Vijay Mallya Vs Indian banks: Battle over Kingfisher airlines’ dues to play out in British court

The current drama began to unfold after a statement by the Indian finance minister, Nirmala Sitharaman, in the Lok Sabha on December 17 last

A simmering dispute between the former chairman of the defunct Kingfisher Airlines, Indian businessman Vijay Mallya, and Indian banks who had lent the company money has escalated exponentially and will likely manifest in courtrooms. The sharp disagreement is over Mallya claiming that more than the sum owed has been realised by the banks and accounts not provided; whereas the banks’ position is to the contrary.

Vijay Mallya (Getty Images)

Kingfisher Airlines, once enjoying a large chunk of market share in Indian civil aviation, closed down in 2012. Mallya, who had given his personal guarantee, against the firm’s borrowings, thereby became liable to repay the banks. In 2017, a debt recovery tribunal (DRT) determined ₹6,204 crore was payable.

The current drama began to unfold after a statement by the Indian finance minister, Nirmala Sitharaman, in the Lok Sabha on December 17 last. She told the House that the Indian Directorate of Enforcement (ED) had collected ₹14,131.60 crore from sale of Mallya’s properties and assets attached by it and that this amount had been returned to the lender banks.

Mallya’s London solicitors Zaiwalla and Company pointed out to the banks’ solicitors TLT LLP, “This information was also confirmed in the Annual Report 2024-2025 of the Indian Ministry of Finance…”

Following Sitharaman’s submission, Mallya filed a writ petition in the Karnataka high court on February 3 this year, seeking disclosure of details of recoveries by the banks. The banks were served noticed by the concerned judge, but responded only on the 10th of last month with a “Statement of Objections“ that said more money was due.

The banks asserted ₹17,471 crore were due, of which ₹10,814.54 crore had been recovered, thereby still leaving ₹6,656.96 crore outstanding. Zaiwalla and Company communicated to TLT LLP, “These figures are inconsistent with the list of recoveries mentioned in… the Statement of Objections itself. They are also inconsistent with the Finance Minister’s statement…”

Mallya’s interim rejoinder said, “In addition to the ₹14,316.32 crore restored pursuant to the bond undertaking, the Banks have recovered further amounts from the assets attached before various other forums.”

He further claimed: “As per the Enforcement Directorate’s press release of 24 June 2021, the Enforcement Directorate had transferred shares worth ₹6,600 crore to the Banks as per the Restoration Order. It further stated that, on the same date, the Recovery Officer, on behalf of the Banks, had sold assets of United Breweries Limited (producers of Kingfisher Beer, which was once controlled by Mallya and in which he is still a significant shareholder) worth ₹5,824.50 crore. This press release also notes that the Banks shall be realising a total amount of ₹9,041.50 crore through sale of a part of assets attached/seized by the Enforcement Directorate.’

He added: “The Enforcement Directorate’s press release of 16 July 2021 records that ₹792.11 crore worth of shares were handed over and realised by the Banks.’ And that, ‘On 29 August 2022, the Recovery Officer of the Debt Recovery Tribunal in Chennai… recorded that ₹10,040.82 crore was recovered by the Banks against the DRT Judgment.”

In a post on X, Mallya on Tuesday said: “The Indian Public Sector Banks who claim monies from me as a guarantor should be ashamed that they have not yet submitted an accurate statement of account of recoveries made despite the Union Finance Minister clearly stating that ₹14,100 crore have been restored to the very same Banks.”

“I will not pursue legal action in England till the Indian Public Sector Banks come clean as I have a justified counter claim that can be adjudicated only in India,” he said in another post.

The erstwhile airline owner has moreover challenged the banks’ entitlement to levy interest ‘on the decretal amount of ₹6,204 crore from the time his assets were frozen in November 2017 by a British court’s worldwide freezing order after 13 Indian banks applied for this. On this, too, he has lodged a writ petition in India.

Zaiwalla and Company’s view is that “there are substantial and unresolved issues”. It believes the Karnataka high court will decide on such issues. Until this happens – and the writ petition opposing imposition of interest after his assets were frozen in 2019 is disposed of -- Mallya’s pursuit of annulment of a 2021 bankruptcy order against him by the High Court of England and Wales, which was scheduled for a preliminary hearing on October 13, will be kept in abeyance.

An email to TLT LLP seeking a clarification went unanswered.

If Mallya has indeed more than repaid his debt, then demands against him constitute a witch-hunt. On the other hand, if the creditor banks are correct, he still has a case to answer. Either way, it will be a relief for Indian taxpayers if the matter is resolved at the earliest.

The Indian government’s plea to British courts to extradite Mallya to India was founded on him allegedly colluding with senior executives of IDBI Bank to obtain a loan of around ₹950 crore for Kingfisher Airlines. The petitions succeeded and his extradition was recommended to the British home secretary (as is the standard practice in the United Kingdom) for consideration. In February 2019, Sajid Javid, as home secretary in the then Conservative party government, signed an order authorising extradition; but this is yet to be implemented.

Meanwhile last month, the Indian Central Bureau of Investigation (CBI), which brought the charge against Mallya and presented it before the UK’s judiciary in the extradition trial, closed the case against a deputy managing director of IDBI Bank hitherto allegedly involved in this matter. How the new circumstance affects the accusation of collusion against Mallya — and therefore the very grounds for extraditing him — remains to be seen.

Mallya may have received another shot in the arm with a judgment earlier this year by the Court of Appeal in the English and Welsh high court refusing extradition of an Indian arms consultant, Sanjay Bhaduri, wanted in India for allegedly violating India’s Prevention of Money Laundering Act 2002 and the Black Money and Imposition of Tax Act 2015.

Lord Justice Timothy Holroyde and Mrs Justice Karen Steyn in a 71-page judgment cited evidence of torture by Indian investigators and in Indian prisons in a dozen instances. But perhaps most damningly, decreed, “The Government of India has failed to ratify the (1984) UN Convention against Torture and Other Cruel, Inhuman and Degrading Treatment of Punishment (“UNCAT”)”. Mallya is expected to utilise this precedent in a bid to overturn the extradition order against him.