United Bank of India (UBI) on Monday declared Kingfisher Airlines and its chairman Vijay Mallya (pictured) wilful defaulters for non-payment of Rs 400 crore of dues. Three company directors — Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly — also figure in the list. The grounded airline company described the bank’s move as “post-haste”.
The bank’s grievance-redress committee on wilful default on Monday met at its Kolkata headquarters. “No representative from the airline company attended the meeting. The committee deliberated on the written submission of the company, examined the documents and directed the bank to declare Kingfisher Airlines and its directors wilful defaulters,” UBI Executive Director Deepak Narang told Business Standard.
Kingfisher Airlines had moved the Calcutta High Court two months after the bank had in May identified it and Mallya as wilful defaulters. The court last week dismissed the plea, paving the way for UBI to declare the company and its chairman wilful defaulters.
“Kingfisher Airlines has been demanding that UBI permit it to have legal representation of its choice at the hearing to be held before the grievance-redress committee set up by the bank. The basis for the demand is that being declared a wilful defaulter entails serious consequences, including penal action. So, depriving Kingfisher Airlines of an opportunity to be represented by a trained legal professional is denial of real and reasonable opportunity to the company to defend itself and a violation of the principles of natural justice,” the company said.
A single-judge Bench and the division Bench of the Calcutta High Court, through orders dated July 10 and August 28, had respectively dismissed a writ petition and an appeal filed by Kingfisher Airlines against UBI’s move. On August 29, the company had filed a special leave petition before the Supreme Court against the orders of high court.
The bank’s grievance-redress committee on wilful default on Monday met at its Kolkata headquarters. “No representative from the airline company attended the meeting. The committee deliberated on the written submission of the company, examined the documents and directed the bank to declare Kingfisher Airlines and its directors wilful defaulters,” UBI Executive Director Deepak Narang told Business Standard.
Kingfisher Airlines had moved the Calcutta High Court two months after the bank had in May identified it and Mallya as wilful defaulters. The court last week dismissed the plea, paving the way for UBI to declare the company and its chairman wilful defaulters.
“Kingfisher Airlines has been demanding that UBI permit it to have legal representation of its choice at the hearing to be held before the grievance-redress committee set up by the bank. The basis for the demand is that being declared a wilful defaulter entails serious consequences, including penal action. So, depriving Kingfisher Airlines of an opportunity to be represented by a trained legal professional is denial of real and reasonable opportunity to the company to defend itself and a violation of the principles of natural justice,” the company said.
A single-judge Bench and the division Bench of the Calcutta High Court, through orders dated July 10 and August 28, had respectively dismissed a writ petition and an appeal filed by Kingfisher Airlines against UBI’s move. On August 29, the company had filed a special leave petition before the Supreme Court against the orders of high court.
"In the meantime, even before a copy of the order dated August 28 passed by the court was made available to the parties, and even before the special leave petition filed by Kingfisher Airlines was listed before the Supreme Court, UBI post-haste proceeded to purportedly declare the airline company and its directors/former directors wilful defaulters in respect of an overdraft facility of Rs 7.5 crore,” the company said. According to the Reserve Bank of India’s (RBI’s) guidelines, a wilful default is a situation where an entity has the capacity to repay its dues but chooses not to do so, or uses the borrowed money for purposes other than those for which a loan was availed of. For instance, if a borrower uses short-term working capital funds for long-term purposes or deploys the borrowed money for creation of assets other than those for which the loan was sanctioned, it is considered diversion of funds and the borrower is classified as a wilful defaulter. “We had asked Vijay Mallya and other Kingfisher Airlines directors to appear before our grievance-redress committee. But they wanted to be represented by lawyers and moved the court. We did not agree because we were relying on simple banking documents and statements of the company. There was no need for lawyers to be part of the grievance-redress committee meeting,” said a banker familiar with the development.
Bankers said they found “enough evidence” of the ability of Kingfisher Airlines and its group companies to repay the money borrowed from the bank. “At the time of taking the loan, Kingfisher Airlines had agreed to pledge its properties as securities.
When it defaulted, banks tried to recover their dues by selling some of those properties. As a good borrower, it should have helped banks in the process. But it has been putting obstacles and preventing sale of the assets by filing court cases. Also, United Breweries Holdings is the corporate guarantor for the loans. While the company has been raising money, it has not made any effort to repay even part of the loan,” said a banker.
UBI has informed RBI, Credit Information Bureau India Ltd and the Securities and Exchange Board of India of its decision to declare Kingfisher Airlines and its directors wilful defaulters. The move will prevent Mallya and other directors from availing of fresh loans and they, according to bankers, would also have to step down from the boards of different companies. Kingfisher Airlines said it intended to pursue all available legal remedies, including through the special leave petition filed before the Supreme Court.
Bankers said they found “enough evidence” of the ability of Kingfisher Airlines and its group companies to repay the money borrowed from the bank. “At the time of taking the loan, Kingfisher Airlines had agreed to pledge its properties as securities.
When it defaulted, banks tried to recover their dues by selling some of those properties. As a good borrower, it should have helped banks in the process. But it has been putting obstacles and preventing sale of the assets by filing court cases. Also, United Breweries Holdings is the corporate guarantor for the loans. While the company has been raising money, it has not made any effort to repay even part of the loan,” said a banker.
UBI has informed RBI, Credit Information Bureau India Ltd and the Securities and Exchange Board of India of its decision to declare Kingfisher Airlines and its directors wilful defaulters. The move will prevent Mallya and other directors from availing of fresh loans and they, according to bankers, would also have to step down from the boards of different companies. Kingfisher Airlines said it intended to pursue all available legal remedies, including through the special leave petition filed before the Supreme Court.
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