Liquor baron Vijay Mallya, who owes Rs 9,000 crore to a group of public sector banks, made public a letter he sent to the Prime Minister and Finance Minister in which he sought “patience and understanding of the severe predicaments that I am currently facing” and said he is offering to settle with the lenders.
Here's the full text of the letter he wrote to PM Modi.
Member of Parliament - Councii of States
Chairman - The U8 Group
15 April, 2016
Shri Narendra Modi
Honourable Prime Minister
Government of India
New Delhi
Respected Prime Minister:
Since assuming office, you have launched several unprecedented Initiatives giving renewed hope to hundreds of miilions of Indians and enhanced the stature of our Nation amongst the Global community.
I have witnessed various administrations over the past three decades since I was appointed Chairman of The U3 Group at the age of 28 following the untimely death of my father in 1983.
I would like to congratulate you for the path breaking initiatives you have taken and to wish you all the best in leading our Nation to greater heights.
Over the last three decades I have had the satisfaction of building the World's largest Spirits Company by volume (United Spirits Ltd) and India's largest Brewing Company (United Breweries Limited) which together have contributed Iakhs of crores in duties and taxes to State public exchequers and provided employment to hundreds of thousands of people with a manufacturing network of over 100 factories in India.
In addition we have taken over sick industrial enterprises (Hindustan Polymers Ltd and Mangalore Chemicais and Fertilizers Ltd) and successfully rehabilitated them for the benefit of all stakeholders including Public Sector Banks who were lenders.
Our Group's core businesses In Beer and Spirits have a flawless track record of dealings with all banks including Public Sector Banks and this can be independently verified.
As a non-resident Indian since 1988, I also successfully developed a global business in alcoholic beverages, paints and hospitality.
Most unfortunately, nothing I have stated above is either understood, appreciated or brought into the public domain by the media.
I seek your patience and understanding ofthe severe predicaments that I am currently facing and appeal to your good sense ofjustice so that I am treated in a fair manner. I am pained to see that I have become the poster boy of all Bank defaults, accused of looting public money and fleeing the Nation.
I have also become a political pawn about whom politicians across Party lines make reference to in public statements to either influence the electorate or set an example before several other industrialists whose Companies are facing financial stress.
In addition, every Government agency - The Central Bureau of Investigation (CBI), The Serious Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED) have started investigations against myself. Just today I received a communication from The Ministry of External Affairs suspending my Diplomatic passport for four weeks and giving me one week to
show cause why my passport should not be revoked. This has severely hampered my ability to raise funds to repay Banks as further explained below.
I left India, as scheduled on March 2nd to attend to my commitments as an International businessman and this has been misconstrued as deliberate.
In 2004 we launched Kingfisher Airlines and within a few years grew to become the largest domestic Airline operating more than 480 daily flights and providing first time connectivity to small towns not ever served even by Indian Airlines. Kingfisher Airlines, therefore, was an important public utility service which directly employed 8500 people and provided indirect employment to a further 4000 people.
Kingfisher Airlines was truly a World Class airline and the recipient of numerous National and International awards.
Unfortunately, the macro economic environment and then Government policies conspired against us and Kingfisher Airlines was forced to shut down operations in October 2012.
It is important for me to bring the following pertinent facts to your attention. Due to the unrest in Egypt and then Libya, prices of crude oil moved up sharply from around $ 60 per barrel to a peak of S 145 per barrel averaging S 120 per barrel. The aviation industry was amongst the worst hit globally. In India, State Governments levied a high rate (between 20% and 30%) of ad valorem sales
tax on Aviation turbine fuel (ATF) whose prices were directly based on international crude
oil prices. I made several attempts to request the Union Government to give "declared goods" status to ATF so that the sales tax rate would be 4 %. l pleaded with State Governments to protect their assumed revenue by charging a flat rate of tax on ATF rather than a high ad valorem rate which was yielding windfall gains as a result of the unprecedented high prices of crude oil and therefore ATF. The additional (incremental) sales tax paid by Kingfisher Airlines over years was approximately Rs 4000 crores which was a windfall gain to the States which added to the operating losses. The vaiue of the Indian currency depreciated by 20 % from USD 1.00 = INR 44 to USD 1.00: INR 52 thereby significantly increasing aircraft lease costs which were all paid to overseas lessors in US Dollars again adding to the operating losses. Airport charges were increased in Mumbai and New Delhi adding to the woes of the already stressed Aviation industry. Finally and most unexpectedly the V 2500 aircraft engines fitted to our fleet of Airbus aircraft developed technical problems resulting in the grounding of almost half our fleet .We have sued the Engine manufacturer, International Aero Engines in the City Civil Court, Bengaluru seeking compensation of approximately Rs 2000 crores.
