Vijay Mallya v Government of India
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Elisabeth Laing DBE,Lord Justice Irwin |
| Judgment Date | 20 April 2020 |
| Neutral Citation | [2020] EWHC 924 (Admin) |
| Date | 20 April 2020 |
| Docket Number | Case No: CO/650/2019 |
| Court | Queen's Bench Division (Administrative Court) |
[2020] EWHC 924 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Irwin
Mrs Justice Elisabeth Laing DBE
Case No: CO/650/2019
and
Clare Montgomery QC and Ben Watson (instructed by Boutique Law LLP) for the Appellant
Mark Summers QC and Aaron Watkins (instructed by Crown Prosecution Service) for the Respondent
Hearing dates: 11 th, 12 th, 13 th February 2020
Approved Judgment
Introduction
This is the judgment of the Court to which we have both contributed. The Appellant appeals against a decision of Senior District Judge Arbuthnot (“the SDJ”), sitting at Westminster Magistrates' Court, on 10 December 2018 to send the Appellant's case to the Secretary of State.
The Appellant was the controlling director of Kingfisher Airways (“KFA”). He also controlled a large group of companies in India, the United Breweries Group (“UB”), of which KFA was part. He assumed control of UB in 1983. After a series of acquisitions in the 1980s and 1990s, UB expanded into over 20 countries. United Breweries Holdings Ltd (“UBHL”) had its headquarters in Bangalore.
In 2003, the Appellant formed KFA as part of UBHL's expansion. At all material times, the Appellant was the Chief Executive Officer (‘CEO’) of KFA. The airline began operations in May 2005, and expanded, acquiring Deccan Airways on 1 April 2008. By 2008, KFA was flying international as well as domestic routes and it grew to have 25% of the Indian market.
In 2008, the cost of aviation fuel rose, and the value of the rupee declined against the dollar. The events leading to the global financial crisis can be considered as commencing with the failure of Lehman Brothers in September 2008. We address the chronology in more detail below, but by late 2008 into early 2009, KFA took the decision to seek substantial loans from Indian banks. On 15 January 2009, KFA ratified a business plan for financial years (“FY”) 2009/2015, including a plan to seek loans totalling 2000 Crores. One Crore equals 10 million rupees; thus, the desired total was 20,000 million rupees, representing approximately £266 million 1. A Lakh is 100,000 rupees.
Between April and November 2009, five banks extended loans to KFA. They were the State Bank of India (“SBI”), the Bank of India, the Bank of Baroda, the United Bank of India (“UBI”) and United Commercial Bank (“UCO”). These loans totalled 1250 Crores, leaving a shortfall of 750 Crores from the desired infusion of 2000 Crores.
In late 2009, KFA approached an additional bank, the Industrial Development Bank of India (“IDBI”) to make up that shortfall. The money was lent in three tranches; 150, 200 and 750 Crores. The 200 crores was an advance on the loan of 750 crores. The loan of 750 Crores was sanctioned in a letter and agreement of 1 December 2009. The Requesting State, the Government of India (“GoI”) seeks the extradition of the Appellant in respect of these loans. It is said that the loans were obtained by means of a conspiracy to defraud and by means of fraudulent misrepresentations; it is further said that the Appellant engaged in money-laundering some of the proceeds of the loans.
The finances of KFA did not improve. In 2010, the airline was in deeper difficulties. A “Master Debt Recast Agreement” (“MDRA”) was organised, with SBI taking the lead. The six institutions which had combined to lend the 2000 Crores joined with twelve other lenders. The MDRA was finalised on 21 December 2010. 30% of the banks' debt was converted to equity in KFA, the payment schedule was extended and a further 1,158 Crores was “infused” into KFA during the calendar year 2011. Despite these measures, KFA got into increased difficulties. By mid-2012, KFA had been forced to exit the low-cost carrier market, and on 1 April 2012, its international operations were suspended. KFA sought international investment, but in vain. On 20 October 2012, the Directorate General of Civil Aviation suspended KFA's operating licence. Further hopes of rescue came to nothing.
No allegations are made against the Appellant in respect of the MDRA.
The Allegations and the Procedural History
The GoI made an extradition request in respect of the Appellant, submitted on 9 February 2017, which was certified by the Secretary of State on 16 February 2017. A warrant for the Appellant's arrest was issued on 28 March 2017, and he was arrested and granted bail on conditions on 18 April 2017. However, additional charges were received from the GoI, and the extradition request re-certified on 25 September 2017. A fresh warrant was executed on 3 October 2017, and the Appellant re-arrested and once again bailed.
