Mumbai: In more trouble for Kingfisher Chairman Vijay Mallya, the Supreme Court has refused to entertain his plea against being declared a 'wilful defaulter' by the United Bank of India. Kolkata-based United Bank has set in motion the process that will declare Mallya and his Kingfisher Airlines as wilful defaulters and it has the Calcutta High Court's blessing to do so.
"Our exposure is more than Rs 350 crore. Declaring them as a wilful defaulter was necessary because now Vijay Mallya cannot be on the board of the companies. He cannot borrow from companies and we have followed the RBI guidelines on that. It was necessary for us to do that," said Deepak Narang, ED, United Bank Of India.
With the bank gearing up to convey this decision to all regulators including Sebi, this spells trouble for Mallya. Going one step further, this allows all banks who have lent money to KFA to invoke all personal guarantees made for the loan.
"There will be a lot of personal guarantees that he would have issued for instance. Now the banking system does, the minute he is announced as a wilful defaulter, has the right now to press for those guarantees," said Ashvin Parekh, Managing Partner, Ashvin Parekh Advisory Services.
The other ramification of this move is that it may leave Mallya and other directors open to criminal proceedings. "If there is any element of evidence available with the banking system to suggest that an application of the fund was carried out not in keeping with what was promised to the banking system, then in that case there is a criminal aspect to that as well," Parekh said.
When contacted, Diageo and United Spirits refused to comment. Analysts say that United Bank's actions mean Mallya's days as chairman of United Spirits may be numbered. Also, the UB group will have to jump through a number of hoops, as RBI and Sebi enter the picture. But the bigger trouble will come when the lender consortium led by SBI, which is trying to recover Rs 4,022 crore from Mallya and his beleaguered airline, jumps into the fray.