Mallya's $40-million transfer to family members that resulted in a $25 fine

Supreme Court penalises Vijay Mallya for disobeying its orders related to 2016 petition filed by SBI-led lenders' consortium

The Supreme Court (SC) on Monday slapped a fine of Rs 2000 ($25) and a four-month jail sentence on fugitive businessman Vijay Mallya. In addition, the former liquor baron has been asked to deposit $40 million with 8 per cent interest within a month, failing which his properties would be attached to recover the amount.

The court held Mallya guilty of contempt after it was brought to its notice that he had transferred $40 million to his children in the US. In 2016, the Karnataka High Court had prohibited Mallya from transferring money to any third party without clearing existing dues. These loans were owed by his now defunct Kingfisher Airlines to a consortium of various public sector banks led by State Bank of India.

Court documents show that Mallya had received the amount of $40 million in his Swiss bank account on February 25, 2016, from Diageo Plc, a company controlled by him. The very next day he transferred an amount of $13 million each to his son Siddharth and daughters Tanya and Leanna. The money was transferred from Mallya’s Swiss bank accounts to three separate trusts whose sole beneficiaries were each of his three children. The remaining amount of almost $1 million was transferred on February 29 through the same channels and divided equally between Siddharth, Leanna, and Tanya Mallya. All his children are American citizens.

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This transfer of money, according to SBI’s petition, amounted to disregarding the high court’s directions and amounted to contempt. The case was challenged in the country’s highest court which passed a judgment in 2017, but reserved sentencing in the case. Mukul Rohtagi, the attorney general of India at the time, had represented the banking consortium in this case.

According to the SC’s rules, any person charged with contempt has to appear in person before the court. With law enforcement agencies in hot pursuit, Mallya, who had shifted to London, filed a petition to withdraw the contempt notice instead. The court had held Mallya’s refusal to appear before it in person an additional ground while holding him guilty of contempt. The Ministry of Home Affairs was asked to produce Mallya before the court, something that Indian authorities have failed to do till date. He was given a “last chance” by the SC in February to appear before it in person, but Mallya had failed to do so. 

The Supreme Court’s sentencing of Mallya on Monday was also based on “disobeying the orders passed by this court in not disclosing full particulars of the assets as was directed.” The Karnataka High Court had asked Mallya to furnish a complete list of all his assets, bank accounts including properties in India and offshore destinations. However, the court agreed with advocate Mukul Rohatgi’s contention that Mallya had provided opaque details about his assets, including beneficial ownerships in various entities. He was accused of “intentionally concealing” these facts.

The lenders' consortium, through Rohatgi, also told the court that despite orders to furnish the information, the location of the assets that were eventually disclosed by Mallya were so vague that no one else except him could identify their whereabouts.

Mallya, through his counsel, had dismissed these allegations and had contended that the details submitted by him were intended to arrive at a “meaningful settlement” with banks. The court found no merit in his counterarguments.