Vijay Mallya Case: Tribunal Says March 7 Order Stands 'Infructuous'

Bengaluru: The Debt Recovery Tribunal (DRT) on Wednesday said its March 7 order restricting transfer of $75 million as a sweetheart deal amount from Diageo Plc and two of its subsidiaries to liquor baron Vijay Mallya was "infructuous".

A part of the deal amount was transferred much earlier to the order date (March 7), DRT Presiding Officer C R Benakanahalli said while hearing submissions made by Mumbai's Service Tax Department.

"The March 7 DRT order, restricting transfer of $75 million sweetheart deal amount from Diageo Plc and two of its  subsidiaries to Mallya stands infructuous as $40 million had  already been transferred much earlier to March 7 DRT order," Mr Benakanahalli said.

The Service Tax Department as part of the original application is seeking recovery of over Rs 1,000 crore debt from Mr Mallya and his subsidiary companies.

Over-ruling submissions by the department, the Presiding Officer said that apart from $40 million, the Tribunal cannot direct Mr Mallya and Diageo to attach the remaining $35 million because the money has not yet been credited to the beneficiary, as per terms and conditions, which spans across next five years. 

"Unless and until there is breach of terms and conditions and Mallya or the companies are found at fault, the tribunal can neither interfere nor give direction to the parties involved. Moreover, the remaining $35 million has not been credited to the beneficiary and that will be done over the period of next five years," he said.

Making yet another separate submission, the Service Tax Department Counsel said it has the right to recover over Rs 1,000 crore from movable and immovable assets of Mr Mallya, which includes a house and altogether four aircraft and helicopters. 

Countering the submissions, Mr Benakanahalli said he is not the determining authority because the matter is already being heard in the Karnataka High Court.

"I am not at all a determining authority. What? To determine the recovery through sale proceeds of immovable and  movable assets, which cannot be recovered due to legal wranglings. The matter is being heard in the High Court and it is a subject of sub-judice," he said.

The Presiding Officer, however, rapped the Service Tax Department for being lax in selling the movable and immovable assets of Mr Mallya soon after the attachment.

"Why didn't you sell the movable and immovable assets, including aircraft and helicopters, and a house soon after attaching these properties?" he observed.

"And also the submissions becomes null and void," he said.

Later, he posted the matter for next hearing on Thursday. 

Mr Mallya's now-defunct group company Kingfisher Airlines owes over Rs 9,000 crore to a consortium of 17 lenders led by State Bank of India.

Mr Mallya, who had left the country on March 2 and is now in the UK, has been declared a proclaimed offender by a special PMLA court in Mumbai on a plea by Enforcement Directorate in connection with its money laundering probe against him in the alleged bank loan default case.