Nihar Gokhale | SabrangIndia

Tribals Invented Sev 200 Years Ago. Now, Sev Makers Are Evicting Them

Mon, 01 Apr 2019 07:12:08 +0000

Ratlam (Madhya Pradesh): “Wheat, corn, pulses like pigeon pea and gram, green chillies, even vegetables like okra and potato…”

Vishna Bai, a farmer from the Bhil adivasi community, grew all her family’s food on a tiny farm in Ratlam in western Madhya Pradesh. But in 2016 she was evicted from her farm to make way for a project to promote namkeen industries. Now, 21 Bhil families are fighting the state government in various courts for the right to cultivate their subsistence farms, revealing gaps in India’s land laws governing the poorest.

Vishna Bai’s eye lit up, as the portly, cheerful farmer rapidly listed the year-round bounty her hectare of land produced until February 2016, when the excavators came and razed her beloved crops.

Illiterate, Vishna Bai is in her 40s–she was not exactly sure–and like 20 fellow Bhils from India’s largest tribe, is now officially an “encroacher”. Their farms were classified “small and marginal” with an area less than 2 hectares, much like 86% of India’s farms, according to the Agricultural Census, 2015-16.

Here on the southern outskirts of Ratlam, the Bhils, after tilling the land for at least half a century, were evicted from nine of a 32-hectare spread of rocky, undulating land–the size of 60 football fields–that was marked for an industrial park in 2009. The Bhils claim to have farmed over 20 hectares of the land.

Though the industrial park never came up, in 2013, the government carved out 18 hectares of the property for a cluster of namkeen (snack) industries, primarily to make the spicy local savoury unique to the region, called Ratlami sev.

Evictions began three years later over the nine hectares of Bhil farms that fell within the proposed cluster. Further evictions were stopped after a three-year legal battle by the Bhils led to two court stay orders, one from the Supreme Court.

The 21 Bhils have neither been paid compensation nor offered rehabilitation because of a legal situation we could call the tragedy of the commons, which now features in 456 land conflicts affecting more than 3 million Indians.

As for the sev, the irony is that it was invented by the Bhils more than 200 years ago. But more on that later.

The tragedy of the commons

The land that Vishna Bai and the rest of the Bhils have been farming for 50 years or more–some farmers said their families have been here for 80 years–are part of a village commons, whose title is held by the district administration.

Such commons are not covered under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, better known as the Land Acquisition Act, 2013, which provides for compensation to people whose land is taken over for public projects but only when the land is privately owned.

The law protects people farming on commons in only two cases: One, in forests where the Forest Rights Act, 2006, recognises the rights of tribal adivasis–as India’s original people are called–and other forest dwellers to the land; and two, in so-called “scheduled areas”, adivasi-dominated regions where projects need collective consent of the community under the Panchayats (Extension to the Scheduled Areas) Act, 1996.

Ratlam is not a scheduled area, and the Bhil fields are not near forests. So, they were treated as encroachers on public property.

Despite a perception that land conflicts in India are driven by acquisition of private land, growing evidence shows that a large number of conflicts involve diversion of common land. Nearly a third of over 200 ongoing land conflicts in 2016 involved common lands, according to an analysis by Mumbai’s Tata Institute of Social Sciences, a research institute, and the Rights and Resources Initiative, an advocacy based in Washington D.C., USA.

There are, currently, 456 land conflicts in India involving commons, as we said, affecting over 3.3 million people and 19,000 sq km, equivalent to half the area of Kerala, according to Land Conflict Watch, a network of researchers tracking land conflicts nationwide. These conflicts constitute two-thirds of all the 678 ongoing general land conflicts reported by the network.

In the absence of mandatory resettlement or compensation, people dependent on commons, such as the Bhils in Ratlam, are simply evicted. The Housing and Land Rights Network, an advocacy that campaigns against forced eviction of the poor, recorded more than 200 cases of forced evictions in 2017 alone, affecting 260,000 people. Evictions for industrial and infrastructure projects accounted for 53 cases, the second most common reason for eviction after slum evictions in cities.

Communities evicted from commons are typically landless and marginalised, so getting legal protection can be a long, expensive adventure, as Ratlam’s Bhils can attest.

Their plea before a local court to let them use the commons meandered through four stages of appeals over three years before ending up as a contempt petition before the Supreme Court in New Delhi.

The Bhils are pitted against a resourceful, determined district administration and the makers of Ratlami sev, who are equally keen on the food-processing park. For the sev makers of Ratlam, a legacy and their livelihoods–much like the farmers–is at stake.