The request originates from the Special Investigations Team of the Central Bureau of Investigation (“CBI”) in Mumbai. Allegations are set out in the first affidavit of Superintendent Gusinha of January 2017. He recites the issue of a warrant from the Special Judge H.S. Mahajan, in Mumbai. The allegations are of conspiracy between the Appellant and other individuals, within IDBI and KFA, to obtain loans on 7 October, 14 November and 27 November 2009, as a result of “undue favour”. The allegations then proceed to default, and to unlawful diversion and disbursement of some of the funds. The Appellant is described as a fugitive. It is alleged that the loans were made:
“despite weak financials, negative net worth and low credit rating of the borrower company and despite the fact that M/S Kingfisher Airlines Ltd being a new client did not satisfy the norms stipulated in Corporate Loans Policy of the bank.”
The subsequent affidavit of Superintendent Gusinha, dated 6 June 2017, submits “additional evidence”. Here it is explained that the relevant offences are:
“… under section 120-B read with section 409 of Indian Penal Code (IPC), 1860 and sections 13(2) r/w 13 (1) (d) of Prevention of Corruption (PC) Act, 1988 in respect of alleged corruption in the matter of sanction and disbursement of Rupee Term Loans.”
The affidavit recites the names and positions of the co-conspirators, as follows:
“That during investigation of the case, offence under section 420 IPC was invoked against accused Mr. Vijay Vittal Mallya and others and on completion of investigation, a Final Report i.e. charge sheet for the offences under Sections 120-B r/w 420 IPC and 13(2) r/w 13(1)(d) of PC Act 1988 and substantive offence thereof was filed before this Hon'ble Court on 24.01.2017 vide Special Case No. 06/2017 against M/s Kingfisher Airlines Ltd., Mr. Vijay Vittal Mallya, Chairman and CEO; Mr. A. Raghunathan, Chief Financial Officer; Mr Shailesh Shar aram Borkar, Asstt. Vice President (Finance); Mr Amit Avinash Nadkarni, Dy. General Manager (Finance); Mr. Arvind Kumar Chimanlal Shah, Sr. Manager (Accounts); all of M/s Kingfisher Airlines Ltd. And officers of IDBI bank namely Mr. Yogesh Shyamkrishna Agarwal, the then Chairman; Mr Bal Krishna Batra, the then Dy. Managing Director; Mr. O.V. Bundellu, the then Dy. Managing Director; Mr S.K.V. Srinivasan, the then Executive Director and Mr. R.S. Sridhar, the then General Manager. The cognizance of offences in the case has since been taken and the case is pending trial against the accused persons.”
In this affidavit, evidence is recited against the Appellant of false representations, in the following terms:
“In order to induce the consortium member banks to sanction and disburse the Term Loans/Corporate Loans aggregating to Rs. 2000 Crores, which also included the Corporate Loan of Rs. 500 Crores sanctioned by State Bank of India and Rs. 750 Crores sanctioned by IDBI bank, false representation/promises of induction of funds by way of unsecured loans, Global Depository Receipts and Equity were repeatedly made on behalf of M/s Kingfisher Airlines Ltd. By fugitive Vijay Vittal Mallya. He himself addressed a letter dated 25.03.2009 to the Chairman, State Bank of India wherein, he made false representation/promise of infusing funds by way of equity/GDRs and falsely represented that the company will in any event ensure that equity infusion takes place in Financial years 2010–11 and 2011–12 in two tranches.”
The allegations of false representation are then amplified, by reference to prospective inward investment, inward infusion of funds by equity, unsecured loans, an “exaggerated Brand Value” of KFA offered as security, misleading forecasts as to growth of the business, inconsistent business plans including a Business Plan of January 2009 which “contained scaled down/lower projections [of anticipated losses] so as to avail the loan from the banks”. The affidavit also accuses the Appellant of offering “symbolic” and “grossly inadequate” security for the loans in the form of “negative lien …on 12 hire purchase aircrafts … despite being aware that M/s Kingfisher Airlines Ltd would never acquire a clear title on any of the aforesaid aircrafts during tenor of the loan”.
The affidavit also alleges that “from inception [the Appellant] had intentions not to repay the loans” and that he “dishonestly and fraudulently” alienated assets to avoid recovery by the Bank after KFA's default. It was also said that:
“While on one hand Mr. Vijay Mallya/UBHL were making false representation/promises of repaying the dues of M/s Kingfisher Airlines Ltd from Diageo deal [a reference to a “non-competition” deal on the part of a company associated with KFA, worth $75m], on the other hand, at the same point of time Mr. Vijay...
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Nirav Deepak Modi v Government of India
...entirely consistent with the approach of the Divisional Court (Irwin LJ and Elisabeth Laing J) in the substantive appeal in Mallya: [2020] EWHC 924 (Admin). In any event, even if the appellant had succeeded on any of his admissibility challenges, that would have been insufficient to underm......