Indian govt 'clutching at straws', says Mallya's defence

By Poonam Joshi

London [UK], Dec 6 (ANI): Vijay Mallya's defence team on Tuesday argued the Indian Government was "clutching at straws" to implicate the liquor baron in an alleged fraud case as there was no evidence to substantiate the allegations.

The extradition trial of Mallya, wanted in India for financial irregularities involving a total amount of Rs 9,000 crore as well as money laundering, began at the London's Westminster court yesterday, wherein Britain's Crown Prosecution Service (CPS) outlined the Indian Government's case against him.

On the opening day of the trial, CPS had claimed Mallya had a "case of fraud" to answer.

The CPS had also questioned why Mallya continued to provide personal guarantees for the loan applications when he, a senior executive at now defunct Kingfisher Airlines and United Breweries Group, knew that the airline would fail.

Responding to this, Mallya's defence counsel, Clare Montgomery, in another detailed session, argued that a false argument was made by CPS at the behest of the Indian Government.

Refuting the government's claim that the representations made by Kingfisher Airlines and Mallya about "profit projections" for the airline in 2009 were false, the defence counsel said that the profitability of the airline was out of his control as it depended on uncertain economic factors.

"How can it contend that that it is false when the profitability of an airline depends on economic factors that are cyclical and out of the control of Vijay Mallya and Kingfisher Airlines. For instance, fuel costs, competition, strength or weakness of the Rupee and the global economic climate. This is a false premise advanced by the Crown Prosecution Service at the behest of the Indian Government," Montgomery said.

The defence counsel further stated that there was no evidence to support the Indian Government's claim that the securities pledged by Mallya against the loans were worthless.

Brushing aside government's claim that Mallya made misrepresentations to various banks to acquire loans, the lead barrister for the defence argued, "The Kingfisher Airlines had a good liquidity in that it was a business where there was regular cash flow, by way of the sale of tickets. The idea that there was a set group of people that had to receive payments is unreal. The airline had cashflow and the funds were diverted where it was needed. The list of creditors does not stand still. The reason that the money needs to be borrowed is because there's a shortfall."

Outlining the issue of dishonesty as alleged by the government, the defense counsel said, "The year 2012 led to a massive falling out between banks and Kingfisher Airlines. Banks were leaking information that they would not continue to support the airline. Even when the government opened up the aviation market, the banks were already declaring that they had no intention of continuing support for Kingfisher. Despite this, Mallya pledged to work with the banks and offered further personal guarantees to make Kingfisher Airlines work."

Montgomery also refuted the government's claim that Kingfisher Airlines had lied about receiving compensation from International Aero Engines, an engine supplier, for faulty engines which had led the company to incur major losses.

"The government claimed this was a lie and that Kingfisher Airlines would not receive any compensation in the future which would go towards liquidity in the company. But a number of contracts were signed between Kingfisher Airlines and International Aero Engines that showed the latter was in talks to honour its commitments in relation to the engines and compensation with the airline," she said.

She also rubbished the government's claim that Mallya inflated his net worth by inflating the values of his assets in April 2009 to acquire loans.

"The government alleged that Mallya had understated the value of his assets. If this was the case then what happened to the money and the adequacy of the securities?" she questioned.

Refuting Indian government's allegation that corporate guarantee by United Breweries Group was worthless and therefore, Mallya attempted to fraudulently obtain loans, the defence counsel questioned on what basis the government was making such claims.

"United Breweries and United Spirits were 'fabulously successful' companies. So on what basis does the government say this?" she said.

On Tuesday, the defence also introduced its first expert witness, Barry Humphries PhD, one of the United Kingdom's foremost experts on the aviation industry.

Humphries spoke at length about the aviation industry in India and the circumstances that could have led to Kingfisher Airlines' demise.

The most animated moment of the day came when Montgomery brought up the issue of jail conditions in India and what she termed the "political motivation" behind the Indian government's case.

"We will provide expert testimony that the CBI has a long and inglorious history of bringing politically motivated prosecutions - we will show that there is a direct correlation between its prosecutions and elections," Montgomery said.

"All political parties - the ruling Bharatiya Janata Party (BJP), the Congress Party and the Shiv Sena - have looked into the Vijay Mallya case to make political capital," she added.

Responding to judge Emma Arbuthnot's comparison between jail conditions in Russia and India - Judge Arbuthnot had recently presided over an extradition case involving a Russian political dissident - Montgomery said that conditions in Indian jails were "infinitely worse than in Russia".

At least in Russia, they provide access to experts to assess conditions, she said.

Montgomery also cited conditions at the Arthur Road jail in Mumbai and the recent incident at the city's Byculla jail.

"There are very few external factors that can be controlled by an airline or its management. Things like the price of fuel, disease, political issues and economic factors impact on a given airline's performance. In India, these are exacerbated by the factors such as excessive bureaucracy and the restrictive Indian regulatory regime," she said.

He stated that at the time of Kingfisher's demise, there was serious "excess capacity" in the aviation sector and that it was there would be some market correction but it was "not inevitable" that Kingfisher would collapse as it did.

"In fact, there was interest in Kingfisher in the years before the Indian Government relaxed rules on overseas investment in the Indian aviation sector. I believe Kingfisher would have benefited enormously by the changes to the laws as it was a very attractive target for an international airline," Humphries added.

Commenting on the concerns about Kingfisher's sponsorship of the Force India Formula 1 team and its impact on Kingfisher's bottom line, Humphries said that the commercial aviation and motorsport was a "perfect fit" as evident by similar tie-ups elsewhere in the world and said such sponsorship was a "very effective" marketing tool.

The courtroom was again packed with press and intrigued members of the public.

Mallya's wife, Pinky Lalvani, was seen sitting in the press gallery, even as the liquor baron sat in the glass-enclosed dock.

The hearing was thereafter adjourned for Thursday (December 7) wherein the arguments will continue in and against Mallya's favour.

The trial is expected to further continue on 11th, 12th, 13th and 14th of December. (ANI)