The invisible Vijay Mallya and his disappearing 'ghost' firm

| Monday, March 14, 2016 - 10:40
First Published |
Vijay Mallya

Following the spoor of Indian business tycoon Vijay Mallya's colossal accumulation of unpaid debts, NewsX has unfolded a scenario where the businessman, accused of defaulting on loan and fleeing the country, might have employed a fraudulent use of a shell company to retain 13 valuable properties.
The USL Group, in which Vijay Mallya was a prominent shareholder, owned 13 prime properties all across India which was valued at Rs. 290 crores instead of its actual market value which was estimated to be around Rs. 1000 crores. A company named PE Data, which in 2011 had a valuation of Rs. 10 lakhs, mysteriously inherited Rs. 28 crores which was placed as an advance on the USL property solely for the purpose of laying first claim on the 13 prime properties. 
(Also Read: Exclusive: Finally, Vijay Mallya bares it all to The Sunday Guardian
Raising suspicions about this particular transaction between the USL Group and PE Data, later on when Diageo bought the USL Group under which the 13 properties were registered and where Mallya was a stakeholder, it terminated the deal with PE Data in February of this year. Diageo rendered null the agreement between USL and PE Data which had laid first claim to the 13 properties. 
In a sting operation conducted by NewsX, Govind Pillai, one of the managing directors of the PE Data, claimed that PE Data was in the process of being shut down by the end of 2016. This statement could bring to light the financial tactics practiced by Vijay Mallya during a time when Kingfisher Airlines was facing severe financial crisis. 
Pertaining to this controversial statement innocuously given by one of the managing directors, there are important questions regarding the financial whirlwind Vijay Mallya has put the whole country in: 
- How did a firm like PE Data, which had a valuation of Rs. 10 lakhs, suddenly inherit Rs. 28 crores? 
- Why was the USL Group willing to sell the 13 prime properties which were valued at Rs. 1000 crores for one-third of its value for Rs. 290 crores? 
- Was PE Data deployed by Vijay Mallya as a ghost firm to purchase the properties below its market value? 

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Wilful Defaulters { and Wilful Lenders ? } There are groups of Indian Companies who have borrowed from dozens of banks, thousands of crores of rupees Total NPA ( Public Sector Banks plus Private Sector Banks ), exceed Rs 7 lakh*crores { A loan gets an NPA tag if an installment remains unpaid for 90 days } But not all loans to Indian borrowers have turned NPA , nor all borrowers declared " Wilful Defaulters " by RBI Who is a " Wilful Defaulter " ? * A borrower who defaults in loan payment despite having capacity to pay * Funds have not been utilized for the purpose for which they were raised and have been diverted * While defaulting, the borrower has also disposed off fixed assets , immovable property given as security , without the bank's knowledge Just two days back, SEBI also decided : * To bar companies which have been declared wilful defaulter ( along with their promoters and directors ) from accessing stock or bond markets for raising funds * To prohibit such defaulters from taking board position in any listed company * Wilful defaulters will also be barred from taking over another listed company No doubt , in the days to come , many more stringent conditions will get added to bring down NPA / Wilful Defaulters That may lead to lenders ( bankers ) getting " Over Cautious " and simply refuse to take legitimate business risks ! So , is it not the time for the Banking System to self-regulate through * Refining " Lending Criteria " , and * Defining " Wilful ( too accommodating ? ) Lenders " Let there be no doubt that when those hundreds of " Wilful Defaulter " cases get thoroughly probed , many a " Skeletons in the Cupboard " , will come tumbling out ! Sadly , a witch-hunt seems inescapable ! In the process , let us not forget that " Honest Decisions " must not be made to suffer ! If that happens , in future , no bank officer will want to stick out his neck for fear of it getting chopped off ! Before drawing up a definition of " Wilful Lenders " , I strongly suggest that RBI debate the following questions : * Is there here , some confusion between a " Wrong " decision and a " Dishonest " decision ? Don't millions of honest people continue to take decisions , which in hindsight , appear wrong ? * Isn't a " Dishonest " decision one which got taken , solely for the benefit of the decision-taker ( or his family / friends etc ) ? * Are we trying to replace honest human " Judgment " by some rigid , hide-bound rules ? by some computer algorithms ? Economic progress depends upon banks lending money to industries / businesses It is no different anywhere else in the World But both, Shri Raghuram Rajan and Shri Arun Jaitley are worried about the pendulum swinging to the other extreme ! And rightly so ! A built-in mechanism for " Pre-Auditing " all loans , could help in balancing the interests of the borrowers and the lenders At least , introduce some sort of " Self Certification / Declaration " by the concerned officer

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