Vijay Mallya, known defaulter: Can SBI stop him from fleeing abroad?

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Vijay Mallya, known defaulter: Can SBI stop him from fleeing abroad?

A crescendo has been building up against the 'King of Good Times', Vijay Mallya. A growing number of voices are clamouring for putting him behind the bars for defaulting willfully, not returning money to Indian banks.

Mallya owes thousands of crore of rupees to Indian banks. He isn't the only defaulter. But his hedonistic lifestyle has brought the ire of Raghuram Rajan, India's central banker.

The Indian banking system collectively has more than Rs 10 lakh crore of bad loans (including restructured and strategic debt restructured loans) most of which is unlikely to be recovered.

State Bank of India (SBI) has moved four applications against Mallya, promoter of UB Group, in the Debt Recovery Tribunal (DRT), seeking the first right on the $75 million (about Rs 500 crore) severance package Mallya will get from Diageo, the UK-based liquor company that took control of Mallya's flagship United Spirits.

The country's largest bank, also sought the arrest of Mallya and asked for his passport to be impounded. A consortium of 17 banks has demaded full disclosure of the industrialist's wealthy assets.

Back in 2015, SBI declared Mallya and his company United Breweries Holdings Ltd (UBHL) as wilful defaulters. The company has defaulted on the payment of dues of over Rs 7,000 crore owed by his now-defunct Kingfisher Airlines.

The question that arises from all of this is whether Mallya can be put behind bars for being a willful defaulter. Also, are Indian Laws strong enough to stop him from travelling abroad by impounding his passport?

The SBI, and a consortium of other lenders are pulling out all stops to prevent Vijay Mallya from fleeing abroad in order to evade repaying the massive loans he has taken.

It is being widely reported in the media that the petitioners before the apex court would push for Mallya's passport to be "impounded". However, that isn't wholly true. This is because there are strict rules for the impounding of passports, and merely because one is a willful defaulter, it's an uphill task, legally speaking, to prevent him from travelling abroad.

So the question is, how can Mallya be prevented from racing away?

Right to Travel - A Fundamental Right

Since the Constitution's Article 21 (Right to Life and Personal Liberty) decrees that the right to travel is an integral part of this right, Mallya's passport can be impounded only if the conditions of Section 10(3) of the Passport Act are met. For, this is the sole legal provision for impounding an Indian citizen's passport, says Sanjay Hegde, a Senior Advocate in the Supreme Court. Hegde cites the apex court's seminal constitution bench ruling in the Maneka Gandhi case (1978), in which the court clearly laid down that there could be no other way of impounding a passport.

If that is the case, then a possible alternative could be invoking Section 104 of the Code of Criminal Procedure (CrPC) which empowers a court to impound any "document". However, this would also hit a wall, because of a 2008 Supreme Court reasoning. On 24 January 2008, in the case of Suresh Nanda v CBI, the court ruled that a passport could not be included within the definition of "document" in the context of impounding. The bench provided the same reasoning as Hegde's.

A solution in sight?

One of the lawyers closely associated with the case clarifies that contrary to media reports, the "impoundment" issue isn't germane here. If the court directs Mallya to deposit his passport with it, so that he can travel abroad but under its watchful eyes, then he might just not be able to get away with a mammoth scale of defaulting.

Edited by Sahil Bhalla

Saurav Datta & Neeraj Thakur