The sev makers and their dreams

Once the seat of a kingdom, Ratlam is today a town in western Madhya Pradesh, a has-been commercial hub known for sarees, gold and Ratlami sev. Only the sev is truly unique to the town–its recipe was developed here over the last two centuries. Its history was revealed when Ratlami Sev was granted a geographical indication (GI) status in 2014.

In Ratlam, the sev occupies a unique place. It is a snack, a side-dish, a garnish and an ingredient. The local breakfast favourite, poha, is served with sev, preferably of two kinds. Curries are prepared with sev. Even if the food does not normally require sev, a handful is served on the side.

For all its popularity in the district, Ratlami sev has been left out of the nationwide growth in packaged snacks, from potato chips to Haldiram’s-style Indian savouries.

“Ratlami sev is famous the world over because our customers travelled there, not because the industry exported it,” said Shailendra Gandhi, president of the Ratlam Sev Namkeen Mandal, a group of 60 of the oldest and biggest sev makers in town. “We wanted to change that.”

Gandhi is concerned that Ratlami firms are losing out to companies from neighbouring Indore and Gujarat, which have built big savoury businesses and even capitalised on the Ratlami sev brand. The turnover of Ratlam’s namkeen makers, Gandhi estimated, is about Rs 15 crore or a tenth of what one big company in Indore makes.

Although nearly 2,000 businesses make and sell sev in Ratlam, all are backyard operations, none has a supply chain outside the district and nearly all the product is sold at storefronts to local customers.

In Ratlam’s market, it is hard to miss the namkeen shops, their glass displays of yellow-gold-brown savouries framed against men hunched over giant, street-side woks of boiling oil. Surrounded by pedestrians and traffic, the cooks press yellow dough through a sieve placed above the oil.

Ratlami sev is fried outside a namkeen shop in Ratlam’s market.

The larger namkeen establishments, such as Janta Sev Bhandar, which belongs to Gandhi, fry sev in enclosed kitchens near the shops. Since 1977, Gandhi has run his shop on a lane barely three-metres wide in a cloth market. His sev-making unit on the third floor of his building caught fire last year. Gandhi said it was necessary to move out of backyard kitchens to grow business and maintain safety.

In 2013, the government agreed to the Namkeen Mandal’s demand for an industrial area where sev could be manufactured in bulk and its quality certified in laboratory. In its funding application to the union ministry of micro, small and medium enterprises, the Madhya Pradesh government said the Ratlami sev industry was hampered by “lack of basic infrastructure”, “inefficient production process” and “lack of quality and standards”.

In June 2014, then chief minister Shivraj Singh Chouhan laid a foundation stone for the namkeen cluster in Karamdi. A contractor was selected and on February 10, 2016, tractors and earth movers headed to Karamdi, to the fields of ripening gram and green chillies of Vishna Bai and her 20 fellow Bhils farmers.

Farmers to labourers

“I still remember the contractor, that thin man,” Vishna Bai said, glancing furtively at what was once her farm, now an empty plot. Its borders were paved with concrete, street lights arched over where her crop thrived, and high-capacity electricity wires criss-crossed what was once open sky.

A bucket-sized water pump, an axe, a sickle and one hectare land: This was all that she once needed to feed her family of seven and build a two-room concrete house for herself. The outer room was bare, save for two beds, and a small television set was placed on a pedestal next to posters of Hindu gods.

When the tractors and a backhoe excavator arrived that morning, women were working on the fields.

“There were just the few of us in front of all those men,” Vishna Bai recalled. One of them, Kodri Bai, said she stood resolutely in front of the excavator, but the officials were adamant. “They almost ran the JCB over me,” she said.

With the land gone, an important source of food and income has been lost.

The Bhil families now work as labourers on the farms of large landowners of the higher-caste Patidar community. While these jobs earn them cash, their own farms provided a year-round supply of food. “Something was always growing each of the 12 months,” said farmer Lila Bai. “All we ever needed from the market was oil and salt.”

“Something was always growing (on the farm) each of the 12 months,” says farmer Lila Bai. “All we ever needed from the market was oil and salt.” Behind her is a plot in the namkeen cluster where she claims her farm was located.

The need to buy food has put greater pressure on Bhils to find whatever odd jobs they can.

“They (the Patidars) give us the job of clearing dung” for Rs 250 a month, said Vishna Bai. Others had taken to selling vegetables on Ratlam’s pavements, earning them about Rs 200 a day, or plucking grapes at farms or working in brick kilns.

When everything else fails, they stand at the town square each morning to be hired as labourers on construction sites.

A new crop

The land the Bhils once tilled is ready for a new kind of crop: The first batch of Ratlami sev may soon be produced at a unit set up by Ankit Luniya, a young entrepreneur who decided on the namkeen business because of the industrial park.

