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INDIA'S WEALTHIEST DELINQUENT: VIJAY MALLYA



In this article we look at the rise and fall of Vijay Mallya. Who is Vijay Mallya? What crimes did he commit? Why did Kingfisher fail? How did Mallya end up being extradited to India to stand before the Supreme Court?


“Ethics and oversight are what you eliminate when you want absolute power.
― DaShanne Stokes

Vijay Mallya is perhaps one of the most well known names of India, for both good and bad reasons. Considered by many to be a genius in marketing as seen by the success of household name, Kingfisher, there is no doubt that Vijay Mallya knows how to create an image. He created his own as the “King of Good Times”. At a time when India was at its most conservative period, Vijay Mallya made a place for himself among the elites by selling alcohol and living life with as much grandeur as possible. Vijay Mallya was the exact opposite of the modest elites of the time.


On the other hand, over the past decade, Mallyas image has been besmirched by the disaster that was Kingfisher Airlines. In a very challenging industry, Mallya crashed and burned faster and harder than anyone before him. The shady business practices he allegedly indulged in to save his business ended up in him becoming a fugitive in a foreign country.


Inheriting a million-dollar business


The rise of Vijay Mallya began in 1983, with the untimely death of his father, Vittal Mallya. Like ancient royalty, Vijay Mallya also inherited an empire from his father. But this wasn’t an empire like in the old days. This was a brewing empire.


Vittal Mallya was a liquor baron, a title which was looked down upon in conservative India. Alcohol was taboo and the people who made and profited from it were allegedly destroying Indias proud culture. This was the view held by the majority of Indias older population.


Post 1983, Mallya became more powerful than ever. An avid racer, Mallya took part in many races and even won the Calcutta and Sholavaram Grand Prixs in the 1980s. But all that changed when suddenly, he was forced to handle his fathers legacy, United Breweries.


United Breweries was mainly an alcohol business, although Vittal Mallya had also heavily diversified into food products as well. During Prohibition in 1977, Vittal Mallya bought up distilleries all over India and gained control of all the hop produce from Kashmir, effectively giving him control over the alcohol industry.

When Vijay Mallya inherited the company, his attention was caught by one of the brands under United Breweries which was Kingfisher. When the first pub in Bangalore opened, Mallya recognized the potential and quickly went all-in with Kingfisher. The brand quickly became a household name despite backlash from the very conservative political parties of the time. Alcohol went against the major religions in India and the political parties of India have always been of a communal type. They strongly opposed Mallyas business and would regularly conduct raids on distilleries and pubs to discourage alcohol production.


The Indian Government prohibited advertisement of alcohol on television, radio etc. This was a huge blow to Mallya’s alcohol empire. However, he was not ready to give up without a fight and found a way to create advertisements around this restriction. His idea was to create an “aspirational lifestyle around the Kingfisher brand name”. He branded himself as “the King of Good Times”. Back then, it was merely a nickname, but it quickly became his entire persona and helped him rebrand himself.


Expansion of the Mallya name


In 1991, United Breweries was selling around 2 million cases of beer a year. Thanks to Vijay Mallyas business sense and shrewd ideas, UB was selling over 20 million cases in 2001 and owned the majority of the Indian liquor market.


In the early 2000’s. Mallya Jr. wanted to diversify and chose to create an airline. Kingfisher Airlines was born, with the vision of creating India’s first luxury air travel experience. With a strict policy of hiring models and training them as flight attendants, to having five star meals onboard, Kingfisher Airlines revolutionised the air travel experience for Indians.


For a while, it was smooth sailing for the tycoon. In 2007, Kingfisher Airlines purchased Air Deccan, which was in heavy debt at the time. United Breweries Holdings Limited paid 550 crores for it in 2008.


In late 2007, Mallya bought an F1 team and named it Force India, marking Indias lavish entry into the modern era of motorsport. What was back then considered to be a source of great pride for India in general, quickly became a blemish on Mallyas life. A few years later, he would be accused of money laundering through his Formula 1 Team. The team itself participated in a few F1 seasons but wasn’t very successful and was losing huge amounts of money after every Grand Prix.


Mallya also bought the Indian Premier League team Royal Challengers Bangalore in Feb 2008. He paid 111.6 million USD for the team. The team remains a subsidiary of United Spirits, albeit without Mallya as Chairperson, as he was forced to step down amid financial controversy in 2015.


