begins, Extradition ends. But the asylum granting state in the normal course should offer to try the fugitive under their laws for the commission of any crime based on the evidence produced by the country seeking extradition. In my opinion, without any disrespect to the Indian Trial Judiciary, the possibility of a celebrity businessman browbeating the conduct of the trial is much higher in Indian Courts. We should accept for the trial of Mr Mallya in British Courts after he pays up the pending dues. Let us not forget that Byrraju Ramalinga Raju, I think was sentenced to less than 5 years. I guess he has discharged the sentence and is a free man now. If there is a conviction and sentence Mr Vijay Mallya need not come to the Arthur Road Facility. Let him stay in the UK and accept the UK courts decision/judgement!!