The Indian government’s fraud case against tycoon Vijay Mallya is baseless and politically motivated, his defence lawyer told a London court on Tuesday (12) as she battled to prevent his extradition to his home country.
Mallya, who lives in Britain, stands accused in India of fraudulently palming off losses from his now defunct Kingfisher Airlines onto banks by taking out loans he had no intention of repaying.
His defence team argue that he is being used as a scapegoat by Indian politicians of all stripes to deflect public anger at the accumulation of bad debts by state-owned banks.
The 61-year-old, nicknamed "the King of Good Times" after the slogan on bottles of one of his premium beers and his partying lifestyle, had business interests ranging from aviation to liquor.
He is also the co-owner of Formula One motor racing team Force India.
The case against him centres on a series of loans Kingfisher obtained from Indian banks, especially state-owned lender IDBI. The banks want to recover a total of about $1.4 billion that the state says the defunct airline owes.
Mallya’s British defence lawyer, Clare Montgomery, told Westminster Magistrates Court that India had made a series of serious allegations against him and others that did not have "a shred of evidence" to back them up.
She also said that the Indian government’s case revealed a "shocking" lack of appreciation of how companies function and of basic realities such as the effects of incorporation and the rights of shareholders.
"Economically and legally, it is impossible to palm off losses onto banks by borrowing to pass on the cost of failure," she said.
Montgomery said she would call witnesses later in the two-week hearing to give evidence on what she called the "political ramifications" of the case.
She accused several Indian parties including the ruling Bharatiya Janata Party (BJP) of "making political capital from the Mallya case on the assumption there was a fraud".
Montgomery said India’s Central Bureau of Investigation, which is prosecuting the case, had a "long and inglorious history of being politically motivated in the cases it brings".
She also criticised prison conditions in India, saying that they were worse than in Russia, a country to which British courts have on several occasions refused to extradite suspects for that reason.
Montgomery said there were competing narratives, fraud versus business failure, and that no reasonable jury would be able to reach a safe conclusion that there had been a deliberate intent to defraud.
Mallya, the focus of intense media interest in India, arrived wearing a dark suit and yellow tie and was mobbed by cameramen as he walked into the building.
Inside the courtroom he spoke only to confirm his name and age, before sitting quietly in the glass-walled dock as Montgomery spoke.
She said that the government's allegation that Mallya had deliberately misled banks by overstating Kingfisher's projected profits was "a false premise".
That was because airlines were subject to many unpredictable factors beyond their control, such as fuel cost fluctuations and the global economic climate, so to make entirely accurate projections several years in advance was unrealistic.
The judge, England’s Chief Magistrate Emma Arbuthnot, will have to decide whether there is a prima facie case against Mallya and whether the alleged crimes would be offences in Britain as well as India.
Meanwhile, a professor has rejected the interpretation of a study he co-authored and which was used by Mallya’s defence.
Shubhankar Dam is a professor of public law and governance at the University of Portsmouth. He wrote an email to the Crown Prosecution Service (CPS), arguing on behalf of India to get 61-year-old Mallya extradited to face charges of fraud and money laundering in the country.
CPS barrister Mark Summers read out Dam’s email, which described the Indian legal system as "fair and transparent".
The CPS told Judge Emma Arbuthnot that the email was sent on Monday (11) night following reports on the witness statement given by Martin Lau, who was deposed by Mallya’s defence team as an expert on south Asian law.
Lau, quoting an academic study, raised questions on the neutrality of India’s Supreme Court judges close to retirement.
“We reject the defence’s understanding of the paper,” said Dam, one of the co-authors of the study quoted by Lau, in his email.
Dam said he had felt compelled to write to the CPS because the defence had "misconstrued the findings" and grossly misunderstood the analysis of their study, which was based on specific cases and trends which he claimed had "no relevance" to any trial involving Mallya that would come up in Indian courts.
On Monday, the Margaret Sweeney, the chief financial officer of Force India, was run through a series of spread-sheets and figures from her written testimony to establish if money was routed from Kingfisher Airlines for "no good reason" by the F1 team and used for some other purposes.
"Absolutely not," was her response, explaining that all payments she was aware of were in relation to a marketing contract between Kingfisher Airlines and the F1 team.
The defence also quoted from an independent media valuation to claim there had been no overpayment by Kingfisher Airlines, as alleged by the CPS.
"Far from it," said Sweeney, on being asked if Force India was being paid too much.
