‘UB Group companies will come under a cloud’

There is a possibility of all UB Group companies being penalised because of the United Bank of India (UBI) declaration that group Chairman Vijay Mallya is a “wilful defaulter”.

Law firm J Sagar Associates’ banking and finance practice partner, Dina Wadia, told BusinessLine that if all the group companies have stood guarantee for Kingfisher Airlines, then all of them would stand to lose in terms of not being able to raise loans.

Wadia added the bank can go ahead and even change the management, if it so desires as there is a provision for it under the RBI norms. “But whether banks have the expertise to do so is another matter altogether,” she pointed out.

The partner at J Sagar, which is one of the leading law firms in the country, said that even if Mallya resigns from all the boards, group companies still cannot shake off the wilful defaulter tag. “Basically, everyone will come under scrutiny because of the tag,” she said.

She added the immediate fallout of being declared a wilful defaulter was that all the group companies will come under a cloud, their reputation will be compromised and it will lead to a negative business impact.

According to the norms, even the corporate debt restructuring cannot take place any longer because of the negative tag, Wadia said. The bank can also initiate criminal proceedings by way filing an FIR and chargesheet and so on, but it need not lead to immediate arrests, she said.

UK-based Diageo which owns United Spirits whose chairman happens to be Mallya, did not comment on the bank’s action.

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