Mumbai: The Enforcement Directorate (ED) is nudging a consortium of bankers owed money by Kingfisher Airlines to file a criminal complaint against Vijay Mallya.
The investigative agency is probing Mallya’s role in a Rs.950 crore loan granted by IDBI Bank to Kingfisher when the airline was already in deep financial trouble.
An ED official, who spoke on condition of anonymity, claimed that the agency may have unearthed some evidence of possible laundering in this case.
So far, the banks have been reluctant to file a criminal case against the former Kingfisher Airlines chief as it could impact the recovery of their dues. The defunct airline owes Rs.9,091 crore to banks.
“If banks come forward with intent to level criminal charges, our investigations could be widened,” said the official, highlighting the agency’s intent to go after Mallya
That’s also evident in the Serious Fraud and Investigation Office (SFIO)’s examination of deals initiated by United Spirits Ltd (USL) when Mallya was still chairman. One deal being investigated is the 2014 sale of USL’s UK-based unit Whyte & Mackay, according to two people familiar with the development, who asked not to be identified.
“SFIO is primarily examining the deal to establish whether Whyte & Mackay was undervalued when it was sold in 2014 to Emperador at a valuation of £430 million,” said one of the people.
The SFIO is a multidisciplinary organization that investigates serious financial frauds.
Still, in its keenness to go after Mallya, the agency may have overlooked the fact that while Mallya was chairman of USL in 2014, Diageo Plc, which acquired a controlling stake in the liquor company 2012-13, was already calling the shots.
USL purchased Whyte & Mackay in 2007 for £595 million, mostly funded by borrowings. The Indian liquor company, then chaired by Mallya, later sold it for an estimated £430 million to Philippines-based Emperador Inc. in 2014.
This sale, though, was prompted by regulatory concerns. USL was forced to put Whyte & Mackay on the block after the Office of Fair Trading (OFT) in the UK raised concerns in November 2013 about the impact of Diageo’s acquisition of USL, on whisky prices in the UK.
The OFT was worried that the merger between Diageo and USL would give the combine an unfair dominant position in the UK market, especially when it came to whisky.
An USL spokesperson didn’t respond to an email seeking comment.
“USL did not disclose adequate details regarding the sale of the UK-based unit and sought a write-off of its loans in the guise of this transaction. While, I do not question the valuation as it could have been impacted due regulatory reasons one can question the management on the lack of adequate disclosures,” said J.N. Gupta, founder, Stockholder Empowerment Services (SES), a proxy advisory firm.
“I am of the opinion that the directors were not transparent. While in communication to shareholders (before the sale of the unit) they were confirming good performance, the real performance was buried in the notes to the account,” he added.
The SFIO claims to have also discovered that of the £634 million pounds USL borrowed in 2007 to fund the Whyte & Mackay acquisition, around £40 million was not used, according to the second of the two people cited earlier.
The ED is mandated with the task of enforcing the provisions of two special fiscal laws—the Foreign Exchange Management Act (FEMA), 1999, and the Prevention of Money Laundering Act (PMLA), 2002.
Mallya left India for the UK on 2 March as creditors led by State Bank of India (SBI) closed in on the businessman, who owes them more than Rs.9,000 crore in loans advanced to Kingfisher Airlines, which was grounded in 2012.
Various government agencies have been attempting to get Mallya back to the country from the UK to question him. The government has already revoked his passport.
The Indian government is trying to have him deported even though the UK has rejected one deportation proposal.