The vijay mallya story

The financial scam in India. The vijay Mallya and Kingfisher airline story.

1. THE VIJAY MALLYA STORY Another Big Name in Indian Financial Fraud List PRESENTED BY : - DIPENDU KUNDU VAIBHAV NEELAVAR

2. This Power Point Presentation is talked about money-laundering case of Vijay Mallya . A sincere effort have been made to scrutinize fraudulent financial practices by Vijay Mallya to save his most ambitious venture Kingfisher Airline. The large part of Mallya’s default of over Rs.9000 crore rest with his lenders, especially banks and that to the PSBs . The unscrupulous businessman as well as the consortium(board of directors) of banks led by State Bank of India . Moves of the government. Regulatory bodies and the banking systems are also analyzed to know the current status and possibilities of recovery of dues. ABSTRACT

3. WHO IS VIJAY MALLYA?

4. VIJAY MALLYA The KING OF GOOD TIMES, a beer baron has always been on news. All thanks to his over the top extravagant lifestyle, Mallya & his companies have been involved in financial scandals, and controversies since 2012. INTRODUCTION

5. BORN ON 18 th DECEMBER, 1955 in BANTWAL, KARNATAKA . FATHER’S NAME – Late Shri . VITTAL MALLYA MOTHER’S NAME – Smt. LALITHA MALLYA Educational Qualification – La Martiniere for Boys School in KOLKATA ( WEST BENGAL) B.Com Degree in St. Xavier’s College, KOLKATA. Doctorate of Philosophy in Buisness Administration, Southern California University for Professional Studies of Santa Ana California in 1997. EARLY LIFE

6. UNITED BREWERIES GROUP . FOCAL BUSINESS AREAS ENCOMPASS ALCOHOLIC BEVERAGES LIFE SCIENCES ENGINEERING AGRICULTURE CHEMICALS INFORMATION TECHNOLOGY AVIATION LEISURE BUSINESS

7. Vijay Mallya became the Chairman of United Breweries Group in 1983 at the age of 28. Since then, the group has grown into a multi national corporation of over 60 companies. Mallya’s franchises, mergers, expansions all proved effective until 2005. When he established KINGFISHER AIRLINES that landed him in big trouble. BUSINESS INSIGHT

8. Under Vijay Mallya’s leadership, UB Group becomes world’s second largest liquor maker selling 55 million cases, after Diago , a British liquor giant, which sold 91 million cases in 2005. By 2007, he had grown his father’s modest business empire into a corporation with revenue of $2.1 billon. Banking on his business foresight, Vijay Mallya has made a record of sorts by entering and exiting more than 34 businesses (ref. table 1 ) in as many years. Business Revenue

9. Sr. No. Company Name In Out 1 United Communications Ltd 1985 2000 2 Pizza King 1986 1989 3 Berger Paints 1988 1996 4 Best & Crompton 1989 1995 5 UB Mysore Electro Chemicals Batteries Ltd Inherited 1991 6 Vijay TV 1994 1999 7 Kissan Products Ltd. Inherited 1994 8 Carbonated Beverages Ltd 1970 1990 9 Asian Age Holdings Ltd and UB Publications Ltd 1997 2005 10 Hindustan Polymers 1961 1997 11 United Spirits Ltd. Inherited 2012(sold majority stake) Vijay Mallya’s Ins and Outs of Various Businesses

10. Sr. No. Company Name In Out 12 Mines Exploration Pvt. Ltd. and UB Mining Ltd. 1995 1999 13 UB Petrochemicals Ltd. Inherited 2001 14 UB Air 1990 2012(Dormant) 15 Shilton Hotels Pvt. Ltd. Inherited Merged in UB holdings 16 UB Hoppeckke Energy Products Ltd. 1989 2001 17 Face One Model Pvt. Ltd. Inherited 2008 18 UB Pharmaceuticals Ltd Inherited Not known 19 Dominion Chemical Industries Pvt. Ltd. Inherited Not known 20 Carews Pharma and Optrex Ltd. Inherited Not known 21 Aventis Pharma , Bayer India 1956 2010 22 Krest Finance Ltd. Inherited Not known Vijay Mallya’s Ins and Outs of Various Businesses

11. Sr. No. Company Name In Out 23 Blue Pearl Internet Group 1993 2002 24 UB Transit Systems Pvt. Ltd. 1994 2001 25 UB Healthcare Ltd. 1990 2015 26 UB Resorts Ltd. Inherited 2001 27 City Properties Maintenance Company Bangalore 2007 Not known 28 Masonelian India Ltd. 1983 1997 29 UB Electronics Instruments Ltd. 1985 2001 30 Kingfisher Sports Gear Pvt. Ltd. 1999 2002 31 Sotiba Garments Inherited Not known 32 United Spirits Ltd. Inherited Not known 33 Cardboard Industries Ltd. 1998 Not known 34 Mangalore Chemicals and Fertilizer 1990 2015(sold majority stake) Vijay Mallya’s Ins and Outs of Various Businesses

