New Delhi: The Supreme Court on Tuesday held UB Group chairman Vijay Mallya guilty of contempt of court, and asked him to appear before the court on 10 July when it will decide on his prison sentence.
The ruling came on a plea by a consortium of creditors led by State Bank of India (SBI) which argued that Mallya had disobeyed court orders by making “vague and unclear disclosure of his assets” by transferring a $40 million payment from Diageo Plc. to his children and by ignoring summonses to appear in court.
“We give him an opportunity to be present in court personally while deciding on quantum of punishment,” justices A.K. Goel and U.U. Lalit said in the ruling.
Contempt of court is an offence punishable with maximum imprisonment of six months or a fine of up to Rs2,000 or both. SBI moved a contempt petition against Mallya in July 2016.
“The apex court is right in holding Mallya for contempt. This is exactly what happens when directions of the court are not followed,” said J.N. Gupta, co-founder and managing director of Stakeholders Empowerment Services, a proxy advisory firm. “Considering that the court is yet to decide on the sentence, Mallya has the option of complying with the directions and disclosing his assets for a lenient sentence. If the lack of compliance continues, then the court can direct his arrest.”
A spokesperson for Mallya did not respond to email and calls from Mint.
Mallya flew to the UK in early March last year as creditors closed in on him to recover Rs9,000 crore owed by his defunct Kingfisher Airlines Ltd. He left after reaching a $75 million sweetheart deal with Diaegeo Plc. in return for him stepping down as chairman of United Spirits Ltd, once part of his family business empire and now controlled by the UK-based distiller.
The businessman said in November that he had gifted the $40 million first instalment he had received from Diageo to his three children who are US citizens and sole beneficiaries of three trusts over which he had no control in his individual capacity.
The apex court directed Mallya twice—in April and October 2016—to disclose all assets held by him and his family after banks spurned his offer to repay Rs4,000 crore to settle the debt of Kingfisher Airlines.
In a 13 March statement, Mallya claimed that banks had already recovered Rs2,494 crore from Kingfisher Airlines since 2013. The airline, founded in 2005, was grounded in 2012 amid mounting debt and losses.
Creditors alleged that Mallya concealed the facts and diverted the money received from Diageo to his son Siddharth Mallya and daughters Leanna Mallya and Tanya Mallya in “flagrant violation” of orders passed by the Karnataka high court. The apex court has questioned Mallya why he transferred the payout.
Mallya’s presence in court, the government’s top law officer attorney general Mukul Rohatgi has argued, will indicate his seriousness in negotiating a deal. Both sides have told the court that they are willing to reach a one-time settlement.
In earlier hearings, Mallya’s lawyer C.S. Vaidyanathan had said his client’s presence in India was not necessary as he could negotiate a deal from London. Mallya has also claimed that he was being politically targeted by being made a “poster boy of loan defaulters in India”.
Mallya was arrested briefly in London last month in response to India’s request to the UK for his extradition. The 61-year-old businessman was released on £650,000 bail, according to court records. Another court hearing is scheduled for 17 May.
“Ultimately, whether Mallya will return to India or not will be determined by the extradition proceedings in the United Kingdom. Today’s contempt ruling will have little bearing on that,” said Ramesh Vaidyanathan, managing partner at Advaya Legal, a Bengaluru-based law firm.
Vaidyanathan added that in Indian courts, non-compliance with the ruling will be invoked in any future legal proceedings against Mallya. Mallya could be declared a fugitive if he fails to appear in court.