KINGFISHER AIRLINES chief Vijay Mallya had no intention of honouring a personal guarantee he had given to IDBI Bank, even before his now defunct private carrier allegedly got involved in a loan default worth Rs 900 crore, according to a supplementary chargesheet filed in the case by the CBI. In the chargesheet filed last week 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 January 6, 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 a collateral for the loan.
In the supplementary chargesheet, the CBI alleged that it was Mallya who came up with the idea of using the brand value of Kingfisher Airlines as security for the loan. The CBI claimed the idea was conceived by Mallya and suggested to the then CFO of UB Group, Ravi Nedungadi, in an email dated September 10, 2008. In 2009, Mallya wrote to State Bank of India offering the brand value of Kingfisher Airlines — pegged at Rs 3,365 crore — as security for the loan, according to the CBI. “The lending banks, including IDBI, were induced to believe that such a value is an outcome of the diligent exercise of an independent outside expert after rigorous investigation and valuation.
The investigation reveals that such a favourable report was obtained by deliberately exaggerated financial indicators, which are different from the ones supplied to the banks,” states the supplementary chargesheet. The agency alleged that Mallya told IDBI Bank while seeking the loan that Kingfisher would submit brand valuation reports carried out by two independent experts but eventually submitted only one, which was favourable to his company. The CBI had earlier claimed that the report by Grant Thornton clearly stated that it was done by the firm for “internal purpose” and was “not an investment advise”.
“Investigation has further revealed that accused Vijay Mallya was also well aware of the findings of the report of Brand Finance showing a lower value of Rs 1,911 crore and a power point presentation of the said report was made before him alone by the Brand Finance team at his residence at Niladri, Mumbai on 20.12.2008, wherein he expressed dissatisfaction and told them that the numbers provided… were very conservative,” the chargesheet claims. The CBI has alleged that this report, “based on more realistic projections”, was “deliberately concealed”.
The CBI has also claimed in the supplementary chargesheet that while submitting the Assets and Liabilities statements to SBI from 2010 to 2012, Mallya “deliberately” did not declare any foreign assets, including his stake in UNB, a property in South Africa. According to the CBI, while Mallya eventually declared his foreign assets on the intervention of the Supreme Court, he concealed assets in VJM Resorts in South Africa valued at Rs 49.75 crore and 100 per cent share holding in UNB-South Africa valued at Rs 746.25 crore.
The chargesheet also claimed that Mallya did not seek prior approval of lender banks, while entering into a settlement agreement on February 25, 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 February 14, 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.
However, the agency has claimed that he “deceitfully concealed” this deed from the banks, revealing it 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 February 26 and February 29, 2016. The Supreme Court has found him guilty of contempt and directed him to appear before it on July 10. The CBI has also claimed that there are “several glaring misrepresentations and false information” given by Kingfisher Airlines, its corporate guarantor, United Breweries Holdings Ltd and personal guarantor, Vijay Mallya.
According to the agency, Kingfisher Airlines repeatedly assured IDBI Bank that they would infuse the promoters’ contribution of Rs 600 crore and additional equity of $400 million through strategic investors, but did not do so. It said that Mallya wrote a letter on March 25, 2009, “inducing the banks to sanction and disburse further loans”.
The CBI has also claimed that while Mallya declared assets in two unlisted companies, their values were inflated. Mallya’s declaration of owning 1,200 shares in Gem Investment and Trading Co Pvt Ltd, at a cost of Rs 66.28 crore, had the actual “face value” of Rs 1.2 lakh, and 9,000 shares of Pharma Trading Co. Pvt Ltd, at a cost of Rs 61.70, had the value of only Rs 90,000, the agency alleged in the supplementary chargesheet.