State Bank of India v Dr Vijay Mallya
| Jurisdiction | England & Wales |
| Judge | Mr Andrew Henshaw |
| Judgment Date | 08 May 2018 |
| Neutral Citation | [2018] EWHC 1084 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000717 |
| Date | 08 May 2018 |
Neutral Citation Number: [2018] EWHC 1084 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Henshaw QC
(Sitting as a Judge of the High Court)
Case No: CL-2017-000717
Nigel Tozzi QC and Neil Henderson (instructed by TLT LLP) for the Claimants
Nicholas Peacock QC and George Hayman QC (instructed by Macfarlanes LLP) for the First Defendant/Applicant
Hearing dates: 16 and 17 April 2018
Judgment Approved
CONTENTS
| (A) INTRODUCTION | 3 |
| (B) OUTLINE FACTUAL BACKGROUND TO THE DRT JUDGMENT | 3 |
| (C) APPLICATIONS TO SET ASIDE THE REGISTRATION ORDER OR STAY ENFORCEMENT | 5 |
| (1) Whether the DRT Judgment can properly be registered under the 1933 Act | 9 |
| (a) Enforceability by execution within India | 10 |
| (b) Enforceability outside India | 13 |
| (c) Absence of seal showing unlimited pecuniary jurisdiction | 16 |
| (d) Lack of statutory mechanism or power to comply with sealing requirement | 19 |
| (2) Dr Mallya's appeal and Bombay High Court application | 21 |
| (D) WORLDWIDE FREEZING ORDER | 30 |
| (1) Risk of dissipation of assets | 31 |
| (a) Failure to satisfy the DRT Judgment | 34 |
| (b) The findings of contempt by the courts in Indian Supreme Court and the High Court of Karnataka | 37 |
| (c) Dr Mallya's alleged flight to England | 42 |
| (d) The criminal proceedings against Dr Mallya in India | 43 |
| (e) The complex ownership structure of Dr Mallya's assets | 46 |
| (2) Delay | 47 |
| (3) Overall conclusion on risk of dissipation | 50 |
| (4) Material non-disclosure | 52 |
| (E) CONCLUSION | 56 |
Mr Andrew Henshaw QC:
(A) INTRODUCTION
The First Defendant (“ Dr Mallya”) applies:
i) to set aside the order of Picken J dated 24 November 2017 (“ the Registration Order”) registering a judgment of the Bangalore Debt Recovery Tribunal (“ the DRT”) in favour of the Claimants against Dr Mallya (“ the DRT Judgment”) under the Foreign Judgments (Reciprocal Enforcement) Act 1933 (“ the 1933 Act”), or to suspend enforcement of the Registration Order; and
ii) to set aside a worldwide freezing order granted by Picken J on 24 November 2017 and continued by Moulder J on 8 December 2017 (“ the WFO”).
By way of elaboration of (i) above, Dr Mallya seeks in the alternative:
i) the setting aside of the Registration Order;
ii) a stay of enforcement in England of the DRT Judgment; or
iii) that his application to set aside the Registration Order be adjourned for a sufficient period to enable his extant appeal in India against the DRT Judgment, or his related challenge brought in the High Court of Bombay, to be disposed of.
There is a degree of overlap in the issues raised by Dr Mallya's two applications, but for the reasons considered later in this judgment he contends that the WFO should be discharged whether or not the Registration Order is set aside.
(B) OUTLINE FACTUAL BACKGROUND TO THE DRT JUDGMENT
Dr Mallya is a well-known Indian businessman and former member of the Parliament of India, now living in the UK pursuant to indefinite leave to remain which he has possessed since 1992.
Dr Mallya has for many years had a wide range of business interests including the United Breweries Group and the Force India Formula One team. In addition to his commercial interests, from 2002 to 2008 and 2010 to 2016 Dr Mallya was elected to represent the State of Karnataka in India's Council of States (the upper house of the Parliament of India), frequently visiting India in order to fulfil his parliamentary duties. He has received a number of honours and awards.
In 2003, Dr Mallya launched Kingfisher Airlines Limited (“ KFAL”) which grew rapidly. Within its first three years of operating, KFAL's market share had grown to 25%. The 2008 global financial crisis impacted the Indian airline industry and KFAL's financial position became precarious. The First Claimant, State Bank of India (“ SBI”), provided loan finance to KFAL from 2009.
