As the Supreme Court seeks a list of big loan defaulters from the Reserve Bank of India (RBI), one man has seemingly escaped the net. Vijay Mallya, long lauded as the King of Good Times, has become the poster figure of how big industrialists game the system and leave hundreds of crores worth of bad loans in their wake.

On Tuesday, state-owned Punjab National Bank declared United Breweries Holdings, the parent company of Mallya’s operations, a “willful defaulter” after it failed to pay back the massive loans it had taken from the bank. This followed similar moves by the SBI. By one estimate, published in DNA, banks have a total exposure of Rs 7,000 crore to UB Holdings, including the now-defunct Kingfisher Airlines.

The DNA report highlights how Mallya may have gotten away with such large defaults due to the poor valuation of the assets of Kingfisher which are now with the banks. The report explains:

“These included Fly Kingfisher (label mark & word), Flying Models, Fly The Good Times, Funliner & Kingfisher (label mark). In 2009, global consultancy firm Grant & Thronton valued Kingfisher trademarks at Rs 4,111 crore or roughly $1 billion. In 2012, when the airline’s licence was suspended by India’s aviation regulator Director General of Civil Aviation (DGCA), Kingfisher Airlines valued itself at Rs 3,008 crore. The current value of the trademarks now stands at a mere Rs 6 crore! ‘We have put it up for sale. But have not received any satisfactory responses till now,’ according to official bank sources.”

It would have been easy to justify these valuations if Mallya were a bankrupt entity who saw a beloved company fail. But that is hardly the case. In his personal capacity, Mallya continues to spend big monies. Last week, he bought a team in the Caribbean Cricket League for a whopping $2 million. This is apart from his ownership of IPL team RCB Bangalore.

The Indian Express, using an RTI query, discovered that state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts in the last three years, an amount that is sucked by the system with no returns to show for it. Most of these bad debts accrue to companies like Kingfisher that have halted operations even as their promoters make hay.

On Tuesday, the Supreme Court rapped the RBI for the rising incidence of companies turning into “willful defaulters” even as their promoters continue to live the good life. A bench headed by Chief Justice TS Thakur asked the RBI: “People owe thousands of crore to the public banks… it is a big fraud. Top ten public sector banks have written off Rs 40,000 crore alone in 2015. Public financial institutions are lending money despite no returns. RBI is supposed to keep a watch on these banks. What are you doing about it?”

The problem is compounded by the alleged complicity between promoters and bank employees in some cases. The CBI, which is investigating the Kingfisher bankruptcy, believes that the loan forwarded by IDBI looks suspicious since at least one board member had raised objections to it. Today, the value of the default stands at Rs 700 crore.

What may seem paradoxical at first – the promoter making windfall gains even as shareholders, employees and lenders suffer – is based in the notion that corporations are “legal persons” with their own existence. The idea of a corporate entity as separate from its promoters is a basic tenet of business, meant to foster growth and increase productivity. But when the promoter misuses this “corporate veil” to enrich himself at the cost of shareholders and employees, the situation can go quickly out of hand.

Consider Kingfisher House, a 17,000 square feet property in Andheri, which was pledged to Punjab National Bank, during the time of loan disbursal to Kingfisher Airlines. When the loan turned bad and PNB tried taking possession of the property, Kingfisher Airlines refused to part with it. In normal course, the bank has enough leeway to recover the loan with the help of agents. But when the matter involves big corporates and crores of rupees, the matter ends up in court, as has happened with Kingfisher. We, thus, see a clear enmeshing of the corporate entity with the interests of the owner, leading to all-round losses and stress on the banking system.

In its scathing remarks on Tuesday, the SC also said: “Who pays for this (writing off debts)? Clearly, the hardworking savers and taxpayers of this country. As just one measure, the total write-offs of loans made by the commercial banks in the last five years is Rs 161,018 crore, which is 1.27% of GDP. Of course, some of this amount will be recovered, but given the size of the stressed assets in the system, there will be more write-offs to come.”

Read with RBI Governor Raghuram Rajan’s recent comments that “the sanctity of the debt contract has been continuously eroded in India in recent years, not by small borrowers but by the large borrowers,” it is clear that something deeply rotten is afoot in India’s banking sector. In January, Raghuram Rajan also made a veiled reference to Mallya’s pernicious propensity to flaunt his wealth when his actions have caused distress to so many.

 “If you flaunt your birthday bashes even while owing the system a lot of money, it does seem to suggest to the public that you don’t care. I think that is the wrong message to send. If you are in trouble, you should be cutting down your expenses,” Rajan said, referring to Mallya’s 60th birthday celebrations in Goa. The party that took place in December hosted close to 600 people who were made to stay at Vivanta by Taj, a plush five-star property. Enrique Iglesias and Sonu Nigam performed.

The King of Good Times continues to marinate in his wealth as his ill-gotten gains rely on debt write-offs paid for by the humble Indian taxpayer. If this is not crony capitalism, what is?