Kingfizzer: The Rise and Fall of Vijay Mallya

Preface

INDIA CHANGED SLOWLY BUT surely after the economic reforms of July 1991 began the process of liberalization. The reforms opened up the economy, bringing in opportunities for Indian entrepreneurs who were willing to modernize and upgrade their capabilities and face competition from foreign players. The laggards were destined to perish as they could not adjust to the changing times, used as they were to operating in a sheltered environment. In a few years, changes to the industrial and business landscape of India gathered pace, and many old, established players started to fall by the wayside even as new ones emerged.

One of the early movers who leapt on the liberalization bandwagon was Vijay Mallya. Having inherited a readymade drinks empire in 1983 after his father’s sudden demise, he realized that he would have to face competition from foreign players, who sooner or later would show up on the country’s shores. Following the dictum ‘Join them if you cannot beat them’, Mallya started forging alliances with foreign liquor majors to strengthen his empire while also diversifying his own. Over the next decade and a half, he went a step further, becoming owner of production facilities and companies abroad. His non-resident Indian (NRI) status helped him run both his international and domestic businesses with ease, something he had realized in the late 1980s after his failed attempt at buying the blue-chip Shaw Wallace. His business acquired a global facet. At the same time, he was accumulating all kinds of personal assets, such as luxury houses and vintage cars, quickly gaining the reputation of being an open-fisted spendthrift. He was also known to be fond of the company of women, and the liquor king’s opulent lifestyle in the fast lane was much talked about.

Mallya was also considered to be cocky and arrogant. In fact, he was almost everything his father was not. The senior Mallya, an enormously rich man, was almost a miser who lived an austere life poring over balance sheets. He kept severely to himself, and few beyond his intimate circle knew him. He was barely recognizable in public.

One of the most important changes brought in by liberalization was in the politics of the day. This has not been adequately recognized, leave alone studied, but it gave impetus to the rise of costly politics by bringing more money into elections. It also brought businessmen into politics. Until then, businessmen had restricted themselves to financing elections and taking favours from politicians elected to office. But now, with more money to spare, they began to enter electoral politics. Here was a direct route to getting business: why give money to politicians and then wait for them to get elected to be granted favours? A more effective way was to get elected as public representatives and use the newfound clout to get things done directly.

Mallya too realized that being a politician was not a bad deal, and in 2002 powered his way into the Rajya Sabha, getting elected again in 2010. Each time he used a different political party, displaying his clout across the board. In between, he also led a political party that contested elections across Karnataka but failed to make an impact.

Success soon went to Mallya’s head. He sought to launch an airline under the brand name of Kingfisher, riding high on the success of his Kingfisher beer, by then a globally known brand. The airline would be of a different kind from the run-of-the-mill ones, and would offer the choicest of food, luxury and entertainment. But he lost sight of the fact that running an airline globally was a highly risky business and that more airlines were going down than soaring high. Moreover, in a country like India with a middle class still only graduating to air travel, the key to success lay in low fares. A low-cost, no-frills airline was the formula to success.

It was with the launch of Kingfisher Airlines that all of Mallya’s troubles started. But the ‘king of good times’ (as he loved to be called) was late in realizing this. He wanted to expand his business to fly overseas. So he acquired the older, low-cost Deccan Aviation (which ran Air Deccan flights) and merged it with Kingfisher for a better experience record, a prerequisite for a licence to fly abroad. His troubles began to mount by 2008-09 as a result of the global downturn and rising prices of aviation fuel. Here, his contacts came to help. He was able to persuade a consortium of banks to lend him a huge sum of money and restructure his earlier loans. But the downslide that had begun could not be stemmed and, in fact, matters became worse. In 2012, the airline sank, leaving behind unpaid staff and creditors. Mallya, always surrounded by his admirers, probably did not see the end coming and till the last looked for more money to somehow flog to life his grounded airline. His friends put forward the argument that the government of the day had gone out of its way to promote rival airline Indigo and support the sinking state-owned Air India. But no money came his way.

His lifestyle was his addiction. Although his airline sank, he continued to live the fine life. He had expanded his activities and had taken over football teams, like Kolkata’s Mohun Bagan and East Bengal, and had established an IPL cricket team for Bangalore, Royal Challengers Bangalore. He had to ultimately sell off the liquor empire he had assiduously nurtured from the fledgling it was when his father left it in his care. Diageo, the largest liquor company in the world, is now the new owner of United Spirits. Much of his beer business (United Breweries) is also gone: it is only a matter of time before Heineken shuts him out of the beer empire he himself built.

