Banks have decided to auction Vijay Mallya’s Kingfisher Villa in Goa on October 19 setting a reserve price of Rs 85 crore. An auction notice is expected to be put out soon and prospective buyers would be allowed to inspect the property between September 26-27 and between October 5-6.
Kingfisher Villa, owned by United Breweries Holdings (UBHL), was mortgaged as collateral for loans given to Kingfisher Airlines. Kingfisher Airlines, which has not flown since October 2012, owes around Rs 6,963 crore to a consortium of 17 bankers who have been trying to recover their money partly by selling securities pledged with them.
These include real estate and shares in multiple group entities. The auction is part of the recovery process of dues from the airline’s promoter Vijay Mallya, under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi), 2002.
Earlier in March and August this year, the e-auction of Kingfisher House – Kingfisher Airline’s corporate office in Mumbai – failed as no buyer approached SBICAP. While the first auction had a reserve price of R150 crore, the second auction had set it at Rs 135 crore.
The case highlights problems faced by public sector banks when recovering money from defaulters; bankers say the legal process is a long and tedious one adding that promoters often resort to delaying tactics approaching one court after another. At present, regulations require state-owned banks to set a reserve price and call an auction to dispose of an asset. If the first auction is not successful, a new reserve price must be fixed and a second auction called before a bilateral negotiation can begin.
The problem, as bankers have pointed out, is that the process takes a long time, often defeating the purpose. The legal process has been virtually ineffective, further frustrating the efforts of banks to recover their dues. Finance ministry data show that loans worth close to Rs 4.5 lakh crore were pending at debt recovery tribunals till December FY16, up from Rs 4 lakh crore in FY15.