‘Vijay Mallya is being victimized and “targeted” even though he is only a “small-time” defaulter compared to the Ambanis! And instead of going after the big fish, the banks are going after “small fry” like Mallya, who has borrowed a measly Rs 7000 crore. Also, ‘going after Mallya “tantamounts to demeaning the institution of Rajya Sabha”, as he is a “respected member” of the Upper House!’
The above are samples from the sound bites of Uday Holla, Mallya’s counsel and Mallya himself.
In other words, the country ought to go after crooks, strictly in the order of their size of default, malfeasance, crime, fraud, or whatever. In short, if you have murdered someone, you ought not to be touched because there is someone else who murdered 10 people, who is still at large. And what is more it is all right for a “respected member” of the Upper House (RMUH) to default on his or her borrowings that he stood personal guarantee for, from the public banks; it is all right for the RMUH to not pay salaries to their employees; it is all right for the RMUH to collect sundry taxes from the passengers but not deposit those taxes to the exchequer; it is all right to have laundered money; it is all right to lead a remorseless life cocking-a-snook at the world at large after leaving thousands of employees and stakeholders in the lurch; it is all right to buy Soccer or Formula I teams around the world, when you owe a tidy sum to the banks under your guarantee. But if someone holds you to account, they may be demeaning the institution of the UH! Some logic that!
Did it enter either Mallya’s or Holla’s psyche that it is only the former’s conduct that can elevate or demean the pre-eminence of the Upper House, and not holding him answerable to the very laws that he is party to making in that very Upper House?
Supporters of Mallya also gripe that Mr Mallya has been a victim of media hype. Well, well, well! He loved the media hype when he was using the Kingfisher airlines as a surrogate advert for his liquor brand, living life king size. He didn’t mind displaying his flamboyant life-style painstakingly styled after Richard Branson (according to whom, the surest way of becoming a millionaire is to start as a billionaire and start an airline!), before the entire media – in fact hosting a lot of them aboard his yacht et al. How easily they forget that those who live in the media glare also meet their D-day in the same glare. Incidentally, he has company here in P. Chidambaram, who is whining that his son has been targeted because of him (the father). Well, if the father is the one who brought him (the son) the riches, why should anyone be surprised that it is the same father who may also be the reason why people are targeting the son? After all fame and media glare are both double-edged swords, right?
That said, Mallya may yet have a point, and there are indeed much larger fish as well larger issues that the country needs to worry about, given that the defaulters list is indeed big and long. How effective are the credit decisions of banks? How are corporates allowed to borrow several times their net worth? Why do banks look the other way when large amounts of borrowed funds are diverted for extraneous purposes? Are bank boards too pally with corporates? Under the circumstances, was it wise to allow corporate sector to enter banking? Should bank chairmen and CEOs be rubbing shoulders with borrowers, or should they assume the stance of the higher judiciary – where socializing must take a back seat in the call of duty?
While the primary responsibility of bad loans must undoubtedly devolve on the banks themselves, one wonders, exactly what role is played by the RBI audit over banks if the auditors are unable to catch early signals, which allow enormous debt equity ratios to build up among a variety of corporate houses.
Even as the Bankruptcy Bill hangs in a limbo, perhaps the time has come for the RBI to mandate bankers or their representatives on the Boards of large borrowers, especially once the borrowers start showing signs of stress in servicing their loan. The nominated members may not be directly from the lending banks, but should be able to represent the interests of lenders at large. Such nomination would also check the principal-agency conflict, inherent in large borrowings, which often involve very low equity proportion of the promoters in the business. The low equity stake gives rise to riskier decisions, since if the gamble pays off, the profits belong to the shareholders (promoters) and if the gamble fails, the can is carried by the banks. Appointing lenders’ representatives on the boards of large-scale borrowers would certainly help in ensuring better discipline among the borrowers and ensure proper and productive use of borrowed funds.
And last but not the least, the Supreme Court should ponder whether it is in the country’s interest for the routine legal machinery interfere and pass cross-orders in the work of Debt Recovery Tribunals, especially when the country does not yet have an integrated bankruptcy law?
If these measures are not put in place sooner rather than later, then Mallya may not be the only one to have caught a flight abroad. In any case, thanks to Vijay Mallya’s living life King size, these issues are at least coming to the fore. Thank you, Mr Mallya.
DISCLAIMER : Views expressed above are the author’s own.
This article first appeared in Times of India.