The Mallya Episode: Case Of An Unscrupulous Businessman

A large part of the blame rests with the clutch of public sector banks which gave loans to Vijay Mallya, despite his being a top defaulter.

- M.G. Arun

In September 2014, the state owned United Bank of India convened an urgent meeting of its board of directors at its Kolkata headquarters. The agenda: to declare Vijay Mallya, sitting Rajya Sabha member and then chairman of United Spirits, a ‘wilful defaulter’— one who doesn’t pay up borrowed money despite having the capacity to do so, or who uses the money for purposes other than what it was originally given for. Mallya owed the bank Rs 430 crore. The move was important, since it was the first time that any public sector bank (PSB) was taking tough action against Mallya, which could make it difficult for him to raise finance for any future projects in India. The fate of Mallya, who owed around Rs 7,000 crore then to PSBs, seemed to be sealed.

But it was not to be. Mallya challenged the decision in the Calcutta High Court, which dismissed the bank’s move on technical grounds— the Reserve Bank of India guidelines required a three-member grievance redressal committee while deciding on a wilful defaulter; the bank had formed a four-member committee.