Banks get green light to recover Kingfisher dues

The Debt Recovery Tribunal directs Kingfisher Airlines Ltd to repay around Rs.6,203 crs to the consortium banks.

January 19, 2017 12:20 pm | Updated January 20, 2017 02:25 am IST - Bengaluru:

Vijay Mallya

Vijay Mallya

Allowing a consortium of 15 banks led by the State Bank of India (SBI) to initiate proceedings for recovering dues from Kingfisher Airlines Ltd (KAL), the Bengaluru Bench of the Debt Recovery Tribunal (DRT) on Thursday said dues of ₹6,203.35 crore should be paid “jointly and severally” by KAL and its guarantors United Breweries (Holdings) Ltd and liquor baron Vijay Mallya, and Kingfisher Finvest (India) Ltd.

Also, they will have to pay an interest at the rate of 11.5 % per annum on the dues with yearly rests from the date of the application till the date of completion of realisation.

DRT’s presiding officer K. Srinivasan delivered the verdict while allowing the banks’ application filed in 2013 seeking issuance of recovery certificate from the tribunal. In the event of failure of KAL and its guarantors to pay the due amount with interest, the DRT said, the applicant banks are at liberty to sell the hypothecated/mortgaged/movable/immovable properties. Also the SBI-led consortium is permitted to proceed against the persons and other properties of KAL and its guarantors as per law if the banks fail to fully realise the dues, despite sale of the schedule properties. The banks have been directed to submit a memo of calculation comprising due amount with interest, costs etc., after deducting any amount realised through sale of assets.

The DRT has held that Kingfisher Finvest Ltd (KFL) is nothing but an “extended arm” and a “conduit” of UBHL while lifting its corporate veil.

Pointing out that Siddarth Mallya, son of Mr. Vijay Mallya, is not made as a party to the proceedings, the DRT clarified that “this order will not in anyway affect the rights of Siddarth Mallya, Diageo Holdings Netherlands B.V and Standard Chartered Bank (SCB) in any manner in so far as the shares in the name of Siddarth Mallya individually or jointly with Vijay Mallya to his [Siddarth’s] own extent only are concerned.”

Meanwhile, the DRT said that the Service Taxes Department shall have the rank as 2nd charge over the schedule properties and other receivable after satisfaction of all claims of applicant bank.

The DRT has also set aside Mr. Mallay’s action of pledging of several shares of UB Ltd to SCB while holding that the pledging was in violation of an oral undertaking of “not to transfer, alienate or otherwise to deal with his assets” given before the tribunal, and in violation of guarantee agreement with the banks.

On the plea of Diageo seeking right over such “pledged” shares, the DRT said that both the SCB and Diageo “failed to conduct proper inquiry into the affairs of both UBHL and Mr. Mallya, who were already declared as wilful defaulters,” before entering into an agreement with him.

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