There are concrete roads, a sewage-treatment plant, conduits for power and water supply, drains, and there may possibly be a testing and certification laboratory.

The infrastructure is “shaandaar (dazzling)”, said Luniya. With a capacity of 4 tonnes of namkeen per day, Luniya’s unit will produce a variety of snacks, including Ratlami sev. “It will be sold in attractive pouches costing just Rs 5,” said Luniya. “We will call the brand Ratlami chaska (relish) to emphasise the speciality of Ratlam.”

Luniya said he was not aware of any farms on the rocky land.

Gandhi of the Namkeen Mandal dismissed the Bhils’ claims as “bakwaas (bogus)”. “This is just a saazish (agenda) by the Indore namkeen lobby and opposition politicians because they don’t want our industry to grow,” said Gandhi.

Shailendra Gandhi, president of the Ratlam Sev Namkeen Mandal, at his shop, Janta Sev Bhandar, which he opened in 1977. Gandhi is at the forefront of the demand to set up the namkeen cluster, and says the Bhil farmers’ claims are “bakwaas (bogus)”.

Bhil farmers still in possession of some of the land–about 11 acres–were vigilant. Bherulal (he uses only one name), the oldest of them at 70, spends most of his time in the fields. “Who knows when they will turn up again with tractors?” he said.

Bherulal said he was not against factories but did not understand why the government wanted their small farms. “There are almost 100 hectares of vacant government land here, there is public land encroached by upper-caste farmers,” said Bherulal, “Yet, the government came after us.”

Bherulal, 70, the oldest among the Bhil farmers and the title petitioner in their litigation against the namkeen cluster, at his farm in Ratlam. Bherulal’s field was not razed, but he spends most of his time in the fields. “Who knows when they will turn up again with tractors?” he said.

Ratlam’s collector, Ruchika Chauhan, the head of the district administration, declined comment. In its affidavits to the lower courts, the district administration argued that the farmers were “encroachers” gaining “unauthorised” benefits by cultivating public property.

The government argued that at least 3,000 jobs would be created in the namkeen cluster, and it would earn Ratlam a name “at world level”. There was no cultivation on the land as it was rocky, and the photographs submitted by the Bhil farmers were from “some other land”, the administration said.

The Ratlam district administration has denied that there were any farms before the namkeen cluster was built. But satellite images of the site from 2003 and 2018 show that farms were indeed razed for the cluster. Satellite imagery courtesy Google Earth.

Many courts, one battle

Within a week of the eviction in February 2016, more than 15 Bhils, including those cultivating fields outside the park area, filed a civil suit in a local court, seeking permanent protection from being evicted from their farms. The district administration had tried evicting them in 2009 as well, when the food-processing park was first announced, but when it was not built, the farmers returned.

In the courts, the Bhils have argued that they had farmed the land for nearly 80 years, and that their forefathers’ names were recorded in revenue surveys as far back in 1967.

The 2016 Bhil petition to the Ratlam fifth civil judge’s court said that the land was originally “uncultivable”, and the Bhils put in ”hard labour” over generations to make it productive.

Bherulal, whose father Rama Bhil is named in the old surveys, said they had migrated from nearby forests and settled on the land, which at the time belonged to Ratlam’s ruler Rattan Singh.

The Bhils argued that since they had made the land cultivable, have “peacefully” possessed it and depended on it for survival, they should be granted titles.

The Bhil tribals’ three-year legal battle has stopped the industrial park for now. Facilities for the namkeen cluster, such as power lines, sheds and a water tank, are seen in the background.

On February 29, 2016, the Ratlam civil court ordered a one-year stay on eviction. This started a three-year-long legal battle spawning a variety of cases at all levels of the judiciary. The temporary stay was challenged by the state government before a senior judge in Ratlam, who overturned the stay, observing that it was “crystal clear” that the Bhils were encroachers and could get no protection from the courts.

An appeal filed against this decision by the farmers in 2016 before the Madhya Pradesh High Court was also dismissed. Finally, the farmers went to the Supreme Court, which in November 2016, issued notices to the state government and ordered a “status quo”. That meant that industrial construction had to be halted.

But in April 2017, the farmers noticed that roads were being built on the razed fields, and the area was being fenced off. They went back to the Supreme Court, alleging a contempt of court and a violation of the status-quo order.

In April 2017, concrete roads were built and the area was being fenced off, in alleged violation of a Supreme Court stay, prompting the Bhil farmers to approach the apex court alleging contempt of court and a violation of the status-quo order.

The contempt case is still being heard.

