Mallya trial: the story after week one

Two very contrasting pictures of Vijay Mallya were painted at Westminster Magistrates Court last week, where the former head of United Spirits is fighting a warrant to have him extradited to India to face trial.

On the one hand, prosecutors representing the Indian authorities portrayed him as a corrupt thief who had deliberately misled a consortium of banks who had advanced loans of £1.1bn (including interest) to his failed Kingfisher Airlines.

As soon as the low-cost airline ran into trouble, they alleged, he made every effort to divert the loan funds to offshore vehicles and other companies, including his Force India Formula One grand prix team, leaving the banks to pick up what pieces they could.

Mark Summers QC, representing the Indian government, said Mallya never intended to repay the loans.

On the other hand, Mallya’s counsel, Clare Montgomery QC, rejected the prosecution allegations, claiming that the Indian authorities had presented no credible evidence that Mallya had committed fraud.

She called two expert witnesses, one on international banking and finance, the other on the airline sector. With them she depicted Mallya as a conscientious entrepreneur who had the most to lose from the collapse of Kingfisher.

He was the owner and had given personal guarantees for the loans, so he had the most to lose.

After being hit by the perfect storm of the 2008 global financial crisis at the same time as the fledgling airline was taking off, he had made “every effort” to sustain the business; his actions could have seen it move into long-term viability.

The Indian state-backed banks had known the full extent of Kingfisher’s problems and had undertaken their own investigations before providing the funds but had declined Mallya’s offer to settle 80% of the debt they had already written off.

“It is likely to be seen as an attractive option,” a witness told the court.

Ms Montgomery’s theme was that Mallya was victim of a political witch hunt and that the banks had been pressurised by Delhi into rejecting an offer by Mallya to settle that would have been more than acceptable to any global lender.

So far there has been little mention in open court of the charges of money laundering brought in India against Mallya and added to the allegations of fraud earlier this year.

However, Indian government sources say they have provided the court with an extensive dossier forensically detailing money trails through several Mallya companies and into jurisdictions beyond their reach.

There will be more technical arguments this week and the hearing will also focus on Mallya’s allegations that he will not be treated humanely in accordance with international standards if extradited to face trial. Some press reports suggest that he fears being murdered in an Indian jail, such is the hostility to him that has been whipped up in the Indian media.

In a counter campaign, India has sent a document to the court saying that conditions in the Arthur Road prison in Mumbai, where Mallya would be held if extradited, exceed the standards in many European countries.

The extradition hearing is scheduled to hear closing arguments on Thursday, with a verdict likely to be reserved until early in the New Year. If the ruling goes against Mallya, he must be deported within two months. However, there will be a string of appeal to higher courts whatever the decision.

Meanwhile, Mallya is battling in a second London court to overturn an order freezing assets of £1.15bn globally. That court has ruled that the former self proclaimed “King of the Good Times” must get by on £5,000 a week, not the £20,000 he claims he needs.

He was served with the freezing order the day before his extradition hearing began and enforces in Britain an Indian court ruling in made January.

In documents lodged with the court the Indian banks’ claim Mallya is the beneficial owner of at least three properties, cars and “other valuable chattels,” His estate in Tewin, Hertfordshire, was bought in 2015 for £11.5m by Ladywalk LLP, which his creditors allege is a Mallya company. It also bought an adjacent lodge for £1.5m.

He also has at least two yachts including Force India, which is on sale for €13.95m.

The banks claim Mallya defied Indian court orders by diverting some of his assets to his three children. They are said to have some $30m each in property outside India, while his wife has $14.2m in real estate abroad.

“Dr. Mallya has arranged his affairs in a way designed to avoid his creditors being able to enforce against him,” Nigel Tozzi, a senior trial lawyer acting for the banks, said in filings. “The evidence of dissipation/secretion is unusually good in this case.”

Mallya fled India in March 2016 on the eve of a warrant being issued for his arrest. Since April he has been on bail of £650,000 plus having to surrender all travel documents.