12. One of his most ambitious ventures was KFA, a full service airline, launched in the year 2005.But KFA did not take off well and started bleeding money. The main reasons were: Provided high-end services (like baggage valet and free giveaways) but charged passenger mid-to-low-end prices. Acquired a loss-making Air Deccan at high price. Lack of synergy between two. Recorded high prices of aviation turbine fuel, high taxes on the same. Despite Mallya’s connections, airline was outmaneuvered in terms of navigating the regulatory landscape. Style over substance, a race to grab No. 1 slot as per market share rather than focus on profitability. Take Off and Grounding of Kingfisher Airlines

13. CHART OF PROFIT AND LOSS OF KFA

14. Kingfisher Airlines' net losses in Rs crore

15. LOAN DETAILS

16. Kingfisher, today owes over Rs. 9000 crore to its lenders, employees and suppliers. This includes borrowing of Rs. 6963 crore from total 17 banks, of which major loan is from PSBs. He has reportedly diverted Rs.7200 crore of United Spirit Ltd.’s (USL) funds to the airline, which was again diverted elsewhere. Apart from this, he has also allegedly tapped off over Rs.1300 crore from his group firm United Breweries (UB). Despite the huge financial crisis and the grounded airline, Mallya continued to be his flamboyant self.

17. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Banks utilize this act as an effective tool for bad loans ( NPA) recovery. It is possible where non-performing assets are backed by securities charged to the Bank by way of mortgage or assignment. The SARFAESI Act, 2002 gives powers of “seize and desist” to banks. THE SARFAESI ACT

18. Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days. If the borrower fails to comply with the notice, the Bank may take recourse to one or more. The SARFAESI Act also provides for the establishment of Asset Reconstruction Companies (ARCs) regulated by RBI to acquire assets from banks and financial institutions.

19. Default  means non-payment of a loan availed by a borrower. A  wilful defaulter  is an entity or a person that has not paid the loan back despite the ability to repay it. Mainly there are 4 conditions to be a Wilful Defaulter WILFUL DEFAULTER

20. According to the hypothecation deed signed between SBI and Kingfisher Airlines on August 10, 2010, SBI was given ownership of all trademarks and goodwill if Kingfisher Airlines failed to repay its debts. These included Fly Kingfisher (label mark & word), Flying Models, Fly The Good Times, Funliner & Kingfisher (label mark). As on January 31, 2014, KFA owes banks Rs 6,963 crore . All the banks had classified the loans as non-performing. Some banks, including SBI and United Bank of India, have declared Mr Mallya a wilful defaulter. As per the notice, the borrower is Kingfisher Airlines and guarantors are United Breweries (Holdings) Ltd and Vijay Mallya . UB Group chairman Vijay Mallya , whose grounded Kingfisher Airlines Ltd has not returned Rs.9,100 crore to a consortium of banks led by State Bank of India, left for the UK on 2 March. VIJAY MALLYA CASE IN A NUTSHELL

21. Kingfisher Airline Chairman Vijay Mallya has offered to pay bank Rs. 4000 crore as partial settlement of the carrier debts. He also indicated the Supreme Court that the atmosphere in India was to vitiated for him to immediately return. PROPOSAL OF VIJAY MALLYA

22. Banks so far have managed to sell about 4 lakh shares of United Spirits for Rs 104 crore last year. The lenders have recovered around Rs 1,600 crore from their original exposure of Rs 6,900 crore by selling pledged shares and other monetisable collaterals. Bankers led by SBI had sought bids for movable assets — primarily vehicles and assets related to the airline business — from prospective buyers. RECOVERY OF LOAN AMOUNT BY RECONSTRUCTION OF ASSETS

23. Among the medium-sized banks, Bank of India is owed Rs 308 crore . The bank was mortgaged all the current assets of the airline. It included items like air conditioners, tractors and monetarily unsubstantial items like folding chairs. The SBI-led lenders consortium had taken over the Kingfisher House near city airport in February 2015 worth around Rs 150 crore , after winning the case in the local court. They have also taken over the Kingfisher Villa in Goa, worth around Rs 90 crore .

