The Enforcement Directorate has told the Bombay High Court that the recovery of assets worth over Rs 14,000 crore for banks from Vijay Mallya does not wipe out the pending money-laundering charges against him, arguing that a PMLA prosecution operates in a field distinct from the recovery of civil dues.
Mumbai: The Enforcement Directorate (ED) has informed the Bombay High Court that the recovery of assets for banks from businessman Vijay Mallya does not absolve him of the pending money-laundering charges, telling the Court that even though movable and immovable properties worth Rs 14,131.6 crore have been handed over to the lender banks, the criminal prosecution under the Prevention of Money Laundering Act (PMLA) survives [Vijay Vittal Mallya v. State Bank of India and Others].
The submission was made in an affidavit filed on September 8, in response to the Court’s earlier direction to the ED and the State Bank of India (SBI)-led consortium of lenders to ascertain whether Mallya’s attached properties had cleared his debts. The allegations against Mallya remain untested; the money-laundering case is pending, and nothing in the present proceedings amounts to a finding of guilt.
ED: recovery does not render the prosecution infructuous
In its affidavit, the ED stated that properties worth Rs 14,131.6 crore, valued as in August 2021, stand handed over to the SBI-led consortium. But the agency was emphatic that this recovery does not, by itself, cancel or lead to the dropping of the money-laundering charges. Restoring assets under the PMLA, it argued, is a statutory mechanism to enable legitimate claimants, here the banks, to recover their losses, and is distinct from the criminal case.
“The criminal prosecution launched pursuant to the investigation under the PMLA is therefore not rendered infructuous merely because the claimant banks have subsequently recovered substantial amounts from the assets restored to them.”
The agency drew a firm line between the two kinds of proceedings, contending that the criminal case arising from the alleged scheduled offences and the offence of money-laundering operates “in a field distinct from proceedings for recovery of civil dues by the lending institutions.” While the quantum of bank recovery might be relevant to quantifying the banks’ outstanding dues, the ED said, it would not determine whether the ingredients of the offence of money-laundering were made out.
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Mallya’s argument: the civil dispute is settled
The affidavit was filed in a criminal petition Mallya moved in 2020, challenging a special court order that had permitted the utilisation of his attached properties for debt recovery. Appearing for Mallya, Senior Advocate Amit Desai argued that the application challenging the restoration of assets to the banks had become redundant, since the civil liabilities had effectively been settled through the recovery, and submitted that the “commercial dispute” underlying the matter needed closure.
The ED, however, described that submission as misconceived, reiterating that the settlement of civil dues to the banks and the continuation of a criminal prosecution under the PMLA are two separate questions, the former going to the lenders’ recovery, the latter to whether the offence of money-laundering is established. It is this distinction, between recovering the proceeds and prosecuting the alleged laundering of them, that lies at the heart of the dispute now before the High Court.
Background: the Kingfisher loans case
The proceedings arise from one of India’s most prominent bank-loan default cases. Mallya is accused of money-laundering and of siphoning off at least Rs 3,500 crore out of the roughly Rs 9,000 crore in loans that banks had extended to his now-defunct Kingfisher Airlines. The ED provisionally attached his properties in 2016, and in 2019 a special court permitted SBI and other lender banks to utilise Mallya’s ED-attached movable properties, including shares of United Breweries Holdings Ltd (UBHL), for debt recovery. Mallya challenged that order before the High Court in 2020, the petition in which the present affidavit has now been filed.
The figures involved illustrate why the case has drawn attention: the value of assets restored to the banks, Rs 14,131.6 crore, considerably exceeds the alleged siphoned sum and the original loan quantum, which is the very foundation of Mallya’s argument that, the banks having been made whole, little remains to litigate. The ED’s response reframes the question, insisting that full recovery for the lenders does not answer the criminal law’s separate concern with whether an offence was committed.
Why the case matters
The dispute raises a question of genuine legal significance that reaches well beyond this high-profile matter: whether, and to what extent, full restitution to the victims of an alleged economic offence affects the criminal prosecution for that offence. The ED’s position reflects the settled architecture of the PMLA, under which the restoration of attached assets to legitimate claimants and the prosecution for money-laundering are conceptually separate, the former a restitutionary mechanism, the latter directed at the crime of dealing with the proceeds of crime. On that view, a defendant cannot buy his way out of a criminal case by satisfying the civil liability, because the offence, once allegedly committed, is against the State and society, not merely the lenders.
Mallya’s contrary argument, that the matter is at bottom a “commercial dispute” now effectively resolved, presses the opposite intuition, that where the money has been recovered and the banks satisfied, continued criminal proceedings serve little purpose. How the High Court resolves that tension, in a case where the recovered sum exceeds the alleged loss, could have implications for how PMLA prosecutions proceed once victims are compensated. For now, the matter rests on the pleadings, with the ED’s affidavit on record and the criminal petition awaiting the Court’s consideration. Nothing has been finally decided, and the allegations against Mallya remain to be tested.
Case Title: Vijay Vittal Mallya v. State Bank of India and Others
Court: Bombay High Court