Bengaluru: Three years after it filed a petition in the Debts Recovery Tribunal in Bengaluru, the State Bank of India and 14 other banks won their first victory against liquor baron Vijay Mallya.
The Debt Recovery Tribunal(DCT) on Thursday allowed bankers to start proceedings to recover Rs 6,203 crore debt plus interest at 11.5 per cent from July 26, 2013 from beleaguered businessman Vijay Mallya.
DRT also ordered attachment and recovery of industrialist Vijay Mallya's properties for defaulting on bank loans by his defunct Kingfisher Airlines Ltd.
This includes the amount taken on loan (plus the interest on it) by Mallya for the now-defunct Kingfisher Airlines company. Mallya and co have been asked to foot a further interest of 11.5 per cent applicable from the date when the petition was first filed on July 26, 2013. In Thursday’s order, banks are also allowed to sell hypothecated or mortgaged properties of the defendants as part of the recovery.
This, of course, is not the end of the legal battles the banks are pursuing against the NRI Mallya, who currently resides in England, and who was once known for his flamboyant lifestyle, his yachts, his parties, the booze and, not to forget, the Kingfisher calendar. Those ‘good times,’ however, seem to have ended their run.
“It is necessary for the commercial world in India should (sic) realise it will no longer be possible for them to avail loans of public money, default in repayment and tried to get away through the lanes and by lanes of twisted facts,” the Tribunal’s presiding officer K Srinivasan said in his order.
Srinivasan had a few unkind words for British liquor-maker Diageo as well, saying this company (one of the defendants in the case) did not do its due diligence before getting into such a big deal with Mallya.
What he was referring to was the February 2016 deal Diageo signed with Mallya for 75 million dollars for a non-compete agreement for the latter to stay out of the liquor business for five years. Diageo, famous for brands such as Johnnie Walker and Smirnoff, owns 55 per cent stake in United Spirits Ltd, the liquor firm that Mallya built since he took over from his father.
Diageo first bought Mallya's shares in 2012, when the liquor baron was in debt due to the loans taken to run Kingfisher Airlines. Since then, it has been a downfall for Mallya. This 2016 deal also absolved him of any internal company disputes against him (court cases, of course, have their own reach).
“This defendant may be a bonafide person, but not an innocent guarantor… (Diageo) must have known that they are dealining with a wilful defaultor and not a genuine person. If the were knowingly dealing with a wilful defaultor, they were only taking a risk of their investments knowingly and they cannot be held to be a bonafide purchaser and for such acts of such persons, this tribunal cannot have sympathy,” the order states.
The tribunal however says it makes no ruling against the shares of Siddarth Mallya, Vijay Mallya’s son. But the Mallyas can’t really rest easy as this could be taken up by any of the parties in higher courts.
Actual recovery of such a huge amount could well be a Herculean task, considering there are many related lawsuits pending in the Karnataka and Bombay High Courts, besides the Supreme Court. This trial itself saw day-to-day hearings in some phases, and is regarded as quick disposal (there are other cases pending for 20 years).
Senior lawyer S S Naganand, who argued for SBI, says there are petitions related to winding up UBHL in high courts. “The company’s balance sheets disclose about 4,000 crore assets. But there are many claimants to it. We will all be standing in line,” he told News18.
Mallya’s legal team had tried to argue that since he was an NRI, he was coerced to sign as guarantor for the loan to Kingfisher Airlines. This was in violation of FEMA laws, as this can be done only with RBI approval. This argument, however, did not find takers.
The DRT order can be appealed against at the Debts REcovery Appellate Tribunal in Chennai.