Court breather for Kingfisher - Calcutta Telegraph

Calcutta, Sept. 27: Kingfisher Airlines has secured a stay from Calcutta High Court on United Bank of India’s decision to declare the airline’s chairman Vijay Mallya and its directors as wilful defaulters.

Kingfisher, along with its directors, had filed a writ petition against the lender, challenging the constitutional validity of the RBI master circular on wilful defaulters as well as challenging the ex-parte decision of the grievance redressal committee constituted by UBI identifying the petitioners wilful defaulters.

After a hearing yesterday, Justice Debangsu Basak had ordered a stay on the decision of the Calcutta-based lender and had directed the bank to file an affidavit in opposition by November 3. The petitioners have to reply to the affidavit in a week from November 3. The next date of hearing has been fixed for November 10.

Commenting on the stay granted by Calcutta High Court, Prakash Mirpuri, vice- president (corporate communications), Kingfisher Airlines, said: “We had earlier stated that we would legally challenge the wrongful decision of United Bank of India and that we have great faith in the judiciary in our country. We will legally defend our position on all allegations going forward.”

United Bank sources, however, told The Telegraph that the bank would take appropriate legal steps and present its case before the court.

Banking industry observers said besides UBI, other banks were also in the process of identifying and declaring the airline and its directors as wilful defaulters and the airline may have to secure legal respite in all such cases.

UBI is among the consortium of 17 banks that had lent to Kingfisher Airlines. The total exposure of the banks had run up to Rs 7,500 crore.

The State Bank of India, Punjab National Bank, IDBI Bank, Bank of India, Bank of Baroda, Central Bank of India, Uco Bank are among the major lenders to Kingfisher Airlines.

The SBI alone had an exposure of around Rs 1,600 crore while IDBI and PNB had lent around Rs 800 crore each. The exposure of UBI was around Rs 400 crore. The bankers initiated a recovery process last year, which included sale of properties in Mumbai and Goa.

UBI was the first among the lenders to identify Mallya and three other directors as wilful defaulters.

The bank issued a notice on May 28 asking Mallya and the board members to appear before the bank’s grievance redressal cell.

Kingfisher had subsequently moved Calcutta High Court challenging the notice and requested that a legal representative, on behalf of the chairman and board members, be allowed to attend the meeting with the bank officials.

The court on July 9 had ruled in favour of United Bank and a division bench on August 28 had upheld the original order.

Once declared a defaulter, a borrowing company would no longer be able to secure debt from banks and financial institutions.

In addition, debt finance plan of other group companies of the defaulting entity would become uncertain if any wilful defaulter sat on that company’s board.