Honestly speaking I am not a keen follower whether Vijay Mallya, Nirav Modi are extradited to India or not. It doesn’t make much difference to the economy at least apart from setting an example that one can not escape law
Shocking ? Please don’t be. I will give full justification in support of my statement. First of all its governments failure to stop them leaving India, or government is responsible to let them leave India, Now the same government spending millions of rupees from tax payers money in fighting legal battle in UK and other countries to bringing them back. And the government & the party would claim full credit - see we have fought a lengthy battle and brought them back to face law of the land. there will be great political debate on TV about who is responsible for what
But none will talk about loss of thousands of job, nobody will talk about the people who lost their job. Possibly banks will get their money back partially by attaching the properties ( Mallya has supposedly offered to pay back his dues 100%) I am more pained at the loss of job.
I am more interested in what we can do to prevent the system to produce defaulter and fugitive like Mallya, Nirav Modi, Choksi and the likes. These few fugitives are alone not the problem for the economy. Law should take its own course, that’s all. But the bigger problem is the huge NPA created by the system. I have always been saying that don’t look at the problem from the angle of economic offence alone, we need to look beyond. Indian economy can not be doomed by few fraudster like them alone. But the fact that we have lakhs of crores NPA, we have written off lakhs of crores bad loans proves that the issue is much bigger & deeper than economic offence alone. But very intelligently we have been put to focus on Mallya, Modi & Choksi etc.
7 Lakh Crore Bad Loans Written Off In Decade, 80% Of It In Last 5 Yrs: RBI Data. From April 2014 to March 2019 RBI revealed that the total loan written off in the last five years since amounted to Rs 5,55,603 crore. However the Bad loans in banks may still remain at Rs 9.1 lakh crore by March 2020, says survey. And this is inspite of additional write off for Rs 80,893 crore (provisional data) by Public & Private sector Bank in the first two quarters of 2019–2020 ( till 30th september 2019 ).
Real estate tops bankruptcy chart; construction, metals and textiles follow
Of the 1484 companies admitted for resolution under IBC (Insolvency and Bankruptcy Code 2016), 612 are from the broader manufacturing sector, which includes metals, textiles, food and beverages and machinery and equipment.
Bankruptcy Board of India (IBBI) shows that the companies in real estate and renting business have been affected most, besides the same in construction, retail & wholesale trade, metals and textile,while IBC does not cover the bankruptcy in banking, insurance and financial services (BIFS) sectors. There are only a few non-affected sectors, which include information technology (IT) and the allied services.
From real estate and renting sector, 235 companies have filed for bankruptcy in the last two years until December 2018. Of that, 87 cases are closed and hearing is going on in 148 cases. The lenders are struggling to recoup loans, amounting to $20 billion from troubled property developers after worst home-sales slump of the decade.
2019: The year Indian tycoons faced bankruptcies, jail and even death -The name Includes a. Anil D Ambani ( saved by his brother at the last moment from going to jail), b.Malvinder & Shivinder Singh(Ranbaxy and Religare promoters), c. Shashikant & Ravikant Ruia (Essar Steel, Essar Oil), d. V.G. Siddhartha ( Cafe Coffee Day founder committed suicide ), e. Naresh Goyal ( stepped down as chairman of Jet Airways India Ltd), f. Rana Kapoor ( Yes Bank) g. Subhash Chandra ( has bee selling his stake in ZEE Entertainment in the past few months to repay group’s debt) h. Gautam Thapar (removed from Chairman’s position of Avantha Group)
10,860 cases under Insolvency and Bankruptcy Code 2016 were pending before National Company Law Tribunal (NCLT) out of total 19771 cases at the end of September 2019
In 2019 NCLT was handling cases under IBC 2016 which would include Essar Steel, Bhushan Power and Steel, Videocon Group, Monnet Ispat Co. Ltd, Amtek Auto Ltd, Ruchi Soya Ltd, Lanco Infratech Ltd and Jaypee Infratech, among others.
Vodafone Idea owes the government $7 billion in AGR dues. The company, which was reeling under a net debt of $168 billion as of March 2019, has threatened to close its India operations if it doesn't get more time to pay up.
If the Indian government chooses to take action against Vodafone, it will affect not just the company and the telecom industry, but also the country's banking sector, experts say. Banks in India are owed roughly $4.2 billion by Vodafone Idea. Company has expressed that unless its given time, it will be left with no alternative but to file for bankruptcy. The threat of a bankruptcy was real. Britain’s Vodafone Group Plc and Indian billionaire Kumar Mangalam Birla — reluctant to throw more good money after bad
This is very serious issue. Its different matter that Mallya, Modi & Choksi were able to sneak out of the country courtesy corrupt system, while other faced their doom staying in India. Bur their fate are not different. Do you think that all these companies committed financial scam or they themselves could be victim of economic melt down and policy blunder by the government..
