Mallya trial: defence says there is ‘no evidence’ to support fraud charges

There is “no evidence” to support charges of fraud by Vijay Mallya, the defence lawyer for the former head of United Spirits and United Breweries, told Westminster Magistrates Court yesterday.

On the second day of the hearing into India’s petition to have Mallya extradited to India, Clare Montgomery QC, the barrister representing Mallya, said the Indian government had put forward “no evidence” to support its case, even though it had made a “number of very serious allegations”, which were “unsustainable”.

“There are competing narratives, fraud versus business failure,” she said. She went on to allege: “What there has been is interference with the prosecution process in a way that is improper.”

In India Mallya has been charged with fraud involving loans worth some £1.1bn from a consortium of banks to prop up his Kingfisher Airlines, which collapsed in 2012 after never making a profit. He fled to Britain in March 2016 and was subsequently arrested by the Metropolitan Police in April this year. Since then he has been on bail.

On the first day of the hearing the prosecution alleged that Mallya never had any intention of repaying the loans and sought to squirrel away as much as possible when it became evident that Kingfisher would collapse. It is also alleged that much of the money was diverted into Mallya’s Force India Formula One grand prix racing team.

India’s Central Bureau of Investigation has charged Mallya and nine others over the loans. It says that Mallya was the central figure in a “dishonest plot” and that he never intended to repay the loans.

For his part Mallya denies all the charges, claiming that they are politically motivated and that he has been portrayed as the “embodiment of all the ills of capitalism in contemporary India”.

As part of his defence, Mallya presented written to the court which claims he is the victim of a “witch hunt” orchestrated by India’s government. His submissions say that the case is spurred by “populist and misguided sentiment” that the collapse of Kingfisher “must be indicative of some criminality somewhere”. That perception had been “stoked in India by politicians of every stripe”.

Ms Montgomery told the court that India’s Central Bureau of Investigation has a “long and inglorious history” of “politically motivated” prosecutions. She said the Indian government had “made political capital on the assumption that there was a fraud”.

She said claims that Mr Mallya wanted to “palm” losses off on to the banks were “financially incoherent”.

Ms Montgomery said that Indian government claims that Mallya fraudulently misled IDBI Bank in 2009 that Kingfisher would be profitable by 2011 “simply ignore” the basics of running an airline, which is heavily tied to the global economy.

On Monday, Mark Summers QC, the barrister for the Indian government, told the court that the bank loans were used by Mallya and his company to play “round robins” and pay off loans at other banks. Mr Summers said some of the money advanced by IDBI was used to repay loans from the Bank of Baroda. This freed up credit at the Bank of Baroda, which “ended up in the defendant’s motor racing team”.

In counter-argument yesterday, Ms Montgomery said that the State Bank of India, which led the consortium of banks, had credibly appraised the loan and acknowledged that Mallya’s company had been “frank” in reporting its financial position at that time.

Had he not been hounded by banks and the authorities, she said, “by now, Mr Mallya could have paid back 80% of the loans”. She alleged that the banks had been unwilling to settle because they had been put under political pressure. Mallya has always maintained that he wished to settle with his creditors but disputes the sums involved.

In a separate argument that Mallya will be harshly treated in India if extradited for trial, Ms Montgomery claimed that “Russia is a lot better than India” on the issue of prison conditions. She alleged that that nothing changes in practice despite court rulings on prison conditions, including in Arthur Road jail in Mumbai where Mallya is likely to be held if extradited.

The hearing continues.