Vijay Mallya’s jet auction: Service tax department buys time to address queries

The luxury airbus was to be auctioned on May 12 to recover part of alleged service tax dues of over Rs 800 crore of defunct Kingfisher Airlines.

Vijay Mallya
The team ownership has been under scrutiny, with the business woes of Mallya and co-owners Sahara Group raising speculation about a possible sale to raise cash.(Reuters)

The service tax department has deferred the auction of Vijay Mallya’s luxury Airbus A319 as it is overwhelmed by the technical queries of the prospective bidders. The department, according to sources familiar to the development, needs more time to address the queries raised by over a dozen interested parties.

The luxury airbus was to be auctioned on May 12 to recover part of alleged service tax dues of over Rs 800 crore of defunct Kingfisher Airlines. The service tax authority has received queries from foreign aviation companies asking for barographic report of the airbus and details of clearances obtained by the tax authority for the airbus.

The department, which is still in the process of obtaining these reports and clearances is now planning to auction Mallya’s airbus on June 30. “Most of the aviation companies are from the US, some others who have shown interest are private agents probably appointed by businessmen. They have asked for a barographic report of the aircraft and clearances obtained by the department from the customs and the shipping authorities,” said an official who did not wish to be named. However, the final list of bidders will be finalised only after the interested firms pay the earnest money deposit (EMD) on June 28, sources said. According to auction documents, the earnest money deposit (EMD) for foreign bidders is set at $ 152,000 while Indian bidders will have to pay Rs 1 crore. Besides, the successful bidder will have to take public liability insurance of at least $1 billion and “include all the involved parties and their officers, employees and agents as additional insured on the policy”.

The aircraft is owned by C J Leasing (Cayman) Ltd and was given on lease to Kingfisher. Last year, the Bombay High Court observed there was no legal trouble in auction of the aircraft which is on financial lease. Proceeds of the sale will be deposited with the High Court.

The service tax department hopes to raise Rs 150 crore from the auction said sources. The service tax authority has seized at least eight aircraft owned by Kingfisher Airlines and Mallya. Last year, Mumbai International Airport Private Limited (MIAL) had auctioned Mallya’s 11-seater jet to a scrap dealer in Mumbai for Rs 22 lakh.

Earlier on March 17, a consortium of banks led by the State Bank of India were unsuccessful in auctioning Kingfisher House in Mumbai as it did not attract a single buyer due to the high reserve price of Rs 150 crore. On April 30, once again auction of brands and trademarks of Kingfisher Airlines turned out to be a damp squib as it failed to attract a single bidder for these pledged assets at a reserve price of Rs 366.70 crore.

Mallya’s Kingfisher Airlines allegedly owes over Rs 9,000 crore to at least 17 Indian banks. Mallya and his companies have come under the scanner of multiple investigating agencies in the country and the Supreme Court over loan default.

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First published on: 12-05-2016 at 10:56 IST