While the Calcutta High Court has dismissed United Bank of India’s decision to declare UB Group chairman Vijay Mallya a wilful defaulter, the bank says since it lost the appeal on technical grounds, it will declare Mallya a wilful defaulter within a month’s time. Apart from Mallya, the bank had also declared three former directors of Kingfisher Airlines — Subhash R Gupte, AK Ravi Nedungadi and AK Ganguly—as wilful defaulters in September this year.
United Bank of India executive director Deepak Narang told FE that the court had found no flaw in its evidence, but ruled in favour of Mallya on purely technical grounds. While RBI guidelines require a three-member grievance redressal committee, United Bank had formed a four-member committee. United Bank will now form a three-member committee and use the same evidence as earlier, Narang said.
Of the total exposure of over R8,000 crore to all banks by Kingfisher Airlines, United Bank is owed over R300 crore. United Bank was the first bank to declare Mallya a wilful defaulter — RBI guidelines mandate that no fresh loans be given to wilful defaulters.
Narang told FE that, earlier this month, the bank had also identified United Breweries Holdings (UBHL), the guarantor of Kingfisher Airlines, as a wilful defaulter. UBHL is the parent company of Mallya’s UB Group.
A borrower is a ‘wilful defaulter’ if he has not met repayment obligations even when he has the capacity to do so or has not utilised the money from the lender for the specific purposes for which finance was availed of, but has diverted the funds for other purposes.
Significantly, once listed as wilful defaulters, no additional loans are given by any bank or financial institution to them. According to the RBI’s master circular, no additional facilities should be granted by any bank/financial institution to the listed wilful defaulters.
The airline company has unpaid loans amounting to close to R6,500 crore, borrowed from a consortium of 17 banks. A few lenders, including the country’s largest State Bank of India (SBI), have identified the airline company a wilful defaulter, but are yet to declare it.
Earlier too, bankers’ efforts to recover dues from errant borrowers have been stymied by the courts.
In September, the Gujarat High Court had deemed RBI’s wilful default guidelines as ‘unconstitutional’ and said it was violative of the RBI Act. Following this, RBI Governor Raghuram Rajan had said RBI would alter the definition of wilful defaulters to accommodate the concerns of the court.
All about a tag
* May 2014: United Bank of India identifies Mallya as wilful defaulter
* July: Kingfisher moves Calcutta HC against decision
* Sept: UBI declares Mallya, three directors of KFA, wilful defaulters
* Sept: SBI sends notice to tag Mallya as wilful defaulter
* Sept: KFA secures stay from Calcutta HC on decision on UBI’s wilful defaulter tag
* Oct: UCO Bank says in process of identifying KFA as wilful defaulter
By: fe Bureau | The Financial Express