The allegations by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) make out that Mallya began diverting cash from his own company from 2010, stashing away part of it overseas. This was to fund his lifestyle abroad and to invest in activities like F1 racing, goes the claim. The impression is that he was doing this even as his companies were going to seed and bank loans remained unpaid. In the end, the banks—which took a rather soft approach towards him to begin with—had to declare him a wilful defaulter. He was now officially someone who had the wherewithal to repay his loans but was not doing so. His sixtieth birthday celebrations in December 2015, where he was said to have burned away crores of rupees, was the ultimate cue that set the banks after him. Now, enforcement agencies are listing his assets abroad.

Getting wind of his imminent arrest, Mallya fled India and is now living in the UK. He has evaded many summons from investigating agencies. His Indian passport has been revoked. He has been declared a proclaimed offender by Indian courts and now extradition proceedings have been initiated against him in the UK.

On 14 June 2017, the ED filed the first charge sheet against Mallya in the case of the Rs 900 crore loan from IDBI Bank under the Prevention of Money Laundering Act (PMLA). The 5,000-page charge sheet also named five officials of IDBI Bank and two executives of Kingfisher Airlines. It accused Mallya of entering into a criminal conspiracy with the other accused to secure the loan. He was also accused of diverting a large part of the loan for his personal expenses and to the entities owned by him.

His is a tale of our times—a heady cocktail of power politics, women and money; a tale of a bright young man whom luck favoured with an inheritance on whose foundations he built a huge empire, only to see it crash like a house of cards as he overreached.

June 2017

Hyderabad

1

The Beginning of the End

AS THE CLOCK STRUCK midnight on 18 December 2015, two sets of fireworks rent the night air at Candolim and Sinquerim beaches in Goa; they were so loud they could be heard in Panaji 18 km away, startling the locals. The fireworks went on for a full five minutes without a break. Tourists still ambling on the beaches took out their phones and cameras to capture the display.

The occasion was the sixtieth birthday of the ‘King of Good Times’, Vijay Mallya.

Mallya was already deep in hot water, the banks having declared him a wilful defaulter, but this in no way diminished the grandeur and scale of the celebrations for his landmark birthday at his home in Kingfisher Villa on the Goa beachfront.

In attendance were 200 friends and well-wishers who had flown in from every corner of India and all parts of the globe, and were staying at the nearby Taj Holiday Village and Taj Fort Aguada. The guests were treated to a two-hour non-stop session of Bollywood numbers by Sonu Nigam, who concluded it with ‘Tum jiyo hazaron saal, saal ke din ho pachas hazar’. But the chief attraction of the evening was the king of Latin pop, international icon Enrique Iglesias, who had travelled across the globe to sing for Mallya. He belted out his 2014 chart-topper ‘Bailando’ to say happy birthday as Mallya’s son Siddharth touched his father’s feet on stage, seeking his blessings.

The grapevine had it that $2 million was spent on the party, described as ‘the mother of all bashes’. Even as the extravagant party was in full swing, Kingfisher Villa had a sword dangling over it; its takeover by the lenders whom Mallya had defaulted had been permitted by the Goa bench of the Bombay High Court. This was to be the last of Mallya’s many, many high-end events at the villa.

The party drew adverse comments from many quarters, among them Raghuram Rajan, then governor of the Reserve Bank of India, who said in a characteristic understatement: ‘If you flaunt your birthday bashes while owing the system a lot of money, it does seem to the public that you don’t care. I think this is the wrong message to send. If you are in trouble you should be cutting down your expenses.’ Rajan did not name Mallya in this statement reported in the Times of India on 23 January 2016, but everybody understood whom he was referring to.

The staff of the grounded Kingfisher Airlines also expressed their disgust. ‘He (Mallya) does not have money to pay our dues. How can he have such gala bashes and be insensitive to our sufferings?’ they complained, even as it surfaced that some of Mallya’s close associates had cautioned him against such a lavish affair. They had advised him to limit the celebrations to a party in London, where he maintained a home. He would then be far away from prying eyes in India, where not only banks but also investigating agencies were on his trail. But these words of caution fell on deaf ears. Mallya couldn’t care less about what people said.

Mallya, who appeared to live from party to party, had always celebrated his birthdays in grand style, although the years since Kingfisher Airlines got into trouble had been marked by low-key events. In 2013, there had been an exclusive do at Niladri, his residence off Napean Sea Road, an upmarket locality in Mumbai. Some of his birthday bashes had been on Indian Empress, the superyacht he owned.

His fiftieth birthday celebrations—at the same spot in Goa as his sixtieth—had also happened in immoderate style, having been an all-night affair, with the American singer Lionel Richie entertaining guests who had been ferried from all over by two Kingfisher Airlines planes requisitioned just for the party. The invite sent out by Mallya said: ‘When I turned 40 a decade ago, I was fortunate to have joined by my closest friends over a three-day celebration that included themed events. While I cross another milestone, I am planning on an exciting but somewhat chilled out series of rendezvous with the Sun, sand and sea in Goa.’ Top industrialists, Bollywood stars, politicians and an assorted assemblage of the wealthy and the fashionable had turned up.

