In a setback to Kingfisher Airlines (KFA), the Karnataka High Court on Wednesday refused to interfere with the action initiated by a consortium of banks to take possession of Kingfisher House, a prime property housing the airline’s offices in Mumbai. The multi-storeyed structure has a built-up area of around 17,000 sq.ft.

Justice Anand Byrareddy passed the order, rejecting KFA’s plea challenging the application filed by SBICAP Trustee Company Ltd on behalf of the consortium.

KFA contended that by filing a winding-up petition before the High Court, the banks had relinquished all security interests on the assets pledged by the company and, hence, could not invoke the provisions of the Sarfaesi Act to realise their outstanding dues.

Rejecting the grounded airline’s contention, Justice Byrareddy said that Sections 34 and 35 of the Sarfaesi Act bar the company court from exercising its powers when banks invoke this Act to take possession of pledged assets.

The judge also ruled that the banks could stand outside the winding-up process in seeking to enforce their secured interests, and simultaneously seek winding up of the company in respect of the balance of the debt that was not secured.

The court upheld the contention of the banks that attachment of Kingfisher House by the service tax authorities in July 2012 and the Income Tax Department in August 2013 would not come in the way as this property was pledged with the banks much earlier.

While refusing to stay the operation of this order, Justice Byrareddy said that the consortium of banks could take over the property according to the law, while also providing the company an opportunity to withdraw from the property.

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