Mallya: A fugitive offender
On Friday, Enforcement Directorate (ED) moved a Mumbai court seeking to declare Vijay Mallya a fugitive offender under the recently-introduced Fugitive Economic Offenders Ordinance, making Vijay Mallaya the first person to be tried under this ordinance. Once declared a fugitive offender by the court, the ED can also confiscate his assets worth Rs 12,500 crore. CBI and ED have been trying to extradite Mallya from London ever since he fled the country in 2016 when the banks turned the heat on him to pay up the loans he had availed for his businesses in India. Instead of repaying the loan, then worth Rs 6,500 crore, he took a midnight flight to London and has not returned ever since. The issue became a hot political topic with opposition blaming the government for turning a blind eye to his escape. Fearing arrest, he has refused to return to India on the grounds that the condition of Indian jails where he might be put up on his return is inhuman and pitiable. The government and different investigating agencies have been pressing the UK government to extradite him but the matter is being contested by him in the UK courts.
The case of Vijay Mallya fleeing the country after defaulting loan repayment brought into focus the fact that Indian public sector banks are sitting on a huge pile of non-performing assets (NPA). Vijay Mallya is not the only businessman who has availed huge amounts of bank loans and refused to repay. Though an exact figure is not available, the NPAs of public sector banks are in the range of Rs 6.5 to Rs 9 lakh crore. Mallya's current liabilities to the banks are to the tune of Rs 9,000 crore. Clearly, there are hundreds of other businessmen who have not paid up their loans to the banks but their names have not been revealed either by the banks or the government. Mallya who had a near monopoly on the Indian liquor market and operated a high-end airline business lived a rather luxurious and king-size life, having friends and sympathisers in every domain of public life from politics to media. It was due to his contacts in the government and the banking industry that he was able to procure such a huge amount of bank loans without bothering how he will make the repayment.
Following on the lines of Mallya, some other businessmen, too, escaped from the country after availing huge amounts of business loans from public sector banks. Diamond jeweller Nirav Modi, who defrauded a number of banks to the tune of Rs 16,000 crore, left the country early this year and has been traceless ever since. All efforts to bring him back to the country and make him repay the loans that he had taken from different banks have so far produced no result. The opposition parties have blamed the government for maintaining a soft attitude towards these fugitives. In the face of opposition heat, the government tried to enact a law to empower the ED to declare these loan defaulters fugitive offenders and confiscate their assets. Though the government could not get the bill passed in the parliament because of a logjam, it issued the Fugitive Economic Offenders Ordinance in March 2018. After Mallya, the ED is expected to move the court against Nirav Modi to declare him a fugitive offender and confiscate his assets and properties in the country.
The investigating agencies like ED and CBI have been working hard to bring back these fugitive economic offenders and make them repay the bank loans but there is no breakthrough in sight. All this while, the ability of public sector banks to fund big projects is deteriorating and the faith of the common man in the banking system is losing. The government is forced to invest heavily in the recapitalisation of the banks. The manner in which Vijay Mallya and Nirav Modi have compromised the banking system clearly highlights that there were systematic flaws in the system, which needed to be plugged in much earlier. But the previous governments did not pay much heed to the problem and rather helped their businessmen friends take advantage of the loopholes. Now, with the NPAs growing to astronomical levels, there is hardly anything that the government can do. New laws will be of little help to recover the loans and in many cases, the businessmen after having taken the loans may have settled abroad from where it is difficult to bring them back like in case of Vijay Mallya and Nirav Modi.