Less than two-and-a-half months after his sixtieth birthday, Mallya spirited himself out of India and away from the reach of the long arm of the law. The rumour in New Delhi was that he had been tipped off by a mandarin that he could be soon behind bars as legal proceedings against him were imminent. The tip was not passed on to Mallya directly; it was said a high-profile fixer-cum-socialite obtained this information from the mandarin and passed it on to Mallya, who lost no time in making his exit. Mallya had also come to know that on 28 February 2016, senior Supreme Court counsel Dushyant Dave had advised the State Bank of India to approach the courts to restrain Mallya from leaving the country. The SBI took its time to act, but Mallya did not.

On 2 March 2016, Mallya, holding a diplomatic passport—by virtue of his being a Member of Parliament—whizzed through immigration with ease and boarded the London-bound Jet Airways flight 9W-122 from New Delhi. According to newspaper reports, Mallya occupied seat 1D in first class and was accompanied by a lady who was later identified as his current girlfriend, Pinky Lalwani, once a hostess on Kingfisher Airlines. Mallya had carried seven pieces of luggage, indicating that this was no short business trip. Usually this quantity would account for the luggage of at least five passengers.

At the airport, Jet Airways staff loaded Mallya’s luggage while he retired to the premium plaza lounge. It appeared that Mallya had spent an hour in the lounge. News reports said he walked slowly—very slowly—out of the lounge, and that the immigration officials noticed his exit but did not do anything to prevent him from boarding his flight. They had no orders to detain him or to prevent his exit. The reports also said Mallya’s tickets had been booked only hours in advance (the same day in the afternoon), giving credence to the theory that he left post-haste after learning that danger was at his heels.

A lookout notice for Mallya had been issued by the Central Bureau of Investigation (CBI) to the Bureau of Immigration on 16 October 2015. This would have led to his detention the moment he presented himself at any immigration counter. Now, a lookout notice is usually not revised, but Mallya, besides being an MP, had top contacts; this may explain how the notice was amended barely a month later, on 24 November 2015. The amended notice required the immigration authorities to merely inform the CBI about his movements; it did not authorize them to detain him. It is interesting too that he had arrived in India from an overseas trip on the night of 24 November, a few hours after the CBI had amended its lookout notice.

Earlier on the same day that he finally fled India, Mallya had been spotted in the lobby of Rajya Sabha, of which he was member. Nobody who met him there had any clue that he would soon make his escape out of the country.

A couple of hours after Mallya was well airborne, then CBI Director Anil Sinha lambasted the chiefs of India’s top banks, including the SBI chairman, for not filing complaints against him in good time, telling them how their tardiness had delayed action against the liquor baron. At the annual session of the Indian Banking Association, the CBI chief would remind the bankers that his agency had to file cases suo motu against Mallya in the absence of first information reports initiated by banks.

Sinha was quite unaware for some time that the liquor baron had flown away for good, as Mallya had been frequently flying in and out of the country in the recent past. He had flown out on 1 December 2015 and had returned on December 7; he had flown out again on 23 December and returned on 2 February 2016. His last overseas trip before his escape to London was to Barbados in the West Indies, where he was negotiating the purchase of a cricket team for the Caribbean T20 cricket league. During this visit he also met with the prime minister of Barbados, Freundel Stuart, in the end bagging the Barbados Tridents. Rather misleadingly, Mallya later claimed that he had paid just $100 to win the team. But realizing that nobody would be fooled by this claim, he said later that the cost of running the team for a season would be $2 million. He also claimed that he had bought the team in a joint venture and the Barbados government would give him subsidies to run the franchise. ‘They are keen to help,’ he said.

It was only on 9 March 2016 that the news of Mallya’s escape became public when the Attorney General of India Mukul Rohatgi informed the Supreme Court about it. All hell broke loose. Questions were asked about how Mallya had escaped in spite of a lookout notice against him, and the CBI was forced to clarify that it had downgraded its advisory to the immigration authorities because the case against Mallya was at a preliminary stage and there was no clinching evidence against him other than that he had reneged on repayments to banks. The CBI also said that lookout detention orders were usually made against individuals for whom there were non-bailable warrants. There was none against Mallya. That he had flown out of the country many times and had returned was evidence that he would not abscond and that he would be available for questioning if required in the future, CBI officials argued. Mallya himself tweeted on the same lines on 11 March 2016: ‘I am an international businessman. I have to travel to and from India frequently. I did not flee from India and neither I am an absconder. Rubbish.’

The CBI was proved wrong. On 25 February, less than a week before he fled the country, Mallya had got a huge severance package from United Spirits Limited (USL). This was a company that he had built but had subsequently lost control of after the Kingfisher Airlines fiasco. The company had been taken over by the world’s largest liquor manufacturer, Diageo Plc., in