On July 26, the Insolvency and Companies Court of the London high court declared Indian fugitive and businessman Vijay Mallya bankrupt. Chief Insolvency and Companies Court (ICC) judge Briggs said, “There is no evidence he will go back to India to face trial, so I find insufficient evidence he will pay the debt in full in a reasonable period of time. I shall adjudicate Dr Mallya bankrupt.”
The orders would take effect immediately, however, he still has an option to seek permission to appeal from a higher court.
In May 2020, Mallya had lost the court cases against extradition to India. However, he has not returned to face trial. After the orders passed by the London Court, he has to submit all his assets, including credit cards, bank accounts etc., to a bankruptcy trustee. The actual value of his assets and liabilities would be established after investigation, and the trustee would assess the relevant assets that could be sold to repay the creditors.
As per the law, if a person is declared bankrupt, he or she must cooperate with the trustee. All the bank accounts belonging to that person would be frozen, leaving a small part of the money owned to buy essentials. Mallya would not be allowed to act as a director of any company or create a new company without permission from the court. He would not be allowed to borrow more than £500 without declaring he is bankrupt. The Individual Insolvency Register would now include his name.
In a tweet Mallya said, “ED attach my assets worth 14K crores at behest of Govt Banks against debt of 6.2K crores. They restore assets to Banks who recover 9K crores in cash and retain security over 5K crores more.Banks ask Court to make me Bankrupt as they may have to return money to the ED. Incredible.”
ED attach my assets worth 14K crores at behest of Govt Banks against debt of 6.2K crores.They restore assets to Banks who recover 9K crores in cash and retain security over 5K crores more.Banks ask Court to make me Bankrupt as they may have to return money to the ED. Incredible.— Vijay Mallya (@TheVijayMallya) July 26, 2021
The consortium led by the State Bank of India had sought to declare Mallya bankrupt as he had failed to clear the judgment debt of Rs 10,763 crore (roughly £1.05 billion) as ordered by the Debt Recovery Tribunal of Karnataka in January 2017. The tribunal is registered in the English courts. The debt owed by Mallya was driven from the personal guarantee he had given for the loans borrowed by Kingfisher Airlines.
The banks that are part of the consortium Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd as well as an additional creditor.
The court rejected Mallya’s appeal
The application for a stay on the bankruptcy and permission to appeal was rejected by the Judge, saying Mallya had no prospect of success. Advocate Philip Marshall QC who is representing Mallya in the court, had argued that the Indian banks had received Rs 5,776.2 crore after the DRT sale of UBL shares owned by Mallya in India. The majority of these shares were sold on June 23 this year.
He further added that shared worth 770 crores had been realised. However, they are yet to be transferred to the banks. Mallya’s shares were attached by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA). On May 24, PMLA court, Mumbai, had ordered to sell and transfer the money raised to the banks.
Marshall, in his arguments, said, “there are a number of other assets which although not yet realised are held with the DRT officer and can be realised. If we combine all that together, you end up with a figure well in excess of the petition debt.” He further added that there is an ongoing case in India to challenge the 11.5% interest imposed on the DRT judgement debt. Mallya’s counsels in India have argued that banks are not treating him equally to other citizens of India who owe the banks similar amounts and called it a breach of Article 14 of the Constitution of India.
However, while rejecting the plea, Judge Briggs said, “My understanding is that he is resisting extradition. The petitioners could be made to return the money after trial as nine different parties, including Mallya, challenged the May 24 order, and there are 40 creditors. There is a real risk the liquidator would require all the proceeds of the UBL sales to be paid to him to pay the creditors.”