Embattled tycoon Vijay Mallya has failed in his latest battle in the English High Court. An Indian judgment against him can now be enforced in the UK and a worldwide freezing order stands. Paul Gair and Nick Curling of UK law firm TLT, who represented 13 Indian banks in the matter, discuss the case’s significance
Vijay Mallya needs little introduction. He is one of a growing number of Indian business executives who face criminal charges relating to fraud and money laundering in respect of loans to their companies and who have since left India. Similar allegations were made against Mehul Choski and Nirav Modi, with the latter understood to have sought indefinite leave to remain in the UK, although his current whereabouts is unclear.
The recent judgment of the English High Court on 8 May in State Bank of India & Others v Dr Vijay Mallya & Others, attracted widespread attention in India’s media. The decision means that a consortium of 13 Indian banks can now enforce a judgment of an Indian debt recovery tribunal (DRT) in England and Wales.
The banks had initiated proceedings at the DRT in Bengaluru in June 2013 for a debt owed by Kingfisher Airlines, which ceased operations in 2012, that Mallya had personally guaranteed. The DRT granted judgment in their favour in January 2017 for ₹62 billion (US$919 million) plus interest from the date of issue.
Vijay Mallya has been in the UK since March 2016, where he is fighting extradition back to India to face criminal charges. Shortly before leaving, he transferred US$40 million to his children, which he had received from Diageo, the UK-based producer of Johnnie Walker scotch and Smirnoff vodka, as part of a severance package when he stepped down as chairman of United Spirits. He was subsequently, in light of the transfer, found in contempt of an earlier order of Karnataka High Court preventing him from disposing of assets.
In November 2017, the banks obtained an order from the English High Court registering the DRT judgment in England and Wales. A registration order is the English court’s way of recognizing a foreign court’s judgment to allow enforcement within the English jurisdiction. At the same time, the banks also obtained a worldwide freezing order (WFO) against Mallya’s assets. This prevents him from removing any assets from England and Wales, or from disposing of, dealing with or diminishing the value of his assets in or outside this jurisdiction up to the value of £1.1 billion (US$1.5 billion).
Mallya applied to have the registration order set aside or alternatively for enforcement to be stayed pending appeals in India. He also applied to have the WFO discharged. Following a two-day hearing in April 2018, the court dismissed both applications. The registration order became immediately enforceable and the WFO remains in place.
This case is the first reported instance of a DRT judgment being registered in England and Wales. This decision will make it far easier to register such judgments in the future, enabling enforcement to be taken against assets in the jurisdiction but also against individuals who are residing in the UK (for example, through a WFO).
Upon registration, the full range of enforcement options that are available to any judgment creditor in the UK will become available, including: writs of control, where a high court enforcement officer can seize and sell moveable property; third party debt orders, where a third party that owes money to the judgment debtor is ordered to pay it to the judgment creditor; charging orders, which provide enforceable security over immovable property and company shares; and bankruptcy, with the appointed trustee in bankruptcy able to realize assets of a bankrupt judgment debtor worldwide.
The registration order was made under UK’s Foreign Judgments (Reciprocal Enforcement) Act 1933. The 1933 act applies to India through the Reciprocal Enforcement of Judgments (India) Order, 1958. Paragraph 4 of the 1958 order states that the 1933 act applies to the Supreme Court, all high courts and district courts and “all other courts [including tribunals] whose civil jurisdiction is subject to no pecuniary limit providing that the judgment sought to be registered … is sealed with a seal showing that the jurisdiction of the courts is subject to no pecuniary limit”.
While accepting that the DRT had no (upper) pecuniary limit, Mallya argued that the DRT judgment itself did not satisfy the criteria because the seal did not show that there was no pecuniary limit to the DRT’s jurisdiction, nor did the DRT judgment say as such in clear words. Mallya also said that a letter obtained by the banks from the DRT’s presiding officer confirming there was no pecuniary limit and bearing the DRT seal was not part of the judgment and there were procedural defects in the manner it had been issued in India.
The court applied a purposive approach to the interpretation of the 1933 act and 1958 order, which involved considering both the literal meaning of the text and the context of the surrounding provisions, and any clear discernible legislative purpose. In doing so, it held that the clear purpose of the 1958 order was to extend the reciprocal enforcement regime to appropriate Indian courts and it would be wrong to take an unduly narrow or technical approach.
Mallya also argued that a judgment of the DRT was not capable of enforcement outside of India because it was only enforceable through the recovery certificate by the DRT recovery officer. The court firmly rejected this argument, saying that this was simply the means of enforcement in India and had no bearing on the ability of the banks to enforce extra-territorially.
The willingness of the English courts to give effect to reciprocal enforcement arrangements is positive for creditors looking to enforce their Indian judgments in the UK. Substance should triumph over form, especially where a challenge to registration is based on technical, administrative arguments that the foreign court is unlikely to be aware of when issuing a judgment. That said, it would be sensible for claimants to ask the DRT to include confirmation of the lack of pecuniary limits in its judgment if there is any chance that enforcement action may be taken in the UK.