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Vijay Mallya never intended to repay loans, says CBI

Mumbai city news: In the supplementary charge sheet, the CBI alleged that Kingfisher Airlines Ltd, its corporate guarantor United Breweries (Holding) Ltd and personal Guarantor Vijay Mallya misled banks and obtained loans with the intention of cheating.

mumbai Updated: Jul 01, 2017 02:53 IST
Charul Shah
The CBI alleged that Mallya quoted Grant Thornton’s figure when he used KFA’s brand value as collateral against a loan from SBI and “deliberately concealed” Brand Finance’s valuation.
The CBI alleged that Mallya quoted Grant Thornton’s figure when he used KFA’s brand value as collateral against a loan from SBI and “deliberately concealed” Brand Finance’s valuation.(HT)

Liquor baron Vijay Mallya never intended to repay the loans he took for Kingfisher Airlines, the Central Bureau of Investigation (CBI) claimed in its supplementary charge sheet, which it filed against the embattled businessman and 10 others earlier this month.

In the supplementary charge sheet, the CBI alleged that Kingfisher Airlines Ltd, its corporate guarantor United Breweries (Holding) Ltd and personal Guarantor Vijay Mallya misled banks and obtained loans with the intention of cheating. The agency claimed that evidence it had gathered showed that “Mallya and UBHL had dishonest intention not to repay the dues of the bank from the inception”.

By 2009, Kingfisher had taken loans totalling Rs 4998.5 crore from various banks and needed another Rs 2,500 crore, of which a consortium of 17 banks sanctioned a loan of Rs 2,000 crore. The charge sheet lists number of allegedly false claims made by Mallya while obtaining these loans.

The CBI said the first thing KFA lied about was how the money would be invested in KFA. According to the CBI, while obtaining a loan of Rs 950 crore from IDBI Bank, KFA they would infuse Rs 200 crore of this in the company in three years. “It was repeatedly conveyed by KFA that additional equity of $ 400 million would be infused though strategic investors,” CBI claimed in the charge sheet.

“Investigation further revealed that KFA were making such false promises of equity infusion to various banks from as early as January 2006, without any real intentions of fulfilling such promises,” read the charge sheet.

The second lie was about inflated value of the Kingfisher Airlines brand.

The airline claimed to have obtained brand valuation reports from two firms, Grant Thornton and Brand Finance. CBI claimed that Grand Thornton had assigned a “highly exaggerated and inflated” value of Rs 3406.3 crore to KFA while Brand Finance said it was worth Rs 1,911 crore.

The CBI alleged that Mallya quoted Grant Thornton’s figure when he used KFA’s brand value as collateral against a loan from SBI and “deliberately concealed” Brand Finance’s valuation.

The charge sheet read, “Mallya and KFA, with a view to induce the bank to sanction a higher loan, used the said inflated and exaggerated valuation report of Grant Thronton, while a report based on more realistic projections prepared by Brand Finance was deliberately concealed from the bank.”

The third false claim, according to the CBI, concerned negative lien on 12 aircraft. ‘Negative lien’ is a promise by a borrower that a property offered to bank under lien will not be sold. However, they are not always part of the securities mortgaged with the bank.

The agency claimed that while availing loan from banks, Mallya offered 12 aircraft as negative lien to induce banks to offer higher loans. However, the CBI’s investigation revealed that the aircraft in question were on lease and he would get ownership of them only by August 2015. The deadline to repay the loan was January 2014.

The forth false claim, the CBI said, was about his personal guarantee.

Mallya stood as personal guarantor while obtaining loans from banks and declared assets worth Rs 1,395 crore in his statement he gave to the banks in April 2009. With this, he also assured the banks that the properties would not be sold.

This list included Mallya’s shares in two companies – worth Rs 66.28 crore in Gem Investment and Tradition Co Pvt Ltd and worth Rs 61.70 crore in Pharma Trading Co. The agency claimed that the values of these shares had been grossly inflated.

The CBI claimed that the two companies were small and had no business activities. It said the value of Mallya’s shares in Gem Investment was no more than Rs 1.20 lakh and those in Pharma Trading only Rs 90,000. The CBI alleged that Mallya intentionally didn’t declare his properties outside India, which include a resort in South Africa valued at Rs 746.25 crore.

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