The chain of appeals leading up to the contempt petition pertains only to the temporary stay issued in 2016. The main case–seeking permanent protection–is still being heard by the Ratlam civil court.

In January 2019, the Bhils filed a fresh case before the High Court of Madhya Pradesh’s bench at Indore, this time seeking land titles under a little-known 1984 state law, which said that all landless people cultivating government property on October 2, 1984, could own the land. The High Court issued notices to the state government, and it, too, ordered a “status quo”.

“What makes this case important is the amount of intensive legal work that had to be put in to protect the rights of some of the poorest,” said New Delhi-based lawyer Karuna Nundy, who is representing the farmers in the Supreme Court pro bono. “But most people don’t get this kind of legal assistance.”

Yet, users of commons, such as the Bhils, have no other option.

“In the absence of rights-based laws related to housing and land, this makes it very subjective, and often dependent on whether the judge hearing the case is sympathetic,” said Shivani Chaudhry of the Housing and Land Rights Network.

Snack that ate its creator

As the Bhils await legal resolution, they do not know that India’s Geographical Indicators Journal credited their ancestors with creating the sev that led to their eviction.

The story goes that in the late 19th century, Mughal rulers on a tour of the region wanted sevaiyan (wheat vermicelli) but could not buy wheat. So, they ordered the tribals to prepare sevaiyan from gram flour, which led to the first recipe of Ratlami sev.

“The name given to the vermicelli thus prepared was Bhildi sev, which is the predecessor of the present-day crisp delicacy called Ratlami sev,” noted an entry in the journal on November 27, 2014.

Vishna Bai had no time for such information. She juggled a number of odd jobs and had rented a field to grow some crops. After being thrown out of her farm and fighting what appeared to be an unequal battle with the district administration, she had little doubt what could help.

“We need land to look after ourselves,” she said, “And to earn some money to educate our children, so that they know better.”

(Gokhale is a writer with Land Conflict Watch, a network of researchers that collect data about ongoing land conflicts in India.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.

Courtesy: India Spend

The post Tribals Invented Sev 200 Years Ago. Now, Sev Makers Are Evicting Them appeared first on SabrangIndia.

Banks May Lose ₹4,300 crore on Loans to Kingfisher Airlines

Wed, 21 Jun 2017 06:17:18 +0000

SBI expected to go over ₹900 crore in the red from loans to Mallya's grounded airline.

A consortium of 14 banks is expected to lose nearly ₹4,300 crore on account of loans given to the grounded Kingfisher Airlines that was headed by Vijay Mallya who is currently a fugitive from law in the United Kingdom. This has been disclosed in an internal document prepared by the country's biggest bank, the State Bank of India, which alone stands to lose ₹900 crore. The actual losses may well be even higher than these estimates.

The author wishes to acknowledge the anonymous whistle-blower who provided the internal assessment report used in this article to the editor of the Economic and Political Weekly.

Credit: Kurush Pawar, via CC BY S.A- 2.0, Flickr

Fourteen banks, 13 of which are public sector banks, stand to lose nearly ₹4,300 crore on account of the loans they have advanced to the grounded Kingfisher Airlines (KFA). Of this amount, the State Bank of India (SBI), India's largest bank and the biggest lender to the KFA, expects to make a loss of over ₹900 crore. This was revealed in an internal assessment prepared by a senior SBI official in December 2016. The assessment, which was not put out in the public domain, was recently shared with the Economic and Political Weekly by a whistle-blower.

The assessment of loss was prepared on 7 December 2016 by Govind Subbanna, chief general manager of the SBI's Mumbai-based "mid corporate group" and submitted as a memorandum to the bank's "Special Committee of the Board for Monitoring Large Value Frauds (₹5 crore and above)" for its meeting that was scheduled and held nearly two months later on 17 February 2017.

Analysing various assets pledged by the KFA as security against loans, the memorandum concludes that not only does the market value of these assets amount to just ₹1,565 crore, but the recoverable value works out to only ₹1,071.64 crore against an exposure of around ₹4,457 crore. The total loss to the SBI and the other banks is calculated as the difference between their individual exposures and their share in this recoverable value. SBI, which has the largest exposure to the KFA amounting to ₹1,202 crore, declared the loan as a non-performing asset in 2011 and classified it as a "fraud" in September 2016. The memorandum pegs the bank's recoverables at arund ₹200 crore. This assessment offers a first peek into the losses that Indian banks stand to incur on loans disbursed to the beleaguered airline, which was grounded in 2012 by India's aviation regulator, the Directorate General of Civil Aviation.

