The Supreme Court on Tuesday refused to grant relief to liquor baron Vijay Mallya and grounded Kingfisher Airlines, declared ‘wilful defaulter’ by United Bank of India (UBI) on Monday.
The airlines had challenged Calcutta high court’s August 28 order that declined its request to let a lawyer represent the company before UBI’s grievance redressal committee.
A bench of Justices AR Dave and UU Lalit said the company’s appeal had become infructuous. “You have a fresh cause of action to move the HC,” the bench told Kingfisher counsel Abhishek Manu Singhvi.
Reacting to the order, KFA said it would “vigorously challenge the decision of UBI”.
If the courts do not grant a stay on the United Bank decision, Mallya will be left with limited options, and could lose all or most of his pledged assets. In fact, Mallya has given personal guarantees and could well lose some of his personal assets that are not specifically pledged.
Companies in which he is a director may be denied bank loans. Wilful defaulters cannot float new ventures for five years.
“Mallya will have to abdicate his position on the board of companies. He will try for a stay from the high court, but his options are limited,” said the managing partner of a major law firm.
“RBI and Sebi are working to prevent defaulters from taking advantage of loopholes,” said KV Karthik, senior director, Deloitte.
“This is a signal that our financial system is going back to the basics,” said Shailesh Haribhakti, chairman of accounting firm DH Consultancy, who sits on the boards of several companies.
United Spirits, India’s largest spirits company, where Mallya continues to be chairman though he lost management control to Diageo two years ago, has not yet decided on his continuation on its board. A Diageo spokesperson declined to comment.
“Being declared wilful defaulter does not automatically disqualify him from the board. However, we will face problem accessing credit from banks. We will have to see what happens,” said a source in United Spirits.
Mallya did not respond to phone calls.