After Kingfisher’s success in aviation, Mallya wanted to look at expansion. He went with his entourage to Toulouse, France to the Airbus factories and bought billions of dollars worth of planes. He said at economic forums that Kingfisher Airlines is looking to raise 200 million primarily for aircraft acquisition.


Kingfisher’s Downfall


By this point KFA was losing money at a rapid pace. This was simply because the new aircrafts, combined with the extravagant experience onboard and rising fuel prices all added up to be more than what Kingfisher was earning. The luxury experience that Mallya wanted to provide came at a price, which the airline wasnt able to recoup through its customers. In the early months of 2008, oil prices surged, causing Kingfisher Airlines debt to shoot up to over 900 crores. In a little over a year, that amount owed shot up at an unimaginable rate to 7000 crores.


In 2011, Kingfisher was beginning to struggle to even pay for fuel, which led to flights being grounded a few times. It was around this time as well that employees stopped receiving salaries. Engineers, pilots, ground crew, cabin crew all took to the streets to protest against Vijay Mallya. Employees in India had not been paid for 15 months now. Many attribute this to lack of regulations in India. There are no strict repercussions for employers not paying wages in India. American citizen and former COO of KIngfisher Airlines, Alex Wilcox said that as an American, it was “unimaginable and shocking” to him that Mallya would do this.


The wife of a Kingfisher engineer committed suicide and mentioned Mallya by name in her suicide note, citing his defaulting on wages as the reason for her mental stress and suicide. The point of outrage for most people was when Mallya held a lavish 60th birthday party in the midst of employees protesting unpaid wages.


At the same time, banks started circling KFA and Mallya for defaulting on loans worth thousands of crores. A lot of doubt was raised by financial experts with respect to why Mallya even got loans worth so much by simply putting a valuation on the brand. The Kingfisher logo is an intangible asset and should not have been accepted in any form during loan agreements. Most experts believe that banks like IDBI which provided loans under such conditions should be investigated for lack of due diligence or even corruption.


Many people alleged corruption within the banks, though there was never any official allegations in court. 13 banks created a consortium to handle Mallyas unpaid due. The consortium was led by SBI and still remains active till date.


By March of 2013, Kingfishers net worth was negative 13,000 crore. A staggering fall from being one of Indias largest airlines. In February 2015, the SBI-led consortium took possession of Kingfisher House in Vile Parle, and 2 months later UBHL asked Mallya to step down as Chairman due to allegations of fund diversions. It was reported that Mallya was using his Formula 1 Team to launder black money, as well as diverting funds to help with Kingfishers huge debt. These allegations have not been confirmed to date.


On March 9 2016, Vijay Mallya fled India to stay in London. He claimed that there was a witch hunt after him and that he was glad to have an impartial UK court for him. He was arrested in April 2017 in the UK on account of Indias request for extradition but was released soon after. He has been arrested in UK a number of ties after that as well for different matters too. Legal proceedings have been going on and continue to remain active as of November 2020.


A lower Court as well as the UK High Court have denied Mallyas appeal against extradition, and the Supreme Court in UK has done so as well. Mallya was due to arrive back in India by November 2020 but has been delayed due to unspecified legal reasons. The Supreme Court has asked for a status report by the Centre which they have promised to provide by end of December. Mallya faces charges of contempt of court for failing to appear in court numerous times owing to his fleeing to London, as well as numerous financial offences regarding non payment of loans worth 9000 crores from 13 banks, namely SBI, BOB, Corporation Bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, J&K Bank, Punjab and Sind Bank, PNB, State Bank of Mysore, UCO Bank, UBI and JM Financial Asset Reconstruction Co. Pvt Ltd. Mallya is still in the UK and is expected to be transferred to CBI custody in early 2021, where the Supreme Court expects him to stand before the courts in his many cases.

Sources:-

https://www.ndtv.com/india-news/india-seeks-expeditious-extradition-of-vijay-mallya-nirav-modi-from-uk-2320791

www.forbes.com

https://www.financialexpress.com/market/stock-market/kingfisher-airlines-ltd-stock-price/financials-balance-sheet/

www.veritas.com

https://www.indialegallive.com/top-news-of-the-day/top-story/sc-reserves-judgement-on-contempt-case-against-vijay-mallya/





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