Payment default case: Delhi HC allows lawyers to represent Kingfisher Airlines

The Delhi High Court today set aside state-run Punjab National Bank’s wilful defaulter notice to grounded Kingfisher Airlines and told the bank that it should allow legal representation before issuing the notice.

Justice Vibhu Bakhru said that the operation of the default notice would not come in effect as PNB will have to give the documents, relied upon by it, within a week from today. The airlines has been given two weeks time thereafter to respond. A high-powered panel of the PNB will hear Kingfisher representation on 22 September, CNBC-TV18 reported.

The court also held as “unacceptable” the bank’s reasons for not allowing the airlines to be represented by lawyers in the proceedings initiated to decide whether the grounded carrier is a wilful defaulter for non-payment of dues and directed that two advocates be allowed to represent Kingfisher.

More from Corporate

Maha: Court orders Rs 30L compensation for parents after youth dies in road accident Ashleigh Barty comes from set down to beat Coco Gauff in Australian Open lead-up

It asked the bank to supply within a week all the documents it has relied upon or intends to rely upon in the matter, saying there is “no justifiable reason” to depart from the practice in the present case.

The court also addressed the bank’s apprehension that the airline is intending to delay the proceedings by wanting presence of its lawyers, saying Kingfisher will be accompanied by twoadvocates, one of whom may be a senior advocate, and they will be present before the committee on September 22 when the hearing will be concluded within six hours.

The bank submitted before the court that lawyers were not allowed as none of the members of the panel, which will conduct the proceedings, was a law graduate.

It said that it intends to initiate such proceedings against 81 other borrowers also and allowing lawyers to represent the parties would impede the hearing in the matters.

The court, however, was not impressed and said that “at the outset” the reasons cited by the bank “are not acceptable” as any adverse decision of the bank’s committee would have significant implications upon the airlines.

The airlines, in its plea, had contended that the bank had denied legal representation to it in the hearings held pursuant to two notices issued last year and it apprehended that the same may happen in connection with the latest notice of August 21.

It had contended that such an act of the bank was “arbitrary, unreasonable, untenable and unlawful”.

The Vijay Mallya-promoted airline, which has not been flying sinceOctober 2012, moved the high court against the bank yesterday. The bank sent a notice to the airline on 21 August 2014 alleging the carrier had wilfully defaulted in payment of outstanding dues of over Rs 770 crore.

The public sector bank also said in the notice that if no reply is received within seven days then the airline and its guarantors, United Breweries (Holdings) Ltd (UBHL) and Vijay Mallya would be declared “wilful defaulters”.

A wilful defaulter, in banking lexicon, would mean that a company or an individual, who chooses not to pay back money borrowed to banks, not necessarily because they don’t’ have any, but wouldn’t do so deliberately. In some cases, this is even done with an intention to fool the banks and the financial system.

The company owes about Rs 7,500 crore of loans to several state-run banks, including country’s largest lender, State Bank of India (SBI). Among the bankers, SBI has the majority exposure to Kingfisher, over Rs1,500 crore.

United Bank of India has already served such a notice on the company, while IDBI Bank has said it is planning to issue one soon.

With inputs from PTI