A detailed questionnaire was sent to the SBI chairperson Arundhati Bhattacharya by email and also by regular post on 17 May 2017. On 8 June, a spokesperson of the SBI responded to the questionnaire sent by the EPW through email stating that, "It is a policy of the Bank not to comment upon Individual accounts and it's treatment [sic]."

Large Exposure
As many as 17 banks had extended term loans to KFA between 2009 and 2012, a period when the airline's business steadily deteriorated and it found itself unable to repay its dues. In 2010, 14 of these banks formed a consortium to pursue these loans together. On 21 December that year, the consortium of banks signed a Master Debt Recast Agreement (MDRA) with KFA. The MDRA merged all the loans into a single term loan. Various assets that KFA had pledged to the banks as security were also pooled together. To this the MDRA added a personal guarantee offered by Vijay Mallya and a corporate guarantee by United Breweries (UB) (Holdings), a listed company which is a parent to the KFA.

In the case of a recovery, banks agreed to share the proceeds proportionate to their respective share in the total exposure. The SBI memorandum in the possession of the EPW uses the total outstanding exposure as on 31 January 2014 to calculate banks' respective shares. As on that date, the airline owed ₹6,955 crore to the banks, including interest. Thirteen of these are public sector banks, facing 99% of the total exposure, led by the SBI (26.9% share), followed by IDBI Bank (12.7% share), and Punjab National Bank (11.7%) (see Table 1 for all the banks' exposures). Axis Bank, the only private lender, has a mere 0.8% share in exposure.

For the purpose of loss calculation, the memorandum considers SBI's exposure to be ₹1,201.19 crore and not ₹1,874.66 crore due on 31 January 2014. The SBI spokesperson did not clarify how and why this reduction came to be. Assuming that this was on account of some recoveries the banks made in the intervening period, and further assuming that these recoveries were shared with other banks in terms of the MDRA, we have adjusted the consortium's total exposure based on the fall in SBI's exposure. Accordingly, the total exposure is assumed to have reduced from ₹6,955.97 crore to ₹4,457.11 crore.

Many Assets Deemed Worthless
The memorandum's calculation of losses is based on its analysis of how much value can be recovered from KFA's assets that were pooled under the MDRA. Interestingly, it does not consider recoverable value of the guarantees made by Mallya and UB (Holdings), even though these were also a part of the MDRA. We will come to that later.

The total market value of all current and fixed assets of KFA are shown to have a write-down value (WDV) of ₹395 crore as on 31 March 2013. But this entire asset base is worthless, according to the memorandum. While the WDV of current assets of the company, including spares, consumables and book debts, was ₹186.12 crore on 31 March 2013, their realisable value is considered zero. According to the memorandum, this is because "the spares are spread across various airports and the value, quantity and quality of the same is unascertainable as on date."

Similarly, while the WDV of KFA's fixed assets, such as ground support equipment, was ₹131.09 crore as on 31 March 2013, the memorandum finds them worthless because "these are not easily identifiable and spread over at various airports, as the company is defunct since December 2012." The third set of assets deemed worthless are two helicopters owned by the airline, whose WDV was ₹78 crore on 31 March 2013. The "DGCA … informed that these two helicopters are stationed at Juhu Aerodrome, Mumbai. These are in unserviceable condition. Hence realisable value is considered 'nil,'" the memorandum states.

Kingfisher Airlines Properties
Two real estate properties of the airline were pledged to the banks: Kingfisher House, the airline's erstwhile headquarters near the Mumbai airport, and the Kingfisher Villa in Goa. The Goa villa was sold in March 2017 to Sachiin Joshi, a businessman, for ₹73 crore, after three auctions failed to find buyers (PTI 2017b). These were held in October 2016, December 2016 and March 2017 at reserve prices of ₹85.29 crore, ₹81 crore and ₹73.1 crore respectively.

Joshi's purchase, which has been described as a "private transaction," was not reflected in the memorandum since it was prepared three months earlier, in December 2016. The price Joshi paid is slightly higher than the memorandum's recovery estimate of ₹68.23 crore, but lower than the true market value of ₹85.29 crore, which it attributed to a July 2016 valuation by P C Gupta, a valuer.

Kingfisher House in Mumbai still has no takers. The memorandum states that its market value is ₹106.95 crore based on a June 2016 report by Bhide Associates, a consultancy firm. It estimates the recovery value to be ₹85.56 crore. In the last auction held in March 2017, the House failed to find bidders for a reserve price of ₹103.5 crore (PTI 2017a).

