Mallya to appear before wilful defaulter panel on July 9

BS Reporter  |  Mumbai  July 1, 2014 

If a borrower is proven to be a wilful defaulter, 
he will find it difficult to get loans from any bank

Vijay Mallya, chairman of Kingfisher Airlines, has been granted more time for appearing before a committee constituted by United Bank of India to examine if the tycoon wilfully defaulted on the lender.

In the last week of May, the Kolkata-based government bank slapped a wilful defaulter notice on Mallya’s grounded Kingfisher Airlines and its board members. If a bank serves such a notice to a borrower, it has to constitute a committee to hear the defence. Mallya was initially scheduled to appear before the panel last Friday. He will now do so on July 9, said sources. UBI’s exposure to Kingfisher is about Rs 350 crore.

According to Reserve Bank of India (RBI) guidelines, banks can categorise defaulters as wilful if the a borrower has not paid back when it has the capacity to honour the obligation or the funds have been diverted and not used for the purpose it was taken, among others.

If a borrower is so proven, the information is made available by RBI to all banks. As a result, the borrower will find it difficult to get loans from any.

A consortium of lenders led by State Bank of India has extended loans of around Rs 6,500 crore to the airline, grounded since 2012. The loan is now overdue with all the banks and is classified as a non-performing asset. Banks have started recovering dues from the airline by liquidating the promoter’s personal guarantee, which includes financial and physical assets.


The bankers also hold the pledged shares of United Spirits, Mangalore Chemicals & Fertilizers and Kingfisher, beside the corporate guarantees of United Breweries Holdings.

Diageo joins Mallya in disagreeing with High Court order

BS Antonita Madonna  |  Bangalore  

January 10, 2014 Last Updated at 17:09 IST

Diageo has made known its strong disagreement with the order of the Karnataka High Court,  joining Vijay Mallya who this week has asked for a redressal of certain facts in the judgment.

The order passed by a division bench consisting of Justice N Kumar and Justice Rathnakala on December 20 annulled the sale of UB Holdings stake in United Spirits Ltd to Diageo in a transaction worth about Rs 1460 crore for over 10 million shares.

"Having reviewed the detail of the Appeal Court judgment, Diageo is of the view that the decision was wrong in law and based on erroneous facts," the company said in a statement.

Diageo said it believes that its purchase of United Spirits' shares from UB Holdings  is "genuine and bona fide",notwithstanding the pronouncements of the Appeal Court.

Creditors to UB Holdings, fighting for dues of close to Rs 600 crore and corporate gurantees for loans to Kingfisher Airlines worth over Rs 6000 crore, alleged that the UB Holdings has not only entered into the transaction without their consent but also at a less profitable rate. Besides, the transaction was entered into at a time when 5 winding up petitions  were filed against UB Holdings for nonpayment of the dues.

In response, Diageo said, "the acquisition price of Rs 1,440 per share paid to UBHL for the USL shares is fair and reasonable.  Diageo intends to appeal the decision and will also consider what other options are open to it to pursue in order to defend its position."

Regarding Whyte and Mackay :-

Diageo has also taken offence to allegations made in Court regarding a "parallel transaction" in which Rs 4000 crore had been allegedly moved out of India to a tax haven for the Whyte and Mackay acquisition by United spirits in 2007.

"That transaction for the acquisition of Whyte & Mackay significantly pre-dates the events which are the subject of the current legal proceedings and has nothing whatsoever to do with Diageo’s transaction to acquire an interest in USL agreed on 9 November 2012," the company said in a statement.

Further defending United Spirits in which it owns a 26.37%t stake and eventually aims to own a majority, Diageo said it "understands that all remittances by United Spirits were done through normal banking channels, following receipt of all requisite approvals from the Reserve Bank of India."

CCI nod for sale of Mallya-owned distillery in Chennai

BS Reporter  |  Chennai  

December 29, 2013 Last Updated at 20:47 IST

The deal involves transfer of USL's entire undertaking, business activities and operation of its unit at Poonamalle, Chennai 

The Competition Commission of India (CCI) has cleared the sale of distillery owned by Vijay Mallya-led United Spirits Ltd (USL) near Chennai to Enrica Enterprises Private Ltd (EEPL).

Through the acquisition, the promoters of EEPL are planning to enter the business of manufacturing the India-made foreign spirits.




The deal involves transfer of USL’s entire undertaking, business activities and operation of its unit at Poonamalle, Chennai. The unit is a distillery for manufacture of Indian-made foreign spirits (IMFS) to EEPL by way of slump sale. The sale consideration was estimated to be Rs 125-crore.

The distilling plant has a capacity for one-million cases a month, and it was acquired by USL nearly five years ago from Balaji Distillers. It was reported that USL was operating this plant at around 55 per cent capacity thus being a drain on the company.

Enrica would make certain IMFS brands of USL using technology and know-how and under the trademark of USL, according to a franchise agreement signed on December 4, 2013, along with the master sale agreement between the two companies.

Pursuant to the agreement, Enrica will bottle USL's brands and in consideration for this bottling arrangement, USL will earn a royalty income.

In the order, the CCI said: “Considering the facts on record, the details provided under the Act, the Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore the Commission hereby approves the proposed combination.”

While the Mallya-promoted USL is a listed company, EEPL, which is a private entity, is promoted by Spurthi Holdings Pvt Ltd, Viki Investments and Properties LLP and Sree Shyam Sayi Investments and Traders Pvt Ltd. The private entity has diversified business interests and now proposes to enter the business of manufacturing IMFS through this acquisition.