A 12-bank consortium led by State Bank of India (SBINSE 1.31 %) has moved a Mumbai court seeking the release of Vijay Mallya’s assets that the Enforcement Directorate (ED) has attached so that these can be sold “immediately” to realise the best value. The banks urged the court hearing the Prevention of Money Laundering Act (PMLA) case that the assets be restored to them so that they can “appropriate the proceeds” without delay, they said in a joint application, which ET has seen.
The banks contended that the attached assets were “amenable to market fluctuations and any delay in liquidating those assets may reduce their value”. Hence, there is a “need for immediate and speedy disposal of the assets to realise their best value”.
The lenders urged the court to allow their request “in the interest of economy and the banking system, which face dire circumstances due to unrecovered NPAs (non-performing assets).” They added that the “rights of the banks, which are second creditors to recover their dues, would take precedence over the state’s right to attach the assets of Mallya after being declared a proclaimed offender”.
The application said if the court lifts the attachment order, banks will be able to liquidate the assets through the Debt Recovery Tribunal (DRT), Bengaluru, and recover their money. The “amounts sought to be recovered is public money” and in initiating this action, the banks are “only safeguarding public interest”.
The court had attached the assets on November 11, 2016, at ED’s request. Banks have claimed a “legitimate interest” in all properties belonging to Kingfisher Airlines (KAL), United Breweries Holdings (UBHL), Mallya, and Kingfisher Finvest India (KFIL), including movable and immovable properties.
Banks claim Mallya owes them over Rs 6,230 crore with an interest of 11.50%, as held by DRT in February 2017. Inclusive of interest and other penalties, the banks have said Mallya owes Rs 9,000 crore as repayments for loans to Kingfisher Airlines.
Mallya, who is fighting extradition from the UK, recently became the first person to be declared a fugitive economic offender in India under the provisions of the Fugitive Economic Offenders Act, which came into effect in August last year.
Wanted for questioning about money laundering, criminal conspiracy and fraud charges over Kingfisher Airlines’ loan defaults, Mallya has denied accusations of wrongdoing and said he wants to settle with the banks. ET reported last week that the ED plans to auction Mallya’s equity holdings attached by the agency once the PMLA court passes its order on confiscating his assets, likely in the second week of February.
The PMLA court will decide next month if the attached properties are free of encumbrances, ET reported. If the court does not detach the properties allowing the banks to liquidate them and recover their dues, the rights of banks will “suffer irreparable loss and injury”, they said.
The banks have staked their claim by virtue of Mallya’s personal guarantee dated December 21, 2010. They have already sought to assert their rights but are unable to proceed due to the court’s attachment order of November 2016, they said.
Apart from SBI, the parties to the case are Bank of Baroda, Corporation Bank, Federal Bank, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, UCO Bank, United Bank of India and JM Financial Asset Reconstruction. The lenders provided both fund and non-fund based working capital facilities and rupee term loan facilities including short-term loans to KAL starting 2005.
However, KAL failed to adhere to the terms of the loan pacts, they said. ED had passed an attachment order on September 3, 2016, attaching several of Mallya’s assets. The court’s November order followed this.
Source: Economic Times