Mumbai: The Enforcement Directorate (ED) on Saturday said it has attached properties worth Rs.1,411 crore of business tycoon Vijay Mallya and his company United Breweries (Holding) Ltd in a case of alleged diversion of Rs.430 crore from an IDBI Bank Ltd loan to his Kingfisher Airlines Ltd to purchase properties overseas.
ED, on its Twitter account, wrote that it has attached properties worth Rs.1,411 crore on current market value of former liquor baron Mallya and UB Group’s holding company United Breweries (Holding) under the Prevention of Money Laundering Act (PMLA).
ED attaches properties worth Rs1411 Crores(Market Value) of Vijay Mallya & UB (Holding) Ltd under PMLA in Kingfisher Airlines IDBI Bank case— ED (@dir_ed) June 11, 2016
The provisional attachment of eight immovable properties include one flat in Bengaluru and Mumbai (2291 and 1300 sq. ft respectively) each, an industrial plot in Chennai (4.5 acres), a coffee plantation plot in Coorg (28.75 acres), a residential and commercial constructed area in UB City and the Kingfisher Tower in Bengaluru (840279 sq. ft).
According to a late night statement by ED, investigation under PMLA revealed that a loan amounting to Rs.864 crore was sanctioned to Kingfisher Airlines against collateral security of Kingfisher Brand, corporate guarantee of United Breweries (Holding) and personal guarantee of Mallya and out of the total loan Rs.807 crore remained unpaid.
“The said corporate loan was sanctioned and disbursed despite weak financials, negative net-worth, low credit rating of the borrower company and despite the fact that the company namely Kingfisher Airlines being a new client did not satisfy the norms stipulated in the corporate loan policy of the bank. Investigation indicates that Kingfisher Airlines and its officials conspired among themselves and got sanctioned and disbursed term loans without conducting due diligence and the airline had diverted the said funds,” ED said in its statement.
ED said the loan was sanctioned “in an extraordinary haste without verifying quality and value” of the security independently and subsequently to avoid payment of dues, corporate guarantee and personal guarantee rendered by United Breweries (Holding) and Mallya were challenged by them before the Bombay high court on the grounds of coercion and undue pressure.
“It emerged during the investigation that from very beginning Kingfisher Airlines defaulted in repayment of loan thereby putting the IDBI Bank to a wrongful loss,” ED said.
The PMLA investigation further revealed that the acts of Mallya, United Breweries (Holding) and others indicate that a criminal conspiracy was hatched for sanctioning of bank loan to the airline in gross violations of established procedure and Kingfisher Airlines had no intent for repayment of loan ab initio, ED said in the statement.
“Further, huge funds (approximately Rs.423 crore) out of these loans were remitted outside India on pretext of aircraft lease rentals etc but no supporting documents furnished so far to substantiate their bonafides. Therefore not only the said bank loan was obtained in questionable manner, but part of the loan has been siphoned off abroad in a calculated and pre-designed manner,” ED said.
ED also found out that Mallya and associate companies had already disposed some of the assets.
“.. therefore to ensure that further proceedings under PMLA may not be frustrated, properties equivalent to proceed of crime of Rs. 807 crore having present market value of Rs.1411 crore have been provisionally attached today. Further investigation is in progress,” ED added.
A UB Group spokesperson declined to comment.
Assets that have been pledged with the banks include the Kingfisher House located in Mumbai, the Kingfisher brand, two helicopters and shares worth Rs.745 crore (value at the time of pledging).
In May, ED officials had said that the investigative agency has identified Rs.4,000 crore worth assets of Mallya for potential attachment.
This attachment comes a day after ED moved a petition in a Mumbai court asking it to declare UB Group chairman Mallya a proclaimed offender, as part of its efforts to bring the businessman back from the UK.
ED suspects Mallya diverted Rs.430 crore from IDBI Bank loan to now grounded airline Kingfisher Airlines to purchase properties overseas.
Mallya had denied this allegation.
ED, a specialized financial investigation agency under the ministry of finance enforcing PMLA and Foreign Exchange Management Act, is investigating the alleged money laundering by Mallya.
The businessman, whose grounded Kingfisher Airlines owes over Rs.9,000 crore in loans and interest to creditors led by State Bank of India (SBI), left for the UK on 2 March as lenders closed in.
The PMLA court is expected to give its verdict on proclaimed offender petition by ED on Monday.
A court can declare a person against whom an arrest warrant has been issued a proclaimed offender if it feels that the person is absconding. The offender is then required to appear at a specified place and time within 30 days. The court can also order the attachment of any property belonging to the concerned person to force him to turn up.
SBI filed four interlocutory applications on 2 March seeking Mallya’s arrest, impounding of his passport, disclosure of all assets and liabilities and stopping the $75 million payout by Diageo Plc, Mint reported on 2 March.
The service tax department has put out an advertisement for the sale of Mallya’s corporate jet, whose registration number famously bore his initials, VT-VJM, Mint reported on 24 March. The auction is intended to recover Rs.370 crore in dues and penalties.
In an interview to the Financial Times on 29 April, Mallya said he was in “forced exile” and that reporting by the Indian media had turned public opinion against him.