Punjab National Bank, which is reeling under huge non-performing assets (NPAs) has declared United Breweries (Holdings) Ltd controlled by Vijay Mallya as a ‘wilful defaulter’. The bank is proceeding against the company as it was a guarantor to the Kingfisher loan.
Shares of United Breweries (Holdings) plunged by 11.23 per cent as the PNB move to slap ‘wilful defaulter’ tag is likely to hit UB’s fund-raising plans.
“The company is in consultation with its legal counsels to challenge the decision by taking appropriate legal action that may be required in this regard,” UB (Holdings) said in a stock exchange filing. Kingfisher Airlines owes around Rs 7,000 crore to various lenders. The RBI had recently brought guarantors also under the wilful defaulter category. If the guarantor refuses to comply with the demand made by the bank, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter, the RBI norms say.
Earlier, United Bank of India and SBI have also identified UB Holdings as a wilful defaulter.
The RBI has defined a wilful default as deliberate non-payment of the dues despite adequate cash flow and good networth, siphoning off of funds to the detriment of the defaulting unit, assets financed either not been purchased or been sold and proceeds have been misutilised, misrepresentation or falsification of records, disposal or removal of securities without bank’s knowledge and fraudulent transactions by the borrower.
While bankers say most of the wilful default cases are allegedly frauds committed by the promoters and money has been siphoned off from the companies, cases filed by banks have been lingering in the courts and debt recovery tribunals for many years. Although the RBI has said wherever possible, the banks should adopt a proactive approach for a change of management of the wilfully defaulting borrower unit, this rarely happens.
On February 12, SBICAP Trustee Company, a wholly owned subsidiary of SBI Capital Markets, said in a newspaper notice it would hold an e-auction of Kingfisher House, Kingfisher Airlines’ corporate office in Mumbai, on March 17. The reserve price for the property has been set at Rs150 crore. The auction is part of the recovery process of dues from the airline’s promoter Vijay Mallya, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
The notice said Mallya owed banks over Rs 6,963 crore. The land along with the building measures around 3,988 sq m, according to the public notice. Lenders have not been able to recover loans and their efforts have met with multiple hurdles.