In a major relief to the lenders, the Debt Recovery Tribunal's Bengaluru Bench on Thursday allowed recovery proceedings against Kingfisher Airlines Ltd and its promoter Vijay Mallya and directed them to repay ₹6,203 crore to the State Bank of India-led consortium.

Allowing a plea of a consortium of 15 banks for initiating proceedings to recover dues from the Kingfisher Airlines Ltd (KAL), the Tribunal said that due amount of ₹6,203.35 crore should be paid “jointly and severally” by the airline and its guarantors Mallya, United Breweries (Holdings) Ltd and Kingfisher Finvest (India) Ltd.

The tribunal said the entire amount will also attract 11.5 per cent per annum from the date of the application till the date of completion of realisation.

DRT’s presiding officer K Srinivasan delivered the order, while allowing banks’ application filed in 2013 seeking issuance of recovery certificate from the tribunal.

In the event of failure of KAL and its guarantors to pay the due amount, the DRT said, the applicant bank is at liberty to sell the hypothicated / mortgaged / movable / immovable properties, as described in the schedule of the application, in accordance with the law. Also the SBI-led consortium is permitted to proceed against the persons and other properties of the KAL and its guarantors as per the law, if the banks fail to fully realise the due amount, despite sale of the scheduled properties.

Siddarth Mallya not liable However, the DRT clarified that as Siddarth Mallya, son of Vijay Mallya, was not made as a party to the proceedings, “this order will not in anyway affect the rights of Siddarth Mallya, Diageo Holdings Netherlands B.V and Standard Chartered Bank (SCB) in any manner as the shares in the name of Siddarth Mallya individually or jointly with Vijay Mallya to his own extent only are concerned.”

Service tax claim Meanwhile, the DRT said that the Service Taxes Department shall have rank as second charge over the schedule properties and other receivable after satisfaction of all claims of applicant bank.

Pledging of shares Also, the DRT has set aside Mallya’s action of pledging UB Ltd shares to SCB, while holding that the pledging was done in violation of an oral undertaking of “not to transfer, alienate or otherwise to deal with his assets” before the tribunal and in violation of guarantee agreement.

On the plea of Diageo seeking right over these pledged share, the DRT said that both the SCB and the Diageo failed to conduct proper inquiry into the affairs of both UBHL and Mallya, who were already declared as wilful defaulters, before entering into an agreement with him. The DRT also said that Kingfisher Finvest Ltd (KFL) is nothing but an “extended arm” and a “conduit” of UBHL while lifting its corporate veil.

The DRT said that if both the SCB and Diageo “knowingly were dealing with a wilful defaulter...they cannot be held to be bona fide purchasers and for such acts of such persons this tribunal cannot have sympathy.”

The DRT said, “Diageo wanted to buy the shares but instead of buying them straight away has aided Defendant No-3 (Mallya) in this roundabout method. Thus, Defendants No-3,7 and 9 [Mallya, Diageo and SCB] colluded to take deal out of the reach of the secured creditors, viz., applicant banks.”

“It is necessary that the commercial world in India should realise that it will be no longer possible for them to avail loan of public money, default in repayment and try to get away through the lanes and by-lanes of twisted facts,” the DRT observed in its order.

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