United Bank declares Vijay Mallya, three directors of Kingfisher Airlines as 'wilful defaulters'

Sep 01 2014, 15:07 IST
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United Bank of India is the first PSU lender to initiate the process of declaring Vijay Mallya as wilful defaulter. United Bank of India is the first PSU lender to initiate the process of declaring Vijay Mallya as wilful defaulter.
SummaryPost this declaration, Vijay Mallya and KFA would not be able to borrow from United Bank in future.

State-run United Bank of India on Monday declared Kingfisher Airlines chairman Vijay Mallya and three other directors of the grounded airline as “wilful defaulters”.

The city-based lender became the first bank in the country’s banking industry to declare Mallya as a wilful defaulter.

“We declared Mallya and three other directors of Kingfisher Airlines as wilful defaulters after no one from the company turned up before our internal committee this morning,” United Bank of India executive director Deepak Narang told FE.

The bank earlier asked Mallya and all other directors of the carrier to appear before its internal grievances redressal committee at 10.30 a.m.

“We will now inform the RBI and SEBI about our decision, and follow necessary procedures,” said Narang.

Once listed as wilful defaulters, no additional loans are given by any bank or financial institution to them.

“Now, the Kingfisher board should force them (Mallya and three other directors) to step down as they can’t raise money for the company,” Narang added.

A borrower is a wilful defaulter if he has not met repayment obligations even when he has the capacity to do so or has not utilised the money from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

Significantly, the Calcutta High Court on last Thursday dismissed an appeal by Kingfisher Airlines against a trial court order that Mallya and the board of directors may be represented by its law officers or company secretary on the wilful defaulter case.

A division bench, comprising Justice Jayanta Biswas and Justice Iswar Chandra Das, dismissed the appeal of the grounded airlines.

The airline authorities had in the petition prayed for withdrawal of the notice of wilful default by the public sector bank and that they be allowed a personal hearing along with legal representative on the issue.

Earlier, the bank had asked Mallya to appear before its internal committee or send one of his representatives in order to defend himself before declaring him a ‘wilful defaulter’. But Kingfisher Airlines moved the Calcutta High Court, challenging the communication from the bank.

Cracking down on Kingfisher Airlines for non-payment of over Rs. 300 crore outstanding dues, the city-based bank had issued wilful defaulter notice to the liquor baron along with directors of the company in the month of May this year.

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