Indian banks ‘broke rules’ when lending money to Mallya

The hearing on whether Vijay Mallya, the former head of United Spirits, should be extradited to India is undergoing further twists with the chief magistrate at Westminster, Emma Arbuthnot, saying that it was “blindingly obvious” that rules were being broken by Indian banks that loaned funds to his failed Kingfisher Airlines.

(Photo: Wiki)

Some observers wonder whether this raises questions of bank officials being corrupt in granting the loans.

At the centre of the case is whether Mallya had any intention to repay the £1.2 billion the banks claim he owes them and whether some of the funds were illegally diverted overseas. He has consistently denied all the charges.

Separately, vital argument on whether Vijay Mallya’s emails to his lawyers can be used as evidence has been heard.

Mallya’s defence counsel, Clare Montgomery, argued that the emails should remain “privileged” as they were being used by his lawyers to seek advice on the case, but counsel for the Indian government said the emails showed Mallya’s fraudulent intent to avoid his liabilities and so should be exempt from “legal professional privilege”.

Referring to two emails from Mallya to his secretary, Mark Summers QC, said they exposed how he dishonestly avoided enforcement of personal and corporate guarantees he had given for the loans. He said the emails proved Mallya’s defence that the guarantees were given “under duress”, was false.

The judge described the case as a “jigsaw puzzle” with different pieces of “massive evidence” to be put together to paint a picture, which she said she was able to see “more clearly” than a few months ago.

“There are clear signs that the banks seem to have gone against their guidelines [in sanctioning some of the loans],” she said, “inviting” the Indian authorities to explain the case against some of the bank officials involved because that relates to the “conspiracy” allegation against Mallya.

She also told the Indian government to provide a breakdown of where some of the emails and documentary evidence originated. But she indicated her decision on the admissibility of evidence would go in favour of admitting some material and excluding other affidavits as they did not pertain to the prima facie case of fraud.

Friday’s hearing represented the closing of much of the evidence in the case. The hearing will resume on 27 April when the magistrate will rule on the admissibility of evidence and hear closing arguments.

The extradition hearing, which began in early December, will continue at least into May when a ruling is likely. That will not be the end of the matter, however, as the losing side is almost certain to begin a series of appeals to higher courts.