Mallya had pre-planned loan defaults, CBI alleges

Embattled businessman Vijay Mallya never intended to repay the loans he took for Kingfisher Airlines, and had no intention of honouring a personal guarantee he had given to IDBI Bank even before his now defunct Kingfisher Airlines carrier got involved in a loan default worth Rs900 crore, the Central Bureau of Investigation (CBI) has claimed in a supplementary charge-sheet filed against the Mallya and 10 others last week.

In the charge-sheet filed in a Mumbai court against Mallya and officials of Kingfisher Airlines and IDBI Bank, the CBI has sought to support its charge with a copy of an email allegedly sent by Mallya on 6 January 2012 to P A Murli, a senior official of United Spirits Limited (USL).

''I have been receiving mails from IDBI regarding the KFA account becoming a Non-Performing Asset or NPA. They may do suddenly something. Take the 10 crore out of my account into USL tomorrow itself,'' states the purported email from Mallya, which is referred to by the CBI in the supplementary chargesheet.

In an earlier chargesheet filed in January, the CBI had claimed that IDBI officials failed to obtain any legal opinion on keeping the Kingfisher Airlines brand, an ''intangible asset'', as collateral for the loan.

In the supplementary charge sheet, the CBI alleged that Kingfisher Airlines Ltd, its corporate guarantor United Breweries (Holding) Ltd and personal guarantor Vijay Mallya misled banks and obtained loans with the intention of cheating. The agency claimed that evidence it had gathered showed that ''Mallya and UBHL had dishonest intention not to repay the dues of the bank from the inception''.

By 2009, Kingfisher had taken loans totalling Rs4,998.5 crore from various banks and needed another Rs2,500 crore, of which a consortium of 17 banks sanctioned a loan of Rs2,000 crore.

The charge-sheet lists number of allegedly false claims made by Mallya while obtaining these loans.

The CBI said the first thing KFA lied about was how the money would be invested in KFA. According to the CBI, while obtaining a loan of Rs950 crore from IDBI Bank, KFA said it would infuse Rs200 crore of this in the company in three years. ''It was repeatedly conveyed by KFA that additional equity of $400 million would be infused though strategic investors,'' CBI claimed in the charge-sheet.

''Investigation further revealed that KFA were making such false promises of equity infusion to various banks from as early as January 2006, without any real intentions of fulfilling such promises,'' reads the charge-sheet.

The second lie was about inflated value of the Kingfisher Airlines brand.

The airline claimed to have obtained brand valuation reports from two firms, Grant Thornton and Brand Finance. CBI claimed that Grand Thornton had assigned a ''highly exaggerated and inflated'' value of Rs3,406.3 crore to KFA while Brand Finance said it was worth Rs1,911 crore.

The CBI alleged that Mallya quoted Grant Thornton's figure when he used KFA's brand value as collateral against a loan from SBI and ''deliberately concealed'' Brand Finance's valuation.

The charge sheet read, ''Mallya and KFA, with a view to induce the bank to sanction a higher loan, used the said inflated and exaggerated valuation report of Grant Thronton, while a report based on more realistic projections prepared by Brand Finance was deliberately concealed from the bank.''

The third false claim, according to the CBI, concerned negative lien on 12 aircraft. 'Negative lien' is a promise by a borrower that a property offered to bank under lien will not be sold. However, it is not always part of the securities mortgaged with the bank.

The agency claimed that while availing loan from banks, Mallya offered 12 aircraft as negative lien to induce banks to offer higher loans. However, the CBI's investigation revealed that the aircraft in question were on lease and he would get ownership of them only by August 2015. The deadline to repay the loan was January 2014.

The forth false claim, the CBI said, was about his personal guarantee.

Mallya stood as personal guarantor while obtaining loans from banks and declared assets worth Rs1,395 crore in his statement he gave to the banks in April 2009. With this, he also assured the banks that the properties would not be sold.

This list included Mallya's shares in two companies – worth Rs66.28 crore in Gem Investment and Tradition Co Pvt Ltd and worth Rs61.70 crore in Pharma Trading Co. The agency claimed that the values of these shares had been grossly inflated.

The CBI claimed that the two companies were small and had no business activities. It said the value of Mallya's shares in Gem Investment was no more than Rs1.20 lakh and that in Pharma Trading only Rs90,000. The CBI alleged that Mallya intentionally didn't declare his properties outside India, which include a resort in South Africa valued at Rs746.25 crore.

The charge-sheet also claimed that Mallya did not seek prior approval of lender banks while entering into a settlement agreement on 25 February 2016 with USL as well as a Deed of Disengagement with Diageo PLC and receiving $40 million.

The CBI has claimed that Mallya, in correspondence with the SBI chairman on 14 February 2013, had said that UB Group will make a significant payment to the Kingfisher Airlines Bank Consortium out of the proceeds received from Diageo on the USL deal.

The agency has claimed that he ''deceitfully concealed'' this deed from the banks, revealing it only after contempt proceedings were launched against him by the Supreme Court in 2016.

The CBI has said that Mallya admitted in an affidavit filed before Supreme Court that the $40 million were ''equally distributed to three separate trusts for the benefit of his three children'' on 26 and 29 February 2016.

The Supreme Court has found him guilty of contempt and directed him to appear before it on 10 July.