Vijay Mallya says money he had borrowed was “public money”

Fugitive liquor baron Vijay Mallya, in his fight against bankruptcy in the UK courts on Friday, claimed that the Indian banks’ amended bankruptcy petition against him. He said this did not stand up in law as the banks could not forfeit the security they held over his assets in India because it was against the public interest in India to do so as the money he had borrowed was “public money”.

On April 9, 2020, the banks were ordered to submit an amended bankruptcy petition agreeing to waive any security they hold over his assets in India in the event a bankruptcy order is made, in order to adhere to UK insolvency laws. The banks are seeking to appeal that order.

Philip Marshall QC, Mallya’s attorney, told the Insolvency and Companies Court on Friday, as per ToI, that under Indian law the banks would not be allowed to give up their security over Mallya’s Indian property, in the event a bankruptcy order is made in the UK, as the money he owes was public money lent by nationalized banks. Mallya’s representative argued that any bankruptcy order made as a result of the amended petition would be thus “made on a false premise”. Giving examples of various judgements in India, including the DRT and PLMA judgements, which established that the banks held security over Mallya’s assets above other secured creditors including Diageo, as well as above the Enforcement Directorate, owing to the fact they lent public money.

“It is not open to the Indian banks to say before this court there is no public interest in them holding security when they have adopted the opposition position in Indian proceedings,” Marshall said and highlighted that much of the Rs 11,000 crore was “interest to the principle debt” and Mallya was challenging that interest in the Indian courts. “If we look at that and consider the realization of his assets to meet the petition debt as well as assets of joint debtors then you don’t end up with an amount sufficient to maintain the bankruptcy petition and so the question of security is very significant,” he said.

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Marshall also brought to the fore that in India there is no recognition of cross-border insolvency. “There is no legislation to enable recognition of an English bankruptcy trustee in India so how can a trustee work effectively to get at the security located in India if it cannot be released?”

Mallya, a former Rajya Sabha member and ex-chairman of United Spirits, fled India in March 2016, the day a clutch of public-sector banks moved the Debt Recovery Tribunal against him. In January 2019, he was declared a fugitive economic offender under the Fugitive Economic Offenders Act.