So the colourful Vijay Mallya continues to hog the headlines. He has not lost his flamboyance nor defiance. As early as in 1990s he destroyed the century-old Best & Crompton in just a couple of years. IE pointed to his nonchalance in blaming everyone else for his failings. When questioned how the profitable B&C turned sick, this babe in the woods explained: “when I took over I had no idea of the company’s liabilities as no due diligence was made. The company had Rs 30 crore hidden liability which was shown as assets. Morever, the company included revenue pertaining to next financial year to show profits in the current year.” He stripped B&C’s assets to the bone, duped the banks and shareholders and landed the employees in misery. The media meets were Jayalalithaa-like durbars with His Highness seated in a lone throne and the MD, COO and CFO kept standing all through.
Decades later he continues with his landmark tirade. This, despite his companies owing the banks over Rs 9000 crore and landing bank executives in jail while himself flaunting his NRI status in the cosy comforts of Britain.
Political parties, their leaders, MPs, bankers and sections of media cozied up to him and obviously enjoyed his largesse. Bank chairmen, perhaps on directions from the political bosses, liberally lavished Mallya’s companies with funds violating every prudential norm.
Several large corporates including Essar, Jaiprakash Associates, Reliance Infra, GMR Group, Videocon… borrowed breezily far beyond their assets and loaded the banks with humongous non- performing assets. In this the role of the political leadership is significant. Major scandals in telecom, mining, power, steel… involved decision makers at the highest level in the UPA government. The stagnation, poor investments and lack of jobs in the subsequent years were the result of the profligacy lack of prudential norms and governance.
IE has come across numerous instances of scandalous settlement of overdues by public sector banks (PSBs) and to the extensive corruption involved in doling out subsidies for setting up export industries. Listen to this graphic description by a chartered accountant: “there are several instances of inflated project reports presented by medium-sized industrial units that often helped in meeting a significant portion of the cost of the project by subsidies. There are many cases where stocks shown were fake: the bank officials used to be taken into cold storages of marine product exporters. The officials can’t stand the freezing temperatures and were led through the garden path for sanctioning inflated non-existent stocks.”
One is surprised at the failure of the banking regulator, Reserve Bank of India, in checking these widespread malpractices and failings of banks. The mounting NPAs in recent years had led to the tightening of the norms. Several large industrial houses had drawn loans far in excess of their capital. At the direction of RBI banks have been forcing these large industrial houses to sell off a good portion of their assets to repay the loans. A shining example is the Essar Group selling its silver, Essar Oil, to come out of its troubles.
At the root of this decay is the slow grinding judiciary. The archaic legal system and a flourishing legal fraternity at the top work with unconcern on prolonging litigation. You have instances aplenty of the futility of such a system: like the disproportionate assets case of Jayalalithaa; of a Lalu Prasad, despite disqualification as a MP and other strictures, leading a political party that wields power in Bihar. Like a Salman Khan acquitted in long pending cases related to reckless driving and killing an endangered animal specie; the case against the promoter of Saravana Bhavan chain of hotels charged with a murder but kept in abeyance for decades.
The rust-ridden judicial system loses its relevance by such denial of justice through
humongous delays. The judicial activism seen in recent months should be directed to fix a strict, short timeline for decisions.
Vijay Mallya can continue to have the last laugh thanks to this deficit in the Indian judicial system.