Kolkata-based United Bank of India (UBI) on Monday declared UB Group chairman Vijay Mallya, his grounded airline Kingfisher Airlines (KFA) and three directors on its board, Ravi Nedungadi, Anil Kumar Ganguly and Subash Gupte wilful defaulters. UBI is the first lender to have taken this
D Narang, UBI executive director who heads GRC, said: “Kingfisher, Mallya and three directors on the board have been declared wilful defaulters.”
Following this declaration, banks are likely to stop funding any company that has Mallya and his colleagues on their boards. They may also have to step down from all companies in which they are directors. UBI can also initiate criminal proceedings against them.
Mallya is chairman of UB Holdings, the holding company of the UB Group, United Spirits, United Breweries, Shaw Wallace, Mangalore Chemicals & Fertilizers, besides a host of smaller UB Group companies. He is also chairman of Bayer Cropscience, the Indian arm of the German MNC.
No executive from the company showed up for a scheduled meeting with UBI’s Grievance Redressal Committee (GRC) at 10.30 am on Monday, forcing the bank to take this step.
HT had first reported on May 30, 2014 that UBI had initiated the process of declaring Mallya and his airline wilful defaulters.
KFA and its directors “intend to pursue all available legal remedies, including an appeal before the Supreme Court of India”, KFA said in a statement.
Reserve Bank of India (RBI) guidelines define a wilful defaulter as a company or individual who does not repay a loan despite having the capacity to do so or diverts borrowed funds for purposes not envisaged in the agreement with the lender.
The airline owes UBI about Rs. 350 crore. A consortium of 17 public and private sector banks, including State Bank of India, Punjab National Bank and IDBI Bank, among others, have outstanding loans of over Rs. 4,000 crore to the grounded carrier. Many of them have also initiated the process of declaring the grounded carrier and its directors as wilful defaulters.
Last week, the Calcutta high court had dismissed a plea by Mallya and KFA to be represented before the GRC by lawyers. The bank had wanted either Mallya or one of his senior executives to be present.
UBI will now inform the finance ministry, the RBI and the Securities Exchange Board of India about its decision.
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