Financial fraud happens when someone deprives you of your money, capital, or otherwise harms your financial health through deceptive, misleading, or other illegal practices. The art of conning banks and public agencies comes with its own set of risks. Financial frauds are committed not only in the domestic arena but also at international levels, for example, Charles Ponzi masterminded one of the biggest international trade frauds of the 20th century.

India has had its fair share of frauds being committed, be it the Punjab National Bank scam, the Satyam fiasco or the scam carried out by the infamous Vijay Mallya. Let us take a look at what this fraud was all about, why and how it was carried out and what does the status quo looks like.

WHO IS VIJAY MALLYA?: Vijay Mallya is an Indian businessman and former Member of Parliament who is presently seeking refuge in Europe and in on extradition charges by the Indian government on account of financial crimes.

Mallya is a former owner of the Royal Challengers Bangalore cricket team. The son of businessman Vittal Mallya, he is the ex-chairman of United Spirits, the largest spirits company in India, and continues to serve as chairman of United Breweries Group, an Indian multi-industry company with interests including beverage alcohol, aviation infrastructure, real estate, and fertilizer. He has been the chairman of Sanofi India and Bayer Crop Science in India for over 20 years, and the chairman of several other companies.

HOW DID THE KING OF GOOD TIMES BECOME THE KING OF BAD TIMES?: Once called “the king of good times” due to his lavish lifestyle, Vijay Mallya has been involved in various financial fraud accusations starting in the year 2012.

Mallya inherited his father’s business UB Spirits after his death in 1983 and eventually converted it into an extremely successful brewery estate called Kingfisher. It went onto become the 2nd largest producer of spirits across the world and was sold to an international company Diageo with Mallya retaining the minority share.

However, his other venture with Kingfisher Airlines is what led him to deep trouble. Kingfisher Airlines was started in 2005 as a domestic airline. Mallya took multibed loans to initiate Kingfisher but in the year 2012, it became insolvent and was declared bankrupt. As of 2013, the company has not paid its employees’ salaries for 13 months and had an estimate of $1 billion in debt which had increased to $1.35 billion due to taxes and other credits. Due to such hefty borrowing Mallya was called a “wilful defaulter” by the Indian government and was charged with crimes such as money laundering and misappropriation.

In March 2016 a number of banks approached the Supreme Court of India to not let Mallya out of the country as he owed them lumpsum amounts, but it later came to notice that he had already left by then. A non-bailable warrant was then issued by the Hyderabad High Court for Mallya’s arrest but his lawyers from London took the plea to a higher court. In April of the same year, a special court in Mumbai issued another non-bailable arrest warrant. This was issued in response to a plea by the Enforcement Directorate on 15 April before the special court hearing cases under the Prevention of Money Laundering Act, 2002. There were allegations on him that he transferred ₹4,000 crores ($560 million) to tax havens.

In June 2016, the Enforcement Directorate reported that it had “provisionally attached” ₹1,411 crores ($200 million) rupees worth of Mallya’s Indian assets and properties against unpaid loans totaling ₹807 crores ($110 million). In September 2016, it issued a second attachment order for a further ₹6,630 crores ($930 million) worth of Mallya’s assets, including a farmhouse, shares in United Breweries and multiple flats in Bengaluru valued at ₹565 crores ($79 million). By December 2016, the ED had attached a total of Rs 9661 crore worth of assets of Mallya and Kingfisher in India. This was one of the largest attachment of assets made by the ED in a Prevention of Money Laundering Act case. The ED also decided to send letters rogatory to the US, the UK and Europe requesting them to assist it in the attachment of Mallya’s over ten foreign assets.

On 16 June 2018, Vijay Mallya was ordered to pay £200,000 (Rs. 1.81 crore) to Indian banks by a United Kingdom court. He was also asked to pay money towards registration of worldwide freezing order and of Karnataka’s Debt Recovery Tribunal. Vijay Mallya has to pay dues to 13 banks namely- SBI, BOB, Corporation Bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, J&K Bank, Punjab and Sind Bank, PNB, State Bank of Mysore, UCO Bank, UBI and JM Financial Asset Reconstruction Co. Pvt Ltd.

The association of the aforementioned banks also tried to get possession of his estate in the UK, but he defied the charges by stating that it belonged to his mother. UBS bank from Switzerland went to court in 2018, seeking to evict Mallya, his son and his mother from their residence in London, but the trial did not go ahead since Mallya drew up a settlement.

MALLYA’S RESPONSE TO THE SITUATION: Mallya has denied all allegations and publicly offered to repay the full principal amount he owes the lenders. Just before leaving the country in 2016, Mallya wrote an open letter defending himself. “All inquiries conducted have failed to find evidence of misappropriation of funds by Kingfisher Airlines or myself,” Mallya said. “Despite pledging blue-chip securities and depositing significant amounts in court, a successful disinformation campaign has ensured my becoming the poster boy of all bank Non-Performing Assets.”

WHAT’S NEXT?: In January of 2019, he was declared a fugitive economic offender under the Fugitive Economic Offenders Act. The Indian government is making all efforts to extradite Mallya from the UK. In February 2019, UK Home Secretary approved the extradition. The case is now pending in the London High Court, where Mallya filed an appeal against the order. The appeal has been listed for a three-day hearing from February 11, 2020.

The government has been making consistent efforts to bring back the money owed to banks but this task is continuously getting difficult and financial crimes are becoming a huge problem for the economy. Embezzlement and money laundering cases are increasing and the economic recession in India does not look good with it. Indian banking system detected Rs 71,500 crore worth of fraud in the financial year 2018-19. Big guns like Nirav Modi and his scam with the Punjab National Bank was a buzz in the country. To curb this menace, the central bank said that it is in talks with various agencies including the Ministry of Corporate Affairs to create an interlinked database for fraud monitoring. In furtherance, the regulators said that analytic engines of banks and user interface of the fraud registry would be improved to create a more robust monitoring system.

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