Mallya's actions don't indicate he knew about airline's impending doom: Defence witness

By Poonam Joshi | ANI | Updated: Dec 07, 2017 20:42 IST

London [UK], Dec 7 (ANI): Vijay Mallya’s defence witness is set to present at London’s Westminster Magistrates Court in his testimony that the liquor baron wasn’t aware of Kingfisher Airlines impending failure, on Thursday.

Mallya will return to the court for the hearing of his extradition case, which is being heard on the behest of the Indian Government, after a day’s break.

Paul Rex, a London-based independent banking expert and Managing Director of overseas GBRW Expert Witnesses, will present his testimony before the court as defence witness.

Rex, who has previously acted on behalf of State Bank of India in a case involving the World Bank, claimed in his testimony, “The actions of Mallya, particularly in relation to the personal guarantee he gave for the loans obtained from the IDBI (Bank), do not indicate that he or Kingfisher Airlines knew that the airline was 'doomed to failure'."

“It is hard to agree with the government’s argument that Mallya applied for these loans knowing that Kingfisher Airlines would fail but at the same time provided a personal guarantee for the loan, which obviously increased his personal liability in the matter,” he argued.

“State Bank of India (SBI) is one of the most reputable banks in India. As such, if I was another bank I would certainly consider positively what the SBI would say about a particular company,” the witness added.

The SBI had recommended to the IDBI to approve Kingfisher Airlines loan for Rs 150 crore and Rs 750 crore.

It had, by that time, already provided Kingfisher Airlines with a Rs 500-crore loan.

The bank, which had the largest exposure of Rs 1,202-crore to the Kingfisher Airlines, had declared the loan as a ‘non-performing asset’ in 2011 and had classified it as a ‘fraud’ in September 2016.

The market capitalisation of the United Spirits Limited (USL), which was part of the UB Group, was Rs 19,000 in 2009.

The UB Group had provided a corporate guarantee for the loans by Mallya. United Breweries had a market capitalisation of more than Rs 10,000 crore.

The Kingfisher’s revenues increased markedly in the fiscal year of 2010-2011, keeping with the projections made by the company in its loan application.

This was reaffirmed by numerous reports internally by the SBI and the independent companies who all said that that company’s long term growth prospects were good.

The SBI had also written to the Reserve Bank of India (RBI) that the performance of the company in the 2010, the year after the loans were granted, was satisfactory.

Later in 2010, the SBI had again written to RBI, citing deteriorating market conditions in the Indian aviation industry as a whole.

In February 2012, the SBI told the RBI, “We see that Kingfisher Airlines is taking all necessary steps to achieve satisfactory results and improve its position and do better despite adverse market conditions. This year, two major changes are expected – foreign investment and import of aviation fuel – which would substantially reduce costs for Kingfisher Airlines.”

However, the Kingfisher Airlines, which was the only five star airline in India that was planning to join the One World Alliance, could never enjoy the benefits of deregulation in the Indian aviation sector.

A central government source had, on Wednesday, said there was a "very strong prima facie case of fraud in terms of Fraud Act 2006 of UK" against liquor baron Vijay Mallya.

This reply came in the wake of number of press reports suggesting that there was no evidence to support 'case of fraud' presented by the Union Government against Mallya in the extradition case.

Defence counsel Clare Montgomery on Tuesday argued that the Indian government, in the extradition trial of Mallya, was "clutching at straws" to implicate the liquor baron in an alleged fraud case as there was no evidence to substantiate the allegations.

The extradition trial of Mallya, who is wanted in India for financial irregularities involving a total amount of Rs 9,000 crore as well as money laundering, began at the London's Westminster court on Monday, wherein Britain's Crown Prosecution Service (CPS) outlined the Indian government's case against him. (ANI)