24. Kingfisher House, measuring over 17,000 square feet in Mumbai's suburban Andheri locality, which was given as a personal guarantee by Mallya . The property was originally hypothecated to Punjab National Bank in 2010 and Kingfisher Airlines owes the bank Rs 290 crore . IRRECOVERABLE PROPERTIES

25. It is mentioned that a various loopholes have come into picture in regards to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 while dealing by the banks with a major loan default case of Kingfisher Airlines and its chief,Vijay Mallya . The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest ( Sarfaesi ) Act, a 2002 law, empowers banks to attach assets of defaulters. In the Mallya case, the banks had moved the DRTs( Debts Recovery Tribunal) in 2012. There have been at least 20 cases pending and hundreds of hearings and adjournments at different DRTs, high courts and the Supreme Court. Fast-track courts too are needed in India to take these cases to closure fast. SHORTCOMINGS IN THE LIGHT OF THE VIJAY MALLYA CASE

26. The assets specially the immovable properties being disputed themselves do not attract buyers which eventually decreases their value and keeps the banks hanging and they are not able to recover their money. Poor coordination among public sector banks (PSBs) is also the main reason for the rise in their non-performing assets,and it is necessary to direct them to join hands and mandatorily seize the assets of “ wilful and hardcore defaulters”.Incoherency in Impounding of assets against wilful and hardcore defaulters remains primarily because of lack of coordination among the bankers,” which negates the purpose of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act ( Sarfaesi Act), 2002. While asset reconstruction companies (ARCs) have come up, there is more supply of restructured assets than there are buyers. The ARCs also pay very little against the securitised receipts issued by them and consequently there is no market for these receipts.

27. March 2016 :- The Enforcement Directorate of INDIA also filed money laundring case against him for allegedly sending abroad Rs. 900 cr. Which was loaned for his airline. June 2016:- PMLA (Prevention of money laundring act) court declared mallya of Proclaimed offender on the base of loan default case. April 2017:- Mallya was arrested by UK(United Kingdom) Police extradition unit,on behalf of Indian Authorities on base of accusation of fraud. May 2017:- The supreme court of INDIA found Mallya guilty of contempt of court & Court ordered him to appear on 10 th july . Law applied on Vijay Mallya

28. The CBI had last July registered the case under Section 409 (criminal breach of trust) read with Section 120 B (criminal conspiracy) of the Indian Penal Code and other provisions of the Prevention of Corruption Act against unknown IDBI officials pertaining to abuse of office to allegedly extend favours to Mr. Mallya’s Kingfisher Airlines. The bankers and KFA executives accused were arrested under the Prevention of Corruption and Criminal Conspiracy Act , Sections 13 (1) ,13 (2) and 420 of the Indian Penal Code , according to the charge sheet. According to CBI, the bank officials entered into criminal conspiracy with the KFA executives for “ misutilisation , misappropriation and diversion of funds”.

29. CBI case on IDBI Bank loan to Kingfisher Airlines:- Prevention of Corruption Act, 1988. Enforcement Directorate case on money laundering Service tax evasion case Provident fund investigation GMR Hyderabad Airport cheque bounce case AAI case Case related to non-payment of TDS Debt recovery tribunal case The case(s) against Vijay Mallya and Kingfisher Airlines

30. Did the government act in haste by revoking Mallya’s passport even before gathering evedence in the case? Does the ED( Enforcement Directorate) have strong evidences against  Mallya that would stand in the court of law? On what Basis did the RBI even clear the restructuring of Kingfisher? How will the Banks recover their full money? Questions for Consideration:

31. There are several other accounts where banks have been struggling for years to recover money and the chances of recovery is almost nil. Mallya’s case is unique in the Indian banking industry ,the government, legal system in many ways. It is both shocking and demanding that an individual has successfully managed to take some 17 banks for a ride. Need to amend The SARFAESI Act. Banks acting as charity house for lending loans to Mallya calls people to question the credibility of authorities involved in credit appraisal process. The two major tools the regulators have introduced so far are ‘ wilful defaulter tag’ and most recently the provision for ‘Strategic Debt Restructuring (SDR)’ power for banks to acquire controlling stake in the companies, which fail to revive.But even if banks apply these provisions on loan defaulters, court's intervention prevents or delays any swift action by banks, diminishing lenders' ability to act. CONCLUSION

32. Jayashee P Upadhyay , Vishwanath Nair, Bidya Sapam , “ Mallya case: Sebi probing allegations of round-tripping of USL shares”, http://www.livemint.com, March 18, 2016 Dinesh Unnikrishnan , “A Mallya case study: Judiciary shouldn't play spoilsport when banks deal with crony-raj”, http://www.firstpost.com, June 11, 2015 PTI, New Delhi, “Vijay Mallya loan default case: Sebi to crack whip on wilful  defaulters”, http://www.financialexpress.com, March 11, 2016 PTI, New Delhi, “Vijay Mallya vs law: Sebi widens probe, finds prima-facie lapses”, http://www.hidustantimes.com, March 20, 2016 ET Bureau, “ Sebi bars wilful defaulters from markets, posts at listed firms”, http://www.economictimes.indiatimes.com, March 12, 2016. “From bang to bust: The Kingfisher story”, www.indianexpress.com Pulapre Balakrishan ,“Lessons from the Mallya case”, http://www.thehindu.com, April 18, 2016. Reference