Case:State Bank of India & Ors. v. Dr. Vijay Mallya.[1]
Case Number: Contempt Petition (C) Nos. 421-424 of 2016 in Civil Appeal Nos. 1074-1077 of 2016.
Citation:2022 INSC 700
Coram: U.U. Lalit, S. Ravindra Bhat, and P.S. Narasimha, JJ.
Abstract
The case of Dr. Vijay Mallya is one among the few cases in the history of Indian financial jurisprudence that has attracted so much public interest and institutional fame. After being a Flamboyant entrepreneur and member of parliament a decade ago, Mallya is now a symbol of greater unease in the Indian financial system namely unease fomented by corporate collapses. Having found that Mallya had knowingly flouted supreme court’s orders by making payment of 40 million dollars to his children in contravention of the express orders, the Court not only imposed penal penalties but even directed recovery of the amount along with interest.
But behind this seemingly resounding decision, there is a cluster of legal and institutional turmoil. The narrative of defiance makes the one-dimensionality of Mallya, which he has stated in his podcast most recently, more complicated. He asserts that he did not even get a chance to be heard; the government has already reimbursed much more than it claimed from just one of the many guarantors. Was contempt the stance of deliberate avoidance, or a court reaction to a realisation? This is case comment attempts to assess whether law was used as a weapon to bury systematic failure.
Background
The legal fiasco around Dr. Vijay Mallya tracks all the way back to the business failure of the former luxury aviation, Kingfisher Airlines in India. In 2013, the consortium of banks headed by the State Bank of India had filed recovery proceedings against Vijay Mallya before the Debt Recovery Tribunal (DRT), Bengaluru, under OA No. 766/2013 wherein the banks were seeking recovery of outstanding dues advanced to Dr. Mallya amounting 6203 crores. Dr. Mallya, being a personal guarantor to the loans, became a mainstay of the strategy of the banks. Nevertheless, the case quickly evolved into an intricate transnational law suit as Mallya absconded India in late March 2016, a few days before a look-out notice could be put into effect.
The contempt jurisdiction swing was made following the finding that Dr. Mallya had moved an amount of $40 million which he received under a severance agreement with Diageo plc, into offshore accounts in the names of his children. The Supreme Court which already passed an interim order prohibiting the alienation of assets, noticed the alleged violation and adopted proceedings to bring it in contempt. Mallya didnot appear before the Court despite repeated summons and argued that he would not be treated fairly and that there was an extradition case against him pending in the United Kingdom.
It was no longer a question of the initial fiscal default but rather of a form of judicial power. On July 2022, the Supreme Court ruled that Mallya had committed civil contempt and gave him a sentence in absence.[2] The Court further directed the Union Government to take action to recover the embezzled funds, together with 8 percent interest by attaching and enforcing properties. Although this ruling was generally hailed as a moral victory of the rule of law, at the same time it blurred the underlying faults of the Indian insolvency regime, which this case comment aims to harshly criticize.
Judicial Reasoning
The judgment acts as an exemplification of an aggressive use of its contempt powers under Article 129 of the Constitution[3]. The Court was categorical in its finding that Dr. Mallya had deliberately and intentionally defied its previous orders by giving his children money (40 million dollars) even after there was strict judicial prohibition of transferring of the assets. According to the Court, this act constituted the greatest form of civil contempt, thus deserved both punitive detention, and entire restitution. The Court relied extensively on precedent in issuing this judgment to emphasize the ethical seriousness of disobedience and to state the necessity of judicial primacy in the constitutional structure.
In the case of Delhi Judicial Service Association v. State of Gujarat[4], the court affirmed contempt powers of the Supreme Court do not limit themselves to the breach of the orders of the Supreme Court, but also covers to the protection of the integrity of the Supreme Court or of the judiciary as a whole. In addition, in the case of Supreme Court Bar Association v. Union of India[5], the Court observed the purpose of contempt; that it works both the punitive as well as reformative objective. The Court drew the distinction between civil and criminal contempt through the precent, Pravin C. Shah v. K. A. Mohd. Ali[6], classifying the actions of Mallya on the side of civil contempt, which involves non-compliance, not offence.
But the sound of the decision was more than jurisprudential. It was a frustrated exasperation: both legal and institutional, faced by the respondent to evade and not cooperate. The verdict acted, therefore, as a legal and a symbolic reaffirmation: that the superior courts of the nation would not allow their powers to be trivialized, not even those absent by territorial constraints. Up for questioning, however, is the nature of this symbolic pose, whether it was a surrogate of or diagnostic indicator of structural incompetence.
Re-examining his Narrative
Judicial decisions tend to have this inevitability which cannot be questioned especially when such pronouncements are made by a supreme court. Still, there is no law outside the vacuum, there is no law devoid of human voice of the party that it punishes. Dr. Vijay Mallya has not kept quiet despite his absence in courtrooms. A counter-narrative, which is also worth intellectual consideration, is presented by Mallya in a widely published podcast interview made after 10 years of his fly.