Kingfisher Brand Worth ₹266 Crore?
Despite its pessimism about KFA's physical assets, the SBI memorandum is strangely upbeat about the airline's brand value. KFA owns nine trademarks such as the 'KFA's trademark, logo, and taglines like "Fly Kingfisher" and "Fly the good times." Their patent registration restricts their use to the airlines business only, and not to beer or water. The SBI memorandum reports that the market value of these nine trademarks is between ₹6.37 crore and ₹313.8 crore based on valuation conducted in 15 different business scenarios by RBSA Valuation Advisors LLP, which submitted its report on 28 February 2015. The memorandum states a very wide range of the recoverable value of these trademarks: between ₹5.4 crore and ₹266.7 crore.

This is surprising. The realisable value of these trademarks is what a buyer would be expected to pay to use these trademarks on another airline. Obviously, the buyer would expect to recover this expenditure by gaining advantage of the "Kingfisher Airlines" brand. This seems improbable, as has been evident from the consortium's failure to sell these trademarks. In April 2014, the consortium of banks led by SBI invited expressions of interest from the public for purchasing the nine trademarks. "The response to the public notice was not evident," according to the SBI memorandum.

Then, the consortium tried to sell the trademarks at two auctions: the first, held on 30 April 2016, had a reserve price of ₹366.7 crore, while the second was held on 25 August 2016 at a reserve price of ₹330.03 crore. Both failed. After the first auction failed, a Press Trust of India (PTI) report quoted an anonymous banker saying, "It is better to start a new airline company than to buy this brand and revive it." After the second auction failed, an anonymous intellectual property rights expert told the PTI: "[The] value of trademark [sic] of the entire group has gone down to almost nothing and nobody will like to buy it."

Yet, the SBI memorandum seems upbeat about selling the trademarks, and proposes now to value and auction the nine trademarks separately. It is not clear if this excercise has begun.

Trademark Attraction
The SBI does not seem to have learnt from banks' earlier encounters with Kingfisher's brand values. In 2011, a year before it was grounded, the KFA brand was valued at nearly ₹4,100 crore by consultancy firm Grant Thornton. This valuation, which the consultancy had said was only for "internal purposes" and not an investment advice, was nevertheless used by the airline as collateral to borrow more money from banks such as IDBI Bank, which, as a charge-sheet prepared by the Central Bureau of Investigation (CBI) has revealed, preferred the brand valuation as a collateral over tangible assets such as shares of United Spirits, a well-to-do sister concern which is under the UB Group. The CBI later arrested former IDBI Bank chairperson and other senior officers.
In 2016, the Serious Fraud Investigation Office of the Ministry of Corporate Affairs sent a notice to Grant Thornton for its brand valuation, according to a report in Mint newspaper (Sanjai and Upadhyay 2016). The consultancy clarified to the publication that it stood by its valuation which was "appropriate in the context of when it was done and the purpose for which it was done" (Upadhyay 2016). Going by this, the question arises as to whether the SBI should be pinning hopes on a brand valuation of KFA prepared in 2015. After all, between then and when the memorandum was signed, the airline and its founder have arguably become national icons of corporate defaulters to public sector banks (even though they are nowhere the largest). Several warrants have been served on Mallya, who has since resigned his membership of the Rajya Sabha or the upper house of Parliament and moved to the United Kingdom in an apparent self-exile, and from where he now faces extradition.

Shares of United Spirits
ICICI Bank, which had lent ₹450 crore to the airline, sold its entire exposure to SREI Venture Capital's Indian Global Competitive Fund in July 2012. ICICI's loan was backed by shares of United Spirits. In 2014, when its share price increased following news of its partial sell-out to Diageo Plc, IGCF sold all its pledged shares of KFA and earned ₹1,341 crore. After adjusting ₹690 crore against its exposure in KFA, it deposited the remaining ₹651.15 crore in the Karnataka High Court.

The banks now want this balance amount. They filed a suit in a civil court in Bengaluru to this effect, but this plaint was dismissed on 16 July 2016. The banks have challenged this verdict before the Karnataka High Court (SBICap Trustee Company Ltd v IDBI Trusteeship Services Ltd and others, 2016). Their petition had not been admitted at the time of writing this article on 11 June. Yet, an amount of ₹651.15 crore has been included in the SBI memorandum as a "receivable," and forms a substantial chunk of the total ₹1071.64 estimated recovery of the bank.

Likely Losses
This is the reason we argue that SBI has overstated its recoveries. Excluding the amount pending before the Karnataka High Court, the consortium's recoveries fall to ₹420 crore and their losses work out to ₹4,037 crore, with SBI losing ₹1,160 crore out of its exposure of ₹1,201 crore. Additionally, assuming that KFA's trademarks are worthless gives us the worst-case scenario, under which the bank consortium's losses are ₹4,303 crore as their recoveries fall to ₹153 crore, which is the value of both the real estate properties (see Table 2).

