Mallya Russia gamble

London: The notorious Russian prison system, the aviation business model, populist politics and a cutting vocabulary....

Vijay Mallya reached the London court on Tuesday wearing a jaunty yellow tie and carrying a water bottle as well as a quiver of arrows as his defence team sought to rubbish the Indian government's claims that he had dishonestly borrowed hundreds of crores from banks.

Mallya's case, argued by his counsel Clare Montgomery, appeared to be resting on three factors.

• The Indian government's case reveals a "shocking" lack of appreciation of how companies function and of basic realities such as the effects of incorporation and the rights of shareholders.

• Mallya is being used as a scapegoat by Indian politicians of all stripes to deflect public anger at the accumulation of bad debts by state-owned banks.

• If deported, he runs the risk of being lodged in prisons whose conditions are worse than that in Russia, a country to which British courts have on several occasions refused to extradite suspects for that reason.

The judge, Chief Magistrate Emma Arbuthnot, who will have to decide whether the alleged crimes would be offences in Britain as well as India, asked how it compared with the poor prison conditions in Russia.

Mallya's counsel Montgomery said the situation in Russia was a "lot better than India" because they at least allow international experts in to review breaches of court orders.

"That is interesting," the judge said.

On Monday, the opening day of extradition proceedings against Mallya at the Westminster Magistrates' Court, the Crown Prosecution lawyer, Mark Summers, acting on behalf of the Indian government, had presented the "dishonesty" case against him.

Compared with the slow and deliberate style of Summers, Montgomery was much more animated and occasionally threw up her arms to ridicule the Indian government's case.

Mallya sat in the glass dock, more relaxed than he was on Monday, occasionally taking a sip of water.

A CBI team that has flown in for the trial kept scribbling notes.

"(Mr Mallya) embarked upon a cunning and fraudulent scheme to expose the group to further massive liabilities running into thousands of crores," Montgomery said. "I'm sorry, that is not a credible case to advance in support of a theory that alleges the borrowing was fraudulent."

"There has been political interference with the prosecution process in a way that is improper," Montgomery added. She said "evidence will be called in relation to the political implications of what's happened".

Montgomery said "the CBI has a long and inglorious history" of corruption and being politically manipulated.

"The CBI responds to requests made by its political masters from time to time. The same can be said for the Enforcement Directorate."

She accused the BJP and its ally the Shiv Sena as well as the Congress of treating the Mallya case as "an opportunity to make political capital in the assumption there has been a fraud".

Montgomery contended that if there was any corruption, it was on the part of the banks. She produced references to file after file - "File A at 259" or "Rex Volume 3 at Flag 60" - to back up her assertion that the banks had full knowledge of Mallya's financial situation.

"The bank had all the information it needed to make its own assessment."

At one point, Montgomery said: "The reality is the profitability of an airline depends on economic factors that are largely cyclical and out of control of the airline."

Montgomery called in an airline expert, Dr Barry Humphreys, who said Kingfisher could have made a profit.

Dismissing the Indian government's suggestion, "he (Mallya) could not make a profit", she declared: "Nonsense!"

The hearing will resume on Thursday after a day's break.

Additional reporting by Reuters