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Vijay Mallya’s Kingfisher Airlines loan: Offer made to pay Rs 4,000 crore to settle case

On Wednesday afternoon it was revealed, in a proposal in sealed cover given to SC by Kingfisher Airlines, that Vijay Mallya has indicated his willingness to repay around Rs 4,000 crore loan to banks by September this year

Vijay Mallya’s Kingfisher Airlines loan: Offer made to pay Rs 4,000 crore to settle case
Service Tax Department has deferred the auction of liquor baron Vijay Mallya's private jet to recover Rs 535-crore dues to June 29-30, after just one potential bidder showed interest, an official said. (Reuters)

Kingfisher Airlines chairman Vijay Mallya on Wednesday informed the Supreme Court through a sealed envelope his willingness to repay Rs 4,000 crore to an SBI-led consortium by September. A bench comprising Justices Kurian Joseph and R F Nariman allowed the consortium of banks a week’s time to respond to the proposal and posted the matter for further hearing on April 7.

In an emailed statement, SBI said, “In respect of dues of Kingfisher Airlines to the consortium of Banks, State Bank of India has received an offer for settlement of dues on Wednesday which is being examined.” Appearing for Kingfisher and Mallya, C S Vaidyanathan said that the copy of the proposal was given to the consortium of banks on Wednesday.

He also requested the bench that the proposal should be kept in a sealed cover for the time being, as negotiations were going on for the settlement and media hype could vitiate the atmosphere.

FE had earlier reported that Mallya offered to pay Rs 2,000 crore to settle all claims. However, the consortium of lenders led by State Bank of India (SBI) turned down the offer saying they were not willing to take a haircut. Kingfisher Airlines (KFA), now declared a wilful defaulter by multiple banks, owes lenders Rs 6,963 crore.

Two senior bankers who are part of the consortium confirmed Mallya had approached lenders through one of his companies asking for a settlement by paying Rs 2,000 crore. “We cannot accept such a small amount and have rejected the proposal,” they had said.

 

While bankers have been making all efforts to recover their money despite facing some legal hurdles, the Enforcement Directorate has initiated an investigation into his financial affairs, suspecting malfeasance. The ED has summoned Mallya to appear before it and the businessman, currently in London, is expected to appear before the investigative agency by April 2.

A recent auction of Kingfisher Airline’s corporate office in Mumbai flopped without attracting a single buyer, ostensibly because the reserve price was too high. The auction was part of the recovery initiative using the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi), 2002. Another assets that banks have been trying to get possession of is Kingfisher Villa in Goa. However, they have been unsuccessful so far facing legal hurdles in the local court.

Kingfisher House, pledged to a consortium of 17 banks has been the bone of contention between banks and the I-T department with both claiming their right to possess the property. In 2013, the I-T department had moved a Bangalore court asking lenders to first settle the dues of the department amounting to Rs 350 crore as the property was attached under the I-T Act. The IT department claimed Kingfisher Airlines Limited (KAL) had deducted tax at source from employees’ salaries and other payments but  had failed to deposit the amount with the government entity.

Mallya has blocked bankers’ attempts to attach the villa in Goa claiming United Spirits (USL) has been a tenant since 2005 and consequently, banks cannot sell the property without its approval. Kingfisher Airlines has been grounded since October 2012 and bankers have recovered just a fraction of their dues by selling securities pledged to it.These include real estate and shares in multiple group entities. Banks had also sold around four lakh shares of USL pledged with them for Rs 104 crore in 2014.

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First published on: 30-03-2016 at 01:13 IST