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  1. Debt Recovery Tribunal, ED signal end of good times for Vijay Mallya

Debt Recovery Tribunal, ED signal end of good times for Vijay Mallya

Barred from accessing $75 million from Diageo till SBI suit settled

By: | Bengaluru/mumbai | Published: March 8, 2016 2:33 AM
Vijay Mallya, Vijay Mallya news, Vijay Mallya kingfisher airlines, Vijay Mallya debt recovery tribunal, vijay mallya drt, kingfisher airlines, SBI, Kingfisher airlines loan, wilful defaulter, Vijay Mallya wilful defaulter, sbi wilful defaulter The DRT said Mallya cannot draw the amount mentioned in the interlocutory application (IA) till disposal of original application (OA). (AP)

In a fresh blow to beleaguered UB Group chairman Vijay Mallya, the debt recovery tribunal (DRT) in Bengaluru on Monday barred him from withdrawing the $75-million exit payment from British liquor giant Diageo till the disposal of Kingfisher Airlines’ loan default case filed by State Bank of India. Further hearing on the case has been posted to March 28.

The DRT said Mallya cannot draw the amount mentioned in the interlocutory application (IA) till disposal of original application (OA). This in essence means neither can Diageo pay Mallya the amount concerned nor can he accept the same, in the interim.

Meanwhile, in another blow to the controversial businessman, the Enforcement Directorate (ED) also on Monday registered a money-laundering case against him, A Raghunathan, chief financial officer of Kingfisher Airlines, and unknown officials of IDBI Bank, said officials familiar with the development. The case is in connection with the alleged default with regard to a R900-crore loan from IDBI Bank. The ED has invoked the Prevention of Money Laundering Act (PMLA) based on the FIR filed by the CBI last year. The CBI had registered a suo motu case against the company in July 2015. The ED will probe if the money lent to Kingfisher Airlines was diverted to tax havens abroad. “We have started investigating the case but as of now have no intention of interrogating Mallya,” said an ED official.

The DRT’s verdict came on a plea by SBI and other banks. In 2013, a consortium of 17 lenders led by SBI had moved the DRT for recovery of their loans to Kingfisher Airlines amounting to over R7,000 crore.

“Diageo Plc and United Spirits Ltd shall not temporarily disburse the amount to Vijay Mallya nor his nominees or agents till disposal of present OA, the amount as sought by applicant banks. The amount as sought by applicant banks stands attached,” the DRT’s presiding officer, judge R Benakanahalli, said in his order.

The judge also directed all defendants to furnish details of agreement as sought by SBI in their application on or before next date of hearing.

The other three applications filed by SBI regarding the arrest of Mallya, impounding his passport and seizure of his assets will be heard by the DRT on March 28. The judge also ordered for issuing the notice of the present IA to the Diageo head office in London through registered post. SBI has also moved the Karnataka High Court against Mallya, and the case is expected to come up for hearing later this week.

According to the terms of the agreement signed by Diageo with Mallya on February 25, the UK liquor major would pay Mallya $75 million over a period of five years, in return for resignation of Mallya as non-executive chairman of United Spirits and a non-compete agreement except in the UK for five years. Soon after signing the agreement, Mallya had announced that he would shift to London to spend more time with his children. In a statement on Sunday night, he had stated, “I have given up my interests in the spirits business globally at considerable cost.”

In an attempt to control damage, Mallya on Sunday had blamed the media for spoiling his reputation and government policies for the failure of his dream airline venture Kingfisher. He accused the media of indulging in sensationalism and felt the time had come to clarify his position in order to avoid a relentless attack on his reputation.

Recalling that Kingfisher was launched in 2005 on the basis of a viable business plan vetted by SBI Capital Markets and international aviation consultants, Mallya admitted that despite every effort, the airline was an unfortunate commercial failure caused by macroeconomic factors and government policies then.

When contacted, Mallya’s spokesperson declined to comment on the issue.

King of Troubled Times
2012 Kingfisher Airlines’ licence cancelled in October following non-payment of dues In November, Diageo announces the intention to acquire majority stake in Mallya-owned United Spirits in a deal estimated at $2.1 billion. Mallya to remain as chairman.

2013 SBI moves Karnataka HC seeking winding up of Kingfisher Airlines to recover dues 2014Diageo finally acquires 54.78% stake in United Spirit for $3 bn

2015 In April, United Spirits board asks Mallya to resign as chairman following alleged financial discrepancies In November, SBI declares Mallya a wilful defaulter

2016 On February 26, Mallya announces decision to resign as United Spirits chairman. Diageo to pay $75 million as sweetheart non-compete fee with an upfront payment of $40 million

On March 2, SBI moves debt recovery tribunal (DRT) to secure the first right to the $75-million payout by Diageo to Mallya

On March 4, SBI moves Karnataka High Court seeking Mallya’s arrest and impounding his passport

On March 8, DRT attaches $75-million payment till the settlement of cases. In effect, Diageo cannot make the payment and Mallya will not be able to receive this money. Enforcement Directorate also files money-laundering case against Mallya

“Kingfisher was launched on the basis of a viable business plan vetted by SBI Capital Markets and renowned international aviation consultants, but despite every effort, it was an unfortunate commercial failure caused by macro economic factors and then government policies.

A consortium of banks loaned funds to Kingfisher Airlines, a public company, but these loans were secured by blue chip securities. After the closure of the airline, since April, 2013, the banks and their assignees have recovered, in cash, an aggregate of R1,244 crore from sale of pledged shares… Thus, the aggregate cash recovery/security available is R2,494 crore.”

—Vijay Mallya’s statement on March 6

“We have been under continuous pain and agony due to your apathy towards us. However, it was particularly aggravated by your recent callous ‘NO REGRET” remark about KFA. For us, KFA still exists as we are still on the payrolls although without pay as we never received any communication from you, after you promised revival, about the shutdown of the company and our fate””

Letter by KFA employees

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