The Claimants are state-owned Indian banks (apart from the Thirteenth Claimant, which is an asset restructuring company that purchased debt owed to other Indian banks). In an attempt to secure KFAL's future, the Claimants combined together to negotiate a Master Debt Recast Agreement dated 21 December 2010 (“ MDRA”) which subsumed within its terms all of KFAL's outstanding loan obligations. KFAL's obligations under the MDRA were secured by, among other things, a personal guarantee from Dr Mallya of the same date (“ the Personal Guarantee”) and a guarantee from United Breweries (Holdings) Limited (“ UBHL”). Dr Mallya does not accept that he is bound by the Personal Guarantee.
KFAL fared badly, and SBI declared it a non-performing asset in 2012. Also in 2012, the Civil Aviation Authority suspended KFAL's operating licence and winding up proceedings were commenced by some of its creditors.
On 26 March 2013 Dr Mallya, UBHL and Kingfisher Finvest (India) Ltd (“ KFin”) commenced proceedings in the Bombay High Court challenging, among other things, the validity of the Personal Guarantee on the basis of alleged non-compliance with Indian banking rules and coercion. That claim remains to be determined and is further considered below. On 2 April 2013 the Claimants called in their loans under the MDRA. On the same date, applications by UBHL, KFin and Dr Mallya in the Bombay High Court for interim relief were refused, and the court ordered the determination as a preliminary of the question “whether this Court has jurisdiction to try and entertain the present suit”.
On 26 June 2013 the Claimants commenced proceedings in the DRT against KFAL, UBHL, Dr Mallya and others. As set out in more detail below, due to delays in the ordinary court system in India the DRT was established in 1993 as the body with exclusive jurisdiction to hear claims by banks or other financial institutions for the recovery of debts exceeding Rs 1 million (1 million Indian rupees, equivalent to about £10,000).
Dr Mallya and others on 16 July 2013 made an application in the DRT contesting its jurisdiction on the basis that the Claimants had already commenced proceedings in the Karnataka High Court and that Dr Mallya and others had already brought proceedings in the Bombay High Court. The DRT dismissed this challenge on 12 November 2013 and Dr Mallya initiated an appeal to the Debt Recovery Appeal Tribunal (“ DRAT”).
Two years later, on 17 July 2015 Dr Mallya applied to withdraw the application for interim relief in the Bombay High Court, seeking at the same time to overturn the court's decision to determine the question of jurisdiction as a preliminary issue (which would, it appears, mean the question of jurisdiction would have to be dealt with at the final hearing on the merits). Those applications have not yet been disposed of.
On 19 January 2017 the DRT issued the DRT Judgment. Dr Mallya's appeal to the DRAT from the DRT's November 2013 dismissal of Dr Mallya's jurisdiction challenge was dismissed on 16 March 2017. On 10 April 2017 the DRT issued an amended Recovery Certificate providing for recovery under the statutory procedure discussed below of sums due under the DRT Judgment. On 27 July 2017 the Presiding Officer of the DRT issued a letter under seal regarding the DRT's jurisdiction which is also discussed further below.
On 4 October 2017, 212 days out of time, Dr Mallya and UBHL lodged appeals with the DRAT from the DRT Judgment along with applications to condone delay. The appeal documents contained errors which the DRAT required to be corrected. It appears those errors were not corrected and on 2 January 2018 the appeal of Dr Mallya was dismissed for non-compliance and non-attendance by counsel at the hearing.
A DRT Order of Attachment was made on 19 January 2018 in respect of shares in United Breweries Ltd said to be worth £385.9 million.
On 1 February 2018 the DRAT dismissed UBHL's appeal from the DRT Judgment stating that “no good ground is made out for extension of time”. Dr Mallya makes the point that this was in fact not a substantive ruling on UBHL's application to condone delay, and in any event that his circumstances are different from those of UBHL.
On 5 March 2018 Dr Mallya issued applications to restore his appeal and for condonation of the delay in issuing that restoration application, it having been filed 27 days beyond the 30-day period allowed for such an application.
On 28 March 2018 the DRAT made an interim order directing Dr Mallya to deposit Rs. 3,101 crores (being 50% of the principal included within the DRT Judgment sum) with the DRAT before 25 April 2018 as a pre-condition to the DRAT considering his applications to restore the appeal and for condonation of the delay in filing the appeal. A crore is Rs. 10 million. Dr Mallya on 13 April 2018 issued an application in the Karnataka High Court challenging the DRAT's order.
In parallel with these civil proceedings, Dr Mallya is the subject of criminal proceedings in India arising out of loan arrangements with the Fifth Claimant, which have led the Indian Government to request his extradition from England. He is contesting those extradition proceedings on the basis that the criminal charges are without substance and are...
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