Again There will be lengthy legal battle in India ( spending crores of rupees from tax payers money ) to prove their guilt. They may or may not proved guilty. Lets consider they are proved guilty and punished
A loan default in itself doesn’t amount to criminal liability in India. It needs to be noted that a default to honour commitments to repay borrowed funds amounts to a breach of contract. Mere breach of contract cannot give rise to criminal prosecution under Section 420 IPC, unless fraudulent or dishonest intention is shown right at the beginning of the transaction time, when the offence is said to have been committed.
If it is established that the intention of the accused was dishonest at the time of entering into an agreement, then the liability will be criminal and the accused will be guilty of cheating. But if all that is established is that the representation made by the accused has not been kept, criminal liability cannot be fastened on the accused and the only right the complainant acquires is a money decree for the defaulted loan.
How a loan default in itself doesn’t amount to criminal liability-At the outset, it needs to be noted that a default to honour commitments to repay borrowed funds amounts to a breach of contract. Any breach of contract to repay debt is not a crime. The only right of the aggrieved party is to approach the civil court to attach and sell securities or other unencumbered properties and recover the defaulted loan.
Mere breach of contract cannot give rise to criminal prosecution under Section 420 IPC, unless fraudulent or dishonest intention is shown right at the beginning of the transaction time, when the offence is said to have been committed.
If it is established that the intention of the accused was dishonest at the time of entering into an agreement, then the liability will be criminal and the accused will be guilty of cheating. But if all that is established is that the representation made by the accused has not been kept, criminal liability cannot be fastened on the accused and the only right the complainant acquires is a money decree for the defaulted loan.
Hence, in cases where borrowers have commenced business or manufacturing activity with loans from banks and if a default is due to a downturn in the economy, or failure of the business enterprise, or defect in product, or glut in the market, or any other similar reason, then such defaults will not amount to cheating.
But there are many borrowers who avail of finance from banks and commence business activity, but then midway decide to use the borrowed funds or the realisation of sale proceeds for purpose not related to their business and commit defaults. In such cases, the intention to use bank loans for purposes other than the business for which they are sanctioned is manifested after the loan has been availed and such conduct does not amount to cheating or any other criminal act.
In limited liability companies, the directors, whatever the wealth and assets owned by them, are not liable for any default, except when they have given a personal guarantee for loans or it is established that borrowed funds were used to acquire personal assets.
Though Vijay Mallya’s case is not so simple. Mallya has multiple cases filed against him for violation of several laws. Some of the key ones include non-payment of salaries to Kingfisher Airlines employees, defaulting on loan repayments to banks and money laundering, under the Prevention of Money Laundering Act (PMLA).
Mallya is expected to be arrested as soon as he arrives in India, and the CBI will seek his custody until such time it is able to conclude its investigations. The Enforcement Directorate (ED), too, will be given an opportunity to probe him. Subsequently, Mallya could be sent to judicial custody,where he will remain until he gets bail in all the cases filed against him.
Mallya can escape with a far lesser jail term if he is able to pay off the salaries Kingfisher Airlines employees, and if he is able to convince the lenders to allow him to pay off only the principal amount of the entire loan. Which looks to be a quite possibility. Now that the ED has agreed to release Mallya’s assets to the consortium of banks led by SBI, it will become easier for the lenders to recover the money.
Under Prevention of Money Laundering Act, 2002 - the maximum punishment is seven years if proved guilty. But here the ED will have to conclusively prove that Mallya had been involved in a criminal activity listed under the PMLA. It will also have to prove that loans were diverted to invest in Force India Formula One team and IPL team Royal Challengers Bangalore.
Image source - Reference article, Google & gettyimages
Ref:
- Once back home,Vijay Mallya could face several months in jail
- How a loan default in itself doesn’t amount to criminal liability
- Real estate tops bankruptcy chart; construction, metals and textiles follow
- 2019: The year Indian tycoons faced bankruptcies, jail and even death
- Insolvency and Bankruptcy Code, 2016 - Wikipedia
- 10,860 cases under IBC pending before NCLT at the end of September: Govt
- NCLT helps recover ₹80,000 crore in 2018 from IBC cases
- India telecom crisis: Vodafone struggles to survive | DW | 19.02.2020
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