Other Recovery Cases
As we mentioned, the memorandum surprisingly does not analyse recoveries from the guarantees offered by Mallya and UB (Holdings). In fact, after it was prepared, the consortium initiated two court cases that can tilt all these calculations.

In 2013, after the loan to KFA was classified as an NPA by most banks, the consortium had filed an application before the Debt Recovery Tribunal (DRT), Bengaluru (SBI and Ors v Kingfisher Airlines Ltd and Ors, 2017) demanding a recovery of ₹6,203.35 crore invoking these two guarantees and additionally dragging Kingfisher Finvest (India) Ltd, a 100% subsidiary of UB (Holdings), for recovery. The demanded amount was based on KFA's dues as on 31 May 2013. In its application, the consortium sought payment of interest at 15.2% per annum from 1 June 2013 until the date of payment. On 19 January 2017, the DRT ruled in favour of the banks ordering Mallya, KFA, UB (Holdings) and Kingfisher Finvest Ltd to "jointly and severally" pay the demanded sum to the banks.
The other legal victory against KFA was in a suit that the consortium along with engine and oil suppliers (who had also claimed unpaid dues of about ₹524 crore) filed before the Karnataka High Court to "wind up" UB (Holdings) for failing to discharge its obligations as a corporate guarantor. On 7 February 2017, the high court ruled in favour of the petitioners and ordered an official liquidator to take charge of the company's assets and proceed with their sale.
It is not clear why the SBI memorandum did not take into account the probablity of winning these cases, even as it considered ₹651 crore as a receivable when their claim over the amount has not even been admitted by the high court. Both these court victories came after the memorandum was prepared but well before it was presented to the Special Committee of SBI's board on 17 February 2017. The documents made available to the EPW suggest that the memorandum was not updated to reflect recoveries resulting from these victories.

This is surprising. After all, the consortium spent considerable resources and several years fighting these legal battles. Instead, the SBI memorandum only mentions the DRT case as part of a timeline of developments in the KFA account. The timeline does not mention the winding up petition at all. In the questionnaire sent to SBI chairperson Bhattacharya, we asked why this was so. We had also asked if the memorandum had been updated, or if the committee took cognisance of the court victories and ordered a fresh study. Since SBI has a policy to not discuss individual accounts, we do not know the present position.

To speculate, it is possible that the banks are pessimistic about any actual recovery from these assets. For instance, the assets of UB (Holdings) may not be sufficient for banks to recover their dues. As the high court judgment remarks on its winding up petition, the quantum of the consortium's claims renders UB (Holdings) "commercially insolvent and a mere skeleton (with) … some assets and liquidity" (IAE International Aero Engines AG and others v United Breweries (Holdings), 2017).

Hoping for a One-time Settlement?
Perhaps this is why the consortium of banks has never closed their doors on a one-time settlement with KFA and Mallya. In March 2016, Mallya, on behalf of Kingfisher Airlines, UB (Holdings) and Kingfisher Finvest offered a settlement amounting to ₹4,000 crore, which consisted less of actual cash and more of an array of receivables such as a recall of pre-delivery payments to Airbus, and some financial claims the company has made in court against an engines supplier. These offers were made after the banks had reached the Supreme Court with a request for Mallya to declare, on oath, all his financial interest in India and abroad, including those of his family. (The banks had landed at the Court's doors after this request was not considered by the DRT and subsequently the Karnataka High Court.)

This offer was rejected by the banks for lacking bonafide intentions, a claim that the Karnataka High Court judgment (on UB Holdings' winding up petition) supported by saying that Mallya's proposal showed "lack of bona fides" as it was "hedged" with conditions that were "practically impossible of compliance." The court judgment mentioned that Mallya made a second offer, which was also rejected by the banks (IAE International Aero Engines AG and others v United Breweries (Holdings), 2017). Yet, the consortium has reiterated that it is still open for a settlement, but that they require a proof of bonafide intention from Mallya. Before the Supreme Court, the consortium has demanded that Mallya can prove this by declaring all his assets on oath and making a "substantial" deposit before the Court (State Bank of India and others v Kingfisher Airlines Ltd and others, 2016).

On 9 May 2017, the Supreme Court found Mallya guilty of contempt of court for not declaring these assets, but ordered him to be present before the Court on 10 July 2017 for contempt proceedings. Interestingly, the guarantees offered by Mallya and UB (Holdings) are themselves under legal challenge. In 2013, before the banks had approached the DRT, Mallya and UB (Holdings) filed a civil suit in the Bombay High Court claiming that they were coerced into offering their guarantees, and appealed that these guarantees be termed invalid. They have additionally appealed for a decree that the liability under the guarantees is limited to ₹1,601.43 crore "based on admissions by the consortium of lenders" (UB (Holdings) 2016).