He argues, with sincere angst, that he never got a fair chance to be heard before, and that the amount that is supposed to be stolen, 40 million dollars, was not stolen, but a clear and open arrangement with Diageo plc. More provocatively, he says that the Indian bank system has received pretty much more than what was due to them in the first place, by which the ongoing legal onslaught is punitive and not corrective in nature.
However, such claims (albeit not dispositive) are beyond judicial examination- especially in the case of contempt which is a quasi-criminal offense, and requires a high level of mens rea. The fact that Mallya has not yet been present in Indian proceedings, definitely goes against the procedural expectations, but must be put into the light of his constant allegations of bias on the part of the judges and political victimization. Is justice actually served when the respondent is declared guilty in absentia, without another investigation of his present claims or conditions? The principle of AudiAlteram Partem which was traditionally acknowledged as attributive to procedural due process appears to have been stretched, or even violated.
Beneath the surface, however, the vilification of Mallya not only reflects a damaging trend but also sets into perspective the close interaction between optics and judicial politics on one hand, and the public perception of outrage, on the other. Although Mallya is certainly guilty of mismanagement of funds and perhaps ethical defaults, the legal wheel seems to have acted excessively against Mallya; have left alone other similarly placed guarantor and defaulters. Such an imbalance poses an embarrassing question: was the contempt verdict a celebration of legal responsibility, or a ceremonial, an attempt to exercise the judicial power in spite of institutional powerlessness?
When his story was retold, this time in an attempt not to vindicate, but to contextualise, it is clear that the contempt judgment, albeit well-crafted in legal terms, may have served as a proxy to more pervasive regulatory failure. Perhaps, it was not merely defiance that was punished, but the humiliation of a system that could not take right in the forms of complex financial evils in a methodical step through the legal process.
The systematic lens
When considered beyond the emotive content, the case of Vijay Mallya reveals a shocking omission that lies at the core of the Indian regime of insolvency enforcement, the lack of a uniform, efficient system of addressing the personal guarantors and in particular the ones with transnational connection. When widely touted and heralded de facto as a watershed reform, the Insolvency and Bankruptcy Code, 2016 (IBC)[7], has lamentably fallen short in its comprehensive operationalisation, especially of Part III, dealing with individual insolvency, and hampering creditor recoveries against high-net-worth individuals in high proportions.
This enforcement gap has been poorly solved by the enactment of laws like the Fugitive Economic Offenders Act, 2018 (FEOA)[8], which despite its rhetoric effect has little substantive success. Although Mallya was labelled as a fugitive economic offender by the Act, the procedure did not show significant advancement to make him pay the punitive penalties. The Mallya saga has taken more than ten years to unwind, largely due to the uncoordinated efforts between tribunals, enforcement agencies and the international legal frameworks, with little systemic internalization or legal correction.
Also, historical reluctance to formal adoption of UNICITRAL Model Law [9]on Cross Border Insolvency by India even though it is repeatedly recommended by expert bodies has made recovery arrangements on a cross-border basis de facto untidily and unpredictable.
The impossibility to establish mutual enforcement agreements with other jurisdiction like that of the United Kingdom has seen the case against Mallya become a cautionary tale: that even the most high-profile cases can become legal playacting without the benefit of organized bilateral cooperation.So, it is not really the case of an individualfailure involving Mallya himself, but of how the Indian financial law is still reactionary, fragmented and no longer fit to deal with globalised financial realities.
Conclusion
The 2022 contempt decision of the Supreme Court against Dr. Vijay Mallya has been hailed as one of delayed justice- a decisive action to establish the dominance of the court over an alleged big defaulter who has been circling the justice system for many years. The comment is not meant to acquaint Mallya, but rather to place his conviction in a broader trend of legal invention and institutional impotence.
The public statements in his podcast of not being heard, with complete recovery of dues, and selective picking of a target, might not discredit the verdict but definitely they do reveal a loophole, with a representation of Indian law, on global financial fugitives.Nevertheless, upon closer inspection, the verdict evokes disturbing qualms regarding the ability of the state to handle tricky monetary crimes via intelligible legal frameworks.
[1]State Bank of India & Ors. v. Dr. Vijay Mallya (2022) INSC 700
[2]Ibid
[3]Constitution of India, art 129
[4]Delhi Judicial Service Association, Tis Hazari Court, Delhi v State of Gujarat (1991) 4 SCC 406
[5]Supreme Court Bar Association v Union of India (1998) 4 SCC 409
[6]Pravin C Shah v K A Mohd Ali (2001) 8 SCC 650
[7]Insolvency and Bankruptcy Code 2016, No.31 of 2016
[8]Fugitive Economic Offenders Act 2018,
[9]UNCITRAL Model Law on Cross-Border Insolvency (1997)
Author Name- Gokul is a 3rd Year, B.B.A. LL.B (Hons), at VITSOL, VIT University,
