DRT orders attachment of Mallya's assets to recover Rs 6,203 cr, questions Diageo's due diligence

The Debt Recovery Tribunal (DRT) in Bengaluru on Thursday ordered attachment and recovery of tycoon Vijay Mallya's properties for defaulting on bank loans by his defunct Kingfisher Airlines Ltd.

Allowing a joint petition filed in June 2013 by a consortium of 17 banks led by the State Bank of India (SBI), the Tribunal's Bengaluru bench said properties of Mallya and Kingfisher worth Rs 6,203 crore ($909 million) be recovered against the combined unpaid loans of Rs.9,091 crore, including compound interest on them.

Vijay Mallya. AFP

Vijay Mallya. AFP

Directing the banks to initiate the recovery proceedings, Tribunal's Presiding Officer K. Srinivasan also ordered the airline's holding companies UBHL and Kingfisher Finvest to pay an interest of 11.5 per cent per annum on the due amount (Rs 6,203 crore) retrospectively since the case was admitted on July 26, 2013.

"I hereby ask the banks to start the process of recovery of Rs 6,203 crore along with interest rate at 11.5 per cent per annum from Mallya and his companies including UBHL, Kingfisher Finvest and Kingfisher Airlines," said Sreenivasan reading out the operative portion of the order in a packed court room.

The flamboyant 61-year-old Mallya is reported to be in Britain since he left India on 2 March 2016 after the consortium moved the Tribunal in February last year to expedite the hearing on its debt recovery petition.

When beleaguered Mallya did not respond to the Tribunal's earlier directives, the consortium in June 2016 sought a recovery certificate from it to sell off his properties in lieu of the defaulted loans to his airline.

SBI and state-run Punjab National Bank had declared Mallya, the airline and its holding firm UBHL (United Breweries Holdings Ltd) as "wilful defaulters" in 2015.

Besides SBI, other state-run and private banks that gave loans to Kingfisher include Bank of Baroda, State Bank of Mysore, Axis Bank, Corporation Bank, Federal Bank, Indian Overseas Bank, Jammu and Kashmir Bank, IDBI Bank, Punjab National Bank, Punjab & Sind Bank, UCO Bank and United Bank of India.

According to a report in the Business Standard, the order also warned that the country's business community to realise "it will no longer be possible for them to avail loans of public money, default on repayment and try to get away through the lanes and bylanes of twisted facts".

It also questioned the due diligence done by UK drink's major Diageo Plc, which acquired 26 percent stake in Mallya's United Spirits in 2012 and then went on to acquire a majority 54.78 percent through open offers by July 2014.

"(While) dealing with a wilful defaulter, they were only taking a risk on their investments knowingly. They cannot be held to be a bona fide purchaser. For such acts of such persons, this tribunal cannot have sympathy,” the BS report quoted Thursday's order as saying .

Mallya remained chairman of United Spirits after the acquisition by Diageo but in April 2015 the UK major asked him to step down after a forensic audit by PwC UK found financial irregularities in the company during 2010-2013. Mallya resigned in February 2016 in a sweetheart deal worth Rs 515 crore. After banks objected, the DRT froze the deal in March 2016 but a major chunk of the amount was already transferred to Mallya's accounts.

The DRT on Thursday also disposed of as many as 20 Interlocutory Applications including several by Mallya and his companies.

Meanwhile, Mallya's counsel has said that it is for the banks to decide how go about implementing the order.

"As the Tribunal has decreed banks to recover the dues from the airline and its holding company (UBHL), it is for them (banks) to decide on how they go about it," Mallya's counsel told IANS on the condition of anonymity.

Since the loans were given against various sureties, including shares of the holding company and its assets as collateral, the banks have to assess their value to recover the amount specified by the Tribunal, hinted the counsel.

"The Tribunal's debt recovery officer will decide on the recovery process in consultation with the banks and the guarantors to the loans," said the counsel.

Mallya and the airline, however, can appeal against the order in the Debt Recovery Appellate Tribunal at Chennai after paying 50 per cent of the due amount with interest levied.

Asked if the attachment includes properties the banks tried to sell but could not, the counsel said the debt recovery officer would decide on the list of properties.

"We are to yet to get a copy of the order. We will go through it (order) and decide our next course of action," added the counsel.

The lenders had moved the DRT in 2013 to recover dues from the defunct airline.

SBI had filed three other applications also, including one seeking Mallya s arrest and impounding his passport, for "defaulting" on loans.

With inputs from PTI and IANS

Published Date: Jan 20, 2017 08:32 AM | Updated Date: Jan 20, 2017 08:32 AM

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