ED files charges against Mallya, 5 IDBI Bank officials

The Enforcement Directorate (ED) on Wednesday filed its first charge-sheet against liquor baron Vijay Mallya, Kingfisher Airlines, two Kingfisher Airlines executives and five IDBI Bank officials in a Rs900-crore money laundering case.

The charge-sheet will now be submitted before the Westminster Magistrates' Court in London, where the Indian government's case for Mallya's extradition is going on and the next hearing is on 6 July.

Accusing Kingfisher Airlines Ltd of participating in ''criminal activities'' and its chairman Vijay Mallya of being an ''active participant'' in ''money laundering'', the ED submitted the prosecution complaint in a Mumbai court.

The complaint accused the now defunct Kingfisher Airlines and Mallya of having routed overseas over Rs417 crore of Rs900 crore it secured as loan from IDBI Bank Ltd for aircraft rental leasing and operational expenses.

Alleging that ''a significant portion of the loan amount was diverted'', the complaint pressed for charges under Sections 3 and 4 of the Prevention of Money Laundering Act (PMLA) against Mallya, Kingfisher Airlines, United Breweries Holdings Ltd and six others.

According to the complaint, Kingfisher Airlines ''participated in criminal activities'', which led to the ''generation and acquisition'' of Rs900 crore, and was ''involved with the concealment, possession, acquisition and use of the proceeds of (the) crime''.

It claimed that Mallya was an ''active participant in the generation of proceeds of crime and the activity of money laundering'' under the PMLA.

The complaint also accused Mallya of colluding with five IDBI Bank officials to secure funds without any valuable collateral and alleged that the bank approved the loan to Kingfisher despite the latter's weak financials, low credit rating and negative net worth.

Detailing the money trail of the IDBI loan, the ED alleged that in at least two instances, the airline diverted the loan money by paying higher rentals for aircraft leased from two Mauritius-based firms run by former employees of the Mallya-controlled UB Group between 2007 and 2013.

Comparing the lease rental rates of Jet Airways with that of Kingfisher Airlines, the complaint claimed that the excess money paid to these firms was about $73,000 each.

''There may be similar over-invoicing in case of lease aircraft of other specifications. Investigation for the same is in progress. Further, the directors / owners of the company (Mauritius firms) being ex-employees of UB Group raises suspicion of siphoning / diversion of funds. Copies of the lease rental agreements were not provided nor any supporting documents to show that the transactions were genuine and bona fide,'' the complaint claimed.

Apart from this, the complaint alleged that Kingfisher transferred about Rs53 crore of the loan amount to Mallya's Force India Formula One Team Ltd while about Rs70 crore was diverted to two firms controlled by him - UBICS Technologies Pvt Ltd and UB Engineering Pvt Ltd.

''KAL has given priority for making payments to its group companies and diverted its funds instead of paying off the loan amount availed from the bank. These amounts are nothing but involved in the offence of money laundering,'' stated the complaint.

The probe agency also alleged that Mallya's ''secretive'' and ''convoluted'' deal with Diageo Plc for the payment of $40 million received towards a $75-million debt settlement with the London-based liquor major last year demonstrated his intent to not repay the loans.

''….Dr Vijay Mallya received payment of $40 million on 25th of February, 2016 from M/s Diageo Plc. Instead of utilizing the same towards squaring up the bank loan, Dr Vijay Mallya structured the deal in a convoluted manner to receive the payments outside India. Thus, it clearly establishes the intention of Mallya to continue enjoying the good times for himself at the cost of wellbeing (of) M/s KAL thereby wilfully siphoning off the loan amount at the cost of public interest and the national economy,'' stated the complaint.

The ED filed the complaint a day after a court in London granted bail till 4 December to Mallya in an extradition hearing (See: Mallya extradition: why so slow, UK court asks India).

Kingfisher Airlines owes over Rs9,000 crore to 17 lenders, including the SBI, IDBI Bank, Punjab National Bank, Bank of India, Bank of Baroda, United Bank of India, Central Bank, UCO Bank, Corporation Bank, Indian Overseas Bank, Federal Bank, Punjab and Sind Bank, and Axis Bank among others.