The e-auction of Kingfisher Villa in Goa has failed as no buyer bid for the property, said sources familiar with the development.
According to sources, the auction failed as SBICAP Trustee did not receive the earnest money deposit (EMD) from any interested buyer. The last date for submission of bid application documents, EMD amount and KYC documents was October 17, 5 pm. The bidders were required to submit 10 per cent of the reserve price or Rs 8.5 crore as the EMD amount. The reserve price for the property was Rs 85.29 crore.
Prospective buyers were allowed to inspect the property tentatively between September 26-27 and between October 5 and 6. “Although six interested buyers including owner of a prominent media organisation had inspected the property, no one bid for it,” a banker said, adding that lenders will call for another auction in a couple of months.
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 Rs 150 crore, the second auction had set it at Rs 135 crore. The service tax department too has also not been able to sell the luxury airbus of Mallya to recover dues of about Rs 400 crore.
The multiple failed auctions of Mallya’s properties 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.