This is unlikely to go through. The Karnataka High Court referred to the coercion claim as "sham and moonshine" remarking that it was more likely that the banks were the ones being coerced (IAE International Aero Engines AG and others v United Breweries (Holdings), 2017). Still, according to its status on the Bombay High Court website, the suit is still is at a "pre-admission" status even though four years have passed; the last hearing in the case was in June 2015 (United Breweries (Holdings) and others v State Bank of India and others, 2013).

Open Questions
The revelations of the memorandum, and the means by which it has been brought to light, raise important questions about SBI's self-confessed policy to not reveal details about its loan to KFA. As we described earlier, the memorandum records a fall in SBI's exposure to the airline from ₹1,874.66 crore in 2014 to ₹1,201 crore in December 2016. The Karnataka High Court judgment mentions that ₹544 crore were recovered from stock sales. But that does not justify the ₹673 crore reduction in KFA's liabilities to SBI alone.

In November 2016, the DNA newspaper published an "exclusive" story that the bank had transferred several bad loans, including those of KFA, to the Advance Under Collection Account or AUCA, which, as the publication described, is "a bin for toxic loans," a mechanism through which non-performing assets are taken off the bank's balance sheet without ending recovery efforts. As SBI head Bhattacharya clarified later, this does not amount to a write-off. (Rai 2016a, 2016b).

But the memorandum in our possession reveals that the KFA loan was moved to the AUCA as early as March 2014. That even two years later this information was considered "exclusive" shows that we know far less about this murky topic than the SBI is willing to disclose even in its internal documents.

CASES CITED
IAE International Aero Engines AG and Others v United Breweries (Holdings) (2017): Company Petition No. 57/2012, Bengaluru: High Court of Karnataka.
SBICap Trustee Company Ltd v IDBI Trusteeship Services Ltd and Ors (2016): Writ Petition 42942-42943/2016, Bengaluru: High Court of Karnataka.
State Bank of India and others v Kingfisher Airlines Ltd and Others (2016): Special Leave Petition (Civil) No. 6828-6831 of 2016, New Delhi: Supreme Court of India.
State Bank of India and Others v Kingfisher Airlines Limited and Others (2017): OA No. 766/2013, Bengaluru: Debt Recovery Tribunal, Karnataka.
United Breweries (Holdings) and Others v State Bank of India and Others (2013): Suit No. 311/2013, Mumbai: High Court of Bombay.

REFERENCES
PTI (2016): "No Takers for Brand Kingfisher, Trademarks," 30 April,http://www.thehindu.com/business/No-takers-for-brand-Kingfisher-trademar….
— (2016): "Kingfisher Auction Finds No Takers Again, Trademark Is Worth 'Almost Nothing,'" 26 August, http://www.firstpost.com/business/kingfisher-auction-finds-no-takers-aga….
— (2017a): "Any Takers? Lenders to Auction Kingfisher House in Mumbai, Goa Villa Today," 6 March, http://www.business-standard.com/article/companies/any-takers-lenders-to….
— (2017b): "Vijay Mallya's Kingfisher Villa in Goa Finally Sold for ₹73.01 crore," 8 April, http://www.rediff.com/business/report/vijay-mallyas-kingfisher-villa-in-….
Rai, Dipu (2016a): "DNA Exclusive: SBI Writes Off Loans of 63 Wilful Defaulters," DNA, 16 November, http://www.dnaindia.com/india/report-sbi-writes-off-loans-of-63-wilful-d….
—(2016b): "Write-off: Will SBI's Play on Words Help Recover Loans?" DNA, 17 November, http://www.dnaindia.com/money/report-write-off-will-sbi-s-change-in-term….
Sanjai, PR and Jayashree P Upadhyay (2016): "Kingfisher Airlines Brand Valuer Grant Thornton Now in Dock," Livemint, 15 March, http://www.livemint.com/Companies/ha3FlmyHooYZLVRDoIic8O/Kingfisher-Airl….
UB (Holdings) (2016): "Annual Report 2015–16."
Upadhyay, Jayashree P (2016): "Grant Thornton India Stands by Its Kingfisher Airlines Brand Evaluation," Livemint, 15 March, http://www.livemint.com/Companies/V2o6bVq02wdz9nU4VQws4K/Grant-Thornton-…

Nihar Gokhale (nihargokhale@gmail.com) is an independent journalist and researcher.

This article was first published on Economis & Political Weekly

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