Thursday, December 12, 2013

Banks get Karnataka HC nod to take possession of Kingfisher House


FP Staff Dec 12, 2013

The Karnataka High Court on Wednesday dismissed a plea byKingfisher Airlines seeking to restrain the SBI-led lenders’ consortium from taking possession of the company’s headquarters, Kingfisher House, in Mumbai.
The high court has refused to  interfere with the action initiated by the consortium.
The airline, which is fighting winding-up petitions by various creditors, had filed its application on November 14 seeking a stay on the banks’ move to recover their debt.
“No inference can be granted by any court or other authority in respect of any action taken or to be taken pursuant to the aforesaid Act (SARFAESI Act). It is clear that this court would not have jurisdiction to interfere in the present circumstance of the case.The company would have to take recourse to appeal under SARFAESI Act,” the court said.
The 14 banks, led by State Bank of India (SBI), which lent Rs 6,500 crore to the airline, are now involved in litigation over the money, as Mallya has sued them in multiple courts.
Collaterals against the loan included pledged shares, real estate assets including its office in Mumbai and a villa in Goa, guarantees provided by the airline's chairman Vijay Mallya and other group companies as well as vehicles used to ferry passengers to planes.
The banks and Mallya have been at loggerheads over the possession of Kingfisher House and Mallya’s villa in Goa for the last eight months.
Both these properties were given as security against the loan to Kingfisher. And while Kingfisher has valued these two marquee properties at Rs 200 crore at the time of the lain in 2010, a report inEconomic Times earlier this year said lenders have discovered that the collateral is worth way less at Rs 128 crore.
While SBI valued Kingfisher House at Rs 93 crore, Mallya's Goa villa has been estimated at Rs 35 crore.
On 6 December, the Karnataka High Court admitted a petition filed by the consortium to wind up the airline.
The court, however, deferred the hearing as well as the process of issuing public notice about the winding-up process till the second week of January in order to hear arguments from both sides.

Court allows banks to take possession of ‘Kingfisher House’


In a setback to Kingfisher Airlines (KFA), the Karnataka High Court on Wednesday refused to interfere with the action initiated by a consortium of banks to take possession of Kingfisher House, a prime property housing the airline’s offices in Mumbai. The multi-storeyed structure has a built-up area of around 17,000 sq.ft.

Justice Anand Byrareddy passed the order, rejecting KFA’s plea challenging the application filed by SBICAP Trustee Company Ltd on behalf of the consortium.

KFA contended that by filing a winding-up petition before the High Court, the banks had relinquished all security interests on the assets pledged by the company and, hence, could not invoke the provisions of the Sarfaesi Act to realise their outstanding dues.

Rejecting the grounded airline’s contention, Justice Byrareddy said that Sections 34 and 35 of the Sarfaesi Act bar the company court from exercising its powers when banks invoke this Act to take possession of pledged assets.

The judge also ruled that the banks could stand outside the winding-up process in seeking to enforce their secured interests, and simultaneously seek winding up of the company in respect of the balance of the debt that was not secured.

The court upheld the contention of the banks that attachment of Kingfisher House by the service tax authorities in July 2012 and the Income Tax Department in August 2013 would not come in the way as this property was pledged with the banks much earlier.

While refusing to stay the operation of this order, Justice Byrareddy said that the consortium of banks could take over the property according to the law, while also providing the company an opportunity to withdraw from the property.

(This article was published in the Business Line print edition dated December 12, 2013)

No comments:

Post a Comment