Vijay Mallya’s overseas assets come under ED, CBI scanner

The Serious Fraud Investigation Office (SFIO), Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) have started looking into the overseas assets of Vijay Mallya as they pursue the businessman who owes Rs.9,091 crore to creditors of his grounded airline.

“We are examining whether any of the loans extended by the consortium of bankers to Kingfisher Airlines were diverted into building of overseas assets,” an official aware of the development said on condition of anonymity.

SFIO, which functions under the ministry of corporate affairs (MCA), and CBI are also exploring legal options to seize some of Mallya’s assets in Africa and the UK, said a second official.

“Real estate properties and Mallya’s lesser known firms present in the UK and Africa are being examined. Courts could be moved for seizing these assets if funds given to Kingfisher Airlines were utilized in acquiring these properties or their maintenance,” said the second official, also on condition of anonymity.

Mallya flew out of India on 2 March for an undisclosed overseas destination, days before creditors led by the State Bank of India approached the Supreme Court to restrain him from leaving the country.

The development follows multiple investigations begun by enforcement agencies into Mallya’s financial affairs at home after he reached a sweetheart deal with Diageo Plc. in late February under which he agreed to step down as non-executive chairman of United Spirits Ltd in return for a $75 million payout.

SFIO has launched an investigation into suspected diversion of funds and other financial irregularities at Kingfisher Airlines, which was grounded in 2012 under the weight of heavy debt, accumulated losses and after bouts of labour unrest.

ED has opened a money laundering investigation against Mallya in connection with alleged default on a Rs.900 crore loan from IDBI Bank Ltd. CBI had earlier moved against Kingfisher Airlines executives and IDBI Bank officials in the case.

CBI is currently preparing a list of foreign properties that belong to Mallya. Following that, CBI is likely to file a Letter Rogatory (LR) seeking help from jurisdictions where Mallya may hold foreign assets. An LR is a formal request from a court to a foreign court for judicial assistance.

An email sent to Mallya’s UB Group for a comment went unanswered.

Mallya has reportedly bought some of the most expensive real estate around the world, with properties in places ranging from Sausalito in Northern California’s Napa Valley to one of the poshest suburbs of Johannesburg, South Africa.

Mallya also did business with Donald Trump, the front-runner for the Republican nomination for the 2016 US presidential election, while purchasing a condo at the Trump Plaza in New York.

“It will be a herculean task for investigative agencies to pursue the investigation in this case. Mallya is a non-resident Indian and is legally allowed to own properties, assets and bank accounts in foreign jurisdictions. The only way an action can be taken against him is on the charge of misappropriation of funds and that trail would be difficult to establish,” said J.N. Gupta, a former executive director of the Securities and Exchange Board of India.

Meanwhile, trouble is also brewing for the officials of IDBI Bank who were involved in sanctioning the loan to Kingfisher Airlines. CBI is investigating whether bank officials received any bribes for sanctioning these loans.

“Investigations are under way to establish whether IDBI official accepted kickbacks or they were under any political pressure while granting the loan,” said a third official familiar with the development, on condition of anonymity.

In an e-mailed response, a spokesperson for the bank said that the lender was cooperating with investigations.

“IDBI Bank has sanctioned loans to Kingfisher Airlines after following due process and prevailing guidelines. It may be mentioned that IDBI has fully cooperated with CBI and provided all information/clarification sought in the matter,” said the spokesperson.

Since August 2014, CBI has been probing alleged collusion between the airline and some bank officials over loans granted to Kingfisher Airlines despite its negative credit ratings and net worth.

Mallya is a guarantor to some of Kingfisher’s debt.

On Tuesday, ED continued questioning former executives of Kingfisher Airlines for the fourth day, along with IDBI Bank officials.

Troubles have been mounting with each passing day for Mallya.

Last week, ED issued a summons to Mallya, asking him to be personally present before it on 18 March. According to a senior official close to Mallya, an extension of the deadline to appear before the ED may be sought. He declined to be identified.

ED is mandated with the task of enforcing the provisions of two special fiscal laws—the Foreign Exchange Management Act, 1999, and the Prevention of Money Laundering Act, 2002.

Meanwhile, a fresh set of non-bailable warrants were issued on Monday against Mallya. A local court in Hyderabad issued the warrants after the businessman failed to turn up before it.

Mallya was dragged to court by GMR Hyderabad International Airport Ltd (GHIAL) after cheques for Rs.50 lakh each (amounting to Rs.2 crore in total) were dishonoured. GHIAL operates Hyderabad’s Rajiv Gandhi International Airport.

The warrants directed the police to produce Mallya and Kingfisher Airlines chief financial officer A. Raghunathan before it on 29 March, according to the Times of India, which first reported the development.

A lawyer representing Mallya said they would appeal against the NBWs in a higher court.

“Previously also NBWs were issued and we challenged the orders of lower courts in high court and have got orders from high court dispensing with his (Mallya’s) attendance,” H. Sudhakar Rao, an advocate appearing for Mallya, told Press Trust of India.

In a separate development, the audit and tax firm Grant Thornton India Llp said it stood by the brand evaluation done by it on Kingfisher Airlines.

Mint reported on Tuesday that the SFIO was looking into the exercise behind theRs.4,100 crore valuation assigned to the brand in 2011 by Grant Thornton. Kingfisher Airlines made the valuation the single biggest collateral for raising loans.

“We fully stand by our brand valuation report which we believe was appropriate in the context of when it was done and the purpose for which it was done. Grant Thornton will obviously be pleased to offer all the information we have in connection with the matter to the appropriate authorities, and support any investigations,” a Grant Thornton spokesperson in an email to Mint.

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