Vijay Mallya, the chairman of the UB Group and a former member of Parliament, has been arrested earlier today in London. Mallya is facing legal proceedings for allegedly defaulting on loans of Rs 9,000 crore.
Following his father’s death, Mallya became the chairman of liquor firm United Breweries in 1983 at the age of 28. With Mallya at its helm, the group grew into a multi-national conglomerate of over 60 companies in a short span of time.
In 2003, Vijay Mallya started Kingfisher Airlines that really became the trouble maker for the business tycoon. Loans taken to 'revive' the dying carrier led to the piling up of defaults.Taking over Air Deccan was another mis-step in that direction.
Banks declare Vijay Mallya as wilful defaulter
Vijay Mallya, Kingfisher and United Breweries (Holdings) were named wilful defaulters by a consortium of banks. Apart from SBI, United Bank of India and Punjab National Bank declared Kingfisher and Mallya wilful defaulters. They moved the court seeking the freezing of his passport.
In August 2014, State Bank of India alleged that funds were diverted several times from Kingfisher Airlines to various UB Group companies and other firms. They alleged that United Breweries (Holdings), the parent company, had been “deliberately avoiding payment to lenders”.
Wilful default - what it means
Reserve Bank of India circular of July 1, 2014, and a subsequent amendment of January 7, 2015, states that a default — not meeting loan repayment obligations — is wilful when it fulfills one of the following four conditions:
A borrower (or an entity) does not pay up even when it has the capacity to pay,
a borrower has not used the loan for the purpose borrowed and diverted the money elsewhere,
a borrower has siphoned off the funds and the money is not available with it in the form of other assets, and,
a borrower sells assets given as security against the loan without informing lenders.
Snapshots – Vijay Mallya’s loan debacle
For the first time on November 4, 2009, Kingfisher reported a second quarter net loss of Rs 418.77 crore, and laid off nearly 100 pilots.
On October 2, 2012, Kingfisher declared partial lock-out following a strike by a section of its employees. And a non-bailable warrant was issued against him and four directors on October 12, the same year.
There was fresh trouble for Mallya in August 2014 when CBI instituted a preliminary inquiry against IDBI Bank and KFA. The bank had sanctioned a loan of Rs 950 crore, despite KFA having a negative rating.
On October 10, 2015, CBI conducted searches at Mallya’s offices and questioned him in December. Thereafter, in February 2016, PNB declared UB Holdings a wilful defaulter.
The SBI-led consortium of lenders moves the debt recovery tribunal (DRT) to attach Mallya’s passport. Mallya moved to London to evade arrest. It is said that he flew out of India on March 2, 2016. Today, he has finally been arrested in London. Government will try for his extradition.