Extradition hearing: Loans offered based on Vijay Mallya's guarantee, argues prosecution

Vijay Mallya arrives at Westminster Magistrates Court in London, United Kingdom on December 4, 2017.

Vijay Mallya arrives at Westminster Magistrates Court in London, United Kingdom on December 4, 2017.   | Photo Credit: Reuters

The much-awaited extradition hearing of liquor tycoon Vijay Mallya gets underway in central London.

 Over the next 10 days, Chief Magistrate at Westminster Magistrate’s Court Emma Arbuthnot will hear the case presented by Britain’s Crown Prosecution Service (CPS) on behalf of the Indian government, and the defence on which Mr. Mallya will hope to thwart efforts to return him to India to face prosecution.

Our London Correspondent Vidya Ram is sending updates from the hearing.

10:20 pm: The Prosecution concluded its opening argument saying "government has shown prima facie case."

10:00 pm: Turning to final uses, part of loan was used to clear Bank of Baroda bill, discounting limit freed up credit in that bank for Kingfisher to use it for other purposes, including money that ended up in his motor racing team. Dealing with Mr. Mallya’s response when banks recalled the loan, Mr. Summers said it involved ‘squirreling’ away as much as possible.

9:20 pm: The focus now turns towards where the loan went. Having obtained the loan on false financial projections and supported by valueless securities, the payments made out of the ₹150 crore were: transfers to Axis Bank and Bank of Baroda; paying off credit card with ICICI Bank; transfers to India Bulls; for Kingfisher expenses and a chunk of it was sent to HSBC in London and also to J&K Bank. The ₹750 crore loan amount was used in part to pay rent on corporate jet and outstanding tax obligations. “Defendant believed paying round robin between bank loans was legitimate,” said. Mr. Summers. One written testimony cited says “this corporate jet was exclusively used by Vijay Mallya.” “The government suggests the loans were not used for the purposes for which they were sanctioned,” said Mr. Summers.

8:30 pm: The hearing now focuses on brand valuation conducted by two companies — Grant Thornton and Brand Finance. The brand valuation presented to the banks by Kingfisher was, in the government’s view, ‘flatly unrealistic and wrong.’ Kingfisher relied on a much higher brand valuation from Grant Thornton rather than the subsequent one from Brand Finance that was presented to Mr. Mallya in December 2008, said Mr. Summers.

Also read: Mallya’s ‘misrepresentations’ to banks listed as extradition hearing begins

8:20 pm: The optimistic picture presented by Kingfisher in its loan application contrasted with the very gloomy picture presented by internal communications, including one email, which predated the loan application that predicted it would take 10 years to recoup losses. “It’s against that that you have to assess the financial obligations given to the bank, on which the bank relies heavily,” said Mr Summers. He also highlighted misstatements with regard to the value of the Kingfisher brand which had “nothing of the value attached to it.”

8:10 pm : “The government says there are reasons why a court could conclude that this was a loan the defendant never intended to repay,” said Mr. Summers. “His company was in intensive care, the market was in intensive care, it was only heading in one direction, as it went down it was going to sustain huge losses and the defendant had a choice: either take those losses yourself and impinge on your own lifestyle or you try and palm them off onto a bank.”

6:15 p.m: IDBI asks for net worth of Mallya in late November 2009, Kingfisher Airlines says its Rs 1,395 crore. But Mr. Summers notes no one investigated this. Still going through the various IDBI loan applications. All the applications took place in October and November 2009.

5:40 pm: Mr. Summers repeatedly cites the witness of one Mr. Gupta, who had worked at IDBI. The defence counters saying that Mr. Gupta had general observations, but wasn’t personally involved in the process of sanctioning loan.

5:35 pm: In their applications, the Kingfisher predicted that it would be profitable by financial year 2011. "That was just wrong,"  Mr. Summers says.

5:20 pm: Mr. Summers is focussing on two loan applications made to IDBI — a five-year loan for Rs. 950 crore made on October 1, 2009 and a six-month loan for Rs. 150 Crore on October 7, 2009. The latter was said to be for critical payments to overseas vendors.

5:10 pm: The prosecution is now focusing on loan applications to IDBI bank. The SBI had already sanctioned their share of the loan and there was an appraisal note from them too, he says.

The application to CBI showed losses in year to March 2009 and further losses for the next six months. The Kingfisher Airlines said in application that its brand value alone was estimated at Rs. 3,500 crore. But for Rs. 950 crore share,  it had a total loan Rs. 2,000 crore across various banks.

Guarantees offered were related to the brand, aircrafts and personal guarantee from Mr. Mallya himself, the prosecution argues.

4:50 pm: Mr. Summers begins his argument. Providing chronology of loan applications, he goes on to say how Mr. Mallya dealt with banks and his conduct thereafter.

The role of bankers are relevant only in so far as the loan sanctioned was in breach of banks internal rules, Mr. Summers argues.

4:45 pm: Mark Summers, who is arguing on behalf of the Indian government is known for appearing in extradition-related cases.

Mr. Summers says bankers role is not central to their case, though may be to case in India. For the CPS, it’s the conduct of Mr. Mallya that is key to case, he adds.

4:30 pm: Mr. Mallya sits calmly in the dock after court reopens following the fire evacuation delay. Lawyers from both sides have also arrived.

Lead Barristers for both sides, Clare Montgomery and Mark Summers are both Queens Counselors from the well-known Matrix Chambers.

3:50 pm: After 30 minutes of anxiety, the alarm is finally turned off. The trial is likely to resume now.

The Crown Prosecution Service (CPS) will be arguing on behalf of the Indian government, led by barrister Mark Summers.

3:20 pm: A twist in the tale. As the trial was about to begin, fire alarm goes off and the premises is being evacuated now.

3:00 pm: Vijay Mallya has arrived at the court premises. During a brief interaction with media persons, Mr. Mallya requests everyone to hear the proceedings. This has been his reply even during the past hearings.

2:40 pm: The extradition proceedings were initiated on the basis of a charge sheet filed by the CBI in a case connected to IDBI Bank, which involved about ₹900 crore. The CBI has registered another FIR in August 2016 against Mr. Mallya and others, of allegedly causing a loss of ₹6,027 crore to a State Bank of India-led consortium of banks.

2:30 pm: A four member team from Central Bureau of Investigation (CBI) and a team from the Enforcement Directorate have come too.

The ED had issued summons to the businessman in connection with the alleged payment of $ 200,000 to a British firm for displaying the Kingfisher logo in Formula One World Championships in London and some European countries in 1996, 1997 and 1998. It had claimed that the money was allegedly paid without prior approval from the RBI in violation of FERA norms.

2:25 pm: A large crowd has gathered outside Westminster Magistrate’s Court. Lawyer Clare Montgomery, who is representing Mr. Mallya has arrived.

2:15 pm: A number of case management hearings have taken place since Vijay Mallya’s arrest in April. Efforts by the defence to push the trial hearing to January in previous hearings did not succeed and the timetable remains the same despite fresh evidence introduced to the case last month.

2:05 pm: Mark Summers QC, a specialist in extradition law will lead the case for the prosecution, while Clare Montgomery QC will lead the defence. Witnesses set to appear include Margaret Sweeney, the chief accountant at Force India F1 Team, Dr. Humphreys, an aviation expert, Professor Lau, a legal expert, and Dr. Alan Mitchell, who has previously given evidence in other extradition cases on prison conditions in India.

2:00 pm: Mr. Mallya was arrested in London in April this year initially on fraud charges, with money laundering charges added subsequently. He has been on bail since April.

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