Due to the collapse in Global financial markets in 2008, raising capital from overseas investors became impossible despite our best efforts. Despite several pleadings to the Union Government to permit Foreign Direct Investment in the Aviation industry so as to attract investment from strategic Airline investors, this was not forthcoming. While the Indian Aviation industry was facing its worst ever financial crisis, the National carrier Indian Airlines started a price war to try and attract passengers and show attractive load factors and market share. Indian Airlines made huge losses in the process but relied on Union Government funding, in effect, using public funds to compete with private enterprise. The Union Government sanctioned a Rs 30,000 crore bail out package for
Indian Airlines (Air India). To tide over the financial difficulties faced by Kingfisher Airlines, The U3 Group directly invested a huge sum of over Rs 4000 crores into the Airline between 2005 and 2013. The lead Banker to Kingfisher Airlines, State Bank of India wrote to the Reserve Bank of India on 31St January 2012 explaining the difficulties faced by Kingfisher Airlines and further stating that the promoters (The U3 Group) had infused funds into the Airline as external fund raising efforts had failed due to Global economic downturn. A copy of this letter is attached for your reference as Annexure 1. Copies of various appeals made by me to the then Prime Minister, Financ Minister and Civil Aviation Minister are attached for your reference as Annexure 2. As you will see, I made every possible effort to save Kingfisher Airlines including investing more than Rs 4000 crores which, sadly has been lost. This was a genuine business failure caused by circumstances beyond control.
The total borrowings (Principal amount) of Kingfisher Airlines including from Public Sector Banks was Rs 5100 crores. These commercial loans were sanctioned after detailed assessment by all Banks of the Company's financial position. Compound interest has been calculated but has not been applied as per Court filings made by the Banks.
The Public Sector Banks are vigorously pursuing me personally for recovery due to my purported personal guarantee and the purported guarantee given by United Breweries (Holdings) Ltd given towards the Kingfisher Airline borrowings. The media, various political personalities and Government agencies are accusing me personally of having "stolen" or "diverted" funds which is wholly incorrect.
I have good reason to believe that the Government agencies - CBI/SFlO/ED are now dealing with me in a highly prejudicial manner despite full cooperation. It has been further stated that I have personally brought the private sector into disrepute which only confirms that l have become the poster boy of all loan defaults in India without having borrowed a single rupee myself. This public outcry with no factual basis seems to be influencing the Banks themselves notwithstanding the substantial settlement offer that I have made as explained below.
Whilst I applaud your Government's actions to curb black money, ensure compliance and bring defaulters to book, | appeal to you to ensure that this Is done in a fair and honourable manner.
The circumstances behind my purported personal guarantee are as follows: A master debt recast agreement (MDRA) was entered into between the consortium of Banks and Kingfisher Airlines on let December 2010. This followed permission from the Reserve Bank of India (RBI) dated 27th August 2010 with a deadline of 120 days. In this letter the RBI has clearly stated that Banks should completely satisfy themselves about the viability of the airline and not rely on intangibles such as
personal guarantees. The letter from RBI is attached as Annexure 3. Notwithstanding the letter from the RBI, on the very last day permitted by the RBI for execution ofthe MDRA, the State Bank of India insisted on my personal guarantee failing which they threatened not to sign the agreement. As I was left with no choice and since there was no time left for discussion, | reluctantly signed the personal guarantee under coercion. My objections have been recorded in the minutes of the meeting of the Consortium of Banks. I have challenged this in the Bombay High Court. I have submitted a statement of my assets and liabilities to the Consortium of Banks who have recorded the value of my purported personal guarantee as Rs 1571.83 crores. This is in addition to the tangible securities provided to the satisfaction of the consortium of Banks. On 9th December 2011 the Minister of State for Finance made a statement in Parliament about my purported guarantee of Rs 248.97 crores and the guarantee of United Breweries (Holdings) Ltd in the amount of Rs 1601.43 crores. The MDRA also included performance responsibilities on the consortium of Banks which they did not perform leading to the collapse of Kingfisher Airlines. In addition, the Income Tax authorities have made several disputable claims against Kingfisher Airlines and have attached my personal assets worth over Rs 1000 crores. The Service Tax authorities have launched criminal proceedings against me personally despite having attached assets of Kingfisher Airlines. Such an unprecedented attack on myself personally for a genuine business failure is most unfortunate. Under your leadership I would request the benefit of fair play and justice. Notwithstanding any of the above and in good faith, I (including on behalf of Companies under my control) have made a one time settlement offer amounting to Rs 4400 crores to State Bank of India which they have rejected, ignoring the important fact that several other secured and unsecured creditors have to be settled and paid as well.
I believe that I am being discriminated against and not being given an equal opportunity that other borrowers and Asset reconstruction Companies have been given by Public Sector Banks.
Having lost over Rs 4000 crores that was pumped into Kingfisher Airlines and with the settlement offer of an additional Rs 4400 crores. I and my group would have lost Rs 8400 crores pursuant to the genuine business failure of a public Company that was a victim of economic circumstances and then prevailing UPA Government policies.
As the head of Government, I would request you to please appreciate the facts that I have now placed before you.
I request you to appoint an Ombudsman or a committee to examine